UK: England and Wales: relief for unfair prejudice, buy-out orders and tax avoidance

Last year, in Estera Trust (Jersey) Ltd v Singh [2018] EWHC 1715 (Ch), Mr Justice Fancourt ordered that two shareholders - the petitioners - should have their shares bought out by the company and another shareholder, following the finding that the company's affairs had been conducted in an unfairly prejudicial manner within section 994 of the Companies Act 2006.

At a subsequent trial, the purchase price and time for payment were fixed (see [2019] EWHC 873 (Ch)), only after which the petitioners appreciated the tax consequences of the proposed order: purchase by the company of their shares would be regarded as an income distribution and taxed more heavily than a capital transaction. With this knowledge, the petitioners made an application requesting that the final order not be sealed until a further hearing had taken place. They sought a change in the proposed order: they wanted a company structure to be created the aim of which was to minimise their tax liability.

Could, and if so should, the court order that the petitioners' shares be bought in the manner they now requested?  The answer was given several days ago in Estera Trust (Jersey) Ltd v Singh [2019] EWHC 2039 (Ch). Mr Justice Fancourt held that while he had the jurisdiction to make the order he would decline to do so. The proposed buy-out structure could, he stated, be reasonably regarded by HMRC and others as aggressive tax avoidance. The parties did not agree and, moreover, the order sought by the petitioners provided in his view "relief that is wholly out of the ordinary - if not unprecedented - for the Court to grant on a section 994 petition, despite the breadth of the jurisdiction to grant relief" (para. [32]). Fancourt J. further observed (paras. [33] and [41]):

[33] There are undoubtedly circumstances in which the Court will order a reluctant party to enter into a transaction for the purpose of saving tax for another party ... [41] In my judgment, in a purely commercial context such as this, there is no compelling reason why the Court should force reluctant parties to enter into a transaction solely for the purpose of saving tax for another party, even if there is no possible harm to them. There is no public policy interest in favour of making such an order. This is a case of an offshore trust, which will incur a tax liability on the receipt of an enormous sum of money, which it can very likely mitigate so that only the same tax has to be paid as would be paid by a private person resident in the UK. The public interest seems to me to be served by the payment of that tax, not by the avoidance of the substantial majority of the tax payable".

UK: FCA guidance on crypto-asset regulatory remit

The Financial Conduct Authority has today published final guidance in respect of those crypto-assets activities which fall within its regulatory remit: see here (pdf).

Sweden: Amending the Swedish Code of Corporate Governance

The Swedish Corporate Governance Board has announced that it will, in September, publish proposed amendments to the Swedish Code of Corporate Governance: see here or here (pdf). The Board has also announced that, in October, it will publish a new recommendation on remuneration.

ECGI publishes video presentations from Global Corporate Governance Colloquia

The European Corporate Governance Institute has uploaded to its YouTube channel video recordings of some of the presentations that were delivered at the recent Global Corporate Governance Colloquia held in Frankfurt: see here.

UK: Takeover Panel publishes annual report for 2018/19

The Takeover Panel has published its annual report for the year ending March 2019: see here (pdf). The report notes a higher number of hostile offers being launched than in previous years and an increase in the number of cases featuring an interplay between the Takeover Code and the insolvency regime. The report notes, as well, the end of the case that saw it, for the first time, seek an order under section 955 ("Enforcement by the court") of the Companies Act 2006 (about which, see [2017] CSOH 156 and [2018] CSIH 30).

UK: England and Wales: did the company receive a fair trial?

Judgment was handed down yesterday in Alstom Network UK Ltd, R. v (Rev 1) [2019] EWCA Crim 1318. The court was required to consider whether a company that had been found guilty of conspiracy had received a fair trial where the individual - the company's directing mind and will, in respect of whose actions the company's liability was based - had not been indicted as a co-conspirator and was not available to give evidence at the company's trial.

The court unanimously rejected the argument that the trial had been unfair, noting that although counsel for the company "was at pains to distance himself from any suggestion that a corporate conspirator could never be tried in the absence of a [directing mind and will], it is plain that, if well-founded, his principal submission would have wide and untoward ramifications .... it can only be in a very rare case that the absence of a [directing mind and will] would itself be determinative of the question whether a corporate defendant could receive a fair trial. " (paras. [53] and [58]).

