Monday 29 February 2016

UK: PRA supervisory statement - the internal governance of third country branches

The Prudential Regulation Authority has published a supervisory statement in which it sets out its expectations concerning the internal governance of third country branches: see here (pdf).

Friday 26 February 2016

Ireland: Banking Inquiry - final report published - governance recommendations

Somewhat belatedly, I note the publication of the final report of the Committee of Inquiry into the Banking Crisis, a joint committee of the Houses of the Oireachtas, at the end of last month: see here.

The Committee made a number of governance related recommendations, including: all board members should undergo compulsory continuing professional development appropriate to banking, risk and governance; banks' governance structures should ensure that the risk function has an independent, senior position in the management structure with direct access to the chairman and board; risk appetite in banks should be clearly defined at board level; and regular reviews of the internal audit function in banks should be strengthened to ensure conformity with best practice.

Thursday 25 February 2016

UK: England and Wales: judicial review claim fails in interest rate hedging case

Judgment was given yesterday in Holmcroft Properties Ltd, R (on the application of) v KPMG LLP & Ors [2016] EWHC 323 (Admin). The case concerned an application for judicial review in respect of a scheme set up by Barclays, in agreement with the predecessor of the Financial Conduct Authority (the Financial Services Authority), to provide redress for certain customers who had been wrongly sold interest rate hedging products. Barclays agreed that an independent party, KPMG, would oversee the implementation and application of the scheme, under which no offers of compensation would be made unless approved by KPMG. KPMG's approval could only be made if it considered the offers to be appropriate, fair and reasonable.

The case was heard by Lord Justice Elias and Mr Justice Mitting. They unanimously held - not without some hesitation - that KPMG's decisions were not susceptible to judicial review because they did not have a sufficient public law favour.

Wednesday 24 February 2016

UK: insolvency - reporting director misconduct - secondary legislation laid before Parliament

Following a wide-ranging consultation in 2013 and 2014, secondary legislation has been laid before Parliament this week regarding the new electronic conduct reports that insolvency practitioners are required to prepare in respect of the conduct of directors (under section 7A of the Company Directors Disqualification Act 1986, inserted by section 107 of the Small Business, Enterprise and Employment Act 2015). This secondary legislation - the Insolvent Companies (Reports on Conduct of Directors) (Scotland) Rules 2016 and the Insolvent Companies (Reports on Conduct of Directors) (England and Wales) Rules 2016 - comes into force on 6 April 2016.

Tuesday 23 February 2016

New Zealand: reviews and consultations - incorporated societies, insolvency law and auditor liability

Several developments - whether draft legislation, or reviews of existing law - are worth nothing. The first is a consultation on the draft Incorporated Societies Bill: see here. The Bill will, amongst other things, place within legislation for the first time the duties of society officers.  A couple of reviews are underway: one concerning auditor liability and another concerning insolvency law. In respect of the latter, a working group was set up in November 2015 (with terms of reference available here, pdf) and it is due to publish a report with recommendations by the middle of this year. Amongst the areas the group will be looking at are voluntary liquidations including phoenix companies, voidable transactions including Ponzi schemes and the regulation of insolvency practitioners.

Monday 22 February 2016

Hong Kong: introducing a new corporate vehicle - the open-ended fund company

The Securities and Futures (Amendment) Bill 2016 was introduced in the Legislative Council last month and considered by the House Committee. The Committee decided that a Bills Committee should be formed to consider the Bill: see here (pdf). The Bills Committee will hold its first meeting tomorrow: see here. The Bill will amend the Securities and Futures Ordinance (Cap. 571) and other legislation in order to introduce a new investment vehicle in Hong Kong: the open-ended fund company. At present it is possible to form such funds in the form of a unit trust but not in corporate form because of restrictions on the reduction of capital under the Companies Ordinance (Cap. 622). The Bill contains, amongst other things, the core framework for the incorporation and governance of such companies. A copy of the Bill, together with supporting information, is available here.

