China: new edition of the Code of Corporate Governance for Listed Companies

A revised edition of the Code of Corporate Governance for Listed Companies, published by the China Securities Regulatory Commission, was issued earlier this year. A copy of the new Code is available here (Chinese, pdf). A copy in English has not yet been published by the CSRC but Glass Lewis have provided a short overview of the changes introduced in the new edition: see here. It is also worth noting that the Shanghai Stock Exchange amended its listing rules this year to require the establishment of audit committees by listed companies: see Article 3.1.6 in the revised rules, available here (English, pdf).

UK: The Official Listing of Securities, Prospectus and Transparency (Amendment) (EU Exit) Regulations 2019

The Government has published a policy note in respect of the forthcoming Official Listing of Securities, Prospectus and Transparency (Amendment) (EU Exit) Regulations 2019: see here. The note explains that the Regulations will seek replicate, as far as possible, the current effects of the prospectus regime, and the transparency rules.

For further information about financial services legislation under the European Union (Withdrawal) Act 2018 - including a policy note on the proposed Market Abuse (Amendment) (EU Exit) Regulations 2018 - see here.

UK: FRC review of audit and ethical standards

The Financial Reporting Council is seeking views on the effectiveness of the changes made in 2016 to its auditing and ethical standards: see here.

UK: The Insolvency (Amendment) (EU Exit) Regulations 2018

The Insolvency (Amendment) (EU Exit) Regulations 2018 were laid in draft form before Parliament yesterday as part of the draft affirmative procedure: see here. The Regulations can be viewed here or here (pdf). They are made under section 8(1) of the European Union (Withdrawal) Act 2018 and make amendments to legislation in the field of cross-border insolvency in consequence of the UK's withdrawal from the European Union. A more detailed explanation of the amendments being made is available in the accompanying explanatory note: see here.

UK: BEIS Committee launches future of audit inquiry

The House of Commons Business, Energy and Industrial Strategy Committee has begun a new inquiry on the future of audit: see here. The inquiry will, to quote directly from the information provided about it, "focus on the likely impact of the CMA market study and the review of the FRC (by Sir John Kingman) in improving quality and competition in the audit market and reducing conflicts of interest". Written submissions are invited and should be received by 11 January 2019: see here.

Hong Kong: HKEX review of listed issuers' corporate governance practice disclosures

HKEX has published the latest edition of its review of listed issuers' corporate governance practice disclosures: see here (pdf). The review surveyed 400 randomly selected issuers, exploring the extent of compliance with the provisions of the Corporate Governance Code. It is interesting to see that the provision of the Code with the lowest compliance rate - 64% - was A.2.1 which provides that the roles of chairman and chief executive should not be held by the same person.

Ireland: Corporate Governance Requirements for Investment Firms and Market Operators

The Central Bank has published its Corporate Governance Requirements for Investment Firms and Market Operators: see here (pdf). The Requirements are intended to supplement and support the MiFID regime, and take effect from 1 July 2019.

India: Committee report - regulating audit firms and networks

The Committee formed by the Ministry of Corporate Affairs to examine the regulatory framework and liability of audit firms, and to make reform recommendations, has published its report: see here (pdf). The Committee considered the role and powers of the new National Financial Reporting Authority, noting the delay in creating this new audit regulatory (Rules are still being made - see, e.g., those published earlier this week here, pdf).

Singapore: Variable Capital Companies Act 2018 published

The Variable Capital Companies Act 2018 - setting out a new corporate form in Singapore for investment funds - received the President's assent on 31 October and has now been published in the Government Gazette: see here (pdf). A copy of the Act is also available on the Singapore Statutes Online website: see here.

UK: Hampton-Alexander Review - third annual report published

The Hampton-Alexander Review published its third annual report yesterday: see here (pdf). The report notes that the number of women on FTSE100 boards has exceeded 30% for the first time, although it is noted that the number of women occupying CEO roles across the FTSE350 is lower than last year (12, down from 15). Within the FTSE350, only five boards are all male; there are, however, 75 boards with only woman on the board.

UK: The Third Parties (Rights Against Insurers) Act 2010 (Consequential Amendment of Companies Act 2006) Regulations 2018

The Third Parties (Rights Against Insurers) Act 2010 (Consequential Amendment of Companies Act 2006) Regulations 2018 were made earlier this month: see here or here (pdf). The purpose of the Regulations is to amend section 1030 of the Companies Act 2006 in order to permit an insurer of a company, where that company has been dissolved for more than six years, the right to restore the company to the register of companies. At present such an application can be made, but only within six years of a company's dissolution. Further information about the proposed change, and the reasons for it, can be found in the accompanying explanatory memorandum available here (pdf).

