Tuesday 30 April 2013

Australia: judgment in Weinstock cases due tomorrow

The High Court of Australia has announced - see here (pdf) - that it will give judgment tomorrow in Beck v Weinstock (on appeal from [2011] NSWCA 228) and Weinstock v Beck (on appeal from [2012] NSWCA 76). The first case concerned, amongst other things, the question whether it was necessary, in order for the issue of redeemable shares to be valid, for other shares to exist at the time of the issue over which a preference would be enjoyed. Amongst the matters for consideration in the second case was the scope of the power conferred on the court by section 1322(4) of the Corporations Act 2001.

Update (1 May 2013) - find the judgments here.

New Zealand: health and safety task force publishes report and recommendations

The Independent Task Force on Workplace Health and Safety published its final report and recommendations today: see here (pdf). The report concludes that the health and safety system is not fit for purpose. Many recommendations are made including the creation of a due diligence obligation for those with governance roles in companies. In this regard, the task force states: "We believe strongly that directors’ duties in relation to workplace health and safety should be as strong as other fiduciary duties" (para. 223). The introduction of a new law on corporate manslaughter law is not proposed; the task force instead proposes that the existing manslaughter offence is extended to companies and the general rules on corporate liability are revised.

For further information see: main report (pdf) | executive report (pdf) | working papers | press release | consultation |.

UK: The Companies Act 2006 (Amendment of Part 18) Regulations 2013

The Companies Act 2006 (Amendment of Part 18) Regulations 2013 were made last week and come into force today: see here or here (pdf). The Regulations amend the Companies Act 2006 in order to make it easier for companies to buy back shares in connection with an employee share scheme. Further information is available in the accompanying explanatory memorandum: see here (pdf).

India: Companies Bill 2012 tabled for consideration by the Rajya Sabha

The Companies Bill 2012 was passed by the Lok Sabha last December: see here. Today, in the Rajya Sabha, the Bill is tabled for consideration and passing: see here (pdf). A copy of the Bill as passed by the Lok Sabha is available here (pdf).

Update: the Bill was not considered, the Rajya Sabha being adjourned early; it will meet again on 2 May.

Update (1 May 2013) - the Bill is on the list of business for 2 May: see here (pdf).

Ireland: Companies Bill 2012 completes second stage

The Companies Bill 2012 completed its second stage in the Dáil Éireann last Thursday and now proceeds to the third stage (detailed consideration by the Select Committee on Jobs, Enterprise and Innovation): see here. Second stage debate, which took place over two days, can be read here (23 April) and here (25 April). A copy of the Bill is available here (pdf, 8.8MB) or in separate parts: 1 to 15 (pdf, 6.7MB) and 16 to 24 (pdf, 2MB). An explanatory memorandum is available here (pdf, 1.5MB). The Bill's progress can be followed here.

Monday 29 April 2013

UK: Enterprise and Regulatory Reform Act 2013 receives Royal Assent

The Enterprise and Regulatory Reform Act 2013 received Royal Assent last Thursday: see here. A copy of the Act will be available here soon. The Act contains, amongst other things, some of the provisions necessary to introduce the new regime for shareholder approval of quoted company directors' remuneration. For further information see here (pdf).

Update (2 May 2013) - a copy of the Act is available here (pdf).

UK: Competition Commission's statutory audit market inquiry - new timetable published

The Competition Commission has published an updated timetable in respect of its inquiry into the market for statutory audit services: see here (pdf). In July 2013 it will publish its provisional decision on remedies; the final report will be published in September 2013.

Friday 26 April 2013

Europe: Commission's proposals for reform of the audit market considered by the Legal Affairs Committee

In 2011 the European Commission published proposals for the reform of the audit market: see here. These were the subject of debate yesterday by the Legal Affairs Committee of the European Parliament. The Commission proposed mandatory rotation of audit firms every six years (nine if there were joint auditors). The Legal Affairs Committee decided that six years was too short and has proposed a maximum period of fourteen years (or twenty five years if certain conditions are met): see here. The Committee also decided, by a majority vote, to enter into negotiations with the European Council in order to agree a common text in respect of the Commission's legislative proposals.

