Thursday 24 December 2015

Season's greetings and best wishes for the new year

Season's greetings to all blog visitors and those receiving the daily email updates. I hope that you have found the contents useful and interesting over the past year (any feedback is welcome; a major task for the new year will be updating the collections of links).

The first blog post and email update for 2016 will appear on January 4.

With best wishes for 2016,

UK: introducing the PSC register - Government implementation plan

Following a consultation earlier this year, the Department for Business, Innovation and Skills (BIS) has confirmed the Government's plans for the introduction of the new Register of People with Significant Control: see here (pdf). Secondary legislation - the People with Significant Control Regulations - will be laid before Parliament in January 2016, and companies will be required to keep a PSC register from 6 April 2016. Legislation will be introduced to bring LLPs into the PSC regime alongside companies. Finalised guidance will be published in January 2016. Further information is available here.

South Africa: introducing 'twin peaks' - the Financial Sector Regulation Bill

The legislation that will introduce the twin peaks financial regulatory framework in South Africa has been introduced in Parliament. A copy of the Bill - the Financial Sector Regulation Bill - is available here (pdf) and its progress can be followed here. Further background information is available here.

Philippines: SEC publishes corporate governance blueprint

The Philippines Securities and Exchange Commission has published a corporate governance blueprint, containing best practice recommendations that will form the basis for a governance code to be published in 2016. A copy of the blueprint, in English, is available here (pdf).

Wednesday 23 December 2015

UK: FRC publishes draft plan and budget for 2016/17

The Financial Reporting Council has published its draft plan and budget for 2016/17: see here (pdf). As well as setting out priorities for the year ahead (including forthcoming publications), the FRC's plan also seeks views on proposed indicators of governance quality, including the proportion of FTSE350 companies stating that they have met all, or all but one, of the provisions in the UK Corporate Governance Code and the perceived quality of 'comply or explain' explanations.

Poland: Warsaw Stock Exchange publishes new corporate governance code

A new corporate governance code - titled 'Best Practice of GPW Listed Companies 2016' - has been published by the Warsaw Stock Exchange (GPW) and comes into force on 1 January 2016. A copy of the code is available here (pdf) and further information is available here.

Ireland: Central Bank - new corporate governance 'requirements' published

The Central Bank of Ireland has, in the past few months, published new corporate governance requirements (formerly known as codes) for: captive insurance and captive reinsurance undertakings; insurance undertakings; and credit institutions. The new requirements documents can be found here.

Netherlands: corporate governance code review to begin in February 2016

The Dutch Corporate Governance Code Monitoring Committee has announced that it will publish on 11 February 2016 a consultation paper containing proposed reforms to the Dutch Corporate Governance Code: see here.

Tuesday 22 December 2015

Sweden: new edition of the Swedish Corporate Governance Code

The Swedish Corporate Governance Board has published a new edition of the Swedish Corporate Governance Code, following a consultation earlier this year. A copy of the new Code, in English, is available here (pdf).

Finland: new edition of the Finnish Corporate Governance Code published

Following a review earlier this year, the Securities Market Association has published a new edition of the Finnish Corporate Governance Code, effective from 1 January 2016: see here (English, pdf).

Monday 21 December 2015

UK: England and Wales: articles of association - interpretation and implied terms

Judgment was given last Friday in Cosmetic Warriors Ltd v Gerrie & Anor [2015] EWHC 3718 (Ch). A first instance decision concerning the interpretation of terms in a set of articles of association would not, ordinarily draw much attention. The judgment comes, however, after two important Supreme Court decisions concerning contract construction and implied terms - Arnold v Britton [2015] UKSC 36 and Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd (Rev 1) [2015] UKSC 72 - and, in particular, observations therein concerning the approach adopted by Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10.

The trial judge held, amongst other things, that there was no absolute prohibition on considering extrinsic material for the purpose of interpreting the articles of association of a company; however, that admissible background was, for the purposes of construction, limited to what any reader of the articles would reasonably be supposed to know. In contrast, the trial judge held, the implication of a term based on extrinsic evidence of which only a limited number of people would have known was impermissible.

