Friday 30 May 2014

UK: "Unfair shares" - a speech by Andrew Haldane and a question about governance reform

Earlier this month, at the Bristol Festival of Ideas, Andrew Haldane - the Bank of England's executive director for financial stability - delivered a speech titled "Unfair Shares": see here (pdf). The speech explored the topic of inequality from the perspective of central banking but also considered corporate governance. It concluded:
This governance structure [granting primacy to shareholders] has stood the test of time. But it is not without distributional consequences. If power resides in the hands of one set of stakeholders, and they are short-termist, then we might expect high distribution of profits to this cohort, at the expense of ploughing back these profits (as increased investment) or distributing them to workers (as increased real wages). To some extent, this matches the stylised facts on rising inequality – rising executive and shareholder compensation and faltering real wage growth. The shareholder model may, ironically, have contributed to unfair shares.

If so, this suggests that one avenue worth considering further is corporate governance reform. A set of corporate incentives which had as its fulcrum long-term company value and which more fully reflected the interests of a wider set of stakeholders might help rebalance the scales – for example, towards investing rather than distributing. Such an alternative model is certainly not without precedent. It is found in a number of countries around the world (Mayer (2013)).

Inequality and corporate governance are deep, structural issues. Central banks do not have many, perhaps any, of the solutions to these problems. But the stakes – a more stable, faster-growing, fairer society – could not be higher. There is a collective public policy interest in getting them right."

Thursday 29 May 2014

UK: Scotland: Law Commission consultation on ninth law reform programme

The Scottish Law Commission has begun a consultation in which views are sought on its ninth programme of law reform: see here. The Commission states that several projects under its current programme will be carried forward into the ninth programme, including compulsory purchase law, moveable transactions, contract law, heritable securities and homicide.

Wednesday 28 May 2014

UK: FRC publishes annual audit quality inspections report

The Financial Reporting Council published its annual audit quality inspections report today: see here (pdf). Separate reports for the big four auditing firms, and third country auditors, have also been published: see here. The FRC finds that the quality of auditing in the UK is "generally good" although inconsistent across audit firms and types of company. Moreover, the quality of bank and building society audits remains below average.

Tuesday 27 May 2014

Ireland: Companies Bill 2012

The Companies Bill 2012 completed the Report and Final stages in the Dáil Éireann last month and now proceeds to the Seanad Éireann: see here. A copy of the Bill as passed in the Dáil Éireann is now available: see volume one (parts 1 to 15) (pdf) and volume two (parts 16 to 25 and schedules) (pdf).

Monday 26 May 2014

Nigeria: Central Bank publishes revised edition of governance code for banks and discount houses

The Central Bank of Nigeria has published a revised edition of its corporate governance code for banks and discount houses in Nigeria: see here (pdf).

Friday 23 May 2014

Kenya: CMA publishes governance blueprint and draft corporate governance code for listed companies

The Capital Markets Authority has published for consultation a corporate governance blueprint and draft corporate governance code for listed companies: see here.

Thursday 22 May 2014

UK: England and Wales: sole shareholder and director could not ratify their own breaches of duty

Judgment was given today by Mrs Justice Rose in Goldtrail Travel Ltd v Aydin & Ors [2014] EWHC 1587 (Ch). Her Ladyship held, amongst other things, that a company's sole shareholder could not in that capacity ratify their misconduct as the company's sole director. Two reasons were given to support this position: the company's insolvency and section 239 ("Ratification of acts by directors") of the Companies Act 2006. Mrs Justice Rose also held that the sole director could not take advantage of the provision permitting director authorisation of conflicts of interests under section 175 ("Duty to avoid conflicts of interest") of the Companies Act 2006.

UK: IMA Stewardship Code survey published

The Investment Management Association has published the latest edition of its Stewardship Code survey: see here. The survey found, amongst other things, that stewardship is referred to in the mandates of an increasing proportion of asset managers.

Wednesday 21 May 2014

UK: England and Wales: Court of Appeal orders resumption of FCA fraud proceedings

The Court of Appeal today gave judgment in R v Crawley & Ors [2014] EWCA Crim 1028 and ordered that fraud proceedings, brought by the Financial Conduct Authority, should be resumed. In doing so it overturned the much publicised decision of His Honour Judge Leonard QC, sitting in the Crown Court at Southwark, in which the prosecution had been stayed: see here (pdf). The Court of Appeal's decision was delivered by the President of the Queen's Bench Division and he ended his judgment by calling for the Ministry of Justice, led by the Lord Chancellor, and the professions to resolve "the impasse that presently stands in the way of the delivery of justice in the most complex of cases" (para. [58]).

Europe: European Banking Authority annual report published

The European Banking Authority - one of the European Supervisory Authorities within the European System of Financial Supervision - has published its latest annual report, setting out the activities it undertook in 2013: see here.

