Monday, 17 June 2019

UK: FCA quarterly consultation paper

The Financial Conduct Authority has published its latest quarterly consultation paper (CP19/19, No 24): see here (pdf). The consultation paper contains, amongst other things, the FCA's proposals for the fees and levies to be paid for 2019/20 by Gibraltar-based firms should the UK leave the European Union without an agreement and a transition period by 31 October 2019; and new notification procedures for certain firms in respect of changes to their management body.

Friday, 14 June 2019

UK: The Companies (Directors' Remuneration Policy and Director's Remuneration Report) Regulations 2019

The Department for Business, Energy and Industrial Strategy has today published a document containing an overview of, and FAQs concerning, the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019: see here (pdf).

UK: Government responds to BEIS Committee report on executive rewards

Earlier this year the House of Commons Business, Energy and Industrial Strategy Committee published its report Executive rewards - paying for success: see here (pdf). The Committee made various recommendations, including that there should be an employee representative on remuneration committees. The Government's response was received by the Committee earlier this month and published yesterday: see here. The response has been described as a "missed opportunity" by the Committee's Chair, Rachel Reeves MP: see here.

UK: England and Wales: shadow and de facto directorships

Judgment was delivered earlier this week by HHJ Hacon in Popely v Popely [2019] EWHC 1507 (Ch). This first instance decision - concerning a double derivative action - is noteworthy for the discussion it contains of the distinctions between de facto and shadow directorships and whether it is possible for an act to be simultaneously carried out in both of these capacities (no was the judge's answer). Of note, too, is the reliance placed on a decision of Guernsey's Royal Court: Carlyle Capital Corporation Ltd v Conway (Judgment 38/2017; available here for registered users; registration is free).

Wednesday, 12 June 2019

UK: The Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019

The Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019 were made earlier this week: see here or here (pdf). The accompanying explanatory memorandum is available here (pdf), from where this very general explanation of the purpose of the Regulations is taken (para. 2.1):
This instrument is being made in order ensure a coherent and functioning financial services regulatory regime once the United Kingdom (UK) leaves the European Union (EU). It makes amendments to a number of financial services EU exit statutory instruments and to an EU delegated regulation, correcting errors identified in legislation after it was made, making amendments to ensure consistency between EU exit instruments and introducing a transitional provision. These amendments will ensure that these instruments operate effectively after the UK leaves the EU".

OECD publishes 2019 edition of its Corporate Governance Factbook

The OECD published the 2019 edition of its Corporate Governance Factbook yesterday: see here (pdf). The factbook covers 49 jurisdictions and provides information in five areas: (1) the corporate landscape (including the ownership structure of listed companies); (2) the corporate governance framework; (3) the rights of shareholders and key ownership functions; (4) the board of directors; and (5) mechanisms for flexibility and proportionality in corporate governance.

Tuesday, 11 June 2019

Trinidad and Tobago: the Companies (Amendment) Act, 2019

The Companies (Amendment) Act, 2019 became law earlier this year with assent given on 4 April 2019: see here (pdf). The Act amends the Companies Act, 1995 and will come into force through promulgation and, so far, this has been done for section 10A of the Act: see here (pdf). The 1995 Act prohibited the issuing of bearer shares; section 10A retains this prohibition but adds to it by also prohibiting the conversion or exchange of any share into a bearer share. Elsewhere in the 2019 Act are rules requiring companies to maintain information about the beneficial owners of its shares.

Monday, 10 June 2019

UK: England and Wales: section 127 of the Insolvency Act 1986 and the defence of change of position

Judgment was given last Friday by HHJ David Cooke in Dingley v Nisa Retail Ltd [2019] EWHC 1383 (Ch). The decision is of interest because of the discussion it contains of the issues surrounding the making of a validation order under section 127 ("Avoidance of property dispositions, etc") of the Insolvency Act 1986 as well as the availability of the defence of change of position where a liquidator seeks recovery of payments void under section 127. HHJ Cooke stated (at para. [69]): "... although the defence is in principle as a matter of jurisprudence available, the circumstances in which it can succeed are constrained in the same way and for the same reasons as the exercise of the court's discretion to validate".

Thursday, 6 June 2019

UK: England and Wales: unfair prejudice and the reasonable offer

Judgment was given today by the Court of Appeal in Prescott v Potamianos [2019] EWCA Civ 932. This unanimous judgment of McCombe, Leggatt and Rose LJJ concerned the unfair prejudice remedy (sections 994-996 of the Companies Act 2006) and is noted here for two reasons.

