Tuesday 30 September 2008

UK: Bradford and Bingley plc - another case of regulatory failure?

For the second time the Government has made use of powers in the Banking (Special Provisions) Act 2008 to take a bank into public ownership. In a statement published by the FSA it is explained that Bradford and Bingley's UK and Isle of Man retail deposit business, together with its branch network, have been transferred to Abbey National plc. The remainder of Bradford and Bingley's business is now in public ownership.

In an interview with the UK's Channel4 news the FSA's new chairman, Lord Turner, explained that Bradford and Bingley's business model suffered the same weaknesses as that adopted by Northern Rock.  But where was the FSA?  


Information about the FSA's internal review of its supervision of Northern Rock is available here

Monday 29 September 2008

Hong Kong: Court of Final Appeal recognises the multiple derivative action

Where a subsidiary (or sub-subsidiary) of a parent company has suffered harm, can a shareholder of the parent company bring a derivative action on behalf of the subsidiary? This question has been considered in Waddington Ltd v Chan Chun Hoo Thomas and others [2008] (FACV 15/2007) by the Hong Kong Court of Final Appeal. The Court held that such a derivative action (often known as a double or multiple derivative action) could be brought. In doing so the Court provided what appears to be the first reasoned decision concerning this matter by a higher court in any common law jurisdiction outside of the USA.

Sunday 28 September 2008

UK: financial regulation - Conservative Party's reform proposals

The Conservative Party has published, at the start of its conference in Birmingham, a policy document titled "Reconstruction - our plan for a strong economy". The proposals are many and wide-ranging; they cover the tax system, consumer credit regulation, the housing market and the role of the Bank of England and Financial Services Authority. Amongst the proposals are the following (to quote directly from the report):
  • Improve the system for regulating banks by asking the FSA to tackle irresponsible bonus structures. Institutions that use massive bonuses to encourage short-term reckless risk-taking will have to hold more capital to offset their higher risks. 
  • Improve the quality of regulation by matching the FSA’s new responsibilities with new funding. Financial institutions will have to contribute more funds and skilled secondees to the FSA so that the regulator is more equal to the regulated.
  • Introduce more transparency into the regulation of complex financial instruments and off balance sheet vehicles.
  • Make DBERR the clearing house across Whitehall for all legislation which has a regulatory impact.

Saturday 27 September 2008

UK: guidance - where a private company provides financial assistance for the purchase of its own shares

The Financial Law and Company Law Committees of the City of London Law Society have published a memorandum in which they explain the company law principles to take into account where a transaction involves a private company providing financial assistance for the purchase of its own shares. With effect from 1 October 2008, the giving of such financial assistance by a private company will no longer be unlawful - see here for further information - but, as the memorandum explains, other company law matters remain relevant.

Friday 26 September 2008

Nigeria: review of corporate governance code

The Nigerian Securities and Exchange Commission has announced the formation of a Technical Committee for the Review of the Code of Corporate Governance for Public Companies in Nigeria.  A review of capital market structure and processes is also being undertaken. Further information about both reviews and Committee membership is available here. The Committee reviewing corporate governance has invited comments - see here.

OECD Corporate Governance Principles - new edition likely

The Secretary General of the OECDAngel Gurría, has provided a strong indication that the OECD's Corporate Governance Principles will soon be updated. At a recent conference, against the background of financial crisis, the Secretary General observed that strengthening the rules, regulations and codes of corporate governance was central to rebuilding investor confidence.  

During the next month the OECD is holding meetings with Government representatives, regulators and other stakeholders.  A statement of findings and recommendations will be made following the next meeting of the OECD's Steering Group on Corporate Governance (scheduled for 19 and 20 November).

Europe: Commission proposals for simplification of the EU rules on mergers and divisions

The European Commission has published proposals to simplify the European rules governing mergers and divisions.  A new Directive is proposed which will amend various company law Directives including 77/91/EEC78/855/EEC, 82/891/EEC and 2005/56/EC.  According to the Commission, the proposal is intended, inter alia, to reduce the reporting requirements of companies and avoid double reporting.

For further information see: press release | proposal | regulatory impact assessment

Thursday 25 September 2008

UK: European Commission requests that the UK properly implement M&S v Halsey, C-446/03, ECJ

The European Commission has requested that the UK Government properly implement the European Court of Justice's decision Marks and Spencer plc v Halsey (Case C-446/03). The Commission notes that although the UK has amended its legislation in the light of the ECJ's decision, conditions are still imposed on the availability of cross border group relief which make it impossible or virtually impossible for a UK parent company to obtain tax relief in respect of losses incurred by a subsidiary in another Member State. For further information click here.

