UK: FICC Markets Standards Board publishes reference price transactions standard

The FICC Markets Standards Board has published for comment a standard - its first - covering reference price transactions (RPTs) in the fixed income rates markets: see here (pdf). The standard contains eight core principles, the first of which provides that "[the] possible conflicts of interest inherent to RPTs should be managed by Dealers in a way that promotes the fair treatment of Clients and other market participants".

UK: key facts and trends in the accountancy profession

The Financial Reporting Council has today published its annual publication Key facts and trends in the accountancy profession: see here (pdf). The report notes, amongst other things, a decline in the number of registered audit firms and an increase in the number of listed companies outside of the FTSE 350 being audited by the 'Big Four' in 2015.

Hong Kong: reforming listing regulation - joint consultation paper published

The Securities and Futures Commission (SFC) and the Hong Kong Exchange (HKEX) have published a joint consultation paper setting out proposed reforms to the regulatory framework for listing: see here (pdf). Included in the proposed reforms is the creation of two new committees - the Listing Policy Committee and the Listing Regulatory Committee - with the SFC and HKEX equally represented on both. The reforms are designed to achieve greater cooperation and coordination between the SFC and HKEX.

UK/Europe: FRC statement following the EU referendum

The Financial Reporting Council - the organisation responsible for the UK's governance and stewardship codes as well audit oversight and accounting standards - has made an announcement in response to the result of last week's referendum:

Stakeholders have asked about the implications of the referendum result for our regulatory work. Our regulatory framework is unchanged and we will continue to apply it. The FRC will also continue to play its part in representing the interests of the UK internationally. We will pay close attention to the decisions now taken by the Government and Parliament, and continue to work in collaboration with our key stakeholders, particularly investors, business and the professionals we regulate, in order to ensure our work continues to support economic growth".

UK: corporate culture and the external auditor

In a speech delivered a couple of days ago at Deloitte’s annual Risk, Regulatory and Public Policy Forum, the chairman of the Financial Reporting Council - Sir Win Bischoff - spoke about corporate culture, the FRC's work in this area, and the role that external auditors can play: see here. In particular, he observed (perhaps a little controversially):

Nobody is in a position to develop a better feel for the culture of an organisation than its auditor. I suggest that you are able – more than anyone- to draw the attention of the Chairman or the Board as a whole, or its CEO, to shortcomings and potential failures as you become aware of them. This is not a duty specifically prescribed in any auditing manual, but is a responsibility you may well agree you have towards investors. Perhaps even towards what is broadly considered the broader public interest".

UK/Europe: the new EU statutory audit framework

The new EU statutory audit framework is now in force in the UK following the making (and coming into force) of the Statutory Auditors and Third Country Auditors Regulations 2016: see here and here (pdf). The Regulations are accompanied by an explanatory memorandum (pdf) and impact assessment (pdf). Further background information is also available from the European Commission: see here. Also, EcoDA (in conjunction with PwC) has also published guidance on the new regime for audit committees: see here (pdf).

UK: Supreme Court rules that property transfers were gratuitous alienations under section 242 of the Insolvency Act 1986

The Supreme Court gave judgment earlier today in Brown v Stonegale Limited [2016] UKSC 30, on appeal from [2015] CSIH 12. A summary of the decision is available here (pdf).

The case concerned the disposition of five properties by a company. The first property was sold for £2.4million, the proceeds being transferred to a bank to reduce the company's borrowing. The remaining four properties were then transferred to others for no consideration. Lord Reed held that there was no reciprocity between the transfer of these four properties and the earlier payment to the bank: the purpose of the later transfer was to divert assets away from the creditors, exactly what section 242 ("Gratuitous alienations (Scotland)") of the Insolvency Act 1986 was designed to prevent.

A recording of Lord Reed, delivering a summary of the court's decision, is available below:

Ireland: Private Members' Bill introduced - Companies (Amendment) Bill 2016

Among the Private Members' Bills introduced in the Dáil Éireann last week was one that seeks to amend the Companies Act 2014 in order to extend the personal liability of company officers for employment law breaches: see here. A copy of the Bill, as introduced by Deputy David Cullinane, is available here (pdf).

OECD business and finance outlook - investment treaties and companies, shareholders and creditors

The OECD has published its 2016 business and finance outlook: see here. Chapter 8 of the report provides a useful introduction to the impact of investment treaties on companies, shareholders and creditors: see here.