The first reason is that, in the context of the remedy that is provided, the court has endorsed the view expressed by Arden LJ (as she then was) about the adaptable nature of the remedy. The case law has, the court noted, "consistently declined to introduce 'bright lines' and the assessment of an offer to purchase is no exception to this flexible approach" (para. [130]).

The second, related reason, is that the court rejected the view, expressed by the trial judge ([2018] EWHC 1924 (Ch), para. [360]), that the assessment of the offer to purchase, in order to determine its reasonableness in the sense explained by Lord Hoffmann in O'Neill v Phillips [1999] 1 WLR 1092, was a "logically antecedent question" to the assessment of the alleged unfairly prejudicial conduct. In the court's view, "[the] terms of any offer made by the majority to purchase the petitioner's shares, the circumstances in which the offer was made and the reasons why it was rejected are one aspect of the overall consideration by the court of whether an unfair prejudice petition should succeed" (para. [130]).

Whilst reluctant to set out an exhaustive list of factors relevant to deciding an offer's fairness, the court nevertheless discussed what it regarded as those factors that were relevant in most cases (see paras. [131] to [136]). But it stressed that there was no one feature of an offer that would make it automatically either reasonable or unreasonable (para. [130]).

Wednesday, 5 June 2019

UK: The EU Prospectus Regulation and the new PRR Sourcebook

The Financial Conduct Authority has published a policy statement containing near final rules the aim of which is to align the FCA Handbook with the EU Prospectus Regulation (Regulation (EU) 2017/1129): see here (pdf). The changes will see the creation of a new sourcebook - the Prospectus Regulation Rules (PRR) sourcebook - coming into force on 21 July 2019 and replacing the current PR sourcebook. The rules are 'near final' because they contain references to proposed revisions to domestic and EU legislation that have not yet been made. Further information about the Regulation can be found here.

Tuesday, 4 June 2019

UK: Establishing the Accounting Standards Endorsement Board

The position of chairman of the new UK Accounting Standards Endorsement Board (UKEB) has been advertised on the Public Appointments website: see here. The advertisement, and role description it contains, is useful in that it sets out what role the UKEB will have and its place within the new regulatory framework following the UK's departure from the European Union.

Further information about the new framework was provided earlier this year in the explanatory memorandum accompanying the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019: see here (pdf). These Regulations, in chapter 3,  give the Secretary of State delegated powers to adopt and endorse IFRS for use in the UK and the process that must be followed. The Secretary of State is also given, by chapter 4, the power through regulations to delegate this decision-making function to another body. We now know that this body will be the UKEB.

Kiribati: company and insolvency law reform

The Republic of Kiribati - as it became known on gaining independence from the United Kingdom forty years ago - is to reform its company and insolvency laws. Draft Bills have been published, including a Companies Bill and a Company Insolvency Bill: see, respectively, here (pdf) and here (pdf). The Bills are accompanied by a consultation paper: see here (pdf). The new Companies Bill, when enacted, will enable companies with a single shareholder to be formed and will abolish the current minimum capital requirements.

Monday, 3 June 2019

UK: FCA Policy Statement - Improving shareholder engagement and increasing transparency around stewardship

The Financial Conduct Authority has published PS19/13 Improving shareholder engagement and increasing transparency around stewardship: see here (pdf). The statement contains final rules and feedback following the FCA's earlier consultation (about which: see here, pdf). The new rules come into force on 10 June and will implement, in part, EU Directive 2017/828 (aka SRD II or the Second Shareholder Rights Directive). They will require, amongst other things, life insurers and asset managers to disclose information concerning their engagement policies and investment strategies (or to explain publicly why these disclosures are not being made).

The FCA states (at para. 2.20) that it cannot see a reason why these new SRDII disclosures should not be contained in the same document as the disclosures required by firms under the revised Stewardship Code but firms will need to consider whether their Stewardship Code disclosures are sufficient to meet the FCA rules. The regulator also states (at para. 1.42) that for an initial period, and because the rules are coming into force quickly after their publication, firms can comply by explaining that they are developing an engagement policy (or considering whether or not to have one).

Friday, 31 May 2019

UK: ICSA consults on the effectiveness of the independent evaluation of listed company boards

In the statement published last year following its insolvency and corporate governance consultation, the Department for Business, Energy and Industrial Strategy stated that it had invited ICSA to convene a group with the purpose of identifying ways to improve the quality and effectiveness of board evaluations: see here (pdf, para. 1.66). The group has been formed and a day or so ago published a consultation paper: see here (pdf). The paper begins by seeking views on the purpose of board evaluation before summarising the evidence regarding current practice. It then invites suggestions and views on various matters and proposals, including a code of practice for the providers of board evaluation services and voluntary principles for listed companies when engaging external reviewers.

