Friday 28 February 2014

UK: England and Wales: unfair prejudice and pre-emption provisions

The Court of Appeal gave judgment yesterday in Graham v Every [2014] EWCA Civ 191. In a case concerning a petition under section 994 of the Companies Act 2006 (the unfair prejudice remedy), the court held that while the trial judge had been right not to strike out the whole of the petition, he should have allowed certain allegations to stand including one relating to non-compliance with a pre-emption provision in an agreement between the shareholders. Lady Justice Arden stated that non-compliance with a pre-emption provision would not, ordinarily, amount to the conduct of the company's affairs (as required by section 994). The current case was, however, an exception because of an agreement that the directors were to be rewarded through dividends and not salary and, in Her Ladyship's view, the remuneration of directors and distribution policy fell within the company's affairs.

The two other judges hearing the case, Lord Justice Vos and Lord Justice McCombe, also commented on the pre-emption point. Lord Justice Vos stated that diluting the shareholding of a shareholder may unfairly prejudice his interests. Lord Justice McCombe held that the failure to observe the requirements of the pre-emption provision was an essential feature of the overall picture of unfairly prejudicial conduct alleged in the petition and it would be artificial to strike it out on the basis that, looked at in isolation, it might not be an act of the company.

Thursday 27 February 2014

OECD begins review of its Principles of Corporate Governance

The OECD has begun a review of its Principles of Corporate Governance: see here. The Principles were first published in May 1999 and last revised in 2004. According to the OECD, "[the] rationale for the review is to ensure the continuing high quality, relevance and usefulness of the Principles taking into account recent developments in the corporate sector and capital markets. The outcome should provide policy makers, regulators and other rule-making bodies with a sound benchmark for establishing an effective corporate governance framework".

UK: supervising international banks - the PRA consults on its approach to branch supervision

The Prudential Regulation Authority yesterday published a consultation paper titled Supervising international banks: the Prudential Regulation Authority’s approach to branch supervision: see here (pdf). The paper focuses in particular on branches from outside the European Economic Area. The PRA is proposing to introduce a rule that will require non-EEA firms to take all steps within their control to have adequate provision made in their resolution plans in respect of UK branches.

Wednesday 26 February 2014

UK: Fraud Advisory Panel chairman calls for company law changes in respect of company formation

Writing in today's Independent newspaper, the chairman of the Fraud Advisory Panel, Ros Wright CB QC, has called for changes to company law in respect of company formation: see here. Several proposals are put forward, including requiring new company directors to prove their identity and demonstrate their good character.

UK: England and Wales: company law and the interpretation of section 61 of the Trustee Act 1925

The Court of Appeal gave judgment earlier this week in Santander UK Plc v RA Legal Solicitors [2014] EWCA Civ 183. At first instance the trial judge found that RA Legal had acted in breach of trust but that they should be relieved from liability under section 61 ("Power to relieve trustee from liability") of the Trustee Act 1925. On appeal it was argued, amongst other things, that the trial judge had wrongly construed section 61 by referring to cases concerning section 727(1) of the Companies Act 1985 (now section 1157 of the Companies Act 2006). In this regard Lord Justice Briggs stated (para. [32]):
The difficulty with equating section 61 with section 727(1), at least for the purpose of interpreting section 61, is that section 727(1) appears to contemplate that a company officer or auditor may have acted honestly and reasonably, even though negligent, whereas section 61 contemplates no such thing in relation to trustees. It would in my judgment be wrong, by any process akin to reverse engineering, to interpret section 61 by reference to the historically more recent and undoubtedly more difficult provisions now to be found in section 727 of the Companies Act 1985."

Tuesday 25 February 2014

UK: Financial Services (Banking Reform) Act 2013 - transitional provisions

An Order containing a transitional provision in respect of the Financial Services (Banking Reform) Act 2013 has recently been made. A copy of the Order - the Financial Services (Banking Reform) Act 2013 (Transitional Provision) Order 2014 - is available here or here (pdf). An explanatory memorandum is available here (pdf).

Monday 24 February 2014

Portugal: IPCG publishes new corporate governance code

The codes and principles directory maintained by the European Corporate Governance Institute was updated yesterday with a copy, in Portuguese, of the new corporate governance code published by the Portuguese Institute of Corporate Governance (IPCG): see here.

UK: Financial Services (Banking Reform) Act 2013 - first commencement order made

Last week saw the making of the Financial Services (Banking Reform) Act 2013 (Commencement No.1) Order 2014, the first commencement order under the Financial Services (Banking Reform) Act 2013: see here or here (pdf).