UK: LLP financial reporting to be aligned with the companies regime

The Department for Business, Innovation and Skills has announced, following a consultation last year, that legislation will be introduced to align the financial reporting regimes for limited liability partnerships (LLPs) and companies, and also to introduce a new 'micro-entity' regime for LLPs and qualifying partnerships: see here (pdf).

Friday 19 February 2016

UK: BIS consultation - implementing the EU Non-Financial Reporting Directive and views sought on electronic reporting

The Department for Business, Innovation and Skills has published a consultation paper seeking views in respect of the UK's implementation of certain aspects of the EU Non-Financial Reporting Directive (2014/95/EU): see here (pdf). The paper also seeks views on topics falling outside of the Government's transposition of the Directive, including the development of electronic reporting.

Thursday 18 February 2016

UK: VAT repayment subject to corporation tax - Supreme Court gives judgment in post cessation receipts case

The Supreme Court gave judgment yesterday in Shop Direct Group v Revenue and Customs [2016] UKSC 7. The court unanimously held that Shop Direct Group (SDG), a company in the Littlewoods Group, was liable to pay corporation tax when it received a repayment (as beneficial owner) of overpaid value added tax of approximately £125 million. The repayment related to supplies made between 1978 and 1996 by companies within the Group, including SDG. In doing so, within the legislative framework for the taxation of post-cessation receipts, the court rejected the argument that the repayment was only taxable in the hands of the former trader. Lord Hodge stated: "No sound reason of policy has been suggested for confining the charge to the former trader and his personal representatives" (para. [21]). The legislation in question had its origins in measures designed to close a loophole whereby receipts received after the discontinuance of a trade escaped the charge to tax.

The hearing before the justices was recorded, and can be watched here. The court's judgment was delivered by Lord Hodge. A summary is available here (pdf) and was also delivered by Lord Hodge in person: see the video below.

Wednesday 17 February 2016

France: new AMF publications (in English) - corporate governance, executive remuneration and companies' communication with individual shareholders

AMF, towards the end of last year, published its 2015 report on corporate governance and executive compensation. A copy of the report in English was published earlier this year: see here (pdf). Also published recently is a research report examining the programmes set up by listed companies to communicate with individual shareholders: see here (pdf). This report provides data on the decline in direct ownership of shares by individuals.

UK: Takeover Code - Panel consults on proposed changes

The Takeover Panel Code Committee has published a consultation paper setting out proposed amendments to the Takeover Code in respect of the communication and distribution of information and opinions during an offer by, or on behalf of, an offeror or the offeree company: see here (pdf).

Tuesday 16 February 2016

Netherlands: updating the Dutch Corporate Governance Code - consultation begins

The Dutch Corporate Governance Code Monitoring Committee is consulting on proposed changes to the Dutch Corporate Governance Code: see here (pdf, Dutch). The Committee has also published its annual monitoring report in respect of companies' compliance with the Code: see here (pdf, Dutch). Copies of these documents, in English, are not yet available.

Update - a copy of the (proposed) revised Code, in English, is available here (pdf).

UK: Government consults on mandatory gender pay gap reporting regulations

The Government has begun its consultation on draft regulations that will introduce a requirement for large employers - those with 250 or more relevant employees (i.e., an employee who ordinarily works in Great Britain and whose contract is governed by UK legislation) - to publish their overall mean and median gender pay gaps: see here.

UK: England and Wales: wrongful trading under section 214 of the Insolvency Act 1986

The operation of the wrongful trading provision - section 214 of the Insolvency Act 1986 - has recently been considered by the High Court in Grant v Ralls (re Ralls Builders Ltd) [2016] EWHC 243 (Ch). A summary of the decision, in which the trial judge considered, amongst things, the operation of the defence under section 214(3), has been published by the ICLR: see here.

Monday 15 February 2016


Unfortunately, for a variety of reasons, I was unable to update the blog (and send email updates) over the past week. I apologise for the break, but hopefully things are now back to normal, with regular daily updates being provided.