UK: The new chair of the Financial Reporting Council (ARGA)

The Department for Business, Energy and Industrial Strategy has today announced that Simon Dingemans is to become the new chair of the Financial Reporting Council and its successor organisation (the Audit, Reporting and Governance Authority): see here. Mr Dingemans will replace Sir Winfried Bischoff.

Mr Dingemans' appointment was subject to a pre-appointment hearing before the BEIS Committee in Parliament several days ago: see here. The Committee's report was published yesterday: see here. The Committee endorsed Mr Dingemans' appointment but noted its concern that he had "not fully appreciated the scale of the challenge ahead, and the degree of commitment required for an organisation in need of root-and-branch reform". The Committee also recommended that he should not take on any additional roles that could be perceived to compromise his independence.

NB: The Secretary of State at the BEIS Department announced, in a speech several days ago, that the new chief executive of the FRC/ARGA will be Sir Jonathan Thompson: see here.

UK: A new edition of the 'Orange Book' (risk management principles for government departments)

A new edition of the Government's risk management principles for government departments (including arm's length public bodies with responsibility derived from central government for public funds) - better known as the Orange Book - has been published: see here (pdf). The Orange book contains main and supporting principles and operates on the basis of 'comply or explain' in conjunction with the corporate governance code for central government departments.

New edition of The Best Practice Principles for Shareholder Voting Research and Analysis

The new edition of The Best Practice Principles for Shareholder Voting Research and Analysis was published yesterday by the Best Practice Principles Group: see here (pdf). Further information about the new edition, the changes made and the rationale for each of the principles can be found in the accompanying report: see here (pdf).

UK: The Financial Services Future Regulatory Framework Review

Earlier this year the Chancellor announced, in his Spring Statement, that a review of the regulatory framework for financial services would begin in the summer: see here. That review - The Financial Services Future Regulatory Framework Review (a mouthful, I admit) - has now started with the publication, last Friday, of a call for evidence document: see here (pdf). The document introduces the Review and seeks views on its first phase: the coordination of regulatory activities by HM Treasury and the other UK regulators, including how firms and the regulators can work together to make authorisation, supervision and enforcement more efficient.

UK: The Draft Registration of Overseas Entities Bill

At this time last year, give or take a day or two, the Government published the draft Registration of Overseas Entities Bill: see here. A Joint Parliamentary Committee was subsequently formed for the purpose of scrutinising the Bill and it reported in May: see here. Yesterday, the Government's response to the Committee's report was published: see here (pdf).

UK: Government consults on CMA statutory audit market recommendations

Earlier this year, the Competition and Markets Authority published its report and recommendations in respect of the statutory audit market: see here. The recommendations are now the subject of an initial consultation by the Department for Business, Energy and Industrial Strategy that opened yesterday: see here (pdf).

Views are being sought on the core remedies proposed by the CMA, including the enhanced regulatory oversight of audit committees; the introduction of mandatory joint audits of FTSE 350 firms; proposals to mitigate the effects of the distress or a failure of a 'Big Four' firm; and the operational split between audit and non-audit practices of ‘Big Four’ firms. Views are also sought on other proposals that did not form part of the CMA's core remedies.

UK: England and Wales: a new liability on forfeiture of shares?

Judgment was given yesterday by Chief Master Marsh in Zavarco Plc v Yusof [2019] EWHC 1837 (Ch). It is noteworthy because of the analysis provided in respect of the effect of a provision in the Articles of Association on the consequences of the forfeiture of shares.

The company's Articles contained a provision stating that forfeiture extinguished all interests in the shares and all other rights relating to them; it also provided that where a person's shares had been forfeited, that person remained liable to the company for all sums payable by that person under the Articles (whether accrued before or after the date of forfeiture). The question for Master Marsh was the effect of this provision: did it - as the editors of Palmer's Company Law had stated - create a new obligation as debtor? The answer is of wide interest given the prevalence of such provisions (see, for example, the model articles for public companies: here, .doc).

