UK: The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2020

The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2020, made by the Scottish Ministers under the power granted to them by section 483 of the Companies Act 2006, came into force on 26 November: see here or here (pdf). The accompanying policy note is available here. The effect of the Order is to provide for the accounts of Scottish National Investment Bank plc to be audited by the Auditor General for Scotland.

UK: FRC expresses disappointment with the overall quality of corporate governance reporting

In a report published yesterday, the Financial Reporting Council has expressed its disappointment with the overal quality of corporate governance reporting: see here (pdf). While noting some examples of good quality reporting in respect of the Corporate Governance Code 2018, the FRC nevertheless found - based on a sample drawn from companies of various size, as well research from other organisations - that "the objective of too many companies is to claim full compliance with the Code, which has led to the 'tick-box' practices we have tried to discourage ... We are concerned that an unexpectedly high number of companies in our sample claimed full compliance but could not demonstrate this in their reports ... We were surprised that in many cases corporate governance reporting was not coherent and cohesive".

UK: The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 were laid before Parliament today and come into force tomorrow: see here or here (pdf). An accompanying explanatory memorandum is available: see here (pdf). Briefly put, the Regulations extend certain measures introduced earlier this year in response to the Covid pandemic including those relating to the potential liability of directors for wrongful trading under section 214 of the Insolvency Act 1986 and the manner in which company meetings are held. 

Germany: board gender diversity proposals announced

Several proposals regarding the gender diversity of company boards have been announced.  For companies where the Federal Government is the majority shareholder, the supervisory board will need to contain at least 30% female directors.  For listed companies with co-determination, there must be at least one female director on the management board where that board contains 4 or more directors. A copy of the formal ministerial announcement, in German, is available here. Media reports in English are available here and here. 

UK: the accounting and audit framework from 1 January 2021 - letters to firms

The Department for Business, Energy and Industrial Strategy and the Financial Reporting Council have written to accounting and audit firms explaining the key changes that will arise, in respect of the accounting and audit frameworks, from the start of 2021 (and when the transition period ends): see, respectively, here (pdf) and here (pdf). 

UK: The UK Listings Review - terms of reference and call for evidence

The terms of reference, and a call for evidence, for the recently announced review of the UK listings regime were published today: see, respectively, here and here.

The review, which is being led by Lord Hill of Oareford, has been asked, to quote directly from the terms of reference, to propose recommendations "for how to boost the UK as a destination for IPOs and optimise the capital raising process for companies seeking to list on the main UK markets". 

The call for evidence invites views on a number of matters such as free float requirements, dual class structures, track record requirements, prospectuses and dual and secondary listing. Various questions are asked including whether dual class share structures should be permitted in the Premium Listing segment of the London Stock Exchange and should the current free float requirement of 25% be changed. 

Guernsey: the scope of section 426 of the Companies (Guernsey) Law 2008

The Royal Court (Ordinary division) gave judgment last month in Re Canargo Ltd [2020] GRC064. A copy of the judgment is available here (registration required). The judgment is noteworthy because it provides guidance on the operation of section 426 of the Companies (Guernsey) Law 2008, which provides that "The liquidator of a company may seek the Court's directions in relation to any matter arising in relation to the winding up of the company and upon such an application the Court may make such order as it thinks fit".

The Lieutenant Bailiff, Her Hon. Hazel Marshall QC, set out certain principles with regard to section 426, the first of which was that the section was "...wide enough in its scope to include an application to the court to approve a liquidator’s intended course of action, either by persuasive analogy with the English decision on the equivalent English companies jurisdiction as exemplified in Re Nortel Networks UK Limited [2016] EWHC 2769 (Ch) or, if necessary, under the court’s inherent jurisdiction" (para. [138]).

UK: FCA review - corporate governance disclosures by listed issuers

The Financial Conduct Authority has recently published a short report explaining the results of a review of a sample of annual reports - for accounting periods ending in 2016, 2017 and 2018 - in respect of corporate governance disclosures: see here (pdf). The FCA has identified several areas where, in its opinion, governance disclosures need improving; it has asked, for example, companies to consider whether their statements of compliance with the UK Corporate Governance Code permit shareholders to evaluate how the Code's Principles have been applied. The FCA also expressed its concern that in "certain cases" the disclosures provided were boilerplate in nature and did not change significantly from year to year.

UK: FRC - developments in audit | company reporting expectations

The Financial Reporting Council has, this week, published: [1] the end of year letter sent to CEOs, CFOs and Audit Committee Chairs summarising key developments for 2020/21 annual reports (here, pdf); and [2] Developments in Audit 2020 (here, pdf).

Amongst the matters of note in the FRC's letter are comments relating to section 172 statements: based on a review, the FRC explains that many companies have failed to explain sufficiently how directors discharge their section 172 duty (under the Companies Act 2006), in particular with regard to the consequencess of their decisions in the long-term. In the audit publication, the FRC notes that, in 49 out of the 130 audits inspected as part of its 2019/20 inspection cycle, improvements were required (key issues related primarily to insufficient challenge of management in areas of complexity and forward looking judgements).

UK: The NHF Code of Governance 2020

The National Housing Federation has today published a new edition of its corporate governance code for housing associations. Further information about the new code is available here, where it is explained that in order to obtain a copy of the code, free of charge, a registration process must be completed. It is 25 years since the publication of the NHF's first governance code, an anniversary noted here.

UK: The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) (No. 2) Regulations 2020

The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) (No. 2) Regulations 2020 were laid before Parliament a couple of days ago: see here or here (pdf). The accompanying explanatory memorandum - available here (pdf) - explains the purpose of the Regulations as follows (para. 2.1): to "make amendments to previously made legislation to prepare the United Kingdom’s ... audit regulatory regime for the end of the Transition Period. It will grant states of the European Economic Area (the EEA States) and Gibraltar approval as equivalent third countries and their audit regulatory authorities status as 'approved third country competent authorities' on account of the adequacy of their arrangements for the transfer of audit working papers and investigation reports".

UK: Law Commission - a couple of developments: intermediated securities; corporate criminal liability

A belated return to updating this blog, with apologies for my absence. Has it really been several months since the last post? Perhaps that question is best not answered. I will, instead, move quickly on to note a couple of initiatives from the Law Commission: [1] Today, the publication of a scoping paper as part of the project on intermediated securities, outlining problems and potential solutions; and [2] Earlier this month, the start of a new project on corporate criminal liability (see the terms of reference here, pdf).