New Zealand: first reading for Companies and Limited Partnerships Amendment Bill

The Companies and Limited Partnerships Amendment Bill has received its first reading: see here. The Bill provides, amongst other things, for the criminalisation of certain breaches of directors' duties (see clause 4) and the requirement for New Zealand registered companies to have a resident agent (responsible for reporting and recording keeping obligations) if they do not have a director who lives in New Zealand or in a country in which New Zealand judgments imposing regulatory fines can be enforced (see subpart 2 of the Bill). The explanatory note accompanying the Bill is available here.

UK: England and Wales: agency - acting for competing principals

The Court of Appeal gave judgment last Friday in Rossetti Marketing Ltd & Anor v Diamond Sofa Company Ltd [2012] EWCA Civ 1021. The case contains, amongst other things, some interesting discussion regarding the circumstances in which an agent may act for competing principals (at paras. [22], [23] and [27], per Lord Neuberger MR):

An agent can act for two principals with conflicting interests in two types of case. The first is, as already indicated, where both principals agree. In such a case, it is for the agent to show that the principal not merely consented, but that the consent was given on a fully informed basis – i.e. that the agent had made full disclosure to the principal – see per Tuckey LJ in Hurstanger Ltd v Wilson [2007] EWCA Civ 299, [2007] 1 WLR 2351, para 35 ... The second type of case where an agent can act for competing principals is where, as in Kelly [1993] AC 205, the principal must have appreciated that the nature of the agent's business (in that case a residential estate agent) is 'to act for numerous principals'. More generally, I agree ... that, particularly as 'estate agents are only imperfectly agents and are known to act for many principals', it is highly questionable whether the reasoning in Kelly [1993] AC 205 should be extended to other cases of agency, at least in the absence of clear evidence to support such an extension".

Europe: ESMA responds to Commission's shadow banking green paper

The European Securities and Markets Authority has published its response to the European Commission's green paper on shadow banking: see here (pdf). Amongst other things, ESMA argues that the definition of shadow banking adopted by the Commission should be more focused on activities rather than with the entity performing the activity.

UK: LIBOR and the Wheatley Review

HM Treasury has published further information about the review of LIBOR to be undertaken by Martin Wheatley, the chief executive designate of the new Financial Conduct Authority and current head of the Conduct of Business Unit at the Financial Services Authority: see here. A discussion paper will be published on 10 August and Mr Wheatley's report is expected by the end of the summer in order to permit the Government to include, if necessary, legislative changes in the Financial Services Bill currently before Parliament.

UK: England and Wales: restructuring, exit consent and the limits of majority power

Mr Justice Briggs, sitting in the High Court, gave judgment last Friday in Assenagon Asset Management SA v Irish Bank Resolution Corporation Ltd [2012] EWHC 2090 (Ch). His decision is important and potentially far reaching. It is the first English law authority to consider the operation of a so-called exit consent mechanism in debt restructuring. Broadly put, the purpose of an exit consent mechanism is to deal with creditor holdout where an issuer proposes to restructure its existing debt. Existing bondholders may, for example, be invited to accept replacement bonds whilst also voting to amend the terms of the existing bonds in a way that reduces (or destroys) their value. Pressure is thereby put on minority bondholders to accept the issuer's offer not least because it is difficult for them to know how other bondholders will vote.

Whilst courts in other jurisdictions have considered the use of exit consent techniques in relation to purported duties of good faith owed by the issuer to the bondholders (see, e.g., Katz v Oak Industries Inc. (1986) 508 A.2d 873 in Delaware), what makes the current case of interest is that argument centred on the power of the majority bondholders to bind the minority. Mr Justice Briggs held that this power was not unlimited, referring to English authorities where limitations have been recognised on the power of a majority to bind a minority within a class. He accepted that it was not lawful for a majority bondholder to use its voting power to "lend its aid" to the coercion of a minority by voting for a resolution under which the minority's rights were expropriated for nominal consideration and, with regard to the the coercive use of exit consent techniques, he stated (at paras. [84] - [86]):