Master Marsh disagreed with the position adopted in Palmer's Company Law and explained that in his view the position was as follows. Forfeiture changed the nature of the relationship but the sum owed remained the same. This sum remained, and was always, a contractual debt by virtue of section 33(2) of the Companies Act 2006. It was wrong to see the liability as a contributory transformed into a different liability. The preservation of the liability, arising from the articles of association, did not create a new liability or a new cause of action.

UK: England and Wales: when will directors owe a fiduciary duty to shareholders?

Judgment was handed down today in Vald. Nielsen Holding A/S Newwatch Ltd v Baldorino & Ors [2019] EWHC 1926 (Comm). The decision is noteworthy because of the analysis it provides of the circumstances in which directors will owe fiduciary duties towards shareholders.

The claimants' argument that fiduciary duties were owed, which relied heavily on the Australian decision Brunninghausen v Glavanics [1999] NSWCA 199, was rejected and, at the end of his analysis, the trial judge (Jacobs J) stated (at para. [746]):

Overall, it seems to me that the circumstances in which a fiduciary duty will usually be held to exist are well-summarised by Nugee J. at [13] of [Sharp v Blank [2015] EWHC 3220 (Ch)]: the cases where such duty has been held to exist mostly concern companies which are small and closely held, where there is often a family or other personal relationship between the parties, and where, in almost all cases, there is a particular transaction involved in which directors are dealing with the shareholders".

UK: England and Wales: directors' duties and an unauthorised profit

Judgment was delivered yesterday in Parr v Keystone Healthcare Ltd [2019] EWCA Civ 1246, the Court of Appeal having given its decision at the end of the hearing on July 9. The court dismissed the appeal and upheld the trial judge's finding (at [2018] EWHC 1509 (Ch)) that Mr Parr, a former director and shareholder of a company, Keystone, was liable to disgorge half the proceeds he had received when he sold his shares in the company to another company. Mr Parr received the full proceeds in circumstances where, had he disclosed his breach of duty (participating in a fraud and failing to disclose his own misconduct) he would have received only half.

The court's decision represents a strong affirmation of the 'bright line' nature of the prohibition against profits imposed on company directors as part of their general duties under the Companies Act 2006. The court made clear that Keystone was entitled to recover from Mr Parr the unauthorised profit even though Holdings had suffered the loss and regardless of whether Keystone itself could have made the profit. 

UK: CIC Regulator publishes 2018/19 annual report

The annual report of the Office of the Regulator of Community Interest Companies has been published: see here (pdf). The report covers the year in which online incorporation became available and it notes that there are now over 15,700 CICs on the register.

UK: Risk Coalition consults on new risk guidance for financial services sector

The Risk Coalition - a network of not-for-profit professional bodies and membership organisations committed to raising standards of risk governance and risk management in the UK - has published for consultation its Principles and guidance for board risk committees and risk functions in the UK financial services sector: see here. The consultation closes on 20 September and the final guidance is expected in December 2019.

UK: APPG on Whistleblowing - report and recommendations published

The All-Party Parliamentary Group on Whistleblowing has published the first of three reports on the UK's whistleblowing framework: see here (pdf). This report, which focuses on the experience and concerns of whistleblowers themselves, contains ten recommendations including the adoption of a new definition of whistleblowing (it should include any harmful violation of integrity and ethics, even if not criminal or illegal, and the focus should be on the harm, or risk of harm to the public).

UK: FRC consults on revised Ethical and Auditing Standards

Last November, the Financial Reporting Council sought feedback as part of a post-implementation review of the 2016 Ethical and Auditing Standards: see here. A position paper followed earlier this year, culminating in the publication today, for consultation, of the amendments the FRC proposes to make to its Ethical and Auditing Standards. The proposed changes include simplifying and restructuring the Ethical Standard; enhancing the authority of the Ethics Partner function with audit firms; and requiring the auditors of all UK listed entities to include in their published auditor's report the performance materiality threshold used in the audit.

