Monday 30 September 2013

UK: Takeover Code - new edition comes into force today

A new edition of the City Code on Takeovers and Mergers comes into force today: see here (pdf). This new edition includes the amendments announced by the Code Committee in May (see here, pdf) and July (see here, pdf). One of the amendments concerns the reach of the Code: a company which has its registered office in the UK, the Channel Islands or the Isle of Man and whose securities are admitted to trading on a multilateral trading facility in the UK will no longer be required to have its place of central management and control in the UK, the Channel Islands or the Isle of Man in order for the Code to apply.

Hong Kong: SFC/SEHK joint policy statement for overseas companies seeking a listing

The Securities and Futures Commission and Hong Kong Stock Exchange have published a revised joint policy statement setting out guidance for overseas companies seeking a listing: see here (pdf). The policy statement outlines, amongst other things, what is expected in respect of shareholder rights and regulatory cooperation.

Friday 27 September 2013

UK: Law Commissions publish draft Co-operative and Community Benefit Societies Bill

The Law Commission for England and Wales, working with the Scottish Law Commission, has published for comment a draft Co-operative and Community Benefit Societies Bill: see here. The purpose of the Bill is to consolidate the legislation relating to co-operative and community benefit societies (formerly known as industrial and provident societies).

Canada: CSA update on proxy advisor consultation

The Canadian Securities Administrators have published an update and summary of the responses received in respect of last year's consultation on proxy advisor regulation: see here (pdf). Regulation is not proposed, but guidance on recommended practices and disclosure will be published next year.

Sri Lanka: SEC/CA Sri Lanka revised corporate governance code

The Securities and Exchange Commission and the Institute of Chartered Accountants of Sri Lanka have published a revised edition of their corporate governance code: see here.

UK: Insolvency Service begins Insolvency Rules 1986 consultation

The Insolvency Service has begun a consultation in respect of proposals to update and consolidate the Insolvency Rules 1986: see here.

Thursday 26 September 2013

Japan: TSE listed companies and outside directors

The Tokyo Stock Exchange has published data concerning the appointment of outside directors at listed companies: see here (pdf). It is reported that 62.3% of First Section listed companies have one or more outside director.

British Virgin Islands: relief for unfair prejudice under the Business Companies Act 2004

The Eastern Caribbean Supreme Court (Court of Appeal) gave judgment earlier this month in Chemtrade Ltd. v Fuchs Oil Middle East Ltd., a case concerning the operation of section 184I ("prejudiced members") of the BVI Business Companies Act 2004: see here (pdf). The court upheld the trial judge's decision to make an order under section 184I to amend a company's articles of association. In doing so it discussed the scope of the court's discretion to provide relief in respect of unfairly prejudicial conduct: this discretion, it held, was unfettered.

Pakistan: SECP proposes changes to single member company rules

The Securities and Exchange Commission has published for consultation the amendments it proposes to make to the rules governing single member companies: see here (pdf).

Wednesday 25 September 2013

UK: ONS share ownership survey published

The Office for National Statistics has published the latest edition of its UK quoted company share ownership report: see here (pdf). This provides estimates of ordinary shares holdings in quoted companies in the UK by sector of beneficial ownership. It reports, amongst other things, that 'rest of the world' ownership now stands at over half of the value of the UK stock market at the end of 2012. It is also noted that shares are increasingly held in multiple-ownership pooled accounts, where the beneficial owner is unknown.

Singapore: MAS consultation paper on amendments to corporate governance regulations

The Monetary Authority of Singapore has published a consultation paper setting out proposed changes to its corporate governance regulations: see here (pdf).

Tuesday 24 September 2013

IESBA announces change to its definition of 'those charged with governance'

The International Ethics Standards Board for Accountants has published a change to the definition of "those charged with governance" for the purposes of its Code of Ethics for Professional Ethics: see here (pdf). The change is intended to align more closely the definition with that in International Standard on Auditing (ISA) 260, Communication with those charged with governance.

Monday 23 September 2013

New Zealand: Royal assent for Financial Markets Conduct Bill

The Financial Markets Conduct Bill has received Royal assent: see here. The new Act will replace several Acts, including the Securities Act 1978, with the aim of reforming the regulation of financial conduct. It contains rules covering the way financial products are offered, promoted, issued and sold, and the continuing responsibilities of those who offer, issue, manage, supervise, deal in and trade them. An overview of the Act is available here. Draft Regulations will be published in the autumn.