The exit consent is, quite simply, a coercive threat which the issuer invites the majority to levy against the minority, nothing more or less. Its only function is the intimidation of a potential minority, based upon the fear of any individual member of the class that, by rejecting the exchange and voting against the resolution, he (or it) will be left out in the cold. This form of coercion is in my judgment entirely at variance with the purposes for which majorities in a class are given power to bind minorities, and it is no answer for them to say that it is the issuer which has required or invited them to do so. True it is that, at the moment when any individual member of the class is required (by the imposition of the pre-meeting deadline) to make up his mind, there is at that point in time no defined minority against which the exit consent is aimed. But it is inevitable that there will be a defined (if any) minority by the time when the exit consent is implemented by being voted upon, and its only purpose is to prey upon the apprehension of each member of the class (aggravated by his relative inability to find out the views of his fellow class members in advance) that he will, if he decides to vote against, be part of that expropriated minority if the scheme goes ahead. Putting it as succinctly as I can, oppression of a minority is of the essence of exit consents of this kind, and it is precisely that at which the principles restraining the abusive exercise of powers to bind minorities are aimed".

Update (3 August 2012): the ICLR has published a summary of the judgment here.

USA: the 10th anniversary of the Sarbanes-Oxley Act

Ten years ago today the Sarbanes-Oxley Act was signed into law by President George W. Bush. The anniversary was the subject of a short hearing last week held by the Committee on Financial Services. Written evidence, with some comments on the JOBS Act which was passed into law earlier this year, is available here. A webcast of the hearing is available here.

UK: FSA Remuneration Code - FSA consults on revised proportionality guidance

The Financial Services Authority has published for consultation revised guidance on proportionality in respect of the Remuneration Code (SYSC 19A) and Pillar 3 disclosures on remuneration (BIPRU 11): see here (pdf). A new framework is proposed, replacing the current four tier structure (based on capital resources) with one containing three levels based on total assets.

Europe: Commission report on the Takeover Directive

The European Commission's report on the operation of the Takeover Directive (2004/25/EC) has been published: see here (pdf). The report draws upon the results of an external study which considered, amongst other things, the implementation of the Directive. The study is available here (pdf) with a couple of annexes published separately and available here (pdf) and here (pdf).

The Commission has concluded that, in general, the regime created by the Directive is working satisfactorily. Amendments are, however, suggested in order to improve legal certainty and the effective exercise of minority shareholder rights. It is, for example, suggested that the concept of 'acting in concert' could be further clarified and that a further investigation is needed to consider how minority shareholders are protected within the Member States where there has been a derogation in respect of the mandatory bid rule.

UK: The Greenhouse Gas Emissions (Directors’ Reports) Regulations 2013

The Government has published for consultation a draft of the Greenhouse Gas Emissions (Directors’ Reports) Regulations 2013: see here (pdf). The Regulations will require quoted companies (as defined by section 385(2) of the Companies Act 2006) to report on their greenhouse gas emissions in the directors' report.

A consultation paper accompanies the draft Regulations: see here (pdf). The paper seeks views on various matters including, for example, the date on which companies should be required to begin reporting on greenhouse gas emissions: for reporting years ending after 6 April 2013 or at the same time as the Government's proposed new narrative reporting framework takes effect (reporting years ending after 1 October 2013). The paper also explains, in the light of the likely changes to the narrative reporting framework, that the reference in the Regulations to the directors' report may well be amended.

UK: Parliamentary Commission on Banking Standards - call for evidence

The Parliamentary Commission on Banking Standards has published a very wide-ranging call for evidence, including many governance related matters: see here. The deadline for responses is 24 August, a tight deadline necessitated by the fact that the Commission has been asked to make any legislative proposals no later than 18 December this year.

UK: England and Wales: restoration to the register and the effect of section 1032

Section 1032(1) of the Companies Act 2006 provides that the "... general effect of an order by the court [under section 1029] for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register". Yesterday* the Court of Appeal gave judgment in Peaktone Ltd v Joddrell [2012] EWCA Civ 1035. The principal question before the court concerned the effect of section 1032(1) and whether it operated to retrospectively validate an action purportedly commenced by or against a company during the period of its dissolution. The court unanimously held that it did.

* - The judgment appeared on BAILII yesterday although it bears today's date.

Update (27 July 2012): a summary of the decision has been published by the ICLR - see here.

