Vietnam: The development of a corporate governance code

The International Finance Corporation, part of the World Bank Group, has published details of the work it is doing with the State Securities Commission in Vietnam to develop a corporate governance code: see here. The new code is expected to be launched by mid 2017.

New Zealand: Review of the NZX Corporate Governance Code

NZX has published a consultation paper seeking views on proposed updates to its corporate governance code: see here (pdf). These will be the first substantive updates to the Code since 2003. An updated copy of the Code is available here (pdf).

OECD working paper - the corporate governance of financial groups

The twentieth paper in the OECD Corporate Governance Working Paper series, titled Corporate Governance of Financial Groups, has been published: see here.

Australia: the director's duty of care and diligence - a private and public duty?

Towards the end of last month, judgment was given by Edelman J. in Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023. The decision is interesting and noteworthy for several reasons, including the discussion of the operation of the director's duty to act with care and diligence in section 180(1) of the Corporations Act 2001 and, in particular, whether a breach of this duty gives rise to both a private and public wrong.

UK: Can 'accounts' be 'accounts' if they are not reliable?

The First-tier Tribunal (Tax Chamber) decision Grint v HMRC [2016] UKFTT 537 (TC) has attracted much attention because of the identity of the taxpayer. The decision is noteworthy for other reasons, not least the discussion of what is meant by the term 'accounts'. The issue arose in a dispute concerning the effectiveness of a change in accounting date. The relevant legislation defined 'period of account' and 'accounting date', concepts that referred to 'accounts' but no definition of 'accounts' was provided: see section 217 of the Income Tax (Trading and Other Income) Act 2005 and section 989 of the Income Tax Act 2007.

The Tribunal held that 'accounts' for the purposes of section 217 referred to the company's general purpose trading accounts and did not include accounts drawn up solely for tax purposes. The Tribunal also rejected the argument advanced by HMRC that 'accounts' could not be regarded as such if they were wrong or unreliable. The Tribunal concluded, on the basis of expert evidence, that accounts (as understood by accountants): (a) must relate to an entity; (b) must be considered by, and intended by, the entity to be its accounts, by some kind of approval or adoption or otherwise; and (c) must represent (however accurately or otherwise) its past transactions over a set period of time.

Ireland: The Companies (Accounting) Bill 2016

The Companies (Accounting) Bill 2016 was introduced in the Dáil Éireann earlier this month: see here. The main purpose of the Bill is to amend the Companies Act 2014 in order to implement the new EU Accounting Directive (2013/34/EU). A copy of the Bill is available here (pdf) and an explanatory memorandum is available here (pdf).

UK: Scotland: Review of the Scottish Code of Good Higher Education Governance

A review of the 2013 edition of the Scottish Code of Good Higher Education Governance is underway: see here. An important question for those conducting the review (and on which views are sought) will be to what extent, and how, the Code should be changed to reflect the passing of the Higher Education Governance (Scotland) Act 2016 earlier this year.

New Zealand: Court of Appeal upholds parent company's liability for debt of subsidiary company

The Court of Appeal gave judgment earlier this month in Steel & Tube Holdings Limited v Lewis Holdings Limited [2016] NZCA 366, on appeal from [2014] NZHC 3311. The case concerned a parent company that had placed one of its wholly-owned subsidiaries into liquidation. The liquidators of the subsidiary disclaimed a lease under section 269 ("Power to disclaim onerous property") of the Companies Act 1993. The lessor sought damages as well as an order that the parent company should be liable for those damages under section 271 ("Pooling of assets of related companies") of the 1993 Act.  Section 272 sets out the guidance the court is required to consider under section 271, including the extent to which the related company took part in the management of the company in liquidation and the extent to which the businesses of the companies were combined.