UK: Scotland: No common law right to 'extra' interest

Judgment was given earlier this month in Dyce v Fairgrieve [2013] CSOH 155. At issue, in this case before the Court of Session (Outer House), was a claim by a former partner for interest over and above that provided for by section 42 of the Partnership Act 1890. The claim was based on an alleged right at common law. Lord Woolman rejected the claim: no authority had been cited to support it, nor was it supported by the cases or treatises.

Friday 20 September 2013

UK: OFWAT consults on governance principles for water companies

The Water Services Regulation Authority, better known as OFWAT, has published for consultation the governance principles it believes should apply to the companies it regulates: see here (pdf).

Thursday 19 September 2013

USA: SEC publishes pay ratio disclosure rule

The Securities and Exchange Commission has published its proposals in respect of the obligation imposed on it, under Section 953 ("Executive compensation disclosures") of the Dodd-Frank Wall Street Reform and Consumer Protection Act, to require issuers to disclose (amongst other things) the ratio of the median of the total compensation of all employees to the annual total compensation of the chief executive officer: see here (pdf).

Europe: Commission publishes proposals for benchmark supervision

The European Commission yesterday published far reaching legislative proposals in respect of indices used as benchmarks in financial instruments and financial contracts. The proposals, in the form of a Regulation, contain a framework for the authorisation and supervision of benchmark providers. For further information see: Regulation text (pdf) | Press release | FAQs | Citizen's summary (pdf) | Impact assessment: full text (pdf), summary (pdf) |.

Wednesday 18 September 2013

UK: Bank of England Quarterly Bulletin

The Bank of England has published its latest Quarterly Bulletin: see here. Included are articles on bank capital and liquidity (here, pdf) and macroprudential policy at the Bank (here, pdf).

Tuesday 17 September 2013

UK: Creating the Competition and Markets Authority - consultation on secondary legislation

Part three of the Enterprise and Regulatory Reform Act 2013 contains the framework for the creation of a new Competition and Markets Authority to replace the Office of Fair Trading and Competition Commission. This framework will be supported by secondary legislation, the second tranche of which was published today for consultation: see here (pdf).

UK: Competition Commission statutory audit services market - new publication date for final report

The Competition Commission has published an updated administrative timetable in respect of its statutory audit services market inquiry: see here (pdf). Publication of the final report is now scheduled for early to mid October.

Monday 16 September 2013

New Zealand: Law Commission proposes new Trusts Act

Last week the Law Commission published its report Review of the Law of Trusts: A Trusts Act for New Zealand: see here. The Commission recommends that the Trustee Act 1956 should be replaced by a new Trusts Act in order to modernise the law. Over fifty recommendations are made, including placing on a statutory footing the duties of trustees and the circumstances in which they can be avoided. A summary of the Commission's recommendations is available here (pdf).

India: Companies Act 2013 implementation - update

Section 1 of the Companies Act 2013 was the only section within the Act to come into force when the Act became law last month. This section provided, amongst other things, that the remaining provisions of the Act would come into force on dates to be notified in the Official Gazette by the Central Government. The first such notification took place last week: see here (pdf).

BIS Quarterly Review - September 2013

The Bank for International Settlements has published the September 2013 edition of its Quarterly Review: see here. The Review includes several articles including one on how banks have responded to higher capital requirements (here, pdf) and another providing a primer on contingent convertible capital instruments (CoCos) (here, pdf).

Friday 13 September 2013

Europe: Article 28 of the Short Selling Regulation should be annulled says Advocate General Jääskinen

Advocate General Jääskinen has delivered his opinion in UK v Council of the European Union and European Parliament (Case C-270/12). The case, which was instigated by the United Kingdom against the Council and European Parliament, concerned an application to annul Article 28 of the Regulation (EU) No 236/2012 (the Short Selling Regulation). Article 28 gives the European Securities and Markets Authority the power to directly intervene in the financial markets of Member States, in exceptional circumstances, to prohibit short selling. It was adopted on the basis of Article 114 of the Treaty on the Functioning of the European Union, which permits the adoption of harmonising measures where necessary for the achievement and functioning of the internal market.

The Advocate General has concluded, in advice that is not binding on the Court of Justice, that Article 28 should be annulled because Article 114 TFEU was not an appropriate legal basis for its adoption. A summary of the Advocate General's opinion is available here (pdf).