Friday 18 December 2015

Europe: ESMA report on the Best Practice Principles for Providers of Shareholder Voting Research and Analysis

The European Securities and Markets Authority has published its report on the development of the Best Practice Principles for Providers of Shareholder Voting Research and Analysis: see here. ESMA reached the following findings in its report: the Principles generally meet ESMA's expectation; there is, as a result, greater transparency; and the group that produced the Principles would benefit from better governance and further clarity over what monitoring it performs.

Thursday 17 December 2015

UK: HM Treasury consultation - FPC powers of direction and the buy to let market

HM Treasury is consulting on the tools the Financial Policy Committee should have in respect of its powers of direction and the UK buy to let market: see here. The consultation paper is accompanied by draft legislation - The Bank of England Act 1998 (Macro-prudential Measures) Order 2016, available here (pdf) - and an impact assessment (here, pdf).

Malaysia: company law reform - an update on the Companies Bill 2015

It has been reported in the media that the Companies Bill 2015, which received its first reading in October in the Dewan Rakyat, is one of nine Bills for which second reading has been deferred to the next session in March 2016: see here.

Bhutan: company law reform - update on the new Companies Act

Earlier this year the Companies Bill 2014 was introduced in the National Assembly and is nearing the conclusion of its legislative journey: see here. A copy of the Bill is available here.

Wednesday 16 December 2015

UK: PRA and FCA final rules - the new accountability framework - UK branches of foreign banks

The Financial Conduct Authority and Prudential Regulation Authority have today published final rules in respect of the new accountability framework (the senior managers and certification regimes) for individuals working in the UK branches of overseas banks: see, respectively, here (pdf) and here (pdf).

USA: PCAOB final rules - identification of the audit engagement partner and audit firm participants

The Public Company Accounting Oversight Board has published new rules designed to provide investors with more information about who is participating in the audits of public companies. The new rules - available here - will require audit firms to disclose the names of each audit engagement partner and the names of other audit firms participating in each audit.

Tuesday 15 December 2015

UK: Stewardship Code - FRC to publish assessment of signatories' reporting

The Financial Reporting Council has announced that it will be assessing signatories' reporting under the UK Stewardship Code and making public its assessment: see here. Two tiers will be used. The first - Tier 1 - where reporting expectations are met and under which asset managers will be asked to provide evidence of the implementation of their approach to stewardship (the FRC says that it will look particularly at conflicts of interest disclosures, evidence of engagement and approach to resourcing and integration of stewardship). The second tier - Tier 2 - where the Tier 1 reporting expectations are not met.

The FRC says that it will contact firms before making public its assessment in order to allow time for improvements. The intention is that signatories wlll engage with this new process positively and will be proactive in improving their reporting of stewardship activities.

Monday 14 December 2015

UK: PLSA corporate governance policy and voting guidelines 2015/16

The Pensions and Lifetime Savings Association has published an updated edition of its Corporate Governance Policy and Voting Guidelines: see here (pdf). An overview of some of the changes is available here. An addition to the guidelines concerns the holding of more than one directorship; a note has been added that it may be appropriate to vote against the (re-)election of a non-executive director holding more than four directorships in complex companies (a stricter approach is advocated where the director chairs a number of key committees).

Friday 11 December 2015

UK: Finance Bill 2016 - the new 'tax strategy report'

HM Treasury and HMRC have published a draft of the Finance Bill 2016, together with explanatory notes and policy papers: see here. Draft Clause 65 (and its supporting Schedule) in the Bill contain the provisions introducing the requirement for certain large businesses to publish a tax strategy report: see here. According to the Schedule, the tax strategy report must explain:

(a) the approach of the UK group to risk management and governance arrangements in relation to UK taxation;

(b) the attitude of the group towards tax planning (so far as affecting UK taxation);

(c) the level of risk in relation to UK taxation that the group is prepared to accept; and

(d) the approach of the group towards its dealings with HMRC.