South Africa: King IV Code and Report - sector supplements published

Earlier this year the Institute of Directors and King Committee published for public comment a draft version of the latest King Report and Code on corporate governance in South Africa (King IV): see here (pdf). The report set out the philosophy, principles, practices and outcomes that provide the benchmark for corporate governance in South Africa. The Code and Report are supported by a series of sector supplements, which have recently been published: see here. These cover, for example, the non-profit sector, state owned entities and SMEs. Comments on the supplements should be submitted by 11 July.

Europe: ESAs publish their annual reports

The three European Supervisory Authorities - the European Banking Authority, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority - published their annual reports this week: see here (pdf), here (pdf) and here (pdf).

UK: Supreme Court rules that capital notes were redeemable

The Supreme Court gave judgment earlier today in BNY Mellon Corporate Trustee Services Ltd v LBG Capital No 1 Plc [2016] UKSC 29. A summary of the judgment is available here (pdf). By a majority of 3:2, the court held that Lloyds Banking Group was entitled to redeem £3.3 billion of enhanced capital notes (ECNs; a form of contingent convertible security often known as a 'coco'). Lord Neuberger, President of the court, delivered the majority opinion and provided some observations on the interpretation of the trust deed (paras. [30] and [33]):

"Over the past 20 years or so, the House of Lords and Supreme Court have given considerable (some may think too much) general guidance as to the proper approach to interpreting contracts and indeed other commercial documents, such as the Trust Deed in this case. What, if any, weight is to be given to what was said in other documents, which were available at the time when the contract concerned was made or when the Trust Deed in question took effect, must be highly dependent on the facts of the particular case. However, when construing a contract or Trust Deed which governs the terms upon which a negotiable instrument is held, as in the present case, very considerable circumspection is appropriate before the contents of such other documents are taken into account. ... In the present case, the Trust Deed, and in particular those parts of clauses 7, 8 and 19 of the T&Cs which fall to be construed, cannot be understood unless one has some appreciation of the regulatory policy of the FSA at and before the time that the ECNs were issued".

"In the present case, the Trust Deed, and in particular those parts of clauses 7, 8 and 19 of the T&Cs which fall to be construed, cannot be understood unless one has some appreciation of the regulatory policy of the FSA at and before the time that the ECNs were issued. That is self-evident from the provisions of clause 19 which are set out in paras 13 and 14 above. Accordingly, I consider that at least the general thrust and effect of the FSA regulatory material published in 2008 and 2009 can be taken into account when interpreting the T&Cs".

A summary of the court's decision was delivered in person by Lord Neuberger this morning:

Jersey: Financial Services Commission publishes revised Codes of Practice

The Jersey Financial Services Commission has published revised editions of its Codes of Practice: see here. Each of these Codes includes governance requirements for different types of business (e.g., deposit-taking business, insurance business). The new Codes come into effect on 1 September this year.

IOSCO survey report on audit committee oversight of auditors

The International Organization of Securities Commissions has published a survey report on audit committee oversight of auditors: see here (pdf). The survey contains results from 47 jurisdictions and clearly highlights how the audit committee has grown in importance since the IOSCO's last survey over ten years ago. The survey found that publicly listed companies are required to establish an audit committee in all but two of the 47 jurisdictions in the survey.

Australia: shareholder meetings - boards, shareholders and the balance of power

Judgment was given last Friday in Australasian Centre for Corporate Responsibility v Commonwealth Bank of Australia [2016] FCAFC 80. The case - on appeal from [2015] FCA 785 and heard by Allsop CJ, Foster and Gleeson JJ - is an important decision on the operation of shareholder meetings as well as the balance of power between the board of directors and shareholders.

At issue was whether shareholders were entitled to table resolutions at a shareholders' meeting for the purpose of expressing an opinion regarding the management of the company. The resolutions were not intended to be acts of the company, or to direct the directors to act in particular way. In the court's view (at para. [60]):

" ....the shareholders in general meeting did not have a role to play in the exercise of powers vested exclusively in the board by passing a resolution which would express an opinion on the exercise of those powers. That general proposition may be affected by the particular constitution of a company, but it applies in this case".

UK: Supreme Court judgment this week in capital notes interpretation case

The Supreme Court will give judgment on Thursday this week in BNY Mellon Corporate Trustee Services Limited v LBG Capital No. 1 Plc. At issue, to quote from the Supreme Court summary, was whether the Court of Appeal ([2015] EWCA Civ 1257) "erred in law in its construction of the terms of enhanced capital notes by relying on technical and specialist information as part of the factual matrix". The hearing took place in March this year, over two sessions, and can be watched here and here.