The trial judge held that it was just and equitable, as section 271 requires, for liability to be imposed on the parent company. The Court of Appeal upheld this decision.  Its judgment is important, not least because there are few authorities considering section 271. The first instance decision, which contains more analysis than the court of appeal judgment, remains a leading authority and its message remains clear: the separate legal personality of companies in groups will be respected where each company is conducted and governed as a separate entity.  To disregard the separate legal status of the companies will be to run the risk of liability being imposed under section 271 even where, as in the current case, the company's constitution permitted directors of the subsidiary to prefer the interests of the parent company (note also section 131(2) of the 1993 Act). Indeed, as the trial judge observed, provisions of this kind do not mean that the interests of both companies can be conflated or the subsidiary company's interests ignored.

Netherlands: consultation on Code principles, provisions and guidance for companies with a single tier board

Earlier this month, the Dutch Corporate Governance Code Monitoring Committee published for consultation the principles, best practice provisions and guidance it proposes to include in the revised edition of the Dutch Corporate Governance Code in respect of companies that choose to have a single tier board: see here (pdf). At this stage the Committee has decided not to publish a completely separate Code for companies with a single board. The option of having a single board was introduced several years ago.

Australia: ASIC report finds improvement in market cleanliness

The Australian Securities and Investments Commission has published a report titled Review of Equity Market Cleanliness: see here (pdf). The report found an improvement in market cleanliness for the ten year period ending 31 November 2015. The report draws upon two measures of market cleanliness: one new and developed by ASIC; and another more established measure used by the predecessor of the UK's Financial Conduct Authority. ASIC has published a podcast in which the report is discussed: see below (or here if the audio player is not displayed).

Pakistan: Limited Liability Partnership Bill introduced in the National Assembly

The Limited Liability Partnership Bill 2016 was introduced in the National Assembly earlier this month: see here. A copy of the Bill is available here (pdf). The Bill will, once enacted, provide for the incorporation, regulation and winding-up of limited liability partnerships in Pakistan. The LLP is not currently available in Pakistan.

UK: HMRC consultation - strengthening tax avoidance sanctions and deterrents

Her Majesty's Revenue and Customs published a discussion document today titled Strengthening Tax Avoidance Sanctions and Deterrents: see here (pdf). The document has attracted much media attention, in particular the penalties proposed for those involved in advising on aggressive tax avoidance schemes: see here or here. What is arguably more interesting is the potential reach of the proposed liability regime, which would operate in respect of defeated tax avoidance arrangements: it would encompass 'enablers', described as including "anyone in the supply chain who benefits from an end user implementing tax avoidance arrangements and without whom the arrangements as designed could not be implemented" (para. 2.7).

Whilst company formation agents and those providing the infrastructure through which the avoidance takes place (e.g., nominee services; company director services) are obvious examples of enablers, the discussion document states (in case study 2.1) that companies would also fall within the new penalty regime where they have been used to enable the defeated tax avoidance arrangements.

UK: gender pay gap reporting - bringing section 78 into force

The Equality Act 2010 (Commencement No.11) Order 2016 was made earlier this month and published yesterday on the legislation.gov.uk website: see here. The Order brings into force, on the 22nd of August, section 78 of the Equality Act 2010. Section 78 provides the power to make, through regulations, the framework for gender pay gap reporting.

UK: public company holds electronic annual general meeting

A couple of months ago, on June 15th to be precise, something rather unusual happened: a UK public company, Jimmy Choo plc, held its annual general meeting electronically. The company's articles of association were amended in 2015 to make this possible. Further information about the AGM is available in the press release from Equiniti: see here. The AGM results are available here.

Indonesia: OECD report - tackling backdoor listings

The OECD has published a report titled Improving Corporate Governance in Indonesia - Policy Options and Regulatory Strategies for Tackling Backdoor Listings: see here. The report identifies four regulatory strategies, for the attention of policymakers in Indonesia, to help improve listing and corporate governance standards.