Friday 21 February 2014

UK: England and Wales: Financial Ombudsman awards and res judicata

The Court of Appeal gave judgment last week in Clark v In Focus Asset Management & Tax Solutions Ltd [2014] EWCA Civ 118 and reversed the trial judge's decision (at [2012] EWHC 3669 (QB)). A summary of the court's decision has been published by the ICLR: see here. The summary's headnote reads: "The doctrine of res judicata precluded a complainant who had accepted an award made by the Financial Ombudsman Service from starting legal proceedings to pursue complaints which had already been submitted to the ombudsman service and which the ombudsman had decided. Further, section 228(5) of the Financial Services and Markets Act 2000 did not exclude the operation of res judicata" (links added).

Europe: Euribor-EBF - report on the implementation of the EBA/ESMA recommendations

The European Banking Authority and European Securities and Markets Authority have published a report in which they review the progress made in respect of their recommendations concerning the Euribor-EBF benchmark: see here (pdf). A summary of the report's findings is available here. Significant progress in implementing the recommendations is noted. The recommendations are available here (pdf).

Thursday 20 February 2014

Canada: new rules on director election for TSX issuers

The Toronto Stock Exchange (TSX) has received the approval of the Ontario Securities Commission to make amendments to the TSX Company Manual in respect of the election of directors: see here. The changes require directors of TSX listed issuers to be elected by a majority of the votes cast.  This change follows amendments made in 2012 requiring directors to be elected individually.

Wednesday 19 February 2014

China: State Council approves removal of minimum capital requirements for certain companies

The State Council announced yesterday that it had approved plans to remove the minimum capital requirements for certain limited liability companies, one-person limited liability companies and joint-stock companies with limited liability: see here.

Tuesday 18 February 2014

UK: Consultation on insolvency practitioner regulation and fee structure

A consultation paper was published yesterday setting out proposed reforms to the regulatory framework governing insolvency practitioners: see here. It is proposed, amongst other things, to introduce regulatory objectives for those organisations (the recognised professional bodies) authorising insolvency practitioners.

Australia: ASIC roundtable on corporate governance

The Assistant Treasurer, Senator the Hon Arthur Sinodinos AO, has announced that the Australian Securities and Investments Commission will be holding a roundtable next month, under the banner of corporate governance, to consider [a] current market practice regarding director share trading in Australia and related aspects of market integrity; [b] forthcoming ASIC findings regarding the handling of confidential information by listed companies. Further information is available here.

Monday 17 February 2014

UK: England and Wales: winding-up on the just and equitable ground

The High Court gave judgment last Friday in Harding v Edwards [2014] EWHC 247 (Ch) and ordered the winding-up of a company on the ground that it was just and equitable to do so within section 122(1)(g) of the Insolvency Act 1986. The decision provides a good illustration of the facts necessary for this to be done where a company's management has become deadlocked.

Friday 14 February 2014

UK: England and Wales: High court endorses earlier decision on multiple derivative actions

Judgment was given yesterday in Abouraya v Sigmund [2014] EWHC 277 (Ch). The decision is noteworthy because the trial judge, Mr Justice David Richards, explicitly endorsed the reasoning and conclusions of Mr Justice Briggs (as he then was) in Universal Project Management Services Ltd v Fort Gilkicker Ltd [2013] EWHC 348 (Ch), [2013] Ch 551. In this latter case, a summary for which is available here, Briggs J. held that the English common law recognised multiple derivative actions before the coming into force of the Companies Act 2006 and that they had survived the Act's introduction.

Thursday 13 February 2014

India: SEBI approves new corporate governance norms for listed companies

The Securities and Exchange Board of India met today and agreed changes to the Listing Agreement in respect of the corporate governance norms for listed companies. The proposed amendments take effect on 1 October this year. A summary is available here. The changes include an expanded role for the audit committee and the requirement for all boards to have at least one female director.

Wednesday 12 February 2014

Singapore: MAS consultation - securities market structure and practices

The Monetary Authority of Singapore has published a consultation paper titled Review of Securities Market Structure and Practices: see here (pdf). Included in the paper are proposals to strengthen the listing framework including the enforcement of listing rule breaches.

Tuesday 11 February 2014

UK: Banking Standards Review - consultation paper published

The first consultation paper to be published by the Banking Standards Review has been published: see here (pdf). The paper sets out proposals for the creation of a new organisation to champion better banking standards in the UK. This organisation will define and publish good practice standards concerning behaviour and competence and will also accredit training programmes meeting these standards. Metrics are proposed in order that bank boards are able to benchmark their performance.

Europe: Single Supervisory Mechanism - ECB consults on draft framework Regulation

The European Central Bank has published for consultation a draft framework Regulation, the purpose of which is to set out the rules and procedures for cooperation between the ECB and the National Competent Authorities, within the Single Supervisory Mechanism: see here (pdf).