Europe: Commission begins review of the European System of Financial Supervision

The European Commission has begun a review of the European System of Financial Supervision with the publication of a questionnaire and supporting background document: see, respectively, here (pdf) and here (pdf). The review follows the publication yesterday by the Commission of the latest edition of its European Financial Stability and Integration Report - see here (pdf) - and a report on financial integration in Europe by the European Central Bank: see here (pdf).

UK: Partnerships (Prosecution) (Scotland) Act 2013 comes into force

The Partnerships (Prosecution) (Scotland) Act 2013 received Royal Assent yesterday and comes into force today: see here. The Act, a copy of which is available here or here (pdf), will make it possible to prosecute a dissolved partnership notwithstanding its dissolution, where the proceedings are commenced within 5 years of the date of the dissolution. Further background information is available here and here.

Thursday 25 April 2013

UK: House of Lords accepts introduction of 'employee-shareholder' status

The House of Lords yesterday debated once more the Government's wish to include in the Growth and Infrastructure Bill a clause to introduce the new employment status of 'employee shareholder': see here. The Lords accepted, 275 voting cast for and 168 against, the clause's inclusion in the Bill following the Government's acceptance of various amendments, including a requirement for independent advice to be given regarding the terms and effect of the proposed agreement for the receipt of shares in exchange for the surrender of certain employment rights. Today, as part of the so-called ping pong, the House of Commons accepted the Lords' amendments (222 votes were cast in support and 161 against). The Bill now requires Royal Assent to become law.

Update (26 April 2013) - Royal Assent was given on April 25: see here. A copy of the Act is available here (pdf).

Europe: Court of Justice opinions - taxing gains and combatting money laundering

The Court of Justice of the European Union gave judgment today in two cases concerning Spain. In the first, Commission v Spain (C-61/11), the court held that the immediate taxation of unrealised capital gains on the transfer of a company established in Spain of its assets or place of residence to another Member State amounted to a restriction on the freedom of establishment. In the second case, Jyske Bank Gibraltar Ltd v Administración del Estado (C-212/11), the court held that EU law did not preclude Spanish legislation under which credit institutions operating but not established in Spain were required to send directly to the Spanish authorities information necessary for combatting money laundering and terrorist financing. Press releases for both decisions are available: see, respectively, here (pdf) and here (pdf).

Wednesday 24 April 2013

Ireland: company law reform - second stage debate for Companies Bill

Last December the Companies Bill 2012 was introduced in the Dáil Éireann. Yesterday the Bill was debated at second stage: see here. The Bill consolidates the existing 16 Companies Acts, dating from 1963 to 2012, into a single Act as well as introducing reforms including the codification of directors' duties and permitting a private company limited by shares to be formed with one director. According to the press release published by the Department of Jobs, Enterprise and Innovation last year, the Bill is the "largest substantive piece of legislation in the history of the State". A copy of the Bill is available here (pdf, 8.8MB) or in separate parts: 1 to 15 (pdf, 6.7MB) and 16 to 24 (pdf, 2MB). An explanatory memorandum is available here (pdf, 1.5MB) and a much shorter press release, highlighting some of the changes being implemented, is available here. The Bill's progress can be followed here.

ECGI Working Papers - some recent additions

New papers have recently been added to the working papers series maintained by the European Corporate Governance Institute. Amongst the new papers within the law series is one by Professor Jesse Fried exploring the justifications for shifting power from short-term to long-term shareholders: see here. Within the finance series is a paper by Ronald Masulis and Shawn Mobbs in which they present their finding that directors with multiple directorships distribute their effort unequally according to the directorship’s relative prestige: see here.

Tuesday 23 April 2013

UK: Takeover Code amendments published in respect of pension fund trustee issues

The Code Committee of the Takeover Panel has published the amendments it is making to the Takeover Code following a consultation last year: see here (pdf).

The OECD Corporate Governance Working Paper Series

The eighth paper in the OECD Corporate Governance Working Paper series has been published. Titled Who Cares? Corporate Governance in today's Equity Markets, the paper considers the impact of changes in the functioning of equity markets for the effectiveness of corporate governance regulations: see here.