EU: manipulating benchmarks - Commission amendments to market abuse proposals

Last October the European Commission published proposals for a Regulation and Directive on insider dealing and market abuse: see here. Today the Commission published amendments to these proposals in order to make it explicit that the manipulation of benchmarks is prohibited. For further information see: press release | FAQs | amendment to the Directive (pdf) | amendment to the Regulation (pdf) |. The FAQs page contains a section titled 'wider issues' in which there is some discussion regarding the manner in which benchmarks are set and overseen by supervisory authorities.

UK: 'Banking at the crossroads' - a speech by Lord Turner

Lord Turner, the chairman of the Financial Services Authority, delivered a speech yesterday titled "Banking at the cross-roads: Where do we go from here?": see here. In a wide ranging speech, Lord Turner said that to restore trust in banking a five fold approach was required:

• Better prudential rules and new macro-prudential policy approaches.
• Structural change – the importance of the Vickers Commission recommendations.
• Better, more intense and more robust conduct supervision and enforcement, but recognising also their limitations.
• Action by the leadership of banks to improve culture and values – a difficult area but a vital one.
• And finally, some recognition by regulators, politicians, consumer groups and the general public of the complexity of the challenge and the constraints which banks face. 

There is much of interest in the speech. Something that caught my eye concerns the extent to which regulators should have regard to competitiveness issues in exercising their functions. This is particularly important because the House of Lords will soon consider amendments to the Financial Services Bill which would, for example, require the new Prudential Regulation Authority, in discharging its general functions, to have regard to the desirability of promoting the competitive position of the UK financial services industry. Lord Turner made clear his view: "I do not believe it is the role of the regulator itself to have responsibility to promote the competitiveness of the City, because the moment you introduce that requirement, you create a confusion of objectives and open the door to regulatory arbitrage".

UK: women on boards and the voluntary code of conduct for executive search firms

The Department for Business, Innovation and Skills has published a press release noting that it is a year since the publication of the Voluntary Code of Conduct for Executive Search Firms: see here. Data are also provided on the composition of large listed company boards: women now comprise 16.7% of FTSE 100 and 10.9% of FTSE 250 boards.

France: listed company AGMs - AMF final recommendations

Autorité des marchés financiers (AMF), the financial regulator, formed a working group last year to consider the functioning of listed company general meetings in France. Earlier this year the group published a report and recommendations for consultation: see here (pdf, French) and here (pdf, summary in English). AMF has now published its final recommendations: see here (pdf). Information in English has not yet been published but an overview has been provided by Manifest: see here.

UK: Kay Review of UK Equity Markets and Long-Term Decision Making - Final Report

In June last year the Secretary of State for the Department for Business, Innovation and Skills commissioned Professor John Kay to undertake a review of investment in UK equity markets and its impact on the long-term performance and governance of UK quoted companies: see here. An interim report was published earlier this year in which issues were identified and responses to an earlier call for evidence summarised: see here (pdf). This afternoon, at the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) in London, Professor Kay will launch his final report: see here.

Update - ahead of the London event, the Department for Business, Innovation and Skills has published a copy of the report: see here (pdf). The following recommendations are made:

• The Stewardship Code should be developed to incorporate a more expansive form of stewardship, focussing on strategic issues as well as questions of corporate governance.
• Company directors, asset managers and asset holders should adopt Good Practice Statements that promote stewardship and long-term decision making. Regulators and industry groups should takes steps to align existing standards, guidance and codes of practice with the Review's Good Practice Statements.
• An investors’ forum should be established to facilitate collective engagement by investors in UK companies.
• The scale and effectiveness of merger activity of and by UK companies should be kept under careful review by BIS and by companies themselves.
• Companies should consult their major long-term investors over major board appointments.
• Companies should seek to disengage from the process of managing short term earnings expectations and announcements.
• Regulatory authorities at EU and domestic level should apply fiduciary standards to all relationships in the investment chain which involve discretion over the investments of others, or advice on investment decisions. These obligations should be independent of the classification of the client, and should not be capable of being contractually overridden.
• Asset managers should make full disclosure of all costs, including actual or estimated transaction costs, and performance fees charged to the fund.
• The Law Commission should be asked to review the legal concept of fiduciary duty as applied to investment to address uncertainties and misunderstandings on the part of trustees and their advisers.
• All income from stock lending should be disclosed and rebated to investors.
• Mandatory IMS (quarterly reporting) obligations should be removed.
• High quality, succinct narrative reporting should be strongly encouraged.
• The Government and relevant regulators should commission an independent review of metrics and models employed in the investment chain to highlight their uses and limitations.
• Regulators should avoid the implicit or explicit prescription of a specific model in valuation or risk assessment and instead encourage the exercise of informed judgment.
• Companies should structure directors’ remuneration to relate incentives to sustainable long-term business performance. Long-term performance incentives should be provided only in the form of company shares to be held at least until after the executive has retired from the business.
• Asset management firms should similarly structure managers’ remuneration so as to align the interests of asset managers with the interests and timescales of their clients. Pay should therefore not be related to short-term performance of the investment fund or asset management firm. Rather a long-term performance incentive should be provided in the form of an interest in the fund (either directly or via the firm) to be held at least until the manager is no longer responsible for that fund.
• The Government should explore the most cost effective means for individual investors to hold shares directly on an electronic register.