Wednesday 24 September 2008

UK: England and Wales: winding-up in the public interest - Re Tag World judgment now on BAILII

A copy of Re Tag World Services Ltd. and Club Labourse Travel Ltd. [2008] EWHC 1866 (Ch), noted in this earier post, is now available here on BAILII. The case concerned an application under Section 124A of the Insolvency Act (1986) by the Secretary of State for the Department of Business, Enterprise and Regulatory Reform.

Europe: Parliament votes on hedge funds and private equity

Members of the European Parliament yesterday voted to make a formal request to the European Commission to develop legislation concerning the regulation of financial markets, hedge funds and private equity investors. Further information is available in the European Parliament's press release, in which it is stated: 

Parliament wants more transparency on voting by hedge funds in general meetings, calling for exploration of whether intermediaries should be obliged to enable original shareholders to participate actively in voting. It wants to see a code of practice on how to rebalance corporate governance structures to reinforce a long-term orientation. MEPs ask for an investigation of securities lending and voting on borrowed shares. It also asks whether reporting requirements should apply to cooperation agreements between several shareholders".


[1] The texts adopted by the European Parliament are available here and here (these links were added on 25 September)

[2] On 22 September, Internal Market Commissioner McCreevy delivered a short speech addressing some of the issues addressed by the European Parliament, particularly concerning hedge funds and private equity.

[3] A short report on the European Parliament's vote, from the International Herald Tribune, is available here.

UK: directors' delegation and the submission of a VAT return

Can the illness of a company's bookkeeper or accountant provide a reasonable excuse for the failure of a company to submit its VAT return on time?  Is it reasonable for a company's directors to delegate whole responsibility for VAT compliance to another? These questions were recently considered in Ivis Group Ltd v Revenue & Customs [2008] UKVAT V20787 by the UK VAT and Duties Tribunal

The Tribunal rejected the argument that it was not reasonable wholly to delegate VAT compliance to another. It held, however, that the fact that a company had delegated responsibility did not provide a reasonable excuse for the failure to submit a VAT return on time. It was reasonable, the Tribunal found, to expect the company to have checked that the VAT return was submitted on time.

Tuesday 23 September 2008

Ukraine: new joint stock companies law

The UK's Guardian newspaper, relying on the Reuters news agency, has reported that Ukraine's Parliament has passed a new joint stock companies law. According to the report, "[t]he law will regulate the creation of joint stock companies, the rights and obligations of shareholders and management, the payment of dividends and access to information".

Further information is available in this presidential announcement from the American Chamber of Commerce in Ukraine

Note (27 September 2008): the Guardian report is no longer available.

Update (2 October 2008): the Ukrainian president has not yet approved the new Act - see this report

Monday 22 September 2008

Europe: proposed codification of the Second Council Directive 77/91/EEC

The European Commission has published a proposal for the codification of the Second Council Directive 77/91/EEC (13 December 1976) on the coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent.

UK: England and Wales: the statutory derivative action - Franbar judgment available on BAILII

BAILII now contains a copy of the judgment Franbar Holdings Ltd v Patel and others [2008] EWHC 1534 (Ch), in which the High Court considered the operation of the statutory derivative action introduced by Part 11 of the Companies Act (2006). This is one of the first reported cases concerning the operation of the statutory derivative action. Although not a full trial of the various claims, Franbar is nevertheless important because it provides (a) clarification regarding ratification and (b) insights concerning the relationship between the new statutory derivative action and the unfair prejudice remedy in Section 994. Further information is available in this earlier post.

UK: bankers' pay and the FSA

Bank reward structures continue to be the focus of attention as the causes of the turmoil in the financial markets are debated. In an interview on BBC Television - reported here in the Guardian and here in the Financial Times newspaper - the Prime Minister, Gordon Brown, observed: "I think there's an element of the bonus system that is unacceptable … When you have got a bonus on your salary based on short-term deals that has no relationship to long-term profits, you have got to look again at what that system is doing".