Europe: Banking supervision in the Eurozone - Parliament approves single supervisory mechanism

The European Parliament has approved proposals to give the European Central Bank supervisory responsibility for banks within the Eurozone: see here.

Thursday 12 September 2013

UK: England and Wales: no implied term requiring disclosure by bank

The ICLR has provided a summary of the recent High Court decision Torre Asset Funding Ltd and another v Royal Bank of Scotland plc [2013] EWHC 2670 (Ch): see here. The headnote reads: "A term was not to be implied into a mezzanine lending agreement that a bank, which had acted as agent for two special purpose vehicles (“SPVs”) when they participated as junior lenders in such structured lending to a property company which subsequently collapsed, was obliged to disclose to the SPVs material financial information in its possession as to the declining health of the company."

Australia: CAMAC discussion paper on crowd sourced equity funding

The Corporations and Markets Advisory Committee has published a discussion paper on crowd sourced equity funding: see here. The paper seeks views on the appropriateness of the current regulatory framework and outlines alternative approaches.

Wednesday 11 September 2013

UK: The Enterprise and Regulatory Reform Act 2013 (Commencement No. 3, Transitional Provisions and Savings) Order 2013

The Enterprise and Regulatory Reform Act 2013 (Commencement No. 3, Transitional Provisions and Savings) Order 2013 was made on 7 September. Article 2(h) of the Order brings into force, on 1 October, sections 79 to 82 ("Payments to directors of quoted companies") of the Enterprise and Regulatory Reform Act 2013. These sections, which makes changes to the Companies Act 2006, contain the new framework for shareholder approval of remuneration policy. An extract from the explanatory memorandum for these sections is available here.

Australia: ASIC report on hedge funds and systemic risk

The Australian Securities and Investments Commission has published its review of the results of its 2012 hedge funds survey: see here (pdf). ASIC concludes that hedge funds do not currently pose a systemic risk to the Australian economy.

FSB publishes peer assessment of the United Kingdom

The Financial Stability Board has published its peer review assessment of the United Kingdom: see here (pdf). Various recommendations are made. The FSB states, for example, that the Financial Policy Committee should develop its relationship with the Financial Conduct Authority by increasing the latter’s involvement in FPC meeting preparations and by jointly undertaking systemic risk analysis work.

Tuesday 10 September 2013

UK: Prudential Regulation Authority - two new consultation papers published

The Prudential Regulation Authority has published two new consultation papers. The first, Capital extractions by run-off firms within the general insurance sector, is available here (pdf). The second, Schemes of arrangements by general insurance firms, is available here (pdf).

UK: The Executive Pay and Remuneration Bill

The Executive Pay and Remuneration Bill, a private members' bill, received its first reading in the House of Commons last week and is scheduled for second reading on Friday this week. The Bill, if enacted, would amongst other things require any public company with a remuneration committee to provide a place on that committee for an employee representative.

Monday 9 September 2013

UK: Company directors, fiduciary duties and tax avoidance

A legal opinion, prepared by law firm Farrer & Co, was published today by the Tax Justice Network: see here (pdf). A copy has been sent to the chief executive of every company in the FTSE100. The opinion considers - and rejects - the view that company directors are subject to a fiduciary duty to avoid tax. Indeed, it states that the "... idea of a strictly 'fiduciary' duty to avoid tax is wholly misconceived ...[and] ... It is not possible to construe a director's statutory duty to promote the success of the company [under section 172 of the Companies Act 2006] as constituting a positive duty to avoid tax."

India: Companies Act 2013 - consultation on first tranche of draft rules begins

The Ministry of Corporate Affairs has published for consultation the first tranche of draft rules that it intends to make under the Companies Act 2013: see here.

UK: The Companies (Revision of Defective Accounts and Reports) (Amendment) (No.2) Regulations 2013

The Companies (Revision of Defective Accounts and Reports) (Amendment) (No.2) Regulations 2013 were laid before Parliament last week and come into force on 1 October: see here or here (pdf). An explanatory memorandum is available here (pdf). The Regulations revoke and replace the Companies (Revision of Defective Accounts and Reports) (Amendment) Regulations (S.I. 2013/1971) because this instrument contained a drafting error (it applied to financial years commencing on or after 1 October 2013, and not to financial years ending on or after 30 September 2013).

G20/OECD High level principles of long-term investment financing by institutional investors

The eighth version of the G20/OECD High level principles of long-term investment financing by institutional investors has been published following its endorsement by the G20 leaders: see here (pdf). The principles seek to provide a framework for encouraging institutional investment in long-term assets.

