Thursday, 15 July 2021

Hong Kong: winding-up and dispositions of property - Court of Final Appeal considers section 182

Rather belatedly, I note a significant decision of the Court of Final Appeal from earlier this year - Hsin Chong Construction Company Ltd v Build King Construction Ltd [2021] HKCFA 14 - which provides important guidance on the operation of section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance. Section 182 provides that "In a winding up by the court, any disposition of the property of the company, including things in action, and any transfer of shares, or alteration in the status of the members of the company, made after the commencement of the winding up, shall, unless the court otherwise orders, be void". 

The Court of Final Appeal held, amongst other things, that the section's purpose was to preserve the company's property for distribution and, in deciding whether a disposition should be validated, the interests of the general body of creditors was of central importance. The analysis of the trial judge and Court of Appeal was rejected.  A summary of the decision, in English, is available here

Wednesday, 14 July 2021

Ireland: The Companies (Rescue Process for Small and Micro Companies) Bill 2021 - an update

The Companies (Rescue Process for Small and Micro Companies) Bill 2021, the purpose of which is to amend the Companies Act 2014 in order to introduce a new rescue process for small and micro companies, was introduced in the Dáil Éireann last month. A copy of the Bill, as introduced, is available here. Yesterday the Bill completed its passage through the Seanad Éireann and will become law on receiving the assent of the President. The explanatory memorandum published to accompany the Bill is available here (pdf). A copy of the Act will be published here in due course.

UK: FRC report - key facts and trends in the accountancy profession

The Financial Reporting Council has today published the latest edition of its annual publication Key Facts and Trends in the Accountancy Profession: see here (pdf). The report notes - and this comes as no great surprise - that only the 'Big Four' firms now undertake the external audits of FTSE100 companies. The report notes, nevertheless, that there has been an increase in the number of FTSE250 external audits completed by firms other than the 'Big Four'.

Tuesday, 13 July 2021

UK: England and Wales: company litigation, non-party costs orders and company directors

Judgment was delivered today by the Court of Appeal in Goknur Gida Maddeleri Enerji Imalet Ithalat Ihracat Ticaret Ve Sanayi AS v Aytacli [2021] EWCA Civ 1037. The decision is noteworthy because of what is said about the circumstances in which, under section 51 of the Senior Courts Act 1951, a director of a company may be personally liable for some - or all - of the company's costs liabilities in unsuccessful litigation.

Lord Justice Coulson delivered the only reasoned judgment (with which Dingemans and Lewison LJJ agreed) in which, after setting out a summary of the guidance provided by cases (para. [40]), he stated: "...without being in any way prescriptive, the reality in practice is that, in order to persuade a court to make a non-party costs order against a controlling/funding director, the applicant will usually need to establish, either that the director was seeking to benefit personally from the company's pursuit of or stance in the litigation, or that he or she was guilty of impropriety or bad faith. Without one or the other in a case involving a director, it will be very difficult to persuade the court that a s.51 order is just" (para. [41]).

UK: PRA statement on shareholder distributions by the largest banks

The Prudential Regulation Authority has, today, published an update in respect of its approach to distributions by the UK's largest banks: see here (pdf). The statement, which is made alongside the publication the latest Financial Stability Report from the Financial Policy Committee, notes that banks remain well capitalised and resilient; it is noted, too, that the level of uncertainty, while considerable, has reduced. As such, the PRA has decided to remove, with immediate effect, the additional restrictions (known as the extraordinary guardrails) put in place last year in respect of bank distributions.