Thursday 10 December 2015

UK: Grant Thornton's annual review of FTSE350 company corporate governance

Grant Thornton has published the 2015 edition of its annual review of governance, based on the analysis of the annual reports of FTSE350 companies: see here (pdf). The report notes that 57% of companies complied fully with the UK Corporate Governance Code. The principal area of non-compliance is board independence. For the first time in four years, there was a reduction in the number of FTSE100 companies claiming full compliance (down to 64%). Reporting by companies of some matters - such as culture - remains highly variable.

Wednesday 9 December 2015

UK: PRA publications - the leverage ratio framework

The Prudential Regulation Authority has published various documents, including a policy statement, concerning the implementation and structure of the UK's leverage ratio framework: see here.

Tuesday 8 December 2015

UK: The importance of corporate governance - a speech by the corporate governance minister

Baroness Neville-Rolfe - the Minister in the Department for Business, Innovation and Skills responsible for corporate governance, company law and Companies House - delivered a speech earlier this month titled The Importance of Corporate Governance: see here. The speech explores recent changes but also highlights several forthcoming proposals that will be the subject of consultation, including the dematerialisation of paper share certificates and implementation of the EU Non-financial reporting Directive. Baroness Neville-Rolfe also identified areas for improvement, including the quality of financial and non-financial reporting.

Monday 7 December 2015

UK: FRC consultation - revising the Audit Firm Governance Code

The Financial Reporting Council has published a consultation paper setting out proposed revisions to the Audit Firm Governance Code, following an earlier consultation this year: see here (pdf). Amongst the proposals put forward by the FRC is a restatement of the Code's purpose. Appendix 1 of the consultation document contains the revised version of the Code being proposed by the FRC.

Friday 4 December 2015

Kenya: CMA publishes governance and stewardship codes

Earlier this year legislation was passed introducing Kenya's new company law framework: the Companies Act 2015 (see here, pdf). The introduction of this new legislative framework has been accompanied by the development of new governance and stewardship codes, draft versions of which were published earlier this year by the Capital Markets Authority: see here.

Thursday 3 December 2015

UK: Supreme Court to hear appeal in case on FCA notices, identification and third party rights

The Supreme Court today published a list of its permission to appeal decisions for October and November: see here (pdf). This document notes that permission to appeal the Court of Appeal decision in Financial Conduct Authority v Macris [2015] EWCA Civ 490, [2015] WLR (D) 219 was granted in early November. This case concerned the operation of section 393 "third party rights" of the Financial Services and Markets Act 2000.

Wednesday 2 December 2015

UK: Directors' duties and the proper purpose rule

Judgment was given earlier today by the Supreme Court in Glengary Overseas Limited v JKX Oil & Gas Plc; Eclairs Group Limited v JKX Oil & Gas Plc [2015] UKSC 71. A copy of the judgment is available here or here (pdf). A summary is available here (pdf).

The judgment was expected earlier this year; indeed, an earlier hand-down date was published on the Supreme Court website. The reasons for the delay are now clear: the court's draft judgment was withdrawn before delivery, following representations from the parties, because it contained discussion of an issue - causation - that had not been the subject of argument during the oral hearing (submissions were, however, provided after the hearing at the invitation of the court).

Whilst the panel of judges agreed on the outcome of the appeal - that the proper purpose rule applied to the exercise of a power given to the directors under the articles - there was a reluctance amongst the majority to accept without further argument aspects of Lord Sumption's opinion (with which Lord Hodge agreed) which would result in a reframing of the rule. As Lord Mance observed (para. [53]:

"... although I have sympathy with Lord Sumption’s view that 'but for' causation offers a single, simple test, which it might be possible or even preferable to substitute for references to the principal or primary purpose, I am not persuaded that we can or should safely undertake what all parties consider would be 'a new development' of company law, without having heard argument".

