UK: The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017

The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 were laid before Parliament on 22 June: see here or here (pdf). These Regulations form part of the legal framework through which the UK will implement MiFID II and MiFIR. Further information is available in the accompanying explanatory memorandum (here, pdf), transposition note (here, pdf) and impact assessment (here, pdf).

Pakistan: implementing the new company law framework

Earlier this year the President signed the Companies Bill, 2017 and the Bill became the Companies Act, 2017. A copy of the Act, which also contains provisions relating to insolvency, is available here (pdf). The task of producing secondary legislation to support the Act is now underway. Amongst the draft Regulations published so far have been those concerning the incorporation process and the reporting obligation of auditors. The draft secondary legislation can be found here.

Kenya: Stewardship Code published in the Kenya Gazette

Kenya's new Stewardship Code, developed by the Capital Markets Authority, has been published in the Kenya Gazette: see here (pdf, p. 2892). Background information is available here.

OECD publishes annual report on its Guidelines for Multinational Enterprises

The OECD has published its annual report on its Guidelines for Multinational Enterprises: see here (pdf). The report provides a summary of the activities undertaken by the OECD Secretariat, adhering governments and National Conduct Points to promote the effective implementation of the Guidelines in the year ending December 2016.  Annual reports for earlier years can be found here.

UK: The Scottish Partnerships (Register of People with Significant Control) Regulations 2017

The Scottish Partnerships (Register of People with Significant Control) Regulations 2017 were laid before Parliament last week. A copy of the Regulations is available here and here (pdf). The Regulations came into force today (although regulation 4 and regulation 81 will come into force on 24 July) and their effect is to require (a) Scottish Limited Partnerships and (b) General Scottish Partnerships where all partners are corporate bodies, to maintain a register of people with significant control.

The following documents have been published alongside the Regulations: an impact assessment (pdf) and a transposition note (pdf). Companies House has also published guidance - see here - as has the Department for Business, Energy and Industrial Strategy: see here.

USA: Delaware corporate law and distributed ledger technologies

Earlier this month the Delaware Senate passed a Bill one of the purposes of which is to provide specific authority for Delaware corporations to use distributed ledgers (of which blockchain is an example) for the creation and maintenance of corporate records: see here. A copy of the Bill is available here or here (pdf).

EU: Commission proposes new transparency rules for tax intermediaries

The European Commission yesterday published proposals to require intermediaries (e.g., tax advisers, accountants and lawyers) to report to their local tax authorities any cross-border tax planning arrangements where these bear at least one of a number of identified hallmarks (including, for example, that the arrangement involves a cross-border payment to a recipient resident in a no-tax country; or, the arrangements involve a jurisdiction with inadequate or weakly enforced anti-money laundering legislation). For further information see the following materials from the Commission: FAQs | press release | video | dedicated website.

UK: Good Mortgages Bill in Queen's Speech

Last year the Law Commission published proposals for the reform of the law governing bills of sale, including the repeal of the Bills of Sale Act 1878 and the Bills of Sale Act (1878) Amendment Act 1882 and the introduction of new legislation - a Good Mortgages Act - providing more protection for borrowers and fewer burdens on lenders: see here. This proposed new law was amongst the legislative proposals contained in today's Queen's Speech, in which the Government's plans for the next couple of years were set out. A copy of the Speech will be available here shortly.

USA: PCAOB adopts new standard to enhance relevance and usefulness of the auditor's report

The Public Company Accounting Oversight Board has adopted a new standard the purpose of which is to enhance the relevance and useful of the auditor's report. An overview is available here and the new standard is available here (pdf). Included is the requirement for the auditor to disclose in its report certain "critical audit matters" (or to state that there are no such matters). In general terms, such matters are those communicated to the audit committee (or required to be communicated), relating to disclosures that are material to the financial statements and involving especially challenging, subjective or complex audit judgment.

Hong Kong: HKEX publishes New Board concept paper

Hong Kong Exchanges and Clearing Limited (HKEX) has published a concept paper on the formation of a New Board, in addition to the current Main Board and Growth Enterprise Market (GEM): see here (pdf). Companies listing on the New Board would be divided into two segments: one called "Pro" for companies not meeting the financial or track record criteria for GEM or the Main Board; and another called "Premium" for companies meeting these criteria but having what the paper refers to as "non-standard" governance structures. HKEX is also reviewing the GEM and Main Board listing rules: see here.