South Africa: introducing the twin peaks financial regulatory framework - an update

The National Treasury has provided an update on the introduction of the twin peaks financial regulatory framework: see here (pdf). Legislation - the Financial Sector Regulation Bill (here, pdf) - is already before Parliament (its progress can be followed here). Revisions are proposed and are shown in an annotated copy of the Bill available here (pdf). An impact study has also been published: see here (pdf). Regulations concerning the over-the-counter derivatives market have also been published: see here. Further background information is available here.

FSB peer review - implementation of the G20/OECD Corporate Governance Principles

The Financial Stability Board has begun a peer review concerning the implementation by FSB member jurisdictions of the G20/OECD Principles of Corporate Governance: see here. Views are being sought on the scope of the review and should be sent to fsb@fsb.org by 9 September.

Ireland: the removal of a liquidator by the court

The Court of Appeal (Finlay Geoghegan, Irvine and Hogan JJ) gave judgment at the end of last month in Revenue Commissioners v Fitzpatrick [2016] IECA 228 (on appeal from [2015] IEHC 477). The judgment, which draws heavily upon English authorities, is now the leading Irish authority on the court's power to remove a liquidator from office (under section 277 of the Companies Act 1963 or section 638 of the Companies Act 2014). Irvine J noted, in particular (at para. [61]):

I fully accept that the removal of a liquidator is a serious matter for any court and the relief should not to be granted lightly. In particular, I would endorse the sentiments expressed by Neuberger J. in AMP Music Box Enterprises Ltd [2003] 1 BCLC 319 that the Court should not remove a liquidator merely because it can be shown that in one or possibly more than one respect his conduct has fallen short of the ideal"

UK: High Pay Centre report on FTSE100 CEO pay

The High Pay Centre today published its annual survey of FTSE100 CEO pay: see here (pdf). Average (mean) pay is reported at £5.480 million (up from £4.964 million the year before). The increase in median CEO pay was smaller: up from £3.873 million to £3.973 million.

UK: DBEIS publishes FRC Direction in respect of audit regulatory tasks

A copy of the Direction issued to the Financial Reporting Council in June, in respect of the delegation of audit regulatory tasks under regulation 3 the Statutory Auditors and Third Country Auditors Regulations 2016, was published today by the Department for Business, Energy and Industrial Strategy today: see here (pdf).

UK: defining the characteristics of mutual deferred shares

HM Treasury has published a consultation paper seeking views on the characteristics of mutual deferred shares, for the purpose of Regulations to be created under section 1 of the Mutuals’ Deferred Shares Act 2015: see here (pdf).

UK: Scotland: corporate groups and implied terms

Lord Malcolm, sitting in the Court of Session (Outer House), delivered his opinion in Fisher v Applied Drilling Technology International Ltd [2016] CSOH 108 last month. At issue was whether the company, ADTI, was in breach of an implied term in Mr Fisher's contract of employment concerning the making of enhanced redundancy payments. It was said that such a term arose through custom and practice within a group of companies. The company sought to have the action dismissed on the grounds that the pleadings did not set out a relevant and sufficiently specific case. Lord Malcolm refused to dismiss the action.

Of interest, albeit at this early stage in the case, is the fact that Lord Malcolm refused to uphold the submission that Mr Fisher was bound to fail in his claim that senior executives of the parent company, acting on behalf of other companies in the group, had given undertakings in respect of the enhanced payments.

UK: PRA consults on system risk buffer policy statement

The Prudential Regulation Authority has published a consultation paper in which it sets out a proposed statement of policy in respect of the approach to be taken in the implementation of the systemic risk buffer: see here (pdf). The paper relates specifically to ring-fenced bodies and certain large building societies.

UK: Takeover Panel publishes annual report for 2015/16

The Takeover Panel has recently published its annual report for 2015/16: see here (pdf). The report notes that M&A activities in the period were similar to those seen in the preceding year. The report also contains information about Panel activities during the year, including work that is not made public.  It is noted, for example, that the Panel Executive issued two letters of private censure and 26 educational/warning letters. The Executive also granted 59 'whitewash' dispensations from the obligation to make a mandatory offer under Rule 9 of the Takeover Code following an issue of new shares.