Thursday 27 June 2019

UK: Companies House - annual statistics published

Companies House has today published its annual statistical release for 2018/19 (covering the year to 31 March 2019): see here. This reports that the size of the register (at 31 March 2019) was 4,202,044, an increase of a little over 4% on the year before. During the year there were 672,890 company incorporations and 508,865 dissolutions. The average age of a company on the register is 8.5 years (it was 10.7 years in 2000). Public limited companies account for 0.1% of the total register; private companies, limited by shares, account for 92.8%.

Wednesday 26 June 2019

UK: England and Wales: directors' liability for unlawful dividends

Judgment was given last week in Burnden Holdings (UK) Ltd v Fielding & Anor [2019] EWHC 1566 (Ch). This is an important first instance decision concerning insolvency and company law.

Of particular interest is the consideration of whether the liability of directors for the making of an unlawful distribution is strict or fault based. The trial judge, Mr Justice Zacaroli, held that liability was fault based. He stated that if directors were unaware of facts that rendered a dividend unlawful, they would not be personally liable if they had taken reasonable care to secure the preparation of accounts to establish the availability of sufficient profits to render the dividend lawful. If there were, in fact, insufficient profits, the directors would not be liable in such circumstances.

In reaching the position, Zacaroli J. commented on what is expected of directors in terms of their knowledge of accounting and their reliance on others. He stated:
"Directors are not required to be accountants and the comments of Lord Davey and Lord Halsbury LC in Dovey v Cory [[1901] AC 477] as to directors being entitled to rely on the judgment of others whom they appoint to carry out specialist financial roles within the company are as pertinent today as when they were made in 1901. The only modification to the position reached at the end of the 19th Century is as to the standard required of directors, which is as set out by Nelson J in [Bairstow v Queen's Moat Houses plc [2000] BCC 1025]."

UK: Law Commission report - "Anti-money laundering: the SARs regime"

The Law Commission for England and Wales has published its report and recommendations concerning the regime for the reporting of suspicious activity within the UK's anti-money laundering and terrorist financing framework: see here (pdf). A summary is available here (pdf, English) and here (pdf, Welsh). The report contains 19 recommendations, including the creation of an advisory board with oversight over the drafting of guidance and responsibility for measuring the effectiveness of the reporting regime.

UK: The Financial Services and Markets Act 2000 (Prospectus) Regulations 2019

The Financial Services and Markets Act 2000 (Prospectus) Regulations 2019 were made yesterday and come into force on 21 July 2019: see here or here (pdf). The Regulations amend existing legislation, including the Financial Services and Markets Act 2000, with the aim of ensuring that the EU Prospectus Regulation ((EU) 2017/1129) is effective in the UK from 21 July. Further information is available in the accompanying explanatory memorandum: see here (pdf).

Tuesday 25 June 2019

Germany: new corporate governance code - copy in English now available

Last month the Corporate Governance Code Commission - DCGK - published a new edition of the German Corporate Governance Code: see here. A copy of the new Code, in English, is now available: see here (pdf) or here (pdf, with rationale for the changes). A press release explaining the key changes is available here (pdf).

Monday 24 June 2019

UK: England and Wales: Law Commission project on intermediated securities system

The Law Commission for England and Wales has announced the start of a project concerning intermediated securities: see here. The Commission states in its announcement that "concerns have been raised about the effect of a system of intermediation on corporate governance and transparency, whilst there is uncertainty over what legal redress is available to investors, if issues with their securities arise". The project is being undertaken at the request of the Department for Business, Energy and Industrial Strategy. A call for evidence will be published in the summer and a scoping study is expected in summer 2020.

UK: Creating a responsible payment culture and board level responsibility

Last October, the Government published Creating a responsible payment culture - a call for evidence in tackling late payment: see here (pdf). Last week the results of the call for the evidence and the Government's response were published: see here (pdf). Part of the Government's response is titled "Board level responsibility" and within this section the following is said (pp. 24-25):
Increasing board level responsibility will ensure that late payments are being discussed at the highest level of organisations. Furthermore, it will increase the visibility of companies’ payment policies and who is responsible for them, allowing other businesses to engage the appropriate person with relevant issues and concerns.

The Payment Practices Reporting duty for large businesses has started to improve Board level responsibility for payment practices.

The Audit Committee of a company, which includes Non-Executive Board members, has an important role to play in considering the integrity of a company’s financial statements and the financial controls in place. In the 2019 Spring Statement, the Chancellor announced that government will require large companies’ audit committees to review payment practices and report on them in their annual accounts. This will further elevate payment practices to Board level, increase transparency and complements a new reporting obligation ... that came into force in January 2019.

We are working through the implementation of the Chancellor’s Spring Statement announcement with the Financial Reporting Council (FRC). This will preferably be implemented through guidance that clearly sets out the expectation that Audit Committees will review payment practices and report on them in their annual reports. But if necessary, we will consider legislation to ensure that the issue of late payments is given sufficient attention by the Boards of larger companies.