Thank you to those readers (and subscribers) who got in touch to ask if everything was okay: your concern is much appreciated.

With best wishes,

Monday 8 February 2016

UK: BIS announces new review of women on boards

A new review, focusing on increasing the number of women holding executive directorships of FTSE350 companies, has been announced by the Department for Business, Innovation and Skills: see here. The terms of reference have not yet been finalised.

Friday 5 February 2016

Gibraltar: setting up the Financial Services Ombudsman

A copy of the Financial Services Ombudsman Act 2016 has been published in the Gibraltar Gazette: see here (pdf). The Act establishes the new Financial Services Ombudsman and will require financial service providers to participate in the Ombudsman's dispute resolution procedures.

Denmark: Stewardship Code to be developed, instigated by Government

The Minister for Business and Growth, Troels Lund Poulsen, has asked the Committee on Corporate Governance to prepare a Stewardship Code containing recommendations for active ownership by institutional investors: see here. The Minister, in his announcement, cited as an example the UK Stewardship Code.

Thursday 4 February 2016

Ireland: Court of Appeal sends a clear message on directors' responsibilities and disqualification

An important decision on the making of disqualification orders and restriction orders was given by the Irish Court of Appeal last month in Director of Corporate Enforcement v Walsh [2016] IECA 2. At first instance, the trial judge (Barrett J., in [2014] IEHC 365) was asked to make such orders against several individuals but declined to do so. The Director of Corporate Enforcement appealed, arguing that the trial judge was in error in not making the orders and had also made in his judgment several statements that created undesirable confusion in the context of corporate regulation.

The judgment of the Court of Appeal was delivered by the President of the High Court, Mr Justice Peter Kelly, sitting with Justices Mary Irvine and Gerald Hogan. The President held that case was one where the discretion not to make a disqualification should be exercised; it was, however, a case where restriction orders, for a period of five years, should be made.

The judgment is of interest for several reasons. The President rejected as relevant to the court's discretion some of the factors that the trial judge had identified, and stated that the "whole thrust of the legislative provision is to ensure that all directors of all companies comply with their obligations. It matters not that they be directors of family companies, or be at the helm of large or quoted enterprises. Neither do the qualifications of the directors or the economic challenges that the companies may be facing affect the obligations of directors to act responsibly in respect of an insolvent company" (para. [60]).

Also of interest is what was said about passive directorships. The President rejected the suggestion, in the trial judge's judgment, that the disqualification or restriction of passive directors should require "real moral blame" on their part. To quote the President: "It would be contrary to the whole notion of proper corporate regulation that passive directors would be exonerated from liability or relieved from disqualification or restriction on the basis of the passive nature of their role" (para. [70]).

Wednesday 3 February 2016

UK: Northern Ireland: new edition of the code of good governance for the voluntary and community sector

A revised code of good governance, for the voluntary and community sector, has been published by the Developing Governance Group and endorsed by the Charity Commission of Northern Ireland: see here. A copy of the revised code is available here (pdf).

Tuesday 2 February 2016

India: Companies Act 2013 - Companies Law Committee report published

The Committee formed to make reform recommendations in respect of the issues arising from the implementation of the Companies Act 2013 has published its report: see here (pdf). Over one hundred changes are proposed, including some on core aspects of the governance framework (e.g., the circumstances in which a director will be regarded as independent) and others to make it easier for companies to identify the beneficial owners of shares.

Monday 1 February 2016

UK: CDSB review of FTSE350 companies' environmental reporting

The Climate Disclosure Standards Board has published a review of FTSE350 companies' environmental reporting and greenhouse gas emission disclosures in annual reports, following the implementation of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013: see here (pdf). The report found, amongst other things, that 41% of companies considered environmental risks in their analysis of the company's principal risks; 87% of companies disclosed environmental policies; and 27% made use of environmental KPIs.