Further information is available in the FRC's press release and in the other documents published today: Feedback statement and impact assessment (pdf) | Revised Ethical Standard 2019 - Exposure Draft (pdf) | Changes to the International Standards on Auditing (UK) (ISAs (UK)) and International Standard on Quality Control (UK) (ISQC (UK)) - Exposure Drafts (pdf) | Glossary of Terms (Auditing and Ethics) - Exposure Drafts (pdf) |.

UK: CIIA consults on draft Internal Audit Code of Practice

The Chartered Institute of Internal Auditors has today published for consultation a draft of its new Internal Audit Code of Practice: see here (pdf).  The Code is intended to become a benchmark of best practice for boards, audit committees and regulators.

The Code contains 30 recommendations, the first of which sets out the primary role of internal audit: "to help the board and executive management to protect the assets, reputation and sustainability of the organisations". The second states that the scope of the internal audit should be unrestricted: "There should be no aspect of the organisation which internal audit should be restricted from looking at as it delivers on its mandate".

There are seven consultation questions; the first question seeks views on the scope of the Code: should it focus primarily on publicly listed companies or should large private companies and third sector organisations be included?

This is not the first Code the CIIA has published. In 2013 it published guidance on effective internal audit in the financial services sector, the latest edition of which was published in 2017: see here.

UK: Insolvency Service call for evidence on the regulation of insolvency practitioners

The Insolvency Service has published a call for evidence concerning the regulatory framework for insolvency practitioners, in particular the introduction of regulatory objectives and other changes made by Part 10 of the Small Business, Enterprise and Employment Act 2015: see here (pdf).

UK: Companies House independent adjudicators' annual report published

The Companies House independent adjudicators have published their annual report for the year to 31 March 2019: see here (pdf). The report contains data on the appeals heard by the adjudicators as well as recommendations for improving Companies House procedures.

Prominent in this year's report is the adjudicators' concern - expressed to Companies House for some time - with the high number of appeals they receive from newly incorporated companies and from dormant companies. The adjudicators argue that more needs to be done to improve compliance amongst such companies, particularly because directors often (wrongly) assume that the Companies House filing obligations are identical to those imposed for tax purposes and filing with HMRC.

UK: The Government's Economic Crime Plan 2019-2022

The Government has published its Economic Crime Plan 2019-2022: see here (pdf). The plan contains seven "strategic priorities", including "Transparency of Ownership". This part of the plan explains what the Government has already done, or what is subject to on-going consultation (including, for example, proposals to reform Companies House in the consultation Corporate Transparency and Register Reform - see here, pdf). With regard to the introduction of the new register of the beneficial owners of legal entities owning property in the UK, the plan states that a Bill will be introduced "early in the next Parliamentary session when Parliamentary time allows". The draft Bill received pre-legislative scrutiny earlier this year.

The UK's implementation of the Fifth Money Laundering Directive ((EU) 2018/843)), also known as 5MLD and the subject of a consultation earlier this year, is discussed as part of a strategic priority titled "Powers, Procedures and Tools". The plan states that the Directive will be transposed into national law by January 2020 and that the Government intends to go beyond the requirements of 5MLD by bringing a wider range of crypto-asset businesses within the anti-money laundering regime. The paper also states that those wanting access to the beneficial ownership information held on the expanded trusts register will need to demonstrate a "legitimate interest".

UK: England and Wales: the effect of administrative restoration on contract termination

Judgment was delivered yesterday by Mrs Justice Cockerill in Bridgehouse (Bradford No.2) v BAE Systems Plc [2019] EWHC 1768 (Comm). The decision is an important one on the consequences that flow from a company's return to the Register of Companies under section 1024 of the Companies Act 2006.

The Registrar of Companies dissolved a company, BB2, and struck it off the Register on 31 May 2016, in exercise of a power given by section 1000 ("Power to strike off company not carrying on business or in operation") of the Companies Act 2006. This was done following BB2's failure to submit accounts on time and its failure to respond to a notice from the Registrar sent to its registered office (the address had not been updated by BB2, meaning that the notice was sent to an address no longer functioning as its registered office).