Monday 10 February 2014

IOSCO consults on revised code of conduct fundamentals for credit rating agencies

The International Organization of Securities Commissions has published for consultation a revised edition of its code of conduct fundamentals for credit rating agencies: see here (pdf).

Global Management Accounting Principles - draft published by CIMA and AICPA

The Chartered Institute of Management Accountants (CIMA) and the American Institute of Certified Public Accountants (AICPA) have published for consultation a set of global management accounting principles: see here. Three major principles are included: preparing relevant information, modelling value creation and communicating with impact. These are considered in the context of 12 main practice areas including budgeting, regulatory adherence and compliance, strategic tax management and risk management.

Friday 7 February 2014

Hong Kong: Consultation on creating an effective regime for the resolution of financial institutions

Several authorities - the Financial Services and the Treasury Bureau, the Hong Kong Monetary Authority, the Securities and Futures Commission and the Insurance Authority - have published proposed changes to the resolution regime for financial institutions: see here (pdf).

Europe: Directive on the criminal sanctions for market abuse - European Parliament approval

Earlier this week the European Parliament approved the Commission's proposed Directive on the criminal sanctions for market abuse: see here.  The text of the Directive is available here. Further background information is available here and some FAQs are available here. It is expected that the Directive will be published in the Official Journal in June this year, after which Member States have two years within which to implement it through national law.

Thursday 6 February 2014

Ireland: Company law reform - Companies Bill 2012 as amended by Joint Committee

A copy of the Companies Bill 2012, as amended last year by the Joint Committee on Jobs, Enterprise and Innovation, has been published: see here (pdf, large file). The Bill has reached Report stage; its progress can be followed here.

UK: Monitor guidance on external governance reviews for NHS foundation trusts

Monitor, the regulator for health services in England, has published guidance for NHS foundation trusts in respect of external reviews of their governance: see here (pdf). The guidance document sets out Monitor's expectation that such reviews will be carried out every three years.

UK: FRC open meeting - discussion of the priorities for 2014/15

Last month the Financial Reporting Council held an open meeting to discuss its priorities for 2014/15. A summary of the presentations and discussions has been published: see here (pdf). At the event an overview was provided of the current state of governance and engagement, including the following issues requiring attention: the quality and effectiveness of internal controls; the extent to which companies, markets and policymakers were taking a sufficiently long-term view; and lack of clarity in some reporting on strategy, business models and risks. It was also noted that engagement by investors with companies was rising but that there was considerable room for improvement.

Wednesday 5 February 2014

UK: FCA guidance on the AIFM Remuneration Code

The Financial Conduct Authority has published final guidance in respect of the AIFM Remuneration Code (SYSC 19B): see here (pdf).

EBRD Core Principles for a Corporate Governance Framework

The codes and principles directory maintained by the European Corporate Governance Institute was updated yesterday with a copy of the Core Principles for a Corporate Governance Framework developed by the European Bank for Reconstruction and Development: see here.

Tuesday 4 February 2014

IOSCO final report - recommendations on the protection of client assets

The International Organization of Securities Commissions has published its final report Recommendations on the protection of client assets: see here (pdf).

UK: England and Wales: three cases on directors' duties

The duties of directors have recently been considered in a trio of High Court decisions. In the first, Pullan v Wilson [2014] EWHC 126 (Ch), the court considered the operation of section 176 of the Companies Act 2006, which imposes a duty on directors not to accept benefits from third parties. The case concerned a trustee who had been appointed a non-executive director of several companies in which the trusts had invested. The judge held that section 176 did not apply because the benefits in question were received by the individual in his capacity as trustee; the benefits were not conferred because the individual was a director or doing anything as a director.

In the second case, The Northampton Regional Livestock Centre Co Ltd v Cowling [2014] EWHC 30 (QB), a director was held in breach of duty where he placed himself in a position of conflict by acting for both the vendor and purchaser in a commercial property transaction. The judgment contains some interesting discussion of the operation of section 1157, under which the court has the power to grant a director relief from liability in respect of negligence, default, breach of duty or breach of trust. Finally, in the third case, Elsworth Ethanol Company Ltd v Hartley [2014] EWHC 99 (IPEC), it was argued that that three individuals were de facto directors and that they had acted in breach of duty. The court rejected this argument, finding that the three individuals were not de facto directors of a company.

Monday 3 February 2014

Europe: EBA publishes main features of bank stress testing exercise

The European Banking Authority has set out the main features of its forthcoming stress test of a sample of EU banks: see here (pdf). FAQs are available here (pdf). The banks in the sample are listed here (pdf).

UK: Code of Governance for NHS Foundation Trusts

Monitor, the regulator for health services in England, has published a revised edition of its NHS Foundation Trust Governance Code: see here (pdf).