UK: England and Wales: the unfair prejudice remedy - adaptable, flexible and open-textured

The Court of Appeal gave judgment yesterday in Maidment v Attwood [2012] EWCA Civ 998. At first instance (see [2011] EWHC 2186 (Ch)) the trial judge dismissed a shareholder's petition for relief under section 994 of the Companies Act 2006 (the unfair prejudice remedy). The Court of Appeal held that the trial judge was wrong to do so. The leading and only reasoned judgment was delivered by Lady Justice Arden (Aikens and Kitchen LJJ concurring). The judgment is interesting and important for many reasons, some of which are highlighted here.

The first reason concerns the concept of unfairness and breaches of directors' duties. In O'Neill v Phillips [1999] 1 WLR 1092 Lord Hoffmann stated that a shareholder would not ordinarily be entitled to complain of unfairness unless there had been some breach of the terms on which it was agreed that company's affairs should be conducted. According to Arden LJ these terms "... include by implication an agreement that any party who is a director will perform his duties as a director. Primary among these duties are the seven duties now codified in sections 171 to 177 of the Companies Act 2006. ... Six out of seven of these duties are fiduciary duties, that is, duties imposed by law on persons who exercise powers for the benefit of others. Non-compliance with ... [these] duties will generally indicate that unfair prejudice has occurred" (para. [22]).

The second concerns the consequences of the company's insolvency. In such cases, Arden LJ observed, the court should be flexible in its approach and to do what is necessary to achieve a just and fair result. The third concerns claims of excessive remuneration: these should be considered by the court with reference to objective commercial criteria and in this regard Arden LJ stated that "... in the light of the public debate that has taken place in recent years over executive pay in large companies, much guidance can be found about the remuneration of directors in listed companies in the various guidelines that have been produced, such as the Association of British Insurer's Principles of Remuneration" (para. [36]).

Fourth, Arden LJ provided this assessment of the role performed by section 994 (at para. [28]): "The dominant characteristic of the unfair prejudice remedy, both in statute and case law, is its adaptability. This enables the courts to produce a just remedy where minority shareholders can show wrongdoing that prejudices their interests. It also makes the unfair prejudice remedy important as a means of encouraging proper corporate behaviour in the management of smaller companies and building up the confidence of investors in them. This policy aim is as important today as it has always been since the original version of what is now the unfair prejudice remedy was introduced in the Companies Act 1947."

UK: The Enterprise and Regulatory Reform Bill

The Enterprise and Regulatory Reform Bill completed the Committee Stage in the House of Commons this week and now proceeds to the Report Stage. There were two sittings on the final day of the Committee's meeting, recorded in Hansard, the official record of Parliamentary proceedings, here and here. On the final day the Committee considered amendments to the Bill regarding directors' remuneration. A copy of the Bill, reflecting the Committee Stage amendments, is available here (pdf). Clauses 61 to 64 concern remuneration and remuneration policy.

UK: Parliamentary Committee on Banking Standards

Further information about the Parliamentary Committee on Banking Standards has been published including its membership and terms of reference: see here. The terms of reference include "... lessons to be learned about corporate governance, transparency and conflicts of interest, and their implications for regulation and for Government policy".