UK: Financial Conduct Authority quarterly consultation

The Financial Conduct Authority has published its second quarterly consultation paper: see here (pdf). The paper seeks views on a wide range of proposed changes including those relating to the Prospectus Rules (to clarify the timing and method of filing of a prospectus with the FCA) and the rules on reporting suspicious transactions (to ensure consistency between SUP 15.10.2R and SUP 15.10.3R). Guidance is also proposed in respect of the AIFM Remuneration Code (SYSC 19B) following the publication earlier this year of ESMA's guidelines on sound remuneration policies under the Alternative Investment Fund Managers Directive.

Friday 6 September 2013

Jersey: The scope of Article 48D of the Banking Business (Jersey) Law 1991

The Royal Court (Samedi) gave judgment earlier this week in Representation of Standard Chartered (Jersey) Limited [2013] JRC 172, an important decision concerning the scope of Article 48D of the Banking Business (Jersey) Law 1991. Article 48D, and the accompanying Schedule to which it refers, were inserted into the 1991 Law by the Banking Business (Amendment No. 6) (Jersey) Law 2008 and establish a framework for the court to sanction the transfer in whole or in part of a deposit-taking business carried on, in or from Jersey by a registered person. The court held that Article 48D was wide enough to cover the transfer of an investment management business as well as a deposit-taking business. This was permissible, Commissioner Clyde-Smith held, where the non-deposit taking activities were integral to the business to be transferred and where they had not been artificially attached to the deposit-taking activities. He added that the transfer of non-depositing activities within a proposed scheme could also be achieved be under Paragraph 9(e) of the Schedule which enables the court to make orders in respect of incidental, consequential and supplementary matters that are, in its opinion, necessary for the full and effective carrying out of the scheme.

UK: FTSE350 companies and their subsidiaries

In a speech delivered in July this year, the Secretary of State for Business, Innovation and Skills said that he was examining how FTSE350 companies meet the legal requirement to identify their subsidiaries in their accounts and/or annual return: see here. Yesterday it was announced, following a review by Companies House, that 124 companies had failed to provide a full list of their subsidiaries: see here (pdf).

Thursday 5 September 2013

UK: Scotland: Scottish Government programme for 2013-2014

The Scottish Government's 2013-14 programme was announced earlier this week: see here. Amongst the proposed Bills are two worth noting here: the Conclusion of Contracts Bill and the Bankruptcy Consolidation Bill. The purpose of the former, according to the Scottish Government, is to make it easier for companies formally to sign and conclude contracts and use e-mail as part of the process. Recommendations to this effect were made earlier this year by the Scottish Law Commission in its report Formation of Contract: Execution in Counterpart.

The purpose of the second Bill is to update Scotland's bankruptcy legislation in order to make it, in the words of the Scottish Government, more readable and accessible. Consolidation of bankruptcy legislation was recommended by the Scottish Law Commission earlier this year: see here.

Europe: Risks and vulnerabilities in the EU financial system

The Joint Committee of the European Supervisory Authorities has published its second bi-annual report on risks and vulnerabilities in the European financial system: see here (pdf).  The report notes, amongst other things, that a weak macro-economic outlook continues to challenge the financial position of banks, insurers and investors. It also notes increased concern regarding the risks of cyber attacks.

Wednesday 4 September 2013

UK: SFO proceedings against Olympus and subsidiary

There is much in the news today about the decision of the Serious Fraud Office to start criminal proceedings against Olympus and its UK subsidiary Gyrus Group Ltd: see here. The charges relate to one of the offences contained in the Companies Act 2006: the offence within section 501 of making - whether knowingly or recklessly - a misleading, false or deceptive statement to an auditor. Gyrus Group faces four charges and Olympus faces one charge. The first hearing will take place at Westminster Magistrates' Court on 10 September 2013. A statement issued by Olympus states that the charges concern representations made to the auditors of the subsidiary in documents relating to its financial accounts for the fiscal years 2009 and 2010: see here (pdf).

Europe: Commission publishes communication on shadow banking and proposals regarding money market funds

The European Commission has today published a Communication on shadow banking as well as a proposal for a Regulation on money market funds. A copy of the Communication is available here (pdf) and FAQs are available here. A copy of the proposed Regulation is available here (pdf). Supporting the proposed Regulation are the following documents: FAQs | Citizens' summary (pdf) | Impact assessment: full (pdf), summary (pdf) |.