A contract between BAE and BB2 contained a clause - number 20 - providing BAE with the right to terminate the agreement should BB2 suffer an event of default including "being struck off the Register of Companies or being dissolved or ceasing for any reason to retain its corporate existence". On 2 June 2016, BAE served BB2 notice of contract termination.  An application was then made for the administrative restoration of BB2 to the Register under section 1024 of the Companies Act 2006. This was successful and BB2 returned to the Register on 28 July 2016.

What effect did restoration have on BAE's termination of the contract?  This question was first answered by an Arbitrator and the answer given - with reference to section 1028 of the 2006 Act, which provides that the "general effect" of administrative restoration is that the company "is deemed to have continued in existence as if it had not been dissolved or struck off the register" - was that BB2's restoration to the Register did not undo or reverse the termination of the contract.

BB2 appealed, pursuant to section 69 ("Appeal on point of law") of the Arbitration Act 1996 and with the agreement of BAE, and this was heard by Mrs Justice Cockerill. Her Ladyship agreed with the Arbitrator. Restoration did not undo the termination. Section 1028 was not mandatory and of universal application. It was necessary, she stated, to make a distinction between direct and indirect consequences. To quote directly (paras. [115] and [116]):

..... The deeming provision [section 1028] will have very wide application indeed. It will be (as it has been in the authorities) taken to undo the automatic consequences of a removal from the register or dissolution which is later undone in circumstances to which the deeming provision applies. But there will be situations where consequences arise which are not automatic. A lease will become forfeit not because of the fact of the dissolution, but because, either consequent on that dissolution or independently of it, the lessee does not pay its rent. A contract will be repudiated for a similar reason and that repudiation will be accepted – as happened in Contract Services. Or, as in this case, a contractual party will have a choice as to whether to terminate a contract simply because of the removal from the register. The termination will not flow from, or be automatically a consequence of dissolution. It will occur where the party decides to make that decision and takes the step necessary to bring about that termination. Such consequences are, in my view, outwith the deeming provision."

[The reference to Contract Services in this quotation is a typographical error in the judgment as it appears on BAILII; it ought to read Contract Facilities - shorthand for Contract Facilities Ltd v Rees [2002] EWHC 2939 (QB), one of the decisions cited in the judgment].

Update (19 July 2019) - a summary of the decision has been published by the ICLR: see here.

UK: Finance Bill 2019-20 - draft published - insolvency law provisions

HM Treasury has published, for consultation purposes, a draft of the Finance Bill 2019-2020 together with supporting guidance: see here. Drawing most attention in the media is the new Digital Services Tax but the Bill also contains measures to change the priority of HMRC in insolvency and to address tax abuse involving insolvency.

With regard to the priority of HMRC in insolvency, it is proposed that HMRC should become a secondary preferential creditor in respect of certain debts. Further information about this change is available in a policy paper; the draft legislation and accompanying explanatory note are available, respectively, here (pdf) and here (pdf).

The Bill also contains a provision that will provide HMRC with a power to make directors (including shadow directors) jointly and severally liable for a company's tax liabilities, in a limited range of circumstances linked to avoidance, evasion and insolvency. Further information about this new power is available in a policy paper and the draft legislation and accompanying explanatory note are available, respectively, here (pdf) and here (pdf).

UK: Cranfield's Female FTSE report 2019

The latest annual edition of Cranfield University's Female FTSE Board Report has been published: see here (pdf). To quote directly from the executive summary:

This year we see a more encouraging picture emerging in terms of the number of women on FTSE boards. Over the past 12 months the percentage of women on FTSE 100 boards has increased from 29% to 32%, so the 33% target set for 2020 is well in sight. In total 292 women hold 339 directorships on FTSE 100 boards. The percentage of female non-executive directors (NEDs) is at the all-time high of 38.9%, whilst the percentage of female executives remains worryingly low at 10.9%."