Lord Sumption and Lord Hodge had agreed with the majority view in the High Court of Australia decision Whitehouse v Carlton House Pty (1987) 162 CLR 285, in which it was stated (at 294): "As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, 'the power would not have been exercised".

Elsewhere in his opinion, and less controversially, Lord Sumption explained the purpose of the proper purpose rule (now found in section 171 of the Companies Act 2006)(para. [37]):

The rule that the fiduciary powers of directors may be exercised only for the purposes for which they were conferred is one of the main means by which equity enforces the proper conduct of directors. It is also fundamental to the constitutional distinction between the respective domains of the board and the shareholders. These considerations are particularly important when the company is in play between competing groups seeking to control or influence its affairs".

A video recording of Lord Sumption explaining the court's decision is available below (this does not give an indication of the disagreement noted above):

Tuesday 1 December 2015

New Zealand: NZX begins review of corporate governance reporting

NZX has begun a review of the corporate governance reporting requirements within the NZX Main Board Listing Rules with the publication of a discussion document: see here (pdf).

UK: Financial Policy Committee - financial stability report published - cyber risk and capital buffers

The Financial Policy Committee has published its second Financial Stability Report for 2015 (two reports are published in each calendar year): see here. An executive summary is available here (pdf). The FPC is maintaining the UK countercyclical capital buffer rate at 0% for the time being, but nevertheless states that it is "actively considering the appropriate setting" of the buffer; a review is planned for March 2016 and an increase seems likely. The FPC also notes that cyber risk continues to pose a threat to the financial system.

Monday 30 November 2015

Pakistan: new company law framework - draft of Companies Bill 2015 published

Update (7 April 2016) - a second draft of the Companies Bill has been published for public comment: see here.


In March 2013, the Securities and Exchange Commission of Pakistan (SECP) announced the start of a review of the company law framework in Pakistan: see here. Progress stuttered but was restarted earlier this year and has now culminated in the publication of a draft Companies Bill 2015, the purpose of which is to amend and consolidate Pakistan's core company law framework: see here (pdf). Comments on the draft Bill, which will replace the Companies Ordinance 1984, should be sent to the SECP (

Clause 209 sets out the duties of directors; subsection 2 provides: "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".

A copy of the draft Bill was presented by the SECP's chairman, Zafar Hijazi, to the Finance Minister, Senator Mohammad Ishaq Dar, on Saturday:

Friday 27 November 2015

UK: Supreme Court judgments next week

The Supreme Court has announced that judgment in two corporate/commercial cases - Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and Eclairs Group Limited v JKX Oil Gas Plc - will be handed down next Wednesday: see here. The first case concerned an alleged implied term in a commercial lease; the second concerned the scope of a provision in a company's articles giving the directors the power to impose restrictions on shareholders voting and the limitations imposed on the directors in the exericse of that power.

Thursday 26 November 2015

Europe: Commission proposals for the European Deposit Insurance Scheme

The European Commission has published its proposals - in the form of a Regulation - for a European Deposit Insurance Scheme. A copy of the proposed Regulation is available here (pdf). For further information see: FAQs| Press release| Press conference video recording|.

UK: The Autumn Statement - some company aspects

The Government's mid-year budget report - known as the Autumn Statement - was delivered yesterday: see here. This contained various announcements relating to corporate taxation, and confirmed the Government's intention to introduce a new corporate criminal offence - the failure to prevent tax evasion - which will be committed where the company fails to prevents its agents from criminally facilitating tax evasion. The Government has also confirmed, following a consultation earlier this year, that it will require large businesses to publish their tax strategies as they relate to, or affect, UK taxation. What is not clear is whether the Government will go ahead with the proposal that there should be a named individual, at board level, with responsibility for this strategy.