Legislation appears unlikely. Closer scrutiny is, instead, expected by the FSA and has, in fact, been likely for some time (see here).  Indeed, the FSA's new chairman, Lord Turner, is reported in the Financial Times as saying: "There are some very important issues to be questioned about the time periods over which bonuses are paid out, the information on which they are measured ... These are legitimate issues for regulators to be quizzing banks about". These are, of course, questions for the boards of banks and the role of bank directors will, in this regard, come under scrutiny in the coming months. 

Update (22 September 2008): today the Chancellor has, in his speech to the Labour Party Conference, commented on his intention to examine bonuses: click here to listen (download in MP3 available here). For further comment about the role of shareholders and the remuneration committee, see here

Friday 19 September 2008

UK: England and Wales: stay of proceedings - the director/shareholder as employee

Earlier this year, in Neufeld v A & N Communications in Print Ltd & Secretary of State for BERR [2008] UKEAT 0177_07_1104, His Honour Judge McMullen QC held that a 90% majority shareholder was an employee for the purposes of Section 230 of the Employment Rights Act (1996). As such the shareholder qua employee was able to benefit from Section 182 of the 1996 Act following the company's insolvency in order to claim redundancy, notice and holiday pay from the Secretary of State (the payments coming from the National Insurance Fund).  

The Secretary of State appealed. The Court of Appeal will hear the appeal in early December. Meanwhile, a stay of all proceedings concerning "the circumstances in which a director and majority shareholder of a company may be regarded as an employee for the purpose of a claim against the Secretary of State pursuant to Section 182 of the Employment Rights 1996 as statutory guarantor for certain categories of debts owed to employees, but unsatisfied on the insolvency of an employer" has been announced pending the Court of Appeal's decision. Click here for further information.  

Note: HHJ McMullen QC relied upon the guidance provided by the President of the Employment Appeal Tribunal in Clark v Clark Construction Initiatives Ltd & Anor [2008] UKEAT 0225_07_2902 (noted here). 

Thursday 18 September 2008

UK: FSA bans short-selling of the shares of quoted financial institutions

In an attempt to promote more orderly markets, the UK's Financial Services Authority has introduced, with effect from midnight tonight, a ban on the short-selling of shares in quoted financial institutions. In addition, and with effect from 23 September, daily disclosure will be required of all net short positions in excess of 0.25% of the ordinary share capital of such companies on the previous working day. These rules are being introduced in the FSA's Code of Market Conduct and will remain in force until 16 January 2009 (although they will be reviewed in 30 days' time).  A comprehensive review on short selling will be published in January 2009. 

According to the FSA's chief executive, Hector Sants:

While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector".

Note: in the USA, the SEC has introduced further rules governing naked short-selling - click here for the SEC press release. These rules introduce a permanent ban on the abusive naked short selling of all listed stocks, described by the SEC as:

In an ordinary short sale, the short seller borrows a stock and sells it, with the understanding that the loan must be repaid by buying the stock in the market (hopefully at a lower price). But in an abusive naked short transaction, the seller doesn't actually borrow the stock, and fails to deliver it to the buyer. For this reason, naked shorting can allow manipulators to force prices down far lower than would be possible in legitimate short-selling conditions".

Update (19 September 2008): the FSA has published the list of institutions to which the rules apply - see here.  The amendments to the Code of Market Conduct have been published here.

Update 2 (19 September 2008): the Australian Securities Exchange has announced that naked short selling will be prohibited from the opening of trading on 22 September. 

Update 3 (26 September 2008): the FSA has published FAQs here.

Europe: legislation under review

In a speech delivered this week at the annual dinner of the Quoted Companies Alliance, European Commissioner Charlie McCreevy outlined work currently being undertaken concerning the operation of the Prospectus, Transparency and Market Abuse Directives. In this regard, Mr McCreevy observed:

We are currently carrying out an evaluation of the functioning of the EU Prospectus regime, five years after it was put in place. Overall, our assessment is positive; however, we have identified a number of areas where the regime does not work as efficiently as we would like. Also we have found a number of unintended consequences nobody thought about when the text was agreed. Employee shares schemes are one example. But there are others. These are the areas where we want to propose changes to reduce the administrative burden on issuers, without lowering investor protection standards.