India: Companies Act 2013 published in the Gazette

A copy of the Companies Act 2013 has been published in the Gazette of India: see here (pdf). There is much to note in the Act, of which only section one has been brought into force. A few highlights follow. First, much has been written about the new Act and corporate social responsibility. Section 135 requires companies of a certain size to spend at least two percent of their average net profits in pursuit of their corporate social responsibility policy. This has been described as a mandatory requirement. However, section 135 provides that if the required amount is not spent then the directors are required to disclose their reasons for not doing so.

Second, the Act contains provisions which in other jurisdictions are contained in corporate governance codes, including the composition of the board and the formation of audit, remuneration and nomination committees. The Act also contains, in Schedule IV, a code of professional conduct for independent directors. Third, the new framework for external auditor appointment and rotation is contained in section 139. Listed companies are not permitted to appoint (or reappoint) an audit firm for more than two terms of five consecutive years.

Fourth, the duties of directors are set out in section 166, which states that "[a] director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment." The way in which this duty is expressed raises several questions. Is this a single duty or several? Must directors always act in the best interests of the identified stakeholders? Is this feasible where, for example, a decision may be in the best interests of the shareholders but not the employees?

Update (9 September 2013) - the first tranche of draft rules have been published for consultation: see here.

UK: England and Wales: company did not have a parent company

Judgment was given yesterday in Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2013] EWHC 2688 (TCC). The judge held, amongst other things, that a company was not the parent of another company. Whilst the two companies had shareholders and directors in common, there was no dominant influence by the alleged parent and the two companies were not managed on a unified basis. This issue arose in the context of a claim for an outstanding parent company guarantee.

Tuesday 3 September 2013

UK: England and Wales: Lord Chief Justice's report published

The Lord Chief Justice's report was published at the end of August: see here (pdf). It is noted therein that the Bankruptcy and Companies Court Users Committee has drafted two new Practice Directions - one on insolvency proceedings and one on the Company Directors Disqualification Act 1986 - that are to be implemented in 2013.

FSB progress reports: OTC derivatives reforms and ending 'too big to fail'

The Financial Stability Board yesterday published two progress reports: the first on OTC derivatives reforms (herepdf) and the second on "too big to fail" (herepdf).

Monday 2 September 2013

UK: England and Wales: directors' power to restrict shareholder voting rights exercised for an improper purpose

Judgment was given last Friday by Mr Justice Mann in Eclairs Group Ltd v JKX Oil & Gas Plc [2013] EWHC 2631 (Ch). The decision is noteworthy because of the discussion it contains of sections 171 and 172 of the Companies Act 2006 in the context of a decision by the majority of a company's directors, shortly before its annual general meeting, to exercise a power in the articles of association restricting the voting rights of certain shareholders. The articles provided this power in respect of the failure by a member (or other person interested in shares) to provide information in response to a notice issued under section 793 ("Notice by company requiring information about interests in its shares") of the Companies Act 2006.

The judge accepted that the directors had acted in what they believed was the best interests of the company. However, he found that they had used a power given for a limited purpose - the disclosure of information in response to the section 793 notice - for the purpose of stopping certain shareholders from voting at the annual general meeting. In doing so they breached section 171 ("Duty to act within powers"), the provisions of which were not trumped by section 172 ("Duty to promote the success of the company"). The result was that the directors' exercise of the power to impose restrictions on the shareholders' voting was set aside.

One point that was not pleaded but which the judge raised at the final speeches stage, was whether the exercise of a power should be set aside if the directors would have acted in the same way taking only proper purposes into account. Having raised this point the judge then held that it was too late for it to form part of the proceedings. He did, however, offer an opinion: in his view it was possible that a decision tainted by an improper purpose might nevertheless be upheld in such circumstances. The facts of the present case were, he noted, very different from the leading cases on improper purposes (Hogg v Cramphorn Ltd [1967] Ch 254 and Howard Smith Ltd v Ampol Ltd [1974] AC 821). Moreover, he did not see why the logic of these two cases should necessarily be applied inexorably to the present case.

India: Company law reform - Companies Bill 2012 receives presidential approval

The Times of India reports that the Companies Bill 2012, which was passed by the Rajya Sabha last month, has received presidential approval: see here. The Bill has thus become the Companies Act 2013. The Regulations to be made under the Act will be published by the Ministry of Corporate Affairs. A copy of the Act has not yet been published.