Germany: Commission consults on revised edition of German Corporate Governance Code

Earlier this week the Corporate Governance Code Commission published for consultation a revised edition of the German Corporate Governance Code: see here (German, pdf) or here (English, pdf).

The opportunity has been taken to restructure the Code and to place greater emphasis on companies' disclosure of their governance arrangements. Key principles are now more clearly identified, alongside supporting recommendations. The principles will operate on the basis of 'apply and explain', with the recommendations operating on the basis of 'comply or explain'. For further information about this change, and the others that have been proposed (particularly concerning remuneration), see the supporting materials available here (in German) or here (in English).

UK: BEIS publishes updated guidance for the Companies (Miscellaneous Reporting) Regulations 2018

The Department for Business, Energy and Industrial Strategy has today published updated guidance concerning the Companies (Miscellaneous Reporting) Regulations 2018: see here. The Regulations contain several new reporting obligations including the requirement for certain large companies to include in their strategic report a "section 172(1) statement". This statement, to quote directly from article 4 of the Regulations, "describes how the directors have had regard to the matters set out in section 172(1)(a) to (f) when performing their duty under section 172 [of the Companies Act 2006]".

UK: BREXIT and the UK corporate law framework (incl. accounting, audit and takeovers)

The purpose of this post is to provide an update concerning the statutory instruments that are being published in order to prepare the UK's corporate law framework for the UK's departure from the European Union. Information concerning the legislative changes being made to the financial regulatory framework under the European Union (Withdrawal) Act 2018 can be found here (and, in respect of the role of regulators and their handbooks, see here and here; the latter link includes news of the temporary permissions regime).

I started, earlier this week, by noting the publication in draft form of the Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EU Exit) Regulations 2018. These Regulations (and their accompanying explanatory memorandum) have been withdrawn because, to quote the relevant Government website, there was "not enough information in the EM [explanatory memorandum]". The Regulations have since been laid again and were published yesterday: see here.

Draft legislation concerning statutory audit and accounts and reports has now been published. A draft of the Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2018 is available here, with a draft explanatory memorandum available here (pdf). These Regulations will make amendments to the legislation that implemented the EU Audit Directive (e.g., Part 42 ("Statutory auditors") of the Companies Act 2006); amendments will also be made to the retained UK version of the EU Audit Regulation.

A draft of the Accounts and Reports (Amendment) (EU Exit) Regulations 2018 is available here, with a draft explanatory memorandum available here (pdf). These Regulations will make amendments to Part 15 ("Accounts and Reports") of the Companies Act 2006.

The Takeovers (Amendment) (EU Exit) Regulations 2019 have also been published (replacing an earlier draft): see here, with the draft explanatory memorandum available here (pdf). The purpose of these Regulations is to amend Part 28 ("Takeovers etc") of the Companies Act 2006 in order to create what the explanatory memorandum calls a "freestanding domestic takeovers regime". The proposed, connected changes that will be made by the UK's Takeover Panel to the Takeover Code were explained in a consultation paper published earlier this week: see here (pdf).

OECD report: flexibility and proportionality in corporate governance

The OECD has published a report titled Flexibility and Proportionality in Corporate Governance: see here. The report covers 39 jurisdictions and, in respect of seven areas - pre-emption rights; board composition, committees and qualifications; say on pay and remuneration disclosure; related party transactions; disclosure of periodic financial information; major shareholding disclosure; and takeovers - provides a descriptive account of the extent to which the governance frameworks permit flexibility and are proportionate (i.e., is something other than 'one size fits all' permitted and, if so, what determines this?). The results are based on the information received directly from jurisdictions through an online questionnaire.

UK: England and Wales: unfair prejudice - court orders buyout by petitioner

A copy of the judgment in Goodchild v Taylor [2018] EWHC 2946 (Ch) was added to the BAILII database yesterday. The case concerned a petition brought under section 994 of the Companies Act 2006 by Mr Goodchild, one of two directors and equal shareholders in a company (Taylor Goodchild Ltd) formed to provide legal services.

The trial judge found that the company's other shareholder and director, Mr Taylor, had failed to act in the best interests of the company and to avoid conflicts of interest: he had broken his duties as a director. This conduct was held to be unfairly prejudicial for the purposes of section 994. The remedy ordered under section 996 was unusual and provides a good example of the breadth of the court's discretion: Mr Taylor was ordered to sell his shares to Mr Goodchild; the usual remedy under section 996 is one requiring the petitioner to be bought out.