Wednesday 25 November 2015

USA: PCAOB budget and strategic plan for 2015 to 2019

The Public Company Accounting Oversight Board has submitted its budget and strategic plan for 2015 to 2019 to the SEC for approval: see here. Copies will be published once approved by the SEC. Meanwhile, an indication of the contents of the plan can be gained from the short speeches delivered by the PCAOB board members at their meeting to approve the budget and plan: see here. Chairman Doty commented:

I believe we will be in a position very soon to finalize our rule to provide greater transparency in execution of the audit, through identification of the engagement partner and other accounting firms that participate in the audit. We should also, in 2016, see a new proposal to expand the standard form auditor's report, as well as new proposals on audit procedures related to using the work of other auditors, using the work of specialists, and auditing accounting estimates, including fair value measurements. We will also continue our outreach to audit committees in 2016, including by looking for ways to help them be effective in overseeing the audit, for example, through wider use and continued evaluation of appropriate audit quality indicators".

Tuesday 24 November 2015

UK: audit reform legislation - updated regulations published

Last month the Department for Business, Innovation and Skills published a consultation paper in respect of the legislation necessary to implement the changes that have been made to the EU statutory audit framework: see here (pdf). A draft of the proposed Statutory Auditors and Third Country Auditors Regulations 2016 was also published. This draft has since been updated and now includes the proposed amendments to chapter 4 ("Removal, resignation etc of auditors") of Part 16 of the Companies Act 2006: see here (pdf).

Monday 23 November 2015

UK: FCA consults on DTR amendment - delaying the disclosure of inside information

The Financial Conduct Authority has published a consultation paper in which it proposes amending one part of its Handbook: DTR 2.5 ("Delaying the disclosure of inside information"). It is proposed to remove the last sentence of DTR 2.5.5G in order to make clear that an issuer may have a legitimate reason to delay disclosure in circumstances other than the non-exhaustive examples listed in DTR2.5.3R or the circumstances described in DTR2.5.5AR.

UK: BIS consultation - a revised financial reporting framework for LLPs

The Department for Business, Innovation and Skills has published a consultation paper in which it sets out proposals to introduce a revised financial reporting framework for limited liability partnerships, including the introduction a new micro-entity regime for LLPs: see here (pdf).

Friday 20 November 2015

IOSCO final report - standard and guidance on the transparency of firms that audit public companies

The International Organization of Securities Commissions has published its final report Transparency of Firms that Audit Public Companies: see here (pdf). The final report contains a statement and guidance. In the statement, the IOSCO identifies what it believes are the elements of a high quality audit firm transparency report. The guidance is intended to support the statement.

Thursday 19 November 2015

UK: PRA/FCA review into the failure of HBOS plc

The long awaited review into the failure of HBOS plc (now part of the Lloyds Banking Group), begun by the (now) disbanded Financial Services Authority and completed by the Prudential Regulation Authority and Financial Conduct Authority, was published this morning: see here (pdf).

The review concluded that the board and senior management of HBOS failed to set an appropriate strategy and failed to challenge a flawed business model which relied on continuous growth without due regard to the risks involved. Ultimate responsibility for the bank's failure rested with the board and senior management. This said, there were flaws in the FSA's supervisory approach which meant that it did not appreciate the full extent of the risks being taken by HBOS and which meant that it was not in a position to intervene before it was too late.

Part 3 of the report focuses on governance and culture; it notes how the board's performance was impaired by its composition (in particular the fact that the non-executive directors lacked sufficient experience and knowledge of banking, and there did not appear to be a systematic process in place whereby the NEDs were updated on banking, regulatory or governance matters on an ongoing basis). The review also saw no evidence - for 2005, 2006 and 2007 - that board evaluations had been undertaken, despite statements that this had been done in the annual report and accounts.

Accompanying publication of the review is a separate report by Andrew Green QC into the FSA's enforcement actions following the failure of HBOS: see here (pdf). Mr Green concludes that the scope of the FSA's enforcement investigations was not reasonable - it should have been wider - and that it's decision-making process was materially flawed.

Wednesday 18 November 2015

UK: FCA review into competition in the asset management industry

The Financial Conduct Authority has published the terms of reference for its investigation into competition in the asset management industry: see here.