[U]nder a new strategic report requirement, large companies must include a statement in their directors’ report summarising how the directors have had regard to the need to foster the company’s business relationships with suppliers, customers and others, and the effect of that regard, including on the principal decisions taken by the company during the financial year.

We are also asking the FRC to review how well payment practices are reflected in the first year of the new reporting requirement, which will inform our future thinking on this issue. The requirement applies to c.15,000 both listed and private companies".

UK: The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019

The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (Amendment) Regulations 2019 were made last week and come into force on 9 July 2019: see here (pdf). The accompanying explanatory memorandum is available here (pdf).

The purpose of the Regulations is to ensure the full implementation of the EMIR REFIT Regulation (to use its full title: Regulation (EU) No 2019/834 of the European Parliament and of the Council amending Regulation (EU) No 648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, the risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty, the registration and supervision of trade repositories and the requirements for trade repositories).

Further information, from the Financial Conduct Authority, is available here. The Regulations will amend the Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504).

Tuesday 18 June 2019

IOSCO Cyber Task Force - final report published

The IOSCO Cyber Task Force has published its final report: see here (pdf). The report examines how IOSCO member jurisdictions have applied three standards: the CPM-IOSCO Guidance on cyber Resilience for Financial Market Infrastructures; the National Institute of Standards and Technology Framework for improving Critical Infrastructure Cybersecurity; and the International Organization for Standardization 27000 series standards. It also provides a series of questions for firms and regulators designed to promote awareness of good practice and guide the review of existing practices.

Monday 17 June 2019

UK: FCA quarterly consultation paper

The Financial Conduct Authority has published its latest quarterly consultation paper (CP19/19, No 24): see here (pdf). The consultation paper contains, amongst other things, the FCA's proposals for the fees and levies to be paid for 2019/20 by Gibraltar-based firms should the UK leave the European Union without an agreement and a transition period by 31 October 2019; and new notification procedures for certain firms in respect of changes to their management body.

Friday 14 June 2019

UK: The Companies (Directors' Remuneration Policy and Director's Remuneration Report) Regulations 2019

The Department for Business, Energy and Industrial Strategy has today published a document containing an overview of, and FAQs concerning, the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019: see here (pdf).

UK: Government responds to BEIS Committee report on executive rewards

Earlier this year the House of Commons Business, Energy and Industrial Strategy Committee published its report Executive rewards - paying for success: see here (pdf). The Committee made various recommendations, including that there should be an employee representative on remuneration committees. The Government's response was received by the Committee earlier this month and published yesterday: see here. The response has been described as a "missed opportunity" by the Committee's Chair, Rachel Reeves MP: see here.

UK: England and Wales: shadow and de facto directorships

Judgment was delivered earlier this week by HHJ Hacon in Popely v Popely [2019] EWHC 1507 (Ch). This first instance decision - concerning a double derivative action - is noteworthy for the discussion it contains of the distinctions between de facto and shadow directorships and whether it is possible for an act to be simultaneously carried out in both of these capacities (no was the judge's answer). Of note, too, is the reliance placed on a decision of Guernsey's Royal Court: Carlyle Capital Corporation Ltd v Conway (Judgment 38/2017; available here for registered users; registration is free).

Wednesday 12 June 2019

UK: The Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019

The Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019 were made earlier this week: see here or here (pdf). The accompanying explanatory memorandum is available here (pdf), from where this very general explanation of the purpose of the Regulations is taken (para. 2.1):
This instrument is being made in order ensure a coherent and functioning financial services regulatory regime once the United Kingdom (UK) leaves the European Union (EU). It makes amendments to a number of financial services EU exit statutory instruments and to an EU delegated regulation, correcting errors identified in legislation after it was made, making amendments to ensure consistency between EU exit instruments and introducing a transitional provision. These amendments will ensure that these instruments operate effectively after the UK leaves the EU".

OECD publishes 2019 edition of its Corporate Governance Factbook

The OECD published the 2019 edition of its Corporate Governance Factbook yesterday: see here (pdf). The factbook covers 49 jurisdictions and provides information in five areas: (1) the corporate landscape (including the ownership structure of listed companies); (2) the corporate governance framework; (3) the rights of shareholders and key ownership functions; (4) the board of directors; and (5) mechanisms for flexibility and proportionality in corporate governance.

Tuesday 11 June 2019

Trinidad and Tobago: the Companies (Amendment) Act, 2019

The Companies (Amendment) Act, 2019 became law earlier this year with assent given on 4 April 2019: see here (pdf). The Act amends the Companies Act, 1995 and will come into force through promulgation and, so far, this has been done for section 10A of the Act: see here (pdf). The 1995 Act prohibited the issuing of bearer shares; section 10A retains this prohibition but adds to it by also prohibiting the conversion or exchange of any share into a bearer share. Elsewhere in the 2019 Act are rules requiring companies to maintain information about the beneficial owners of its shares.