Australia: resolutions to remove directors of public companies

Judgment was given several days ago by Justice Beach, sitting in the Federal Court, in the case State Street Australia Ltd in its capacity as Custodian for Retail Employees Superannuation Pty Ltd (Trustee) v Retirement Villages Group Management Pty Ltd [2016] FCA 675. At issue was the operation of section 203D of the Corporations Act 2001, which provides certain rules concerning the removal of directors from public companies. Beach J held that whilst section 203D was "mandatory in the sense that it overrides a company's constitution to the extent of any consistency, it does not provide an exhaustive codification of the mechanism for removal" (para. [16]). In reaching this view, Beach J refused to follow the earlier authority of Scottish and Colonial Ltd v Australian Power and Gas Co Ltd [2007] NSWSC 1266.

Europe: Commission consultation on the Financial Conglomerates Directive

The European Commission began a consultation today as part of its evaluation of the EU Financial Conglomerates Directive (2002/87/EC). A copy of the consultation paper is available here (pdf) and further background information is available here. The Commission is considering whether the framework set out in the Directive is proportionate and fit for purpose. More specifically, the Commission wants to know whether the framework has: (a) contributed to enhanced financial stability; (b) safeguarded creditors' and policyholders' interests; and (c) promoted the competitiveness of financial conglomerates within the EU and at international level.

UK: The Bank of England and Financial Services Act 2016 (Commencement No. 3) Regulations 2016

The Bank of England and Financial Services Act 2016 (Commencement No. 3) Regulations 2016 were made yesterday: see here or here (pdf). They bring into force various provisions of the Bank of England and Financial Services Act 2016 on July 6, including section 2 (term of office of non-executive directors) and section 3 (abolition of the Oversight Committee). A short explanatory note is available here and a note concerning earlier commencement orders is available here.

Isle of Man: derivative actions under Manx law

His Honour Deemster Doyle (First Deemster and Clerk of the Rolls), sitting in the High Court of Justice, gave judgment at the end of May in Gulf Hibiscus Limited v Lime Petroleum Plc (Ord, 2016/1): see here (part 1 of 2) and here (part 2 of 2). This is an important decision concerning derivative actions under the regime introduction by the Isle of Man Companies Act 2006 (pdf) and the Rules of the High Court of Justice 2009.

Deemster Doyle refused a shareholder's claim to bring a derivative action under section 175 of the 2006 Act and in doing so considered the meaning and operation of those factors the court is required to take into account in exercising its discretion (including, for example, whether the shareholder was acting in good faith). Reference was made to authorities from England and also to a couple of recent decisions from the Eastern Caribbean Supreme Court, Deemster Doyle noting that Tynwald had appeared to follow British Virgin Islands legislation - section 184C of the BVI Business Companies Act 2004 - rather than English legislation in respect of derivative actions brought on behalf of companies formed or re-registered under the Companies Act 2006.

UK: ICSA consultation on the practice of minuting meetings

ICSA - the Institute of Chartered Secretaries and Administrators - has published a consultation paper on the practice of minuting meetings: see here (pdf). The role, purpose and standard of minutes has been the subject of recent Parliamentary attention: see the letter sent by the Rt Hon Andrew Tyrie MP, chairman of the Treasury Committee, to the chief executive of ICSA: here (pdf). Indeed, the first question asked by ICSA in its consultation paper is this: what is the principal function of meeting minutes?

Ireland: Corporate Manslaughter Bill introduced in the Dáil Éireann

Among the Private Members' Bills introduced in the Dáil Éireann earlier this week was one that seeks to introduce a statutory offence of corporate manslaughter. A copy of the Bill, as introduced, is available here (pdf) and an explanatory memorandum is available here (pdf). The memorandum states that Bill is based on the draft Bill prepared over ten years ago by the Law Reform Commission and published in its Report on Corporate Killing (pdf).

Bhutan: Parliament passes the Companies Bill 2015

The seventh session of the second Parliament of Bhutan began last month. A Bill to introduce a new company law framework - the Companies Bill 2015 - was debated earlier this week and passed: see here.

Pakistan: SECP publishes capital markets action plan

The SECP has published for comment its capital markets action plan: see here (pdf). Governance is an important theme running through the plan, particularly with regard to the self-regulatory organisations, described by the plan as the pillars of the capital market.