Thursday, 30 May 2019

UK: IA report - Shareholder votes on dividend distributions in UK listed companies

Last year, when responding to the feedback received in respect of its insolvency and corporate governance consultation, the Department for Business, Energy and Industrial Strategy stated that it was "concerned at what appears to be a growing trend for companies to pay only interim dividends which, under most articles of association, do not require shareholder approval": see here (pdf, para. 1.52).* The Investment Association was asked to assess and report on the prevalence of this practice and this it did a few days ago with the publication of its report Shareholder votes on dividend distributions in UK listed companies: see here (pdf).

The IA's sample contained 628 companies: the constituents of the FTSE All-Share as at 1 January 2018 that held an AGM between 1 December 2017 and 30 November 2018. This sample included 98 FTSE 100 companies, 249 FTSE 250 companies and 281 FTSE SmallCap companies. The IA found that of those companies paying dividends, 22% did not seek shareholder approval. The majority of such distributions were interim dividends: 92% of companies not seeking a shareholder resolution were distributing interim dividends only.

The IA's findings lead it to call on companies to publish a distribution policy, in respect of which the IA will establish a working group to develop best practice guidance. The group will also consider whether there should be a mandatory vote on this policy and/or yearly distributions. The guidance is expected in the autumn this year.


* - See, for example, Article 70 of the Model Articles for Public Companies - available here.

China: guidelines for the articles of association of listed companies

The China Securities Regulatory Commission has issued an updated edition of its guidelines for the articles of association of listed companies. A copy of the new guidelines, in English, is available here (pdf).

Wednesday, 29 May 2019

UK: The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019

The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 were made a few days ago and come into force on 10 June: see here or here (pdf).

The Regulations implement, in part, Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement. More specifically, the Regulations will implement elements of articles 9a ("Right to vote on the remuneration policy") and 9b ("Information to be provided in and right to vote on the remuneration report") of the Directive to the extent that they are not already part of UK law. Further information can be found in the accompanying explanatory memorandum (here, pdf) and transposition note (here, pdf).

Saudi Arabia: CMA publishes amended Corporate Governance Regulations

The Capital Market Authority has adopted an amended edition of its Corporate Governance Regulations: see here (pdf, English). Further information, including related company law changes, is available here.

Tuesday, 28 May 2019

IOSCO consultation report - Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms

The International Organization of Securities Commissions has published a consultation report titled Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms: see here (pdf). The report identifies measures that can be adopted to address the identified risks in the context of the following considerations: access; safeguarding participant assets; conflicts of interest; operations; market integrity; price discovery; and technology.

Friday, 24 May 2019

Belgium: the new 2020 Belgian Code on Corporate Governance

The Corporate Governance Committee has published a new edition of its corporate governance code ("the 2020 Code"): see here (pdf, Dutch), here (pdf, English) or here (pdf, French). The new Code applies to reporting years beginning on or after 1 January 2020, replacing the Code published in 2009. A list, in English, of the changes contained in the new edition is available here (pdf) and a more general summary can be found in the press release available here (pdf, English).

UK: FRC plan and budget 2019/20

The Financial Reporting Council has published its plan and budget for 2019/20: see here (pdf). The work needed to establish the FRC's successor - the Accounting, Reporting and Governance Authority - is the first of five strategic priorities identified.

UK: England and Wales: fraudulent trading and directors' duties

Judgment was delivered by ICC Judge Mullen yesterday in Pantiles Investments Ltd & Anor v Winckler (Rev 1) [2019] EWHC 1298 (Ch). The case concerned claims brought by a liquidator against a company's former director under section 212 ("Summary remedy against delinquent directors, liquidators, etc.") and section 213 ("Fraudulent trading") of the Insolvency Act 1986 (and this involved consideration of the general duties of directors under the Companies Act 2006).

The judgment is noteworthy in providing examples of the breach of section 172 ("Duty to promote the success of company") of the 2006 Act as well as fraudulent trading. The trial judge also recognised, in the context of the fraudulent trading claim under section 213, that the test for dishonesty was as set out by the Supreme Court in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67.

Thursday, 23 May 2019

Australia: perceptions of audit quality among professional investors

The Financial Reporting Council and Auditing and Assurance Standards Board have published a report containing the results of a survey among 47 professional investors of their perceptions of audit quality: see here (pdf). Over 90% of respondents regarded audit quality in Australia as either "average" or "above average" when asked for their overall view of audit quality. This perception of audit quality was influenced by various factors, the three most important being the quality of financial reporting disclosures, reported episodes of fraud within audited companies and the quality of information within the auditor's report.


