Canada: corporate governance reform - an update

Here is a further update on the Bill that will, when enacted, make changes to the governance framework by amending the Canada Business Corporations Act, the Canada Cooperatives Act, and the Canada Not-for-profit Corporations Act. The Bill completed second reading in the Senate yesterday and has now been referred to the Standing Senate Committee on Banking, Trade and Commerce: see here. The text of the Bill is available here and further information is available here. Among the changes proposed are those relating to the election of directors (including annual elections and votes for individual directors), the disclosure of information regarding board diversity and communications with shareholders.

Pakistan: SECP approves the Listed Companies (Code of Corporate Governance) Regulations 2017

Following a consultation earlier this year, the Securities and Exchange Commission has approved the final version of the Listed Companies (Code of Corporate Governance) Regulations 2017: see here (pdf). Further background information is available here (pdf).

Canada: CSA consultation on director independence

The Canadian Securities Administrators have published for comment a consultation paper the purpose of which is to seek views on the approach taken in determining the independence of directors, including those sitting on the audit committee. The paper, CSA Consultation Paper 52-404 Approach to Director and Audit Committee Member Independence, is available here (pdf).

UK: Review Panel report - the FRC's enforcement sanctions

The Panel established to conduct a review of the Financial Reporting Council's enforcement sanctions has published its report and recommendations: see here (pdf). Making greater use of non-financial penalties is one of the recommendations that is made and, whilst the Panel concluded that it would not be appropriate to set a tariff for financial sanctions, it suggested that a fine exceeding £10 million could be appropriate where a major firm - one of the Big 4 - was found guilty of "seriously bad incompetence" in respect of the audit of a major public company where the errors were measured in nine figures (or more).

EU: Commission consultation on institutional investor and asset manager duties regarding sustainability

The European Commission has published a consultation paper on institutional investor and asset managers' duties regarding sustainability: see here (pdf). This is part of work being undertaken by the Commission to determine whether, and how, a clarification of such duties could contribute to (a) more efficient allocation of capital and (b) sustainable and inclusive growth. Further information is available here.

UK: updated edition of the voluntary code of conduct for executive search firms

An updated edition of the voluntary code of conduct for executive search firms was published earlier this week: see here (pdf). Thirty-nine firms are code signatories and each is committed to following the Code in respect of their board and senior executive search activities: see here. The Code was created following a recommendation from the Davies Review ("Women on Boards") in 2011.  One of the Code's provisions states that search firms should, when presenting their longlists, ensure that at least 30% of the candidates are women.

New Zealand: FMA consults on updated (and refocused) Corporate Governance Handbook

The Financial Markets Authority has published for consultation an updated edition of its Corporate Governance Handbook: see here (pdf). The consultation follows the publication earlier this year by the NZX of an updated edition of its corporate governance code (here, pdf). The FMA regards the NZX Code as providing the primary guidance on governance practices for NZX listed companies; the focus of the FMA Handbook has therefore moved away from listed companies and is intended instead to provide practical guidance for directors of non-listed companies including state owned enterprises and public sector entities.

Zambia: the Companies Bill 2017

A new framework for companies in Zambia - the Companies Bill 2017 - was introduced in the National Assembly earlier this year. The Bill - a copy of which is available here (pdf) - is nearing the end of its parliamentary journey (its progress can be followed here).

Hong Kong: HKEX consults on amendments to the HK Corporate Governance Code

HKEX has published a consultation paper setting out proposed changes to the Hong Kong Corporate Governance Code: see here (pdf). The proposed changes address a variety of issues including concerns with 'over-boarding' by NEDs, board diversity and NEDs' attendance at general meetings and the factors affecting NEDs' independence.

UK: Tax strategy reporting among the top 50 FTSE100 companies

Schedule 19 of Finance Act 2016 contains the framework requiring large businesses to publish a tax strategy report. The extent to which the largest 50 companies (by market capitalisation) in the FTSE100 have published such a report (and, where they have, the nature of its content) is the subject of a report published by Fair Tax: see here (pdf). The report's headline is: "Slow to emerge, poorly executed, but some examples of excellence". According to the report, 66% of companies had failed to publish online a compliant Tax Strategy at the study's cut off date (30 June 2017).

UK: Grant Thornton's 2017 corporate governance review

Rather belatedly I note the publication of the 2017 edition of Grant Thornton's Corporate Governance Review: see here (pdf). Based on an analysis of FTSE350 company annual reports, it is noted that 66% of companies claim full compliance with the UK Corporate Governance Code. Other highlights are noted here.

Ireland: 'Measures to Enhance Ireland's Corporate, Economic and Regulatory Framework ('Ireland combatting white collar crime')

The Department for Business, Enterprise and Innovation, working with other Government Departments, has published a report titled Measures to Enhance Ireland's Corporate, Economic and Regulatory Framework (subtitled Ireland combatting 'white collar crime'): see here (pdf). The report contains wide-ranging proposals, divided into the following areas: (a) organisational and procedural reforms; (b) corporate governance; (c) enhancing the powers of the authorities to identify and combat economic and regulatory offences in the financial sector; and (d) countering Money Laundering and Corruption. Under (a), the Office of the Director of Corporate Enforcement will become an independent agency responsible for company law enforcement (the ODCE has welcomed this proposal: see here, pdf).

EU: TFEU articles 49 and 54 and the transfer of a company's registered office

The Court of Justice of the European Union gave judgment at the end of last month in Polbud v Wykonawstwo sp. z o.o.  (Case C‑106/16). A summary of the decision is available here (pdf). To quote directly from the judgment:

Articles 49 and 54 [of the Treaty on the Functioning of the European Union, on the right of establishment] must be interpreted as precluding legislation of a Member State which provides that the transfer of the registered office of a company incorporated under the law of one Member State to the territory of another Member State, for the purposes of its conversion into a company incorporated under the law of the latter Member State, in accordance with the conditions imposed by the legislation of that Member State, is subject to the liquidation of the first company".

South Africa: unfair prejudice claims and beneficial shareholders

The Supreme Court of Appeal gave judgment last week in Smyth v Investec Bank Ltd (674/2016) [2017] ZASCA 147. A summary is available here (pdf). At issue was whether those owning shares beneficially through a nominee were able to seek relief under section 252 of the Companies Act 61 of 1973 (the unfair prejudice remedy).

Referring to section 103 (who are members of a company) of the Act, and authorities from other jurisdictions, the court unanimously held that the beneficial shareholders were unable to bring a claim under section 252: relief was available only to those whose names appeared in the register of members. The court also rejected the argument that the beneficial shareholders could, on the grounds that they had a direct and substantial interest in the section 252 proceedings, be joined as co-applicants.  Petse JA, delivering the judgment of the court, stated (para. [55]):

It was a simple matter for the appellants, if they wished to avail themselves of the remedy provided for in s 252 of the Act in their own names, to terminate the nomination of their respective nominees so as to procure the entry of their names in the register of ... members. Instead, they obdurately elected ‘to saddle what has proven to be an unruly horse’ by seeking to invoke the s 252 remedy in their own names as beneficial owners. They were ill-advised in doing so. As I see it, for as long as the nominees’ names remained in the register of members, the beneficial owners lacked a legal interest in the subject-matter of the litigation".