One thing that we have heard so far is that the way Member States have implemented the [Transparency] Directive has not helped. My services are currently conducting research on the extent of the national gold plating. The preliminary findings show that problems with the Directive may not always be Brussels' fault. Interestingly, in the UK there are some slightly more stringent transparency measures in place because some obligations from a previous regime were maintained when transposing the Directive. Actually, when they were consulted, market participants had expressed a preference for the older rules they already knew. So, the UK chose to listen to market participants and did not to take all the opportunities for simplification offered by the Directive.

At the moment, we are commissioning an independent study on the way in which the Transparency Directive operates in practice. A survey on stakeholders' perceptions will be an important component of this study. And we will be listening carefully to smaller quoted companies. This study will help the Commission evaluate the Directive in 2009. I hope that it will help us identify any problems and how best to address them.

Our review of the Market Abuse Directive is well underway. It will look at the efficiency of the Market Abuse framework and, more precisely, its scope of application, insider dealings, market manipulations, the powers of national administrative authorities and the sanctioning process. This review will give us an excellent opportunity to simplify some provisions of the Directive".

Note: Research undertaken by the Commission concerning the operation of the Prospectus Directive was published in June and is available here.

Wednesday 17 September 2008

UK: London Stock Exchange Admission and Disclosure Standards - changes

The London Stock Exchange has, today, published a Notice (N11/08) which explains that changes are to be made to the Admission and Disclosure Standards with effect from 1 October 2008. The changes are noted in this Notice attachment and copies of the revised Standards will be available here on 1 October.

Sweden: takeovers and equality of treatment for shareholders - ICGN position

The ICGN has published its letter to the chairman of the Näringslivets Börskommitté with regard to the latter's review of shareholder equality during takeovers. In its letter the ICGN explains its concern that shareholders facing the same level of economic risk, but with greater voting rights, can receive a higher price for their shares. The ICGN notes:

We recognise that in most takeovers of companies listed on the Stockholm Stock Exchange shareholders with the same economic rights in the company do get equal treatment. However, that this is not always the case does suggest that the rules need to be fine-tuned. Doing so should provide some confidence to shareholders, both Swedish and foreign, that their interests are protected in takeover and other acquisition situations. This is not a substitute of applying the principle of proportionality".

Tuesday 16 September 2008

UK: banking reform - Treasury Committee report published

The House of Commons Treasury Committee has today published its Banking Reform Report (HC 1008) - available here (PDF) and here (HTML). The report makes many recommendations, against the background of the Government's proposals, with regard to depositor protection, the proposed Financial Stability Committee of the Bank of England and the operation of the Financial Services Authority with regard to failing financial institutions. A summary is available here.  

With regard to the functioning of the Tripartite Authorities (the Bank of England, HM Treasury and the FSA) the report notes:

New legislation must not be seen as a panacea for the failings within the Tripartite arrangements. Practical steps must be taken in parallel with the creation of the new legislative framework. In particular—
  • The FSA must continue to strengthen its capacity to regulate to reduce the need for the use of the Special Resolution Regime;
  • The Tripartite authorities must develop an effective external communications strategy to help to secure public and market confidence in the exercise of their new powers; and
  • Depositor protection arrangements must be developed which will function smoothly and effectively in the event of a bank failure, including in the event of the failure of a European Economic Area (EEA) bank with a branch or branches in the United Kingdom".
Elsewhere there has been criticism of the Government's proposals: see here and here.

USA: Securities Act (2008) passed by House of Representatives

The House of Representatives has passed the Securities Act (2008), which now proceeds to the Senate Committee on Banking, Housing, and Urban Affairs for consideration. The Act makes amendments to the Securities Act (1933), Securities Exchange Act (1934), and the Investment Company Act (1940). Its purpose is to provide the SEC with increased enforcement powers and to increase investor protection. The Act will, for example, give the SEC authority to obtain financial penalties from wrongdoers in administrative proceedings without the need to file a separate civil action.

Monday 15 September 2008

UK: pension fund engagement with companies - NAPF survey

The UK based National Association of Pension Funds has published its 2008 survey of pension fund engagement with companies. The NAPF surveyed pension funds managing more than £1 billion and received responses from 53 funds (with combined asset holdings of over £300 billion). The NAPF reports that pension funds are increasing their influence over companies and highlights the following findings:

Board Membership: 74% of pension funds had seen changes to board membership as a result of their engagement activities - up from 67% in 2007.

Company strategy: 69% saw changes to company strategy - up from 57% in 2007.

Remuneration Policy: 79% of respondents saw changes to remuneration policy - up from 74% in 2007.