The report is available on the FRC and AUASB websites. The report I accessed today on the FRC website was watermarked throughout as a 'confidential draft' whereas the report published on the AUASB website was not. The link provided above is to the report on the AUASB website.

IFIAR publishes annual audit inspections survey

The International Forum of Independent Audit Regulators has published its annual inspection findings survey: see here (pdf). IFIAR members from 45 jurisdictions took part in the survey. The survey reports that 37% of the audits of public interest entities inspected by members had at least one "finding" (generally understood to be a significant failure to satisfy the requirements of auditing standards).

Wednesday, 22 May 2019

Germany: new edition of German Corporate Governance Code published

DCGK, the Corporate Governance Code Commission, has today published a new edition of the German Corporate Governance Code: see here. A copy of the new Code, in English, will be published shortly. A press release, in English, explaining the key changes contained in the new Code is available here (pdf).

UK: Draft Registration of Overseas Entities Bill - pre-legislative scrutiny report published

The Joint Parliamentary Committee appointed to conduct pre-legislative scrutiny of the Draft Registration of Overseas Entities Bill has published its final report: see here or here (pdf). The purpose of the Bill is to require all overseas entities owning land in the UK to identify and register information concerning their beneficial owners. The Committee concluded that the Bill is "timely, worthwhile, and, in large part, well drafted" but makes various recommendations for further improvement. A summary of these recommendations is available here.

UK: Scotland: The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2019

The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2019 was made yesterday by the Scottish Ministers and comes into force on 24 May: see here or here (pdf). The accompanying policy note is available here (pdf). The purpose of the Order is to provide that the accounts of ILF Scotland are to be audited by the Auditor General for Scotland.

Tuesday, 21 May 2019

New Zealand: audit quality - perceptions and expectations

The Financial Markets Authority has today published the results of its first research project to explore perceptions of audit quality. Views were sought from investors, directors, managers and auditors. The research reveals very clear differences of opinion - and of expectations - between these groups over (for example) the extent of auditor independence from management, competition and choice in the audit market, and trust in the audit profession. A copy of the report is available here (pdf) and a summary is available here (pdf).

BCBS report on implementation of the Basel III standards

The Basel Committee on Banking Supervision has published its sixteenth report on the implementation of the Basel III standards by member jurisdictions: see here (pdf).

Thursday, 16 May 2019

UK: England and Wales: Ofwat consultation - licencing and mandatory governance requirements

Ofwat - the regulator for the water sector in England and Wales - published its updated Board leadership, transparency and governance principles earlier this year: see here (pdf). These new principles, replacing those first published in 2014, came into force last month. This month - this week, in fact - the regulator announced the start of a consultation in respect of its intention to make several of the new principles mandatory by amending the licences of the largest regulated water companies: see here (pdf).

Wednesday, 15 May 2019

UK: The Proxy Advisors (Shareholders’ Rights) Regulations 2019

The Proxy Advisors (Shareholders’ Rights) Regulations 2019 were laid before Parliament yesterday and come into force on 10 June: see here or here (pdf). The Regulations are accompanied by an impact assessment and explanatory memorandum: see, respectively, here (pdf) here (pdf). The Regulations introduce a new transparency framework for proxy advisors; as the memorandum explains (para. 2.1):
This instrument transposes Article 3j of the revised EU Shareholder Rights Directive (SRD II) into UK law, in line with the UK’s obligations as a member of the EU. Article 3j of SRD II places requirements on proxy advisors, which primarily offer voting services and/or advice to shareholders in publicly listed companies, to make certain disclosures about the way in which they conduct their business". 

Under the framework being introduced by the Regulations, the Financial Conduct Authority will become responsible for enforcing the new requirements placed on proxy advisors, including the obligation to disclose publicly the code of conduct* that has been adopted (with an explanation provided if a code is not adopted). Proxy advisors will be required to notify the FCA if they fall within the new framework and the FCA will maintain a public list.

* - The BPP Group is currently revising its Best Practice Principles for Shareholder Voting Research. The review is expected to be completed next month; an update on the review was published last month: see here.

Tuesday, 14 May 2019

Isle of Man: corporate governance requirements for insurance intermediaries

In November last year, the Isle of Man Financial Services Authority published for consultation a draft corporate governance code for insurance intermediaries: see here (pdf). The consultation closed in January and the IOMFSA has since announced that it will "take account of feedback ... when incorporating the governance requirements proposed in CP18-07/T08 into consolidated regulatory requirements for intermediaries, which will be subject to further consultation in due course".

