Malaysia: the conduct of directors of listed companies and their subsidiaries

The Securities Commission yesterday published guidelines on the conduct of directors of listed companies and their subsidiaries: see here (pdf). The Commission explains, in the accompanying press release, that the new guidelines "take into account the evolving Malaysian corporate governance landscape, lessons learnt from the [Commission's] regulatory work in enforcing corporate governance breaches and the need to ensure that Malaysia’s framework remains relevant and effective".

Australia: the role, responsibilities and duties of the company chairman

Judgment was delivered today by Beach J, sitting in the Federal Court, in Australian Securities and Investments Commission v Mitchell (No 2) [2020] FCA 1098: see here or here (pdf). I note the decision because of the important and lengthy discussion it contains (relative to other Commonwealth decisions) concerning the role, responsibilities and duties of the chairman of the board of directors (see, in particular, paras. [1398] to [1429]).

UK: The Re Duomatic principle, ostensible authority and the consent of beneficial owners

The Judicial Committee of the Privy Council delivered its opinion today in Ciban Management Corporation v Citco (BVI) Ltd & Anor (British Virgin Islands) [2020] UKPC 21: see here or here (pdf). The Board found, amongst other things, that the principle of informal, unanimous shareholder consent - often referred to as the Re Duomatic principle - could operate to confer ostensible authority. This operated subject to recognised exceptions or qualifications: where there is dishonesty; where the shareholder had not consented to the relevant act; and where the transaction would jeopardise the company's solvency or cause loss to creditors.

The Board also referred to what it called a further "possible" qualification in the operation of the principle: where the consent is that of the beneficial owners rather than the registered shareholders. But it stated: "... the correct view is that, at least as here where the ultimate beneficial owner and not the registered shareholder is taking all the decisions in the relevant transactions, the Duomatic principle applies as regards the consent of (and authority given by) the ultimate beneficial owner" (para. [47]).

UK: England and Wales: a member's right to inspect the register of members

The Court of Appeal gave judgment yesterday in Houldsworth Village Management Company Ltd v Barton [2020] EWCA Civ 980, a case concerning the right given to each member of a company (and any other person) under section 116 of the Companies Act 2006 to inspect the company's register of members and request a copy.  The decision is an important one, not least because of the strong endorsement it provides for the role performed by section 116 in helping shareholders to hold directors accountable. A summary has been published by the ICLR: see [2020] WLR(D) 445.

UK: England and Wales: companies, freezing orders and the pursuit of a fledgling business

Earlier this week the Court of Appeal gave judgment in Organic Grape Spirit Ltd v Nueva IQT, SL [2020] EWCA Civ 999, an important decision on the scope of a freezing order and the extent to which it permitted within "the ordinary and proper course of businesses" - or should be amended to permit - a company to invest in a fledgling business. A summary of the decision has been published by the ICLR: see [2020] WLR(D) 443.

UK: Supreme Court decision: the fiduciary position of the members of charitable companies

The Supreme Court gave judgment today in Lehtimaki v Cooper [2020] UKSC 33: see here or here (pdf). A summary of the judgment is available here (pdf). The court held, amongst other things, that members of charitable companies owed fiduciary duties but, in contrast to the position adopted by the Court of Appeal, these did not apply to every exercise of a power to act. A summary of the decision was given by Lady Arden in the following video recording:

UK: The Finance Act 2020 receives Royal Assent

The Finance Act 2020 received Royal Assent a few days ago and has now been published: see here or here (pdf). The Act includes - in section 100 and schedule 13 - provisions making directors jointly and severally liable, in certain circumstances involving insolvency or potential insolvency, for amounts owing by companies to HMRC. Background information, published to accompany the (then) Bill's parliamentary passage, is available here.

UK: Law Commission consultation on draft legislation - consumer sales contracts and the transfer of ownership

The Law Commission for England and Wales has published a consultation paper and draft legislation designed to reform the law concerning the transfer of ownership in consumer sales contracts, following the report, Consumer Prepayments on Retailer Insolvency, it published several years ago (here, pdf). Views are sought on proposed transfer of ownership rules for contracts of sale between consumers and retailers.

While the Commission's remit is with England and Wales, the legislative changes would be made to the Consumer Rights Act 2015, which has UK wide application; the Commission hopes that the Government will implement its proposed changes throughout the UK. 

The consultation paper is available here (pdf). The draft Bill is available here (pdf). A summary of the proposal is available here (pdf). A Government press release is available here.

UK: Charity Commission regulatory alert - the importance of transparent and accountable governance

The Charity Commission for England and Wales issues a handful of regulatory alerts each year. These have, increasingly in recent years, focused on the threat of fraud. In its most recent alert, addressed to large charities, the Commission has, however, focused on the importance of governance: see here. The alert follows an investigation by the Commission into RNIB which found evidence of "ineffective and dysfunctional governance" and, according to the Commission's chief executive, other "grave governance failings in some household name charities".

Singapore: ACRA consults on Companies Act amendments

The Accounting and Corporate Regulatory Authority is consulting on proposed amendments to the Companies Act (and subsidiary legislation): see here. Included is a provision to abolish the requirement - currently found in section 174 of the Act - that "Every public company that is a limited company and has a share capital shall, within a period of not less than one month and not more than 3 months after the date at which it is entitled to commence business, hold a general meeting of the members of the company to be called the 'statutory meeting'".