Social/Environmental policy: 68% of funds reported making an impact on social/environmental policy - up from 51% in 2007.

A press release is available here.

UK: BERR consultation on proposed changes to the European Works Council Directive (94/45/EC)

Earlier this year the European Commission published proposed changes to the European Works Council Directive (94/45/EC). The Department for Business, Enterprise and Regulatory Reform has now published a consultation paper with regard to the Commission's proposals, the closing date for responses being 6 October 2008. This does not provide much time; the reasons for this short consultation period are explained in the consultation paper (p. 3):

The French Presidency and the European Commission are seeking political agreement from the Member States and the European Parliament on the revision of the EWC Directive by December 2008. The Commission's proposals will therefore be subject to early and detailed consideration by the Council this autumn, starting with Working Group meetings scheduled for mid-September".

Saturday 13 September 2008

UK: Companies House - new guidance booklets published

Companies House has recently published two updated guidance booklets: Resolutions and meetings (version 6) and Cross-border mergers (version 2). Other booklets can be accessed here.

Note (added 15 September 2008): the above links will take you to HTML versions of the booklets. The PDF version of the "Resolutions and meetings" booklet does not appear to have been updated.

Friday 12 September 2008

New Zealand: finance company failures and corporate governance

Earlier this month Jane Diplock, the chairman of New Zealand's Securities Commission, delivered a speech titled "Securities Commission and Corporate Governance". The speech provides a brief overview of the development of New Zealand's Corporate Governance Code and highlights the Commission's recent and ongoing work in this field. The speech provides examples of poor governance in failed finance companies and in this regard it is stated:

There is no common thread across all finance companies, but there are a range of aspects where good governance was lacking. As you will appreciate with investigations underway I cannot be specific but I would like to share with you some general themes evident in the troubled finance companies".

Note: Click here for a copy of "Corporate Governance in New Zealand: Principles and Guidelines". A handbook is available here.

Thursday 11 September 2008

UK: Guardian executive pay survey published

The UK's Guardian newspaper has published its 2008 survey of executive pay.  This confirms the trends in FTSE100 company directors' pay reported in earlier posts (e.g., here), particularly with regard to the increasing gap between directors of the largest and smallest companies in the FTSE100 index. The survey found a decline in the average remuneration of chief executives (down to £ 2.8 million from £ 2.9 million in the previous year) and other executive directors (a fall from £ 1.8 million to £ 1.4 million).

UK: FSA - International Regulatory Outlook, 2nd edition published

The UK's Financial Services Authority has published the second edition of International Regulatory Outlook. The second edition focuses on regulatory cooperation and considers whether a case can be made for institutional reform in European financial services regulation.  It also contains a short explanation of the FSA's position vis-a-vis the European Commission's proposals for greater regulation of credit rating agencies.

Wednesday 10 September 2008

Europe: McCreevy calls on Member States to provide shareholders with 'say on pay'

At yesterday's Transatlantic Corporate Governance Dialogue conference, the theme of which was "Corporate Governance Standards and Financial Stability", Internal Market Commissioner McCreevy delivered a keynote speech in which he spoke about risk management, market transparency and remuneration. With regard to remuneration, Commissioner McCreevy observed:

I think that in the light of recent events, Member States that have not yet done so, should reconsider their policy and ensure that shareholders can vote on the remuneration criteria of board members. A say on this issue would go a long way towards increasing or restoring shareholder confidence. It would force boards to do a whole lot more explaining than is done at present. In particular, shareholders will then be able to understand whether executive pay is linked to performance, whether it should be linked to performance or indeed, express their disapproval at a compensation package.

What we currently have is a situation where shareholders behave too much like shrinking violets - unwilling, unable but most of all unequipped - to curb corporate excesses. Shareholders should push their Member States to have a vote on this issue as laid down in the Commission Recommendation".

Tuesday 9 September 2008

UK: executive directors' remuneration in the FTSE350 - Deloitte report published

Deloitte has published its annual survey of executive directors' pay within the FTSE350. The report is not available online but the accompanying press release provides a good summary (along with details of the sample and data sources). The report indicates that the median salary increase was 6.2%, compared with 7% a year ago. It also provides further evidence of the increasing differential in remuneration and incentives between the largest and smallest companies within the FTSE100. 

Note: a copy of the report can be requested here. The report is not, however, available to professional services firms or individuals - the website states "corporate applications only" - but it's unlikely that those working for educational institutions will be refused a copy.