Tuesday 17 November 2015

BCBS report on finalising its post financial crisis reforms

The Basel Committee on Banking Supervision has published a short report in which it provides an update on the work it has done this year finalising its post financial crisis reforms: see here (pdf).

Monday 16 November 2015

France: new edition of the AFEP/MEDEF corporate governance code for listed companies

A revised edition of the AFEP/MEDEF code of corporate governance for listed companies has been published: see here (pdf, French). A copy of the code in English is not yet available.

Friday 13 November 2015

UK: England and Wales: when will a director owe a fiduciary duty to individual shareholders?

Judgment was given yesterday by Mr Justice Nugee in Sharp v Blank [2015] EWHC 3220 (Ch). The decision contains a review of English and Commonwealth case law exploring the circumstances in which a director may be held to owe a fiduciary duty to individual shareholders.

Thursday 12 November 2015

UK: England and Wales: unfair prejudice, trust and confidence and winding-up

Judgment was given today in Apex Global Management Ltd & Anor v FI Call Ltd & Ors [2015] EWHC 3269 (Ch). The decision is noteworthy because of the discussion it contains concerning the operation of the unfair prejudice remedy (sections 994 to 996 of the Companies Act 2006), particularly the question of whether a section 994 petition is appropriate in all cases where the trust and confidence of the parties in a quasi-partnership has broken down. The trial judge, Hildyard J., held that the breakdown must be in consequence of some breach of either a legal right or equitable constraint affecting the conduct of the company's affairs. Insulting behaviour, his Lordship noted, would not ordinarily be sufficient unless, perhaps, the situation was one where one quasi-partner had so denigrated the activities of another quasi-partner regarding the latter's conduct of the company's affairs as to make their constructive continuation in the quasi-partnership unrealistic.

With regard to the court's discretion under section 996, Hildyard J. held that it could extend to adjusting the proportion of distributions upon a winding-up, although he made clear that the court should not ordinarily make a winding-up order under section 996.

Wednesday 11 November 2015

Singapore: arbitration and the unfair prejudice remedy

The Court of Appeal has provided guidance on the relationship and interaction between arbitration proceedings and those for oppression/unfair prejudice under section 216 of the Companies Act. It did so in a judgment, Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57, handed down at the end of last month and referring to authorities from England and other jurisdictions including Australia and Canada: see here (pdf). The decision is now one of the leading authorities on section 216.

Tuesday 10 November 2015

France: AMF report on governance and executive compensation

AMF has published its 2015 report on corporate governance and executive compensation: see here. A copy of the report, in French, is available here


Monday 9 November 2015

UK: FCA/HMT policy statement - Transparency Directive and DTR changes

The Financial Conduct Authority and HM Treasury have published a joint policy statement on the implementation of the Transparency Directive Amending Directive (2013/50/EU) and other Disclosure Rule and Transparency Rule (DTR) changes, including feedback on the earlier consultation paper (CP15/11) and final rules: see here (pdf). A copy of the Instrument making changes to the DTR is available here (pdf).

Friday 6 November 2015

UK: A legal framework for "transformer vehicles" - the first steps

The Bank of England and Financial Services Bill, which received its second reading in the House of Lords at the end of October, begins committee stage next Monday. A marshalled list of the amendments to be moved at this stage has been published: see here or here (pdf). One of the amendments being moved by the Government will add a new section to the Financial Services and Markets Act 2000 and its purpose is to give HM Treasury the power, through secondary legislation, to create a framework for companies described as "transformer vehicles". A protected cell regime is clearly envisaged: the proposed new section makes clear that secondary legislation can include provisions for the vehicle to comprise different parts having their own legal personality separate from that of the vehicle. Here is the formal definition of "transformer vehicle" contained in the amendment:

Note: The Bill also makes changes to the governance of the Bank of England, including the creation of a Prudential Regulation Committee, and also extends the reach of the Senior Managers Regime. Further information is available in the explanatory notes that have been published to accompany the Bill: see here or here (pdf). A copy of the Bill as introduced is available here or here (pdf). The progress of the Bill can be followed here.