Germany: Bundestag rejects mandatory board quota for women

Politicians in the Bundestag have voted against the introduction of a mandatory quota of 40% for female representation on supervisory boards: see here or here.

Monday 22 April 2013

UK: England and Wales: consent solicitation and consent payments upheld by court

The Court of Appeal gave judgment today in Azevedo & Anor v Imcopa Importacao, Exportacao E Indústria De Oleos Ltd & Ors [2013] EWCA Civ 364. At issue in this important decision was whether English law permitted companies to solicit and procure votes in respect of a financial restructuring proposal by offering and making cash payments (so-called consent payments) to those members of the relevant class voting in favour of the proposal (and excluding those not voting or voting against). The court unanimously held that this practice was permitted, Lloyd LJ stating (at paras. [69] and [71]):

I see nothing wrong in principle with the idea that a company, which has taken the view that a particular course of action is in its best interests and in those of its creditors and shareholders, but which requires favourable votes from one or more classes, should take part in the process which leads to the relevant resolution being put to the necessary vote. It seems to me that it would be extraordinary to suggest that the company cannot take part in the process. Indeed, in practical terms, it must do so. The only issue is whether it is allowed to strengthen its urging and encouragement in favour of a vote by offering an incentive. For my part I find no objection to that in principle under English law, so long as all is open and above board ..

I would hold that it is not inconsistent with English company law ... for the Issuer to offer a consent payment to Noteholders who vote in favour of a resolution proposed for their consideration as a class, where the payment is available to all members of the class, and provided that the basis of the payment is made clear in the documents relating to the resolution, the meeting and the vote, as was the case here."

Friday 19 April 2013

IOSCO consults on high level principles for financial benchmarks

The International Organization of Securities Commissions has published a consultation report titled Principles for Financial Benchmarks: see here (pdf). The report contains a set of high level principles falling into three broad categories - governance, quality and accountability - the purpose of which is to promote the reliability of benchmark determinations.

USA: Supreme Court gives judgment in Kiobel

The Supreme Court gave judgment earlier this week in Kiobel v. Royal Dutch Petroleum Co. A copy of the judgment is available here (pdf). Judgment was keenly awaited because of the potential impact of the decision on the accountability and liability of multinationals. The case was brought by a group of Nigerian nationals living in the United States against certain Dutch, British, and Nigerian companies. The petitioners sued under the Alien Tort Statute 28 U. S. C. §1350, arguing that the companies had aided and abetted the Nigerian Government in committing violations of the law of nations in Nigeria. The petitioners did not succeed, the court holding that the presumption against extraterritoriality applied to claims under the Alien Tort Statute. Amongst other things, Chief Justice Roberts stated:
...all the relevant conduct took place outside the United States. And even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application. ... Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices. If Congress were to determine otherwise, a statute more specific than the ATS would be required."

UK: Church of England Ethical Investment Advisory Group publishes new executive remuneration policy

The Church of England's Ethical Investment Advisory Group - the organisation which advises the Church's investing bodies (the Church Commissioners, the Church of England Pensions Board and the CBF Church of England funds managed by CCLA) - has published an updated policy on executive remuneration: see here (pdf). The investing bodies together hold assets in excess of £8 billion. Amongst other things, the EIAG states that executive directors should only receive an annual bonus of more than 100% of base salary where they have delivered extraordinary results through exceptional performance to the significant benefit of shareholders.

Thursday 18 April 2013

UK: The duty to investigate and report on possible regulatory failure - FCA and PRA statements of policy published

Section 73 of the Financial Services Act 2012 imposes on the Financial Conduct Authority a duty to investigate and report on possible instances of regulatory failure. Section 74 imposes this duty on the Prudential Regulation Authority as well. Both regulators, under section 80, are required to publish a statement of policy in which they set out the matters they will take into account when determining whether the relevant conditions are met and how investigations will be carried out. Today the FCA and PRA published their statements of policy: see, respectively, here (pdf) and here (pdf).