USA: institutional ownership of US stocks

Research highlighting the changes in ownership of the shares of the USA's largest 1000 companies has been published by The Conference Board. The research indicates that institutions - pension funds, investment companies, insurance companies, banks and foundations - now own over three quarters of the stock in such companies.  In 1987 less than half of the stock of these companies was owned by institutions. A summary of the research is available here.


[1] The Conference Board's research has been reported here by the UK's Financial Times newspaper.

[2] Click here for data concerning the ownership of listed company shares in the UK.  

Monday 8 September 2008

Ireland: the derivative action

Several Irish company law cases have recently been placed on BAILII and one has caught my eye: Fanning v Murtagh & Ors [2008] IEHC 277. This case is of interest because it concerned a derivative action brought in respect of a company listed on the London Stock Exchange's Alternative Investment Market. Shareholder litigation of this kind, brought in respect of a listed company, is unusual. Indeed, derivative actions against public companies in the UK are rare (see, e.g., A. Reisberg, Derivative Actions and Corporate Governance, OUP, 2007, p. 204). 

The trial judge, Ms. Justice Irvine, held that it would not be prudent or in the interests of the company for the derivative action to proceed. Her decision is nevertheless noteworthy because it considers many important issues concerning the operation of the derivative action in Ireland. It was argued that there was a fifth exception to the rule in Foss v Harbottle (1843) 2 Hare 461 [about which see here] where the "justice of the case so requires it".  This was rejected. 

With regard to procedural matters, the trial judge observed that the Rules of the Superior Courts do not provide any mandatory procedure in respect of the derivative action.  Her decision begins to fill this lacuna. With regard to the appropriate burden of proof, she observed:

[it] is for the plaintiff to establish to the Court that he has a realistic prospect of success, not based upon any assumption that he has an arguable case in support of the conduct alleged [as suggested in Keane's Company Law, 4th ed., Dublin, 2007], but based upon the extent of the evidence laid before the Court on the leave application and preferably supported by counsel’s opinion ..."

Friday 5 September 2008

Sovereign wealth funds: generally accepted principles and practices

Earlier this month the International Working Group of Sovereign Wealth Funds (IWG) reached preliminary agreement on a draft set of Generally Accepted Principles and Practices (GAPP). Mr. Hamad al Suwaidi, Co-Chairman of the IWG, described the GAPP as providing "a voluntary framework that guides the appropriate governance and accountability arrangements as well as the conduct of appropriate investment practices by sovereign wealth funds". The GAPP will be presented to the International Monetary Fund's International Monetary and Financial Committee in October and are likely to be published thereafter.

Update (22 October): the Principles are available here

UK: gender diversity on FTSE100 boards

The UK's Equality and Human Rights Commission has published a survey of the proportion of women in positions of power and influence, including FTSE100 companies. The survey reports that women hold 11% of FTSE100 directorships. Click here for a related post concerning Canada and here for a post concerning Norway. 

Thursday 4 September 2008

UK: England and Wales: the criminal liability of unincorporated associations

The Court of Appeal has recently explored several issues surrounding the criminal liability of unincorporated associations in R v RL and JF [2008] EWCA Crim 1970, [2008] WLR (D) 299. The case concerned a prosecution under Section 85(1) of the Water Resources Act (1991), which provides that it is an offence of strict liability for a person to cause or knowingly commit any poisonous, noxious or polluting matter or any solid waste matter to enter controlled waters. The Court of Appeal held that a prosecution for the offence in Section 85(1) could be brought against an unincorporated association and its members. In the course of his composite judgment, Hughes LJ observed (para. [29]):

Whether or not it be true that the presence of differing kinds of statutory provision in some Acts has inhibited the prosecution of unincorporated associations in their absence, the definition in the Interpretation Act is of general application. To assert that a contrary intention appears from the absence of a specific statutory provision amounts to depriving that definition of its generality. We conclude that the judge was right in his first decision. The prosecution of the club was permissible in law. The definition of ‘person' in the Interpretation Act 1978 applied and no contrary intention appeared.

Note: the case is not yet available on BAILII but a summary has been provided here by the ICLR as part of its free WLR Daily service (this summary will be removed when the case is reported in one of the ICLR series of law reports).