Canada: OSFI publishes revised Corporate Governance Guideline

The Office of the Superintendent of Financial Institutions has published a revised edition of its Corporate Governance Guideline: see here (pdf). Further information about the Guideline, including the revisions made, is available in the accompanying news release (here, pdf) and letter sent to federally regulated financial institutions (here, pdf).

UK: Scotland: gender representation on public authority boards

The Gender Representation on Public Boards (Scotland) Act 2018 (Commencement No. 1) Regulations 2018 were laid before the Scottish Parliament today and bring into force, on 1 December, certain provisions of the Gender Representation on Public Boards (Scotland) Act 2018 including section 2 (key definitions),  section 7 (guidance on the operation of the Act) and schedule 1 (public authorities).

The Act contains a gender representation objective for public authority boards - 50% of non-executive members who are women - and will, when fully in force, impose duties on those appointing such members to give, in specified situations, preference to female candidates where this will help achieve (or make progress in achieving) the gender representation objective. The explanatory notes accompanying the Act are available here (pdf).

UK: BREXIT and companies legislation

Drafts of two statutory instruments have recently been published, the purpose of which is to prepare aspects of the UK's company law framework for the UK's departure from the European Union. These instruments have been made under the European Union (Withdrawal) Act 2018 and, before they are laid before Parliament, will go through the sifting process.

The first is the European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2018: it can be viewed here (pdf) and the accompanying explanatory memorandum is available here (pdf). These Regulations will provide a temporary framework for any European Public Limited Liability Companies - known as Societas Europaea - that remain registered in the UK on the day the UK leaves the European Union: such companies will be converted into "UK Societas", a new corporate form (albeit one that is not expected to be particularly attractive).

The second is the Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EU Exit) Regulations 2018: it can be viewed here (pdf), with the accompanying explanatory memorandum available here (pdf). The purpose of this instrument is to amend the Companies Act 2006 and secondary legislation made under the Act, as well as revoking certain Regulations. The changes being made are described in the explanatory memorandum as miscellaneous and do not relate to accounting or audit which will be the subject of separate statutory instruments (to be published here and/or here in draft form); their purpose is to deal with the deficiencies in retained EU law (e.g., references to the EU or EEA in the legislation which are no longer appropriate).

Update 1 (7 November 2018): The Companies, Limited Liability Partnerships and Partnerships (Amendment etc) (EU Exit) Regulations have been withdrawn, to be replaced with new Regulations and a new Explanatory Memorandum: see here (pdf) and here (pdf).

Update 2 (7 November 2018): A draft of The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2018 is now available here, with a draft explanatory memorandum available here (pdf).

Update 3 (7 November 2018): A draft of The Accounts and Reports (Amendment) (EU Exit) Regulations 2018 is now available here, with a draft explanatory memorandum available here (pdf).

Hong Kong: section 300 of the Securities and Futures Ordinance

The Hong Kong Court of Final Appeal delivered judgment a couple of days ago in Securities and Futures Commission v Lee Kwok Wa and others [2018] HKCFA 45. A summary, in English, is available here.

The case concerned section 300 of the Securities and Futures Ordinance, Cap 571, which provides that "[a] person shall not, directly or indirectly, in a transaction involving securities, futures contracts or leveraged foreign exchange trading - (a) employ any device, scheme or artifice with intent to defraud or deceive; or (b) engage in any act, practice or course of business which is fraudulent or deceptive, or would operate as a fraud or deception".

The court held that "transaction" should be given a wide meaning, interpreted with reference to the purpose of section 300: to outlaw fraudulent conduct in securities transactions. It also held that the phrase "transaction involving securities" should be interpreted to include any dealings with a view to profit or avoidance of loss by the use of inside information (including, for example, the opening a securities account for the purpose of trading in securities).

UK: British Academy Future of the Corporation Project - A Framework for the Future

The British Academy has published, as part of its Future of the Corporation Project, a report in which it is argued that the future of business should be based on three connected principles: corporate purpose; trustworthiness; and an enabling culture. Five "levers" are identified in order to bring about change: ownership; corporate governance; regulation; taxation; and investment. The report provides the foundation for the work that will follow: developing policy recommendations.

A copy of the report is available here (pdf). A special edition of the Journal of the British Academy contains research underpinning the report: see here.