However, and to quote from the report's concluding remarks:

We are pleased to report on the good progress achieved this year in terms of increasing the number of women on both FTSE 100 and FTSE 250 boards. .... What is very concerning is the mounting evidence to show that once women are appointed to boards they have significantly shorter tenures and are less likely to be promoted into SID [Senior Independent Director] or Chair roles. The number of women holding Chair roles across FTSE 100 boards has actually decreased on the already low levels of last year. Urgent action needs to be taken on addressing this issue, hence we welcome the initiative set up recently to accelerate women into Chair roles. It is vital that women are not appointed to boards because of the symbolic importance. This is not the case of just ticking a box. One of the routes into Chair is to acquire experience running a board committee, hence it is positive news this year that the percentage of women chairing such committees across FTSE 100 boards has increased to 31%. Clearly women directors have many more strengths to offer beyond being women. In our extended analysis of their diversity this year, we see that the women directors across FTSE 100 boards come from many countries (only 55% are British), different ethnic backgrounds, a range of universities (with only 11% from Oxford and Cambridge), are financially extremely literate (55% have held various financial roles) and won many awards. We certainly do not have enough women from BAME backgrounds nor women from outside of the corporate mainstream. We also note that the average age of women directors is several years below the average age of men directors, indicating another bias. All these gaps in the talent pipeline must be addressed if the UK is to fill its boards with the best individuals available."

UK: FRC audit inspection results published

The Financial Reporting Council has today published the results of its most recent audit inspections, relating (on the whole) to the audits of companies with a December 2017 year end: see here. The inspections covered seven audit firms and the FRC reports that it found cases in all of them where auditors had failed to challenge management sufficiently on matters of judgement. Overall, the FRC classed 75% of the FTSE350 audits it inspected as being good or requiring limited improvements. The remaining 25% were assessed as being below an acceptable standard.

The FRC notes that there have been changes in individual audit firm performance. At Grant Thornton, for example, only half of the reviewed audits were classed as good or requiring limited improvement (down from 75% in the previous year). The FRC states that Grant Thornton is now under increased scrutiny. The firm announced, last year, that it had stopped tendering for FTSE350 external audit engagements, citing the cost involved: see here. It announced, last month, some of the actions it had taken (and will take) to address the concerns raised by the FRC: see here.

UK: FCA publishes annual report

The Financial Conduct Authority has published its annual report and accounts for the year ended 31 March 2019: see here (pdf). Chapter 3 focuses on the FCA's work concerning firms' culture and governance and discusses, amongst other things, the Senior Managers and Certification Regime, the Financial Services Register, remuneration and whistleblowing (1,119 reports were received). The main report is accompanied by the following separate reports: anti-money laundering (pdf), competition (pdf), diversity (pdf) and enforcement (pdf).

UK: Fraud Advisory Panel report - 'hidden in plain sight: domestic corruption, fraud and the integrity deficit'

The Fraud Advisory Panel has published a report titled 'Hidden in plain sight: domestic corruption, fraud and the integrity deficit': see here (pdf). The report provides an overview of the anti-corruption framework in the UK as well as highlighting well-known and emerging areas of concern. It ends with a 'blueprint for action', arguing (amongst other things) for greater and easier access to court information and documents; the creation of a central public reporting mechanism (the Home Office is currently exploring options for a centralised reporting mechanism: see here, pdf); and the introduction of corporate criminal offence in respect of the failure to prevent economic crime (the subject of a Government call for evidence in 2017).

UK: The Capital Allowances (Structures and Buildings Allowances) Regulations 2019

Section 30 of the Finance Act 2019 provided for the introduction of a new capital allowance in respect of expenditure incurred from 29 October 2018 in the construction of a building; it also provided the Treasury with the power, exercised through secondary legislation, to amend the Capital Allowances Act 2001 in order to provide for the operation of this new allowance.  That power has now been exercised, with the Capital Allowances (Structures and Buildings Allowances) Regulations 2019 being made earlier this week and now in force: see here or here (pdf). Further information is available in the accompanying explanatory memorandum: see here (pdf).

European Union: freedom of establishment, group relief and 'final losses'

The Court of Justice of the European Union gave its judgment last month in Skatteverket v Holmen AB (Case C-608/17). The judgment is an important one on the meaning of 'final losses' as described by the court in its judgment Marks and Spencer plc (C-446/03). A summary, published by the ICLR, is available here.