UK: trustees, delegation and ostensible authority

The Judicial Committee of the Privy Council gave its opinion last week in Kelly v Fraser (Jamaicas) [2012] UKPC 25. The court held that the trustees of a pension fund were bound by representations made by a senior officer of a company to which administrative functions had been delegated. Judgment was given by Lord Sumption, in the course of which he stated (at para. [15], emphasis in the original):

An agent cannot be said to have authority solely on the basis that he has held himself out as having it. It is, however, perfectly possible for the proper authorities of a company (or, for that matter, any other principal) to organise its affairs in such a way that subordinates who would not have authority to approve a transaction are nevertheless held out by those authorities as the persons who are to communicate to outsiders the fact that it has been approved by those who are authorised to approve it or that some particular agent has been duly authorised to approve it. These are representations which, if made by some one held out by the company to make representations of that kind, may give rise to an estoppel".

USA: IFRS adoption - SEC final staff report published (but no final recommendation)

The SEC has published a final report as part of work exploring the impact of incorporating IFRS into the financial reporting system for US issuers: see here (pdf). The SEC states that the report's publication should not be taken to imply that a decision has been made about the adoption of IFRS. The chief executive of the UK's Financial Reporting Council, Stephen Hadrill, has commented: "We have all followed the SEC’s work on determining whether, when and how to move to a system incorporating International Financial Reporting Standards for a long time. It is disappointing that transition is not yet clearly recommended".

UK: FRC discussion paper 'Towards a Disclosure Framework for the Notes'

The Financial Reporting Council, together with the European Financial Reporting Advisory Group (EFRAG) and the Autorité des Normes Comptables (ANC) in France, has published a discussion paper titled Towards a Disclosure Framework for the Notes: see here (pdf). As well as questioning whether the notes continue to serve a useful purpose, the paper also outlines some principles that the EFRAG, ANC and FRC believe are essential to the design of an effective disclosure framework.

Hong Kong: Legislative Council passes Companies Bill

The introduction of a new company law framework in Hong Kong has moved closer. The Companies Bill, which was introduced into the Legislative Council in January 2011, was finally passed today: see here.

Spain: corporate governance of IBEX 35 companies

CNMV, the securities market regulator, has published a review of IBEX 35 company compliance with the Unified Corporate Governance Code: see here (pdf, Spanish). A summary, in Spanish, is available here (pdf). An increase in compliance with the code's recommendations is reported, with all companies (bar one) meeting over 75% of the recommendations.

UK: House of Lords EU Committee report - MIFID II

The House of Lords European Union Committee (Economic and Financial Affairs) has published the results of a short inquiry regarding MiFID II: see here (pdf). The Committee states, amongst other things, that the MiFID II proposals "have been rushed, and risk creating confusion rather than providing clarity in terms of the regulatory framework for investment".

UK: England and Wales: liquidator disqualified for 12 years

The High Court gave judgment yesterday in Wood v Mistry [2012] EWHC 1899 (Ch). The facts are somewhat unusual: an application by liquidators of various companies for the disqualification of a former liquidator of those companies under section 4(1)(b) of the Company Directors Disqualification Act 1986. The trial judge, Newey J., disqualified the liquidator for a period of twelve years and with regard to the scope and operation of section 4(1)(b) made these observations (at paras. [24], [27] and [28]):

I cannot envisage circumstances in which the Court would exercise its discretion to make a disqualification order against a liquidator without serious misconduct having been established. That is not to say that each breach of duty alleged must, individually, be serious if it is to be relevant. Were a serious breach of duty established, the Court could surely take other, less important breaches into account when deciding what, if any, order to make under section 4. A number of relatively minor breaches of duty could also, taken together, be thought serious enough to warrant a disqualification order ....

I do not think it can be the case that a liquidator can apply under section 4 of the CDDA only if he has a financial interest in a disqualification order being made. In the first place, it is difficult to think of a situation in which a liquidator would ever have such an interest. To require such an interest would thus mean that liquidators could not in practice make applications under section 4. That, however, would seem to run counter to section 16(2), which expressly provides for applications by liquidators. A second point is that it is hard to see why a financial interest should necessarily be a prerequisite of an application under section 4 of the CDDA. The purpose of disqualification is essentially, after all, the protection of the public, not private advantage. Why then need an applicant always have a personal financial interest? In fact, even the Secretary of State and the Official Receiver would presumably be unable to apply under section 4 if a personal financial interest were invariably required".