UK: Banking reform - Government rejects remuneration amendments but promises new disclosure obligations

The Financial Services (Banking Reform) Bill has completed the committee stage in the House of Commons, earlier than expected, and now proceeds to report stage: see here. Amongst the amendments considered was one requiring employee representation on bank remuneration committees and another providing for banks' shareholders to appointment remuneration consultants. Neither of these amendments was accepted by the Government but the Financial Secretary to the Treasury, Rt. Hon. Greg Clark MP, stated that the Government would amend the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 to require quoted companies (not just banks and financial institutions it would seem) to disclose: whether anyone has provided advice to the remuneration committee; if so, who; whether that person or body has provided any other services to the company; who appointed the group or individual; how they were selected; the cost of that advice; and the basis of payment.

NB: The UK Corporate Governance Code 2012, in section B.2.1., provides: "Where remuneration consultants are appointed, they should be identified in the annual report and a statement made as to whether they have any other connection with the company."

IMF publishes global financial stability report - old challenges remain, new risks emerge

The International Monetary Fund published its global financial stability report yesterday: see here (pdf). An overview is available here. The report calls for stronger policies to reduce financial fragmentation in the euro area and identifies the threat to financial stability associated with the relaxation of monetary policy.

Wednesday 17 April 2013

Europe: CRDIV approved by Parliament

The European Parliament has approved the package of measures known as CRDIV: see here. The adopted texts can be viewed here. The package consists of a Regulation and Directive and contains rules on bank capital, liquidity, remuneration and governance. The final agreement of the Council of the European Union is now required.

UK: House of Commons restores 'employee shareholder' clause to Growth and Infrastructure Bill

The amendments made to the Growth and Infrastructure Bill in the House of Lords were considered yesterday in the House of Commons. One amendment made by the Lords was to remove clause 27, which would introduce a new type of employment status - 'employee shareholder ' - whereby employees receive shares in exchange for surrendering certain employment rights. The Commons debated clause 27 and voted to restore it to the Bill by 277 votes to 239: see here. Further consideration of amendments is scheduled for 22 April.

Tuesday 16 April 2013

Europe: Commission publishes proposals to improve non-financial reporting by companies

The European Commission has adopted proposal for a directive to increase the disclosure provided by certain large companies in respect of environmental, social and employee matters, respect for human rights, anti-corruption and bribery. Proposals are also included in respect of the disclosure by large listed companies of their policy on board diversity.

For further information see: Press release | FAQs | Copy of proposed Directive (pdf) | Impact assessment: full text (pdf), summary (pdf) | Further background information |.

New Zealand: new guide on directors' role and responsibilities published

The Financial Markets Authority and Institute of Directors of New Zealand have jointly published a short guide on the role and responsibilities of directors: see here (pdf). The guide includes references to relevant statutes as well as recent court cases.

Hong Kong: corporate insolvency law consultation launched

The Financial Services and Treasury Bureau is consulting on wide-ranging proposals to improve corporate insolvency law in Hong Kong: see here (pdf). The proposals include new provisions dealing with transactions at an undervalue and an expansion of the list of persons disqualified from appointment as a liquidator or provisional liquidator.

Europe: Joint Committee report on risks and vulnerabilities in the EU financial system

The Joint Committee of the European Supervisory Authorities has published a report on the risks and vulnerabilities in the EU financial system: see here (pdf). Amongst other things, the report notes the risk of further fragmentation of the EU single market and the significance in this regard of financial institutions' revised business strategies as well as uncoordinated national policy measures.