UK: FCA proposes ban on sale of crypto-asset derivatives

The Financial Conduct Authority is proposing to ban the sale, marketing and distribution to retail consumers of all derivatives and exchange traded notes that reference unregulated transferable crypto-assets by firms acting in, or from, the UK: see here. The FCA has also announced that it expects to publish later in the summer its final guidance on the regulation of crypto-assets (the outcome of its consultation (CP19/3) that closed in early April).

UK: England and Wales: directors' duties and the unfair prejudice remedy

Judgment was delivered several days ago by Adam Johnson QC (sitting as a Deputy High Court Judge) in Dinglis v Dinglis [2019] EWHC 1664 (Ch). This first instance authority, which concerned a petition for relief in respect of unfairly prejudicial conduct under sections 994 to 996 of the Companies Act 2006, is noteworthy for the following reasons.

With regard to directors' duties, it adds to the growing list of cases in which a director has been held in breach of section 172 ("Duty to promote the success of the company") of the 2006 Act. It also contains discussion of the scope of the statutory duty to avoid conflicts of interests and, in particular, the scope of section 175(3) which provides that the duty does not apply to conflicts arising in relation to transactions or arrangements with the company. Judge Johnson QC held, in this regard, that section 175(3) applied not only to cases where the director was himself a party to the transaction but also to those transactions or arrangements in which he was interested regardless of who had entered into the transaction.

The judgment also considers two issues relating to the scope of the unfair prejudice remedy. The first is whether understandings can exist, of the kind indicative of a quasi-partnership, where there are shareholders not party to those understandings. Judge Johnson QC did not rule out this possibility, although the facts before him required further investigation. He nevertheless asserted that it was "obviously undesirable for a situation to exist in which equitable constraints impact on the rights and obligations of some shareholders but not others, in particular where such others have acquired their shareholdings on the assumption that the company's constitution was contained within its published constitutional documents only" (para. [191]). The second issue concerns the valuation method to use where an order to purchase the petitioner's shares is made under section 996. Noting the broad discretion provided by section 996, and conflicting authority, Judge Johnson QC stated that outside of quasi-partnership scenarios, it would be a very unusual case where no discount was applied to reflect the petitioner's minority position.

Update (8 July 2019) - the ICLR's short case summary is available here.

UK: Hampton-Alexander review - women on FTSE350 boards

The Hampton-Alexander Review published an update today on the number of female directors appointed to FTSE350 company boards: see here (pdf). The headline figures are: 32.1% of FTSE 100 board positions are held by women (up from 12.5% in 2011); in the FTSE250 the percentage is 27.5 (up from 24.9). There are four all male FTSE350 boards (there were over 150 in 2011).

Notes:

The 2019 Hampton-Alexander Report will be published on the 13 November 2019 and this year's Female FTSE report, from Cranfield's School of Management, will be published on 11 July.

UK: JCPC opinion on apparent authority

The Judicial Committee of the Privy Council handed down its opinion last week in East Asia Company Ltd v PT Satria Tirtatama Energindo (Bermuda) [2019] UKPC 30: see here or here (pdf). A summary of the opinion is available here (pdf).

In a case concerning the principles of apparent authority, the Board upheld the decision of the Court of Appeal of Bermuda (here, pdf) that a director did not have the apparent authority to enter into a share sale agreement, contained within a heads of agreement document, on the company's behalf. Amongst the factors leading to this conclusion was the absence of reliance on any representations made by the company.

Of particular interest - and importance - is the discussion the Board provides, albeit obiter, about the extent to which a party can rely on apparent authority where they are "put on inquiry" as to the agent's authority (or lack thereof). In such cases, the Board accepted that in order to rely on the apparent authority of a director, the third party must have made the inquiries that a reasonable person would have made in all the circumstances in order to verify that director's authority. In adopting this test, the Board rejected the position adopted by Lord Neuberger in Akai Holdings Ltd v Kasikornbank Public Co Ltd [2010] HKCFA 64, [2011] 1 HKC 357, that reliance was permitted unless the third party knew of the agent's lack of authority, was dishonest or irrational, or reckless in his belief or turned a blind eye.

Update (18 July 2019) - a summary has been published by the ICLR: see here.