UK: Supreme Court finds that LLP member was a worker

The Supreme Court gave judgment today in Clyde & Co LLP & Anor v van Winklehof [2014] UKSC 32 and unanimously held that a member of a limited liability partnership was a worker within the meaning of section 230(3)(b) of the Employment Rights Act 1996. A summary of the court's decision is available here (pdf) and it is also explained by Lord Wilson below:

Tuesday 20 May 2014

Nigeria: NCC draft code of governance for the telecommunications industry

The Nigerian Communications Commission has published a draft code of governance for the telecommunications industry: see here (pdf).

Monday 19 May 2014

UK: Banking Standards Review - recommendations published for new standards body

Following a consultation earlier this year, the Banking Standards Review published its recommendations today: see here (pdf). These centre on the creation and operation of the new Banking Standards Review Council, the role of which is described in these terms: "... to contribute to a continuous improvement in the behaviour and competence of all banks and building societies doing business in the UK. It will act as an independent champion of better banking standards in the UK, and be driven by the interests of customers and of the wider group of stakeholders with a concern for the well-being of the British banking system."

In a press release accompanying the publication of the recommendations, it is stated that the new Council will be launched later this year and that its creation has the support of the chairman of Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Standard Chartered: see here (pdf). The Governor of the Bank of England is to chair an independent panel to appoint the Council's first chairman.

UK: England and Wales: proper purposes and company register inspections

Section 116 of the Companies Act 2006 provides that a company's register and index of members' names must be open for inspection by a shareholder without charge and any other person on payment of a fee. It also provides that any person may require a company of the company's register of members, or part of the register, on payment of a fee. Section 117 provides that a company need not comply with a request under Section 116 if an application is made to the court and the court is satisfied that the inspection or copy is not sought for a proper purpose. The operation of section 117 has recently been considered by the Court of Appeal in Burry & Knight Ltd v Knight [2014] EWCA Civ 604. The court upheld the Registrar's decision to grant an order permitting a company not to comply with a request under section 116. In doing so, Lady Justice Arden set out the purpose of section 116 in the following terms (paras. [24] and [25]):
Unless a company obtains an order under section 117(3) it must comply with a request for access and a criminal penalty is imposed for non-compliance by section 118. This is an important signal that Parliament attached importance to the exercise of the right of access to the share register. I agree with the Registrar that the way the statutory provisions are framed reflects a strong presumption in favour of shareholder democracy and a policy of upholding principles of corporate transparency and good corporate governance. I also agree with the Registrar that these factors point in favour of the court exercising its discretion "sparingly and with circumspection" where requests are made by shareholders to communicate with fellow shareholders. The reasons for this are obvious. If a member cannot communicate with fellow members, it puts the board into a very strong position. The corporate governance of a company is accordingly weakened. The relationship between the board and the shareholders cannot operate as it is intended to operate with the shareholders monitoring the activities of the directors. In my judgment, it would require a strong case to prevent access for these reasons.

Moreover, it is in principle for shareholders to assess whether a communication is of value to them and what action they should take. Parliament cannot in my judgment be taken to have intended the court to take a view about just how far the information which the member seeking access wishes to give him is information of value. This would involve the court making a commercial judgment as to the merits of the requesting member's view and would lead to satellite litigation which would delay a decision on access. In some cases, however, it will be obvious that the information is of no value, as where the information is already known to members or simply nonsense. But if the court is in any doubt, it should not make a no-access order."

Friday 16 May 2014

UK: Listing Rule changes come into force today; FCA policy statement published

The changes made to the Listing Rules by the Listing Rules (Listing Regime Enhancements) Instrument 2014 came into force today. The new provisions, intended to improve the effectiveness of the listing regime, include those designed to protect the interests of shareholders in companies with a controlling shareholder. Listing Principles are now provided for listed and premium listed companies. Further information about these changes is contained in a policy statement published today by the Financial Conduct Authority: see here (pdf).

UK: The Financial Services and Markets Act 2000 (Transparency) Regulations 2014

The Financial Services and Markets Act 2000 (Transparency) Regulations 2014 were laid before Parliament today and come into force on 6 June. The Regulations given the Financial Conduct Authority the power to remove from its rules the requirement for share issuers to produce interim management statements or quarterly reports, following amendments made to European law. An explanatory memorandum is available here (pdf).

UK: England and Wales: judgment in Winkelhof due next week - is a member of an LLP a worker?

The Supreme Court has announced that judgment wil be given next Wednesday in Clyde & Co LLP v Winkelhof. The issue before the court, to quote directly from its summary of the case, was whether a member of a limited liability partnership was a worker within the meaning of section 230(3) of the Employment Rights Act 1996 and therefore within the category of persons protected by the Public Interest Disclosure Act 1998 and permitted to bring a whistleblowing claim.