Monday 15 April 2013

UK: England and Wales: assisting a foreign insolvency court and section 426 of the Insolvency Act 1986

The High Court gave judgment last Friday in HSBC Bank v Tambrook Jersey Ltd [2013] EWHC 866 (Ch). The case concerned a request by the Royal Court of Jersey for assistance within section 426 ("Co-operation between courts exercising jurisdiction in relation to insolvency") of the Insolvency Act 1986. Section 426(4) provides that "The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory".
At issue in the current case was whether assistance could be given where, in Jersey, there were no existing or planned insolvency proceedings. The trial judge, Mann J., held that it could not and stated (at para. [18]):
Without some form of existing or future intended activity by the foreign insolvency court, I do not see how that court is "assisted". Creditors might be; a foreign commercial community might be helped by an English court doing what its own courts cannot do. But that is not enough. It is the foreign insolvency court, in its insolvency jurisdiction, which has to be assisted. The section does not exist to fill in gaps in another jurisdiction's insolvency processes without more. It exists to improve co-operation between actual processes. In the present case, for the reasons given, the Jersey court is not assisted in a relevant way."

Update (24 April 2013) - the ICLR has provided a summary of the decision: see here.

UK: the new financial regulatory framework - FCA and FCA memorandum of understanding

The new Financial Conduct Authority has published a memorandum of understanding in respect of coordination and cooperation with the Financial Reporting Council: see here (pdf).

Friday 12 April 2013

UK: 'Turning the red tape tide' - a speech from the Bank of England's director for financial stability

A copy of a speech titled "Turning the red tape tide", delivered by Andy Haldane, the executive director for financial stability at the Bank of England, has been published by the Bank: see here (pdf). Mr Haldane used his speech to ask some important questions which he said should form the new regulatory battleground. Is risk-weighting of bank assets worth the costs? Are bank’s internal risk models more regulatory trouble than they are worth? Does complexity unduly advantage large incumbents over small new entrants? Are armies of supervisors and compliance officers a sign of success or failure?

UK: 'The human face of regulation' - a speech from the chief executive of the Financial Conduct Authority

Martin Wheatley, the chief executive of the new Financial Conduct Authority, delivered a speech yesterday in which titled "The human face of regulation" in which he set out how the FCA proposes to use behavioural economics: see here. The speech coincides with the publication of a paper - the first - on this topic in the FCA's occasional papers series: see here (pdf).

Thursday 11 April 2013

UK: Financial Conduct Authority publishes first two papers in its occasional paper series

The new Financial Conduct Authority has published the first two papers in its occasional papers series. In the first paper, "Applying behavioural economics at the Financial Conduct Authority", the authors outline the main lessons from behavioural economics for retail financial markets and how it can, and should, be used in the regulation of financial conduct: see here (pdf). The second paper is titled "Encouraging consumers to claim redress: evidence from a field trial" and its authors argue that the results of their research challenge current accepted practice: see here (pdf).

Cyprus: the amended third edition of the Stock Exchange's corporate governance code

The codes and principles directory maintained by the European Corporate Governance Institute was updated today and now includes a copy of the amended third edition of the Corporate Governance Code published by the Cyprus Stock Exchange: see here.

Wednesday 10 April 2013

UK: Cranfield's Female FTSE Report 2013

The International Centre for Women Leaders at Cranfield University has published the 2013 edition of its annual Female FTSE report: see here (pdf). The report is titled "False dawn of progress for women on boards?" and finds (to quote from its executive summary):
... The last year has seen extraordinary changes for women on boards. The number of women holding FTSE 100 board seats is 169 (holding 194 seats), an increase of 28 on the 2012 figures. The overall percentage of female-held board directorships is 17.3%, an uplift of 2.3% on last year’s figure. The number of FTSE 100 companies with all-male boards has dropped to seven and two thirds (67%) of the FTSE 100 have more than one woman on their board.

In the first six months the pace of change was extremely encouraging. There was a sharp increase in the percentage of new appointments going to women on both FTSE 100 and 250 boards, peaking at 44% and 36% respectively. However, those high levels were short-lived and over the past six months they have dropped to 26% and 29% respectively, showing a considerable gap from the 33% required to reach Lord Davies’ target of 25% women on boards by 2015 [about which see here, pdf]. That target for the FTSE 100 companies is still in sight but only if the rate of new appointments going to women regains momentum promptly and there is concern that complacency may be setting in, which the UK economy cannot afford..."

Tuesday 9 April 2013

UK: statutory audit services market inquiry - responses to provisional findings and possible remedies

Earlier this year the Competition Commission published its provisional findings report and identified possible remedies in respect of its inquiry into the market for statutory audit services: see here. The Commission has now begun to publish the responses it has received in respect of its report: see here.