Monday, 13 May 2019

UK: KPMG Report - Executive Remuneration in AIM Listed Companies

KPMG has published a report surveying executive remuneration in AIM listed companies: see here (pdf). One of the research findings concerned the governance code adopted by such companies. Under Rule 26 of the AIM Rules (here, pdf), AIM listed companies are required to disclose: which governance code the board has decided to apply; how compliance with that code is achieved; and the reasons for any departures from the chose code. The KPMG report notes that, of the 50 largest AIM companies by market capitalisation, 42% have adopted the UK Corporate Governance Code and 58% have adopted the QCA Corporate Governance Code. A different picture is painted when more companies are considered. Research by the QCA published last year, which surveyed all AIM listed companies, found 89% following the QCA Code, 6% following the UK Corporate Governance Code and 5% following other codes: see here.

Friday, 10 May 2019

Singapore: the new variable capital company framework - further consultation

The Variable Capital Companies Act 2018 - setting out a new corporate form in Singapore for investment funds - was passed last year: see here. Last month, the Monetary Authority published a consultation paper concerning further aspects of the new framework, including the criteria that will be used to determine whether a director (or proposed director) of a variable capital company is "fit and proper" to act as such: see here.

Myanmar: recommendations to improve corporate governance practices

A joint report considering the governance of 24 companies has been published by the International Finance Corporation, the Securities and Exchange Commission, the Yangon Stock Exchange and the Directorate of Company Investment and Company Administration: see here (pdf). The report's analysis is based on the ASEAN Corporate Governance Scorecard (here, pdf) and included all of the companies listed on the Yangon Stock Exchange (five in total), four private companies and fifteen public companies. The public and private companies were selected for reasons including economic significance or their potentially becoming listed. It is worth noting that, according to data published earlier this year, the number of companies registered in Myanmar is approximately 61,600.

The report, which surveyed companies before the new Companies Law came into force, notes that governance practices are at a "nascent stage" of development. A large number of recommendations for improvement are made, including the development of a corporate governance code (to operate on the "comply or explain" basis). Other recommendations seek improvements in the quality and quantity of the information that is disclosed; improvements in monitoring and enforcement powers are also suggested.

Thursday, 9 May 2019

UK: England and Wales: directors and officers insurance was capable of recovery through service charge

The Upper Tribunal (Lands Chamber) gave judgment yesterday in Chiswick Village Residents v Southey [2019] UKUT 148 (LC). One of the issues before the Tribunal was whether a lessee was liable to pay, as part of his service charge, an expense to cover the cost of the insurance for those lessees acting as directors of the company owning the freehold. The First-tier Tribunal held that this expenditure could not be included but the Upper Tribunal disagreed. 

The Upper Tribunal held that the provision in the lease covering the insurance expenses that could be recovered as part of the service charge - “Effecting insurance against the liability of the Lessor to third parties and against such other risks and in such amount as the Lessor shall think fit (but not against the liability of individual tenants as occupiers of the flats in the Building).” - could not be given a wide interpretation whereby "the liability of the Lessor" included the liability of its directors and officers. It held, however, that this provision contemplated the Lessor company obtaining insurance against liabilities of persons other than itself and that, in the context of the case, without insurance cover for the directors it would be difficult to find individuals willing to act as such or for the company to function at all.

Wednesday, 8 May 2019

Ghana: The Companies Act 2019

It is now over sixty years since Professor Gower was appointed to chair a commission on company law reform in Ghana, the product of which was the Companies Act 1963. A new company law framework, to replace the 1963 Act, was placed before Parliament last year: the Companies Bill 2018. Media reports suggest that the Bill has been passed and the new company law framework - the Companies Act 2019 - will become law on receiving the President's assent: see here. The Parliament website has yet to be updated with further information.

Australia: ACSI calls for Stewardship Code for all institutional investors

The Australian Council of Superannuation Investors has called for the introduction of a Stewardship Code applying to all institutional investors in Australia, as part of a wider review of the regulatory framework for stewardship: see here (pdf).

UK: The AIC Code of Governance for Investment Companies

A belated post. Earlier this year the Association of Investment Companies published a new edition of its Code of Governance for Investment Companies. Further information about the Code is available here but registration is required to obtain a copy. The Code is intended for UK, Guernsey and Jersey member companies.

Tuesday, 7 May 2019

Malaysia: Securities Commission publishes inaugural corporate governance monitor report

The Securities Commission has published its first corporate governance monitor report: see here. The report provides information on a wide range of governance practices among listed companies, including board diversity and adoption of new best practice recommendations in the 2017 edition of the Malaysian Corporate Governance Code. It notes, for example, that among 930 listed issuers, just under 16% of directors were female and a little over 24% of independent board positions have been held by the same director for more than 9 years.