Thursday 15 May 2014

UK: England and Wales: disqualification and the interpretation of a court order

The ICLR has provided a summary for the recent decision Feld v Secretary of State for Business, Innovation and Skills [2014] EWHC 1383 (Ch), a case concerning the interpretation of an order granting a disqualified company director permission to act as a director, in circumstances where the director had been involved in the drafting of the order: see here.

The summary's headnote reads: "The principles of contractual interpretation could also be relevant to interpretation of a court order. Where a court order was to be applied to a person who had had a hand in drafting the terms of the order, the court should be entitled to have regard, as part of the exercise of construing the order, to what that person could reasonably have been thought to have intended in drafting the order in a particular way, as far as that might be objectively determined on the basis of the evidence presented to the court".

UK: Royal assent for Co-operative and Community Benefit Societies Bill

The Co-operative and Community Benefit Societies Bill, which consolidates the law relating to co-operative and community benefit societies - reflecting recommendations made by the Law Commissions - received Royal assent yesterday: see here.

Update (15 May 2014) - a copy of the new Act is available here or here (pdf).

Tuesday 13 May 2014

OECD consults on revised governance guidelines for state owned enterprises

Earlier this year the OECD began a review of its Guidelines on Corporate Governance of State-Owned Enterprises: see here. A revised draft of the Guidelines has now been published for public comment: see here (pdf). Final discussion is expected in the autumn, with the revised Guidelines being summited to the OECD Corporate Governance Committee for approval in November.

Monday 12 May 2014

UK: ICSA consultation on the content of annual reports

ICSA has published a short consultation paper seeking views on a contents list for company annual reports, the purpose of which is to assist those preparing reports: see here (pdf). The consultation is being published following a request from the Department for Business, Innovation and Skills.

Friday 9 May 2014

UK: GMG consults on changes to the Walker Guidelines

The Private Equity Monitoring Group on Transparency and Disclosure (known as the Guidelines Monitoring Group, GMG) has published a consultation paper setting out proposed changes to the so-called Walker Guidelines on transparency and disclosure in private equity: see here (pdf).

Europe: Implementing the single supervisory mechanism - ECB quarterly report

The European Central Bank has published its second quarterly report in respect of the implementation of the Single Supervisory Mechanism (SSM) Regulation: see here (pdf). This notes, amongst other things, that in April the ECB published a regulation setting out a framework for cooperation between the ECB and national competent authorities and national designated authorities: see here (pdf).

For further information concerning the SSM, see the information provided by the ECB as well as E. Wymeersch, The Single Supervisory Mechanism or 'SSM', Part One of the Banking Union, Ghent University Financial Law Institute Working Paper No. 2014-01, available at SSRN: see

Thursday 8 May 2014

UK: FCA board approves changes to the Listing Rules

Earlier this month the board of the Financial Conduct Authority approved changes to the Listing Rules. These changes will be made by Listing Rules (Listing Regime Enhancements) Instrument 2014, a copy of which is now available: see here (pdf). Further information about the changes is available here. The new rules come into force on 16 May and include, for example, provisions designed to protect the interests of shareholders in companies with a controlling shareholder.

Wednesday 7 May 2014

UK: Enforcement decision making by the financial regulators - call for evidence

The Treasury has published a call for evidence as part of a review of enforcement decision making by the Prudential Regulation Authority and Financial Conduct Authority: see here. Various questions are asked in order to solicit views on the overall effectiveness of current enforcement decision making.

Tuesday 6 May 2014

UK: NCVO report on executive pay in the charity sector

The National Council for Voluntary Organisations has published the results of an inquiry into senior executive pay in the charity sector: see here (pdf). The report make a number of recommendations, including the adoption by charities of a set of principles for setting remuneration.

Monday 5 May 2014

Gibraltar: Companies Bill 2014 published

The Companies Bill 2014, the purpose of which is to consolidate and revise the company law framework in Gibraltar, has been published by the Government: see here (pdf). It is expected that Parliament will consider the Bill later this month.

Update (5 November 2014) - the Bill has become an Act and the new framework came into force on 1 November: see here.

Friday 2 May 2014

Ireland: Companies Bill 2012 completes Report and Final stages in the Dáil Éireann

A rather belated post to note that the Companies Bill 2012 completed the Report and Final stages in the Dáil Éireann last month: see here. The Bill now proceeds to the Seanad Éireann. Further information about the Bill is available here. Its progress can be followed here.

Thursday 1 May 2014

UK: FCA board to consider new listing regime rules today

The board of the Financial Conduct Authority will today consider new rules on the UK listing regime (about which it has consulted) and, if these are approved, they will come into force on 16 May. For further information see here.