Monday 8 April 2013

UK: 'Trade Union Share Owners' publish voting and engagement guidelines

The TUC and its two largest affiliated unions, Unite and UNISON, launched Trade Union Share Owners last month, a group which aims to "put union values at the heart of the world of corporate governance, with a new approach to the way in which their investments are voted on at company AGMs": see here. In this regard, voting and engagement guidelines have been published: see here (pdf).

Friday 5 April 2013

UK: Banking Standards Commission publishes report on the failure of HBOS

The Parliamentary Commission on Banking Standards published its fourth report today. Titled ‘An accident waiting to happen’: The failure of HBOS, the report is divided into two volumes: volume one (here, pdf) contains the report and formal minutes; volume two (here, pdf) contains oral and written evidence. Amongst other things, the report is critical of the way in which the HBOS board operated, describing it as "a model of self-delusion, of the triumph of process over purpose", and with the failure of the regulatory system to impose sanctions that would have deterrent effect. The subject of sanctions will be further considered by the Commission in its final report.

BCBS progress report on implementation of the Basel regulatory framework

The Basel Committee on Banking Supervision has published an update regarding implementation of the Basel regulatory framework: see here (pdf).

Thursday 4 April 2013

India: proposals for a new financial regulatory framework

The Financial Sector Legislative Reforms Commission, which was formed to review and make proposals for updating the financial regulatory framework, has published its final report, recommendations and draft legislation. The Commission proposes, amongst other things, that a single agency should be created by merging SEBI, FMC, IRDA and PFRDA. The report is divided into two volumes: volume one contains analysis and recommendations (see herepdf) and volume two contains draft legislation (see herepdf).

South Africa: fraudulent trading under section 424 of the Companies Act 1973

The Supreme Court of Appeal gave judgment last month in Tsung v IDC (173/2012) [2013] ZASCA 26. A copy of the judgment is available here (pdf) and a summary is available here (pdf). The case concerned the liability of directors under section 424(1) of the Companies Act 1973 (liability of directors and others for fraudulent conduct of business). The court unanimously held that directors were liable and considered the scope of section 424 liability against the background of the court's decision last year in Fourie v First Rand Bank Ltd (548/2012) [2012] ZASCA 119; 2013 (1) SA 204 (SCA); [2013] 1 All SA 291 (SCA).

UK: the new financial regulatory framework - FCA and OFT memorandum of understanding

The Financial Conduct Authority, which formally came into existence this week, has published a memorandum of understanding setting out the way in which it will cooperate and work with the Office of Fair Trading: see here (pdf).

Wednesday 3 April 2013

Pakistan: update on the corporate law review project

The Securities and Exchange Commission has provided an update with regard to the review of company law in Pakistan: see here (pdf).

UK: the new financial regulatory framework - the PRA's approach to banking and insurance supervision

Earlier this week the newly created Prudential Regulation Authority published documents setting out its approach to banking and insurance supervision: see, respectively, here (pdf) and here (pdf).

Tuesday 2 April 2013

UK: the new financial regulatory framework - memoranda of understanding and a couple of PRA policy statements

Under the UK's new financial regulatory framework, which formally came into existence yesterday, memoranda of understanding are required in respect of financial crisis management and the co-ordination of engagement with EU and international committees and organisations. These memoranda have been published: see, respectively, here (pdf) and here (pdf).

The Prudential Regulation Authority, one of the new regulators, has also published a couple of new policy statements. The first, titled The Prudential Regulation Authority’s approach to enforcement: statutory statements of policy and procedure, is available here (pdf). The second, titled The power of direction over qualifying parent undertakings, is available here (pdf).

Monday 1 April 2013

UK: the new financial regulatory framework

The UK's new financial regulatory framework formally came into existence today, with the creation of the Financial Policy Committee, the Financial Conduct Authority and Prudential Regulation Authority. The FCA and PRA Handbooks are available here. The FCA can be followed on twitter: see here.