Ireland: The oppression remedy - "something in the nature of a lacuna"?

Section 205(1) of the Companies Act 1963 provides that "[a]ny member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or any of the members (including himself), or in disregard of his or their interests as members, may apply to the court for an order under this section".  An identical provision (more or less) is now found in section 212 of the Companies Act 2014.

A recent decision of the Court of Appeal - Kelly v Kelly [2021] IECA 244 - is significant because of the discussion it contains regarding the remit of section 205 and, in particular, whether "the powers of the directors of the company" were only those exercised collectively by the board and not, therefore, by an individual director. Counsel making this argument accepted that if it were correct it would mean, as Mr Justice Haughton put it, that there was "... something in the nature of a lacuna  in s.205(1) as it could not apply to a deadlocked board where one director was alleging oppression by another director" (para. [136]). 

The Court of Appeal unanimously rejected counsel's argument, with Mr Justice Haughton finding that to interpret "powers of the directors" as referring only to the powers of directors at board level was an unduly narrow interpretation.  His Lordship stated (paras. [154] and [155]):

.... the term 'powers of the directors' must be construed to include an exercise of one or more powers by one or more directors in an oppressive manner.  Thus the oppression could consist of the exercise of one power or multiple powers and equally it could be such exercise by one or more than one of the directors of the company.  There is no reason to distinguish between the plural in 'powers' and the plural in 'directors'".

.... In my view ... [section 205] was always intended to be a provision conferring on the court a wide jurisdiction to afford a remedy where it found oppression in the conduct of the affairs of the company or in the exercise of the powers of directors, and to avoid the winding up of a company where that is not necessary and can be avoided, particularly where there are a number of employees..."

UK: Independent reviews of ring-fencing and proprietary trading - terms of reference published

The terms of reference for two reviews - one for ring-fencing, the other for proprietary trading - have been published by HM Treasury: see here. Both reviews are required by the Financial Services (Banking Reform) Act 2013 (specifically, section 8 and section 10).

UK: The Capital Requirements Regulation (Amendment) Regulations 2021

The Capital Requirements Regulation (Amendment) Regulations 2021 were made on 22 September and come into force on 1 January 2022: see here or here (pdf). The accompanying explanatory memorandum is available here (pdf). The primary purpose of the Regulations is to revoke provisions within the Capital Requirements Regulation ((EU) No. 575/2013), part of retained EU law in the UK, in order that they can be replaced by rules made by the Prudential Regulation Authority.

ISO publishes its first international benchmark for organisational governance

The ISO - an independent, non-governmental organisation with over 160 members representing national standard setting bodies - has published its first standard (ISO 37000) for benchmarking the governance of organisations. Further information is available here. The standard is not freely available but must be purchased; a limited preview is, however, available here.

UK: OPBAS report - law/accounting professional body AML supervision - significant weaknesses found

OPBAS - the Office for Professional Body Anti-Money Laundering Supervision - has published the results of its assessment of AML supervision and controls within the professional body supervisors (PBSs) responsible for law and accountancy: see here (pdf).

The report notes (at para. 2.6) that, in 2020/21, the PBSs "... were generally compliant with the technical requirements of the MLRs, where assessed. As the reports for the first two years of OPBAS show, there has been considerable progress. However, when focusing on effectiveness in 2020/21, we found differing levels of achievement and some significant weaknesses. We expect PBSs to continue investing and improving, focusing their supervisory efforts to have the greatest impact on the prevention of money laundering and, working with other authorities, to make the UK an inhospitable place for criminals".

ICGN Global Governance Principles - new edition published

The International Corporate Governance Network has recently published a new edition of its Global Governance Principles: see here (pdf). The new edition was approved earlier this month at the ICGN's annual general meeting, the accompanying documentation for which contains further information about the new edition and the changes it contains: see here (pdf).

Hong Kong: HKEX consults on listing regime for SPACs

A day after noting developments in Singapore regarding Special Purpose Acquisition Companies (SPACs), we can turn to Hong Kong where the HKEX has published proposals, in a consultation paper issued several days ago, for the creation of its own listing regime for SPACs: see here (pdf). A summary of the proposals is available here.

Singapore: SGX confirms proposed listing framework for SPACs

Earlier this year the SGX consulted on a proposed listing framework for special purpose acquisition companies (SPACs). In a response to the consultation - published at the start of September and available here (pdf) - the SGX has confirmed that it will implement its framework "broadly as proposed with some amendments to reflect comments made by respondents on matters of detail and to clarify the intent of some of the Mainboard Rules" (para. 2.3).

UK: England and Wales: standing to pursue an unfair prejudice petition after ceasing to be a member

Judgment was delivered today by Deputy ICC Judge Kyriakides in Motion Picture Capital Ltd [2021] EWHC 2504 (Ch). The case required the court to consider an interesting question concerning the unfair prejudice remedy (sections 994-996 of the Companies Act 2006): if a member ceases to be a member after presenting a section 994 petition, do they continue to have standing to pursue the petition? The trial judge answered 'yes' and observed (para. [38]):

As a matter of construction, it seems to me that section 994(1) is directed to the commencement of proceedings for unfair prejudice and to those parties who have standing to bring them. It provides that the proceedings must be started by petition and only those who are members or to whom shares have been transferred or transmitted have locus to apply. The provisions of section 994(2) support such a construction in that the pre-requisite to a person who is not a member having standing to bring a petition is that shares must have been transferred or transmitted to him, that is, by the time the petition is presented. There is no requirement, however, that the shares must continue to be held by him up until the hearing of the petition".