Update: the case is now available on BAILII - click here

Wednesday 3 September 2008

UK: directors' pensions - TUC survey published

The UK's Trades Union Congress has published its sixth annual PensionsWatch survey (prepared on its behalf by PIRC).  The survey analyses the pension arrangements of 346 directors from 102 companies (drawn from the FTSE100 and other large employers). The report's introduction states:

In the debate about executive remuneration, attention has tended to focus on the pay and bonuses that directors receive. Pensions are also an important part of these executive remuneration packages but can be the most opaque element, with limited information available in the public realm. The TUC maintains that pensions should be subject to the same level of scrutiny as other parts of directors' benefits packages. Investors need clear information about executive remuneration as a whole, including pensions, in order to effectively scrutinise company pay and benefits policies and hold boards of directors to account.

The TUC launched PensionsWatch in 2003 in order to track the pensions of directors and staff at the top firms in the UK. The central aim of the project is to give an insight into pensions provision at some of the biggest companies, with an emphasis on directors’ benefits. The project focuses on establishing the nature and level of pensions provision made available to directors, and examining whether there are elements of differential treatment for directors and other employees".

Note: the 2007 survey is available here.

UK: the FSA and insider dealing

The FSA's Director of Enforcement, Margaret Cole, recently delivered an after dinner speech on the subject of insider dealing at the Cambridge International Symposium on Economic Crime.  The speech, which began light heartedly with Ms Cole's observations on her early studies of company law, proceeded to outline the FSA's approach to insider dealing. In the course of her speech Ms Cole noted:

Since the start of this year we’ve commenced 3 criminal prosecutions for insider dealing and we have several more cases under investigation. And some of you may have seen that a few weeks ago we carried out a major search and arrest operation involving 10 premises and 8 individuals. We’re determined to use all our powers to investigate and gather evidence to bring the right cases. We know that this is a long term plan – we won’t clean up the markets overnight. We need to prosecute a steady stream of cases demonstrating by our visible activity that the FSA means business"

Tuesday 2 September 2008

USA: the constitutionality of the Public Company Accounting Oversight Board

The Public Company Accounting Oversight Board was created by the Sarbanes-Oxley Act (2002) to oversee the auditors of public companies. The PCAOB's duties include registering public accounting firms; establishing auditing, quality control, ethics, independence and other standards relating to public company audits; conducting inspections, investigations and disciplinary proceedings of registered accounting firms; and enforcing compliance with the Sarbanes-Oxley Act (2002).

The constitutionality of the PCAOB was challenged in a recent case (Free Enterprise Fund and Beckstead and Watts LLP v PCAOB et. al., No. 07-5127, 22 August 2008) before the Court of Appeals for the District of Columbia Circuit.  It was argued that Sarbanes-Oxley (2002) violated the Appointments Clause of the Constitution and separation of powers because it did not permit adequate Presidential control of the PCAOB. By majority the court rejected these arguments. The following summary of the majority view is taken from the judgment:

We hold, first, that the Act does not encroach upon the Appointment power because, in view of the Commission’s comprehensive control of the Board, Board members are subject to direction and supervision of the Commission and thus are inferior officers not required to be appointed by the President.  Second, we hold that the for-cause limitations on the Commission’s power to remove Board members and the President’s power to remove Commissioners do not strip the  President of sufficient power to influence the Board and thus do not contravene separation of powers, as that principle embraces independent agencies like the Commission and their exercise of broad authority over their subordinates".

Monday 1 September 2008

UK: limited partnership reform - DBERR consultation paper published

In November 2003 a joint report (Law Com No 283; Scot Law Com No 192) concerning the reform of partnership law was published by the English and Scottish Law Commissions. Although the Government does not plan, at present, to implement the Commissions' recommendations with regard to general partnerships, changes to the law governing limited partnerships have been proposed by the Department for Business, Enterprise and Regulatory Reform in a consultation paper published last week. 

DBERR's aim is to remove doubts about the operation of limited partnerships and to produce a coherent body of law relating to them. The consultation paper contains recommendations falling within the following categories:
  • The establishment, registration and de-registration of a limited partnership.
  • The liability of limited partners to third parties.
  • The rights and obligations of general and limited partners in a limited partnership.
The consultation paper contains a draft of the The Legislative Reform (Limited Partnerships) Order 2009 and The Companies Act 2006 (Index of Company Names and Consequential Provisions relating to Limited Partnerships Act (1907) Order 2008.