Update (11 July 2012): a summary of the decision has been published here by the ICLR.

Germany: revised corporate governance code - copy in English published

Earlier this year the Corporate Governance Commission published, in German, a revised edition of its corporate governance code: see here. A copy of the code in English is now available: see here (html) or here (pdf). A copy of the new Code, with the amendments highlighted, is available here (pdf).

UK: Government consultation - the future of building societies

The Government published a consultation paper last Friday titled The future of building societies: see here (pdf). The paper sets out reform principles and explains the Government's proposals with regard to building societies and the Independent Commission on Banking's recommendations. The same restrictions that apply to ring-fenced banks will be applied to building societies and it is proposed that there will be no de minimis exemption. Building societies will not be included in the ring-fencing legislation (the Banking Reform Bill, due in the new year) but amendments will instead be made to the Building Societies Act 1986.

Europe: the future of European company law - a view from the European Parliament

Earlier this year the European Commission published a consultation paper on the future of European company law. Responses have not yet been published but last month the European Parliament passed a resolution in which it welcomed the Commission's consultation and outlined its position on various matters: see here. For example, it was suggested that the Commission should resume work on the Fifth and Ninth Company Law Directives.

UK: convictions for corporate manslaughter

The first conviction under the Corporate Manslaughter and Corporate Homicide Act 2007 was secured last year: see here. Earlier this month the Crown Prosecution Service announced that Lion Steel Ltd. had received the "second ever conviction for corporate manslaughter": see here. It would, however, be more accurate to state that this is the second conviction that the CPS has secured in England and Wales rather than the second conviction under the Act because, in May this year, a company was convicted in Northern Ireland: see R v JMW Farm Ltd. [2012] NICC 17, a summary of which is available here (pdf).

UK: Takeover Code amendments - three consultation papers published

The Takeover Panel Code Committee yesterday published three consultation papers outlining proposed changes to the City Code on Takeovers and Mergers. The first paper concerns, amongst other things, profits forecasts, quantified financial benefits statements and material changes in information: see here (pdf). The second paper, available here (pdf), is concerned with issues relating to pension scheme trustees. In this paper the Code Committee proposes that the provisions of the Code which apply to employee representatives should apply also to the trustees of the offeree company’s pension scheme(s). As such offerors will, amongst other things, be required to state in the offer document what their intentions are with regard to the offeree company’s pension scheme(s). The third paper, available here (pdf), is concerned with the companies to which the Code applies and in this regard the Committee is proposing removing the residency test.

Ireland: the Criminal Justice (Corruption) Bill 2012 - general scheme published

The Department of Justice and Equality has published a draft general scheme of the Criminal Justice (Corruption) Bill 2012: see here (pdf). The purpose of the scheme is to clarify and strengthen the principal corruption offences. Head 13 outlines the circumstances in which a company will be guilty of an offence in respect of the corrupt acts of its directors, officers and employees, where there was the intention to obtain or retain business or an advantage for the company. A defence is provided where the company can prove that it took all reasonable steps and exercised all due diligence to avoid the commission of the offence.

Europe: shadow banking consultation responses published

The European Commission has published the responses received in respect of its green paper on shadow banking: see here.

UK: directors' remuneration - amendments to the Enterprise and Regulatory Reform Bill

The Government has published explanatory notes to accompany the amendments it has tabled to the Enterprise and Regulatory Reform Bill to introduce a binding shareholder vote on remuneration policy in quoted companies: see here (pdf).

UK: the Nuttall Review of Employee Ownership

The Nuttall Review - the purpose of which was to identify barriers to employee ownership and make recommendations - published its report yesterday: see here (pdf). The report identifies three broad barriers: a lack of awareness, a lack of resources and actual (or perceived) legal, tax and regulatory complexities. Many recommendations are made. The Government has responded - see here - and, amongst other things, a call for evidence is expected later this week on how a right to request employee ownership could operate.

UK: Government consultation 'Sanctions for the directors of failed banks'

HM Treasury yesterday published a consultation paper titled Sanctions for the directors of failed banks: see here (pdf). Views are sought on two proposals: [1] the introduction of a rebuttable presumption that the director of a failed bank would not be suitable for approval by the regulator to hold a senior executive position in a bank; [2] the introduction of a new criminal offence for serious misconduct, based on recklessness, in the management of a bank. The consultation paper rejects the introduction of strict liability offences.