UK: The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) Regulations 2021 were made earlier this month and come into force on 29 September: see here or here (pdf). The accompanying explanatory memorandum - available here (pdf) - explains the purpose of the Regulations as follows (para. 7.1):

The CIG Act included temporary measures restricting the use of statutory demands and company winding up petitions to protect businesses affected by restrictions introduced in response to the Coronavirus pandemic. These measures placed a high bar for creditors seeking ... a winding up petition and have been extended several times. As restrictions on businesses have now been removed the current measures are to be replaced with new tapering measures, that will help business get back to normal without facing a 'cliff edge' following withdrawal of the current provisions". 

UK: England and Wales: section 217 of the Insolvency Act 1986

Earlier this month, Robin Vos (sitting as a Deputy Judge of the High Court) gave judgment in PSV 1982 Ltd v Langdon [2021] EWHC 2475 (Ch). The judgment is noteworthy because it appears to answer a question previously unanswered by the courts concerning the operation of sections 216 and 217 of the Insolvency Act 1986. Here is that answer: "... the effect of Section 217 Insolvency Act 1986 is that ... once a liability is established in proceedings against the company, the defaulting director automatically becomes responsible for that liability. It is not necessary for the liability to be established in separate proceedings against the director" (para. [46]).  

Update (22 September 2021) - the ICLR has published a summary of the decision: see [2021] WLR(D) 491.

Ireland: The Companies (Corporate Enforcement Authority) Bill 2021

The Companies (Corporate Enforcement Authority) Bill 2021 was introduced in the Dáil Éireann earlier this month. A copy of the Bill, as introduced, is available here (pdf). Its progress can be followed here. The Bill is accompanied by an explanatory memorandum (here, pdf) and impact analysis (here, pdf).

The purpose of the Bill is to create a new a body, the Corporate Enforcement Authority, to replace and perform the functions currently performed by the Director of Corporate Enforcement. The Bill also makes changes to the Companies Act 2014, including those relating to share capital and governance. For example, an amendment to section 131 of the 2014 Act will make it clear that the purported appointment of an individual under the age of 18 to the post of secretary will be void.  Also, an amendment will be made to section 1045 to clarify the law on the transfer of shares (in particular when directors may decline to register the transfer of a share).

Australia: Treasury review of the insolvent trading safe harbour

The Treasury is seeking views as part of its review of the insolvent trading safe harbour introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No.2) Act 2017: see here. 

New Zealand: unfair prejudice, summary judgment and the buy-out offer

Earlier this month the Court of Appeal gave judgment in Birchfield v Birchfield Holdings Limited [2021] NZCA 428. The decision is an important one - and therefore noted here - because of the guidance provided in respect of the relevance of a buy-out offer in the context of a claim for unfair prejudice under section 174 of the Companies Act 1993. The decision provides, moreover, an illustration of the enduring influence of the English decision O'Neill v Phillips [1999] 1 WLR 1092, in which Lord Hoffmann said that unfairness "does not lie in ... exclusion alone but in exclusion without a reasonable offer".

UK: Takeover Panel statement - disclosure of takeover approaches

During the summer, the Takeover Panel's Code Committee published a statement concerning the operation of Rule 2 of the Takeover Code, which sets out the circumstances in which an offeree company should disclose the existence of a takeover approach prior to their being a firm offer: see here (pdf). The Committee decided that no changes were required to Rule 2 and, in doing so, rejected the suggestion that offeree companies should be required to make immediate disclosure of any serious takeover approach.

UK: FCA consultation - Listing Rules - disclosure - board diversity targets

Some catching-up to do - by me! Over the summer, the Financial Conduct Authority published a consultation paper in which changes were proposed to the Listing Rules that would require certain companies to disclose, on a comply or explain basis, whether several board diversity targets have been met: see here (pdf). The consultation closes on 20 October. The targets are these:

1. At least 40% of the board are women (including individuals self-identifying as women).
2. At least one of the senior board positions (Chair, CEO, SID or CFO) is held by a woman (including individuals self-identifying as a woman) 
3. At least one member of the board is from a non-White ethnic minority background (as categorised by the ONS). 

UK: FRC announces first list of successful Stewardship Code signatories

The Financial Reporting Council has, today, published its first list of successful signatories in respect of the UK Stewardship Code 2020: see here. The FRC received 189 applications (147 from asset managers, 28 from asset owners and 14 from service providers) of which two thirds (125) were successful. Unsuccessful applicants, the FRC has said, tended not to address all of the Principles in the Code or did not provide sufficient evidence.

Would you like to know some more about stewardship in the UK and the development of the UK Code?

I can - if you will forgive the self-promotion - point you in the direction of a forthcoming publication, written with a colleague, Daniel Cash, at Aston: Investor Stewardship and the UK Stewardship Code.