UK: England and Wales: the extraterritorial effect of section 236 of the Insolvency Act 1986

Judgment was delivered earlier this week by Adam Johnson QC (sitting as a Judge of the High Court) in Wallace v Wallace [2019] EWHC 2503 (Ch). At issue was whether an order under section 236 ("Inquiry into company’s dealings, etc.") of the Insolvency Act 1986 could be made against an individual resident abroad. To put this another way: does section 236 have extraterritorial effect? The existing authorities presented, the Judge noted, "a somewhat fragmented picture" (para. [46]) but he concluded, with respect to the power to order the production of "any books, papers or other records" under section 236(3), that an order could be made against an individual resident outside of the United Kingdom.

UK: FRC says Audit Transparency Reporting is ineffective

The Financial Reporting Council has published the results of its review of audit firm transparency reporting: see here (pdf). The FRC reviewed, amongst other things, the 2017 Transparency Reports for each of the 33 audit firms that audit a public interest entity and which, therefore, are subject to the requirement to prepare a Transparency Report (see, now, EU Regulation 537/2014, article 13). The FRC identified five firms - unnamed in the report - that had failed to publish a Transparency Report notwithstanding the requirement to do so.

The FRC has concluded that audit transparency reporting is ineffective, with Transparency Reports seen by many firms as a marketing opportunity (rather than an accountability or compliance document) and the Reports themselves remaining unread by the intended beneficiaries (principally investors and audit committee members). A review of the current requirements will begin in 2020.

Australia: ASIC report on corporate finance regulation

The Australian Securities and Investments Commission has published its latest report on its corporate finance oversight activities for the period January to June 2019: see here (pdf). The report notes, amongst other things, that ASIC asked for amended or additional disclosure in more than a quarter of the prospectuses lodged during this period. Under the heading of corporate governance, the report outlines what ASIC has recently done to clarify its policy concerning the disclosure of the risk and opportunities associated with climate change. 

Singapore: Court of Appeal considers the prohibition against a company acquiring its own shares

The Court of Appeal gave judgment a few days ago in The Enterprise Fund III Ltd and others v OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) [2019] SGCA 48: see here (pdf). The decision is important as it has become the leading authority on the prohibition, within sections 76 and 76A of the Companies Act (Cap 50, 2006 Rev Ed), against a company acquiring its own shares. Amongst the specific matters considered by the court were the breadth of an indirect acquisition (under section 76(1A)(a)(i)) and the scope of the saving provision (in section 76A(1A)) for a disposition of book-entry securities.

France: AMF consultation on squeeze outs

AMF - Autorité des Marchés Financiers, the financial market regulator - has begun a consultation on squeeze outs: see here.

UK: England and Wales: more on relational contracts and good faith

Judgment was given yesterday by Mr Justice Fancourt in UTB LLC v Sheffield United Ltd & Ors [2019] EWHC 2322 (Ch). The decision is noteworthy because of the discussion it contains concerning the use of the label 'relational contract' and the circumstances in which a duty of good faith should be implied in an investment and shareholder agreement. The trial observed (paras. [203] - [204]):

Rather than seek to identify and weigh likely indicia of a "relational contract" in the narrower sense used by Leggatt LJ, it is, I consider, preferable to ask oneself first – as Leggatt LJ did in the Sheikh Tahnoon case – whether a reasonable reader of the contract would consider that an obligation of good faith was obviously meant or whether the obligation is necessary to the proper working of the contract. The overall character of the contract in issue will of course be highly material in answering that question but so will its particular terms, as recognised by the principle that (as restated in the Marks and Spencer case) no term may be implied into a contract if it would be inconsistent with an express term.

That approach is, in my respectful opinion, preferable also because the exact content of any implied obligation of fair dealing, or to act with integrity, or to act in good faith, will be highly sensitive to the particular context of the contract, as observed by Dove J in D&G Cars Ltd v Essex Police Authority [2015] EWHC 226 (QB) at [175]. The greater part of that context is the express terms of the contract. Thus, to imply a general obligation to act at all times in good faith towards the counterparty because the contract is a relational contract may fail to have regard to rights and obligations created by the express terms, to which any implied obligation must be tailored if it is not to be excluded as being inconsistent with them. In the instant case there is a real example of just such a question, to which I return ..."

UK: Treasury announces review of the disguised remuneration loan charge

The Treasury has announced a review of the disguised remuneration loan charge: see here. The operation of the charge has been subject to intense criticism, not least by the Loan Charge All Party Parliamentary Group in its report published in April this year: see here (pdf). The review will be conducted by Sir Amyas Morse, the former Comptroller and Auditor General and Chief Executive of the National Audit Office.

UK: Director disqualifications in 2018/19

The Insolvency Service reports that, in 2018/19, there were 1,242 director disqualifications and that, since April 2014, the average length of disqualification is 5.7 years: see here.

Ireland: a review of the Registration of Business Names Act 1963

Somewhat belatedly - for those who wanted to make a submission - I note that earlier this year the Department of Business, Enterprise and Innovation consulted on the operation of the Registration of Business Names Act 1963: see here.

UK: FCA investigations and the destruction of documents

The Financial Conduct Authority has, for the first time, brought a prosecution under section 177(3)(a) of the Financial Services and Markets Act 2000 in respect of an individual's destruction of documents relevant to an investigation. For further information, see here.

UK: The Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019

The Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 were made and laid before Parliament yesterday: see here. Further information about the Regulations is available in the accompanying explanatory memorandum: see here (pdf).

UK: The Prospectus (Amendment etc.) (EU Exit) Regulations 2019

The Prospectus (Amendment etc.) (EU Exit) Regulations 2019 were made and laid before Parliament yesterday: see here. For further information see the accompanying explanatory memorandum available here (pdf).

UK: England and Wales: Law Commission report on the electronic execution of documents

The Law Commission (England and Wales) published its report on the electronic execution of documents yesterday: see here (pdf). A summary, which includes a statement of the law on execution with an electronic signature, is available here (pdf). The report makes several recommendations including the creation of multi-disciplinary, industry working group to consider the practical issues relating to the electronic execution of documents.

UK and Australia: Directors' duties and climate change - a speech by Lord Sales

Lord Sales, a justice of the UK Supreme Court, delivered a speech at the end of August in Australia titled "Directors’ duties and climate change: Keeping pace with environmental challenges": see here (pdf). With reference to laws in England and Australia, Lord Sales observed:

... the clear message to be taken away from this lecture is that company law in England and Australia alike is still undergoing a process of coming to terms with the new challenges raised by climate change and wider environmental issues ... There is a clear case for these company laws to be modified, by legislation, to provide a greater impetus to boards and individual directors to accord greater attention and weight to climate issues than has until now been considered appropriate.  That said, even as things stand, there is much force in the view that directors may and, increasingly, must take into account and accord significant weight to climate change in their decision-making. This is not least because a failure to act sustainably is more and more likely to have adverse financial impacts on companies who are, or are perceived to be, behind the curve on environmental issues"

UK: Insurance Special Purpose Vehicles - PRA consultation

The Prudential Regulation Authority has published a consultation paper setting out proposed changes to its approach and expectations concerning the authorisation and supervision of insurance special purpose vehicles: see here (pdf).