UK: England and Wales: the fiduciary duties of members of a charitable company

The ICLR has published a summary of the recent judgment Children’s Investment Fund Foundation (UK) v Attorney General [2017] EWHC 1379 (Ch): see here. The judgment is noteworthy because it contains discussion of the extent to which the members of a charitable company limited by guarantee owed duties to the company that served to impose a limitation on the exercise of their voting rights as members. Such a limitation was found to exist.  To quote from the ICLR summary:

"A member of a company limited by guarantee without a share capital with exclusively charitable objects was bound in to the regime now contained in the Charities Act 2011, the whole thrust of which was to ensure that the assets of the company were used for its exclusively charitable objects and for no other purpose. In those circumstances the members of the claimant did not stand outside the charity; they were part of the administration of the charity and they could not lay claim to any private interest. It would be contrary to the whole regime established by the increasingly prescriptive legislative regime reflected in the 2011 Act if the member of a company such as the claimant could vote in his interests or in a manner detrimental to the charitable objects of the company".

UK: FCA consults on powers in relation to LIBOR contributions

The Financial Conduct Authority has published a consultation paper seeking views on how it should exercise the new powers it has been given to require, if necessary, banks to contribute data for the purposes of calculating the LIBOR rate: see here (pdf).

UK: FRC reports on audit quality

The Financial Reporting Council has today published the results of its annual audit quality inspections, including inspection reports for the six largest audit firms: see here. No overall change in audit quality is reported, with 81% of FTSE350 audits reviewed classified as requiring no more than limited improvements (against a target of 90%).

Apologies: life and work rather hectic, hence the lack of regular posting - but a 'normal' service will resume very soon

Germany: English translation of the new Corporate Governance Code

A copy of the new edition of Germany's Corporate Governance Code was published in the Federal Gazette earlier this year: see here. An English translation is now available: see here.

South Africa: shareholders' derivative claims and good faith

The Supreme Court of Appeal gave judgment last week in Lazarus Mbethe v United Manganese of Kalahari (503/2016) [2017] ZASCA 67: see here or here (pdf). This is an important - and now leading - authority on the operation of the derivative action in South Africa under section 165 ("Derivative actions") of the Companies Act 71 of 2008. A short summary of the decision is available here (pdf). At issue was the good faith requirement imposed on the applicant under section 165(5)(b). The court held, amongst other things, that the requirement of good faith did not require the absence of a collateral purpose; however, any collateral purpose was relevant when considering (under section 165(5)(b)) whether the proceedings involved a serious question of material consequence to the company.

India: SEBI establishes corporate governance committee

The Securities and Exchange Board of India has established a corporate governance committee and asked it to provide advice, within four months, on a range of governance matters including the independence "in spirit" of independent directors, the effectiveness of board evaluation practices and participation and voting at general meetings: see here.

UK: England and Wales: the exercise of discretion and a share option agreement

His Honour Judge Waksman QC (sitting as a Judge of the High Court) gave judgment at the end of last month in Watson v watchfinder.co.uk Ltd [2017] EWHC 1275 (Comm). A summary of the case has now been provided by the ICLR: see here. Here is an extract from the summary: "Although the court would not, in every case, inevitably find that a discretion should not be exercised in a manner that was arbitrary, capricious or irrational in the public law sense, it was appropriate to do so in relation to the share option agreement. To conclude otherwise would give rise to commercial absurdity and render the share option agreement worthless".

Pakistan: Companies Bill, 2017 becomes law

The SECP has announced that the President signed the Companies Bill, 2017, earlier this week: see here (pdf). The Bill has, therefore, become law as the Companies Act, 2017, and replaces the Companies Ordinance, 1984. A copy of the Act, which also contains provisions relating to insolvency, is available here (pdf).

Section 204 contains the duties of directors; sub-section (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".

According to the SECP, the Act "... is the longest and one of the most exhaustive pieces of legislation ever approved by [the] Pakistani parliament. It has 515 sections and eight schedules, and took almost 12 years in the making".