The first proposal, if adopted, would be included in the Financial Services Bill currently before Parliament. The Government is less clear about how the second proposal, if adopted, would be introduced. Elsewhere in the paper several suggestions are made for the FSA (and its successors) to consider, including providing greater clarity with regard to regulatory and management responsibilities.

Europe: ESMA's proxy advisor consultation - responses published

The European Securities and Markets Authority has published the responses received in respect of its consultation on proxy advisors: see here. A feedback statement is expected later this year. A copy of the consultation paper is available here (pdf).

UK: Scotland: trust law - Law Commission consultation

As part of its review of trust law, the Scottish Law Commission has published a short consultation paper in which it asks, amongst other things, whether it would be desirable to permit two type of charitable investment funds - Collective Investment Funds (CIFs) and Collective Deposit Funds (CDFs) - to be set up under Scots law: see here (pdf).

UK: the scope of the Parliamentary banking inquiry - some comments from Lord Turner

The Financial Services Authority held its annual public meeting today. Lord Turner, the FSA's chairman, spoke about the changes in regulation and supervision the FSA has implemented over recent years: see here. Lord Turner also questioned again the value of certain investment bank activities and offered his view as to the remit of the Parliamentary Joint Committee inquiry into banking standards, the formation of which was announced yesterday by the Government. He argued that a major area of focus should be how banks "... rededicate their business to a focus on fundamental economic functions – raising capital for companies creating real wealth, managing customer risks rather than creating new risks to bet against, and how to purge the industry of the culture of cynical entitlement which was far too prevalent before the crisis". These matters overlap with the Kay Review, the final report of which is expected by the end of the summer.

BCBS supervisory guidance: the audit function in banks

The Basel Committee on Banking Supervision has published revised supervisory guidance for assessing the effectiveness of the internal audit function in banks: see here (pdf).

Europe: empty voting - no need for regulatory action according to ESMA

The European Securities and Markets Authority has published a feedback statement following its recent consultation on empty voting: see here (pdf). ESMA has concluded, in light of the feedback and evidence reviewed, that the case for regulatory action at European level has not been made.

UK: Parliamentary committee inquiry into banking standards

The Government has announced that a Joint Committee of both House of Parliament will be formed to conduct an inquiry into banking standards. The inquiry will be chaired by the Andrew Tyrie MP, the chairman of the House of Commons Treasury Committee. Information about the inquiry, and other proposals, was given in the House of Commons by the Chancellor - see here - including the following proposed terms of reference: "... building on the Treasury Select Committee’s work and drawing on the conclusions of UK and international regulatory and competition investigations into the LIBOR rate-setting process, consider what lessons are to be learnt from them in relation to transparency, conflicts of interest, culture and the professional standards of the banking industry". It is the Government's intention that the Joint Committee's report should be published before the end of this year in order that its recommendations can be reflected in the Banking Reform Bill.

UK: the Companies (Cross-Border Mergers) Regulations 2007

The ICLR, as part of its free case summary service, has provided a summary for Re Itau BBA International Ltd [2012] EWHC 1783 (Ch), the headnote for which reads: "The definition of 'existing transferee company' in regulation 3(1) of the Companies (Cross-Border Mergers) Regulations 2007 was intended to do no more than to exclude from merger by absorption a transferee company formed for the purposes of, or in connection with, a merger by formation of a new company".

UK: Treasury Committee inquiry - corporate governance and remuneration in banks

Written evidence submitted to the House of Commons Treasury Committee, as part of its inquiry into corporate governance and remuneration in banks, has been published: see here (pdf). The Committee's business will this week be dominated by the appearance of the chief executive and outgoing chairman of Barclays on Wednesday and Thursday, following an announcement by the bank today about board changes.

Europe: banking supervision in the eurozone

At the European Council meeting last week, the eurozone members agreed to give the European Central Bank a much greater role in respect of the supervision of banks within the eurozone through the creation of a single supervisory mechanism: see here. Further details about the operation of this new regime, and in particular its scope (e.g., all banks?), will be published later this year.