UK: Supreme Court judgment next week - charitable companies, members' powers and the court's jurisdiction

The UK Supreme Court will give judgment next Wednesday in Lehtimäki v The Children's Investment Fund Foundation (UK), on appeal from [2018] EWCA Civ 1605, [2018] WLR(D) 423. The issue before the court, to quote directly from its summary, was this: "Does the court have jurisdiction to direct members of a charitable company on how to exercise their powers absent a breach of fiduciary duty?"

Japan: revised Stewardship Code published

Rather belatedly I note that a revised edition of Japan's Stewardship Code was published earlier this year: see here.

Spain: CNMV publishes new edition of the Good Governance Code for Listed Companies

The Comisión Nacional del Mercado de Valores (CNMV) has published a new edition of the Good Governance Code for Listed Companies. A copy of the new Code, in Spanish, is available here (pdf). A summary of the changes contained in the new edition, in English, is available here (pdf).

UK: Expanding the Trust Registration Service

HM Treasury has published a document summarising the responses received in respect of its technical consultation on the Fifth Money Laundering Directive and, in particular, the expansion of the UK's Trust Registration Service (TRS) to include a wider range of express trusts (not just those with tax consequences, as is currently the case): see here. Draft Regulations - The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 - have also been published: see here.

The Government has set a registration deadline of 10 March 2002 for existing trusts to register (or update their records if they are already registered on the TRS).

UK: HM Treasury consultation on new economic crime levy

HM Treasury has published a consultation paper seeking views on the design of the new economic crime levy, the purpose of which is to raise funds (approximately £100 million from entities regulated for anti-money laundering purposes) to support (and enhance) the Government's work in addressing money laundering: see here.

UK: Company reporting and Covid-19 - a review by the FRC

The Financial Reporting Council has published its first thematic review of company reporting following the start of the Covid-19 pandemic: see here (pdf). The FRC found that most companies in the sample reviewed had provided sufficient information to enable users to understand Covid-19's impact on performance, position and prospects. There was, however, room for improvement by many companies, in particular with regard to going concern disclosures.

OECD Report: The Duties and Responsibilities of Boards in Company Groups

The OECD, as part of its corporate governance series of publications, has published an overview, covering 45 jurisdictions, of the duties and responsibilities of boards in the context of corporate groups: see here.

UK: The Supreme Court decides - the reflective loss principle in company law and beyond

The Supreme Court - a panel of seven justices - gave judgment today in Sevilleja v Marex Financial Ltd [2020] UKSC 31: see here or here (pdf). The court's summary of its decision is available here (pdf). The judgment provides a wide-ranging review of what has become known as the reflective loss principle and its place within company law and more widely. The court unanimously held that the principle did not operate to prevent a creditor from bringing a claim for damages in tort against a third party where the company had a concurrent claim for damages.

Of note is the fact that a minority of the justices disagreed with the majority's position on the significance of Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 in establishing a principle precluding shareholders from bringing a claim where the company has suffered loss resulting in the fall in the value of its shares or distributions.

The Supreme Court's decision is summarised in the below video by Lord Reed PSJ; he begins by noting that the appeal "raised one of the most important and difficult questions of law to become before the court for some time" and, towards the end, he refers to the "radical approach" adopted by the minority in its position regarding Prudential.

UK: FRC publishes principles for Big Four audit practice operational separation

The Financial Reporting Council has published the principles that will apply in respect of the operational separation of the audit practices of the Big Four firms: see here (pdf). The firms are expected to submit an implementation plan to the FRC by 23 October 2020 and to complete separation by 30 June 2024.

Monitoring Group: recommendations to strengthen the international audit and ethics standard setting system

The Monitoring Group has today published a set of recommendations the purpose of which is to strengthen the international audit related standard setting system: see here (pdf). The accompanying press release is available here (pdf).

UK: The Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) Regulations 2020

The Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) Regulations 2020 were laid before Parliament on July 8 and are now in force: see here or here (pdf). The Regulations amend the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012 in order to ensure that the moratorium provisions within Part A1 of the Insolvency Act 1986 (as inserted by the Corporate Insolvency and Governance Act 2020) apply effectively to charitable incorporated organisations. Further information is available in the accompanying explanatory memorandum is available here (pdf).

UK: The Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020

The Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020 were laid before Parliament on July 9 and come into force on September 3: see here or here (pdf). The Regulations complete the UK's transposition of Chapter 1a of EU Directive 2017/828 (amending Directive 2007/36/EC) (known as the Shareholder Rights Directive). Further information is available in the accompanying explanatory memorandum (here, pdf) and transposition note (here, pdf).

UK: Supreme Court judgment this week in Sevilleja v Marex Financial

The UK Supreme Court will hand down its judgment in Sevilleja v Marex Financial Ltd on Wednesday this week: see here. The case - on appeal from [2018] EWCA Civ 1468, [2018] WLR (D) 395 -  looks set to be one of the most important company and insolvency law cases of the year and was heard, unusually, by a panel of seven justices. The court identified, in its summary of the case, the main issue before it thus: "Whether the rule against reflective loss bars creditors of a company from claiming directly against a third party for asset-stripping the company".