Monday 10 June 2019

UK: England and Wales: section 127 of the Insolvency Act 1986 and the defence of change of position

Judgment was given last Friday by HHJ David Cooke in Dingley v Nisa Retail Ltd [2019] EWHC 1383 (Ch). The decision is of interest because of the discussion it contains of the issues surrounding the making of a validation order under section 127 ("Avoidance of property dispositions, etc") of the Insolvency Act 1986 as well as the availability of the defence of change of position where a liquidator seeks recovery of payments void under section 127. HHJ Cooke stated (at para. [69]): "... although the defence is in principle as a matter of jurisprudence available, the circumstances in which it can succeed are constrained in the same way and for the same reasons as the exercise of the court's discretion to validate".

Thursday 6 June 2019

UK: England and Wales: unfair prejudice and the reasonable offer

Judgment was given today by the Court of Appeal in Prescott v Potamianos [2019] EWCA Civ 932. This unanimous judgment of McCombe, Leggatt and Rose LJJ concerned the unfair prejudice remedy (sections 994-996 of the Companies Act 2006) and is noted here for two reasons.

The first reason is that, in the context of the remedy that is provided, the court has endorsed the view expressed by Arden LJ (as she then was) about the adaptable nature of the remedy. The case law has, the court noted, "consistently declined to introduce 'bright lines' and the assessment of an offer to purchase is no exception to this flexible approach" (para. [130]).

The second, related reason, is that the court rejected the view, expressed by the trial judge ([2018] EWHC 1924 (Ch), para. [360]), that the assessment of the offer to purchase, in order to determine its reasonableness in the sense explained by Lord Hoffmann in O'Neill v Phillips [1999] 1 WLR 1092, was a "logically antecedent question" to the assessment of the alleged unfairly prejudicial conduct. In the court's view, "[the] terms of any offer made by the majority to purchase the petitioner's shares, the circumstances in which the offer was made and the reasons why it was rejected are one aspect of the overall consideration by the court of whether an unfair prejudice petition should succeed" (para. [130]).

Whilst reluctant to set out an exhaustive list of factors relevant to deciding an offer's fairness, the court nevertheless discussed what it regarded as those factors that were relevant in most cases (see paras. [131] to [136]). But it stressed that there was no one feature of an offer that would make it automatically either reasonable or unreasonable (para. [130]).

Wednesday 5 June 2019

UK: The EU Prospectus Regulation and the new PRR Sourcebook

The Financial Conduct Authority has published a policy statement containing near final rules the aim of which is to align the FCA Handbook with the EU Prospectus Regulation (Regulation (EU) 2017/1129): see here (pdf). The changes will see the creation of a new sourcebook - the Prospectus Regulation Rules (PRR) sourcebook - coming into force on 21 July 2019 and replacing the current PR sourcebook. The rules are 'near final' because they contain references to proposed revisions to domestic and EU legislation that have not yet been made. Further information about the Regulation can be found here.

Tuesday 4 June 2019

UK: Establishing the Accounting Standards Endorsement Board

The position of chairman of the new UK Accounting Standards Endorsement Board (UKEB) has been advertised on the Public Appointments website: see here. The advertisement, and role description it contains, is useful in that it sets out what role the UKEB will have and its place within the new regulatory framework following the UK's departure from the European Union.

Further information about the new framework was provided earlier this year in the explanatory memorandum accompanying the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019: see here (pdf). These Regulations, in chapter 3,  give the Secretary of State delegated powers to adopt and endorse IFRS for use in the UK and the process that must be followed. The Secretary of State is also given, by chapter 4, the power through regulations to delegate this decision-making function to another body. We now know that this body will be the UKEB.

Kiribati: company and insolvency law reform

The Republic of Kiribati - as it became known on gaining independence from the United Kingdom forty years ago - is to reform its company and insolvency laws. Draft Bills have been published, including a Companies Bill and a Company Insolvency Bill: see, respectively, here (pdf) and here (pdf). The Bills are accompanied by a consultation paper: see here (pdf). The new Companies Bill, when enacted, will enable companies with a single shareholder to be formed and will abolish the current minimum capital requirements.

Monday 3 June 2019

UK: FCA Policy Statement - Improving shareholder engagement and increasing transparency around stewardship

The Financial Conduct Authority has published PS19/13 Improving shareholder engagement and increasing transparency around stewardship: see here (pdf). The statement contains final rules and feedback following the FCA's earlier consultation (about which: see here, pdf). The new rules come into force on 10 June and will implement, in part, EU Directive 2017/828 (aka SRD II or the Second Shareholder Rights Directive). They will require, amongst other things, life insurers and asset managers to disclose information concerning their engagement policies and investment strategies (or to explain publicly why these disclosures are not being made).

The FCA states (at para. 2.20) that it cannot see a reason why these new SRDII disclosures should not be contained in the same document as the disclosures required by firms under the revised Stewardship Code but firms will need to consider whether their Stewardship Code disclosures are sufficient to meet the FCA rules. The regulator also states (at para. 1.42) that for an initial period, and because the rules are coming into force quickly after their publication, firms can comply by explaining that they are developing an engagement policy (or considering whether or not to have one).