IFIAR publishes ninth annual inspection findings survey

The International Forum of Independent Audit Regulators has published its ninth annual (audit) inspection findings survey: see here. IFIAR members from 50 jurisdictions took part in the survey. The survey reports that 34% of the audits of public interest entities inspected by members had at least one "finding" (generally understood to be a significant deficiency in satisfying the requirements of auditing standards) - hence the observation that there continues to be a lack of consistency in the execution of high quality audits.

IOSCO statement on going concern assessments and disclosures during the Covid-19 pandemic

The IOSCO has published a statement on going concern assessments and disclosure during the COVID-19 pandemic: see here (pdf). Within the statement, the IOSCO has taken the opportunity to remind issuers, audit committees and external auditors of their important roles in providing investors with high-quality, reliable, timely, and transparent financial information - especially during times of uncertainty.

Japan: Council of Experts to consider revisions to governance and stewardship codes

The Council of Experts, set-up to review Japan's governance and stewardships codes, will meet on March 31 to consider revisions to the codes: see here.

UK: The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 were laid before Parliament today and come into force on Friday (March 26th): see here or here (pdf). The accompanying explanatory memorandum - available here (pdf) - explains the purpose of the Regulations as follows (para. 2):

... to further extend the duration of some of the temporary measures introduced by the Corporate Insolvency and Governance Act 2020 ... beyond their current expiration dates ... [including] suspending liability for wrongful trading in the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (S.I. 2020/1349) ... from the current expiry date of 30 April 2021 to 30 June 2021"

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European Union: the Statutory Audit Directive - Article 22 - "Employment by audited entities of former statutory auditors or of employees of statutory auditors or audit firms"

The Court of Justice of the European Union delivered its judgment today in A (Company law - Statutory audit of annual and consolidated accounts - Judgment) [2021] EUECJ C-950/19. The case concerned - as its name suggests - the Statutory Audit Directive 2006/43/EC (as amended by Directive 2014/56/EU), more specifically Article 22a which imposes a time-based bar on a statutory auditor, or key audit partner, taking up a position with a former audit client. The court held that a position for the purposes of Article 22(a)(1)9a) would be regarded as being held from the point at which the employment contract was agreed and not from when the duties associated with the position had begun to be performed.

UK: England and Wales: LLP members and disqualification

An important judgment of the High Court was delivered earlier today: Secretary of State for Business, Energy And Industrial Strategy v Geoghegan [2021] EWHC 672. The decision of Mr Justice Michael Green is noteworthy because it confirms that all members of a limited liability partnership can be disqualified under section 6 of Company Directors Disqualification Act 1986. The judge held, moreover, that [a] there is no requirement that such members should be on the management board (or at a level equivalent to a director of a company); [b] the conduct that can be relied on for the purposes of disqualification is anything done in the capacity of a member of a LLP; and [c] the test for unfitness is the same as in relation to companies.

UK: Government consultation - audit and governance reform

A quick note. The Government has, this morning, published a press release announcing the start of a consultation on "wide-ranging reforms to modernise the country’s audit and corporate governance regime": see here. At the time this post was originally posted, the consultation document (a white paper, I believe) had not been published - it ought to appear here later today (most likely after the Secretary of State for Business, Energy and Industrial Strategy has delivered a statement about the reforms in Parliament - as is expected according to the order paper for today).

UK: FTSE100 boards and ethnic minority directors

The Financial Times reports (here, paywall) that "[a]lmost a fifth of FTSE 100 boards lack any ethnic minority representation, with less than a year to hit a key target of at least one non-white director, according to a government-backed review into corporate diversity".

Update (12 March): The data cited by the FT are contained in a progress report, available here, published by the Parker Review Committee.

UK: First Review of the Insolvency (England and Wales) Rules 2016 - call for evidence

The Insolvency Service has published a call for evidence in respect of its first review of the Insolvency (England and Wales) Rules 2016: see here. These Rules, to quote from the opening paragraph of the call for evidence, "... set out the detailed procedure for the conduct of company and individual insolvency proceedings under the Insolvency Act 1986, providing the framework giving effect to the regime specified in the Act. They represent the single most significant piece of legislation in respect of the insolvency regime operating in England and Wales, after the Insolvency Act itself; and the largest, with over nine hundred rules in the main body and numerous additional schedules covering specific topics".

UK: The Accounts and Audit (Amendment) Regulations 2021

The Accounts and Audit (Amendment) Regulations 2021 were laid before Parliament yesterday and come into force on 31 March: see here or here (pdf). The purpose of the statutory instrument - to quote directly from its explanatory memorandum (here, pdf) - is to "amend... the Accounts and Audit Regulations 2015 (S.I 2015/234) ... by delaying the dates for certain public and local bodies to publish, and make available for inspection, their annual accounts and supporting documents" (para. 2.1).

OECD: ACI Guidelines - implemenation guide published

The OECD has this week published an implementation guide in respect of its Guidelines on Anti-Corruption and Integrity in State-Owned Enterprises: see here (pdf). 

UK: FCA announcement on the ending of LIBOR

The Financial Conduct Authority has published a further update in respect of the ending of LIBOR: see here. This follows the publication by ICE, the benchmark administrator, of a feedback statement in respect of its consultation on the ending of LIBOR: see here (pdf).

Australia: board meetings and differences in recollection

A recent decision of the New South Wales Court of Appeal - ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24 - is worth noting because of the discussion it contains, albeit brief, regarding differences of recollection in respect of board meetings. To quote Bell P (with whom Bathurst CJ and Leeming JA agreed) (at para. [197]):

It is not unknown, still less uncommon, for disputes to arise as to what may have been said at meetings of boards of companies ... Sometimes, the differences may be substantial; sometimes, they may go to matters of emphasis or the extent of detail recorded about particular issues discussed. The mere fact that there may be competing versions of minutes does not mean, moreover, that one of the different versions is necessarily false: recollections of events may differ. Obviously it is desirable that directors reach accord as to the accuracy of minutes but that may not always be possible."

OECD: Working Paper 22 - the governance of company groups

The latest addition to the OECD working paper series on corporate governance has been published: number 22, the governance of company groups. This paper, to quote from its abstract, "presents a comparative overview of the regulation of groups in company law ... [and] also discusses how different corporate governance codes make recommendations on issues relevant to the boards in company groups". 

 

UK: The UK Listing Review - recommendations published

The UK Listing Review, chaired by Lord Hill, published its recommendations today: see here (pdf). As has been widely predicted, the Review is recommending that premium listed companies should be permitted dual class share structures (subject to certain conditions); that HM Treasury should conduct a fundamental review of the prospective regime, including the liability rules relating to forward-looking information; and free float requirements should be reviewed, lowering the minimum absolute requirement to 15%.

India: SEBI consultation - independent directors

Noting that concerns remain regarding the efficacy of independent directors as part of the governance framework, SEBI - the Securities and Exchange Board of India - has published for consultation various reform proposals including, most notably, new procedures for appointment and removal: see here. 

Hong Kong: Foss v Harbottle, 'fraud on the minority', and the common law derivative action

A recent decision of the Court of Appeal concerning the common law derivative action, Wang Pengying v Ng Wing Fai [2021] HKCA 100, will be of interest beyond Hong Kong - and in particular in England because of the discussion it contains about whether Harris v Microfusion 2003-2 LLP [2016] EWCA Civ 1212 was wrongly decided in holding that, for the purposes of the 'fraud on the minority' exception to what is known as the rule in Foss v Harbottle(1843) 2 Hare 461, personal benefit by the wrongdoers was required in cases of breach of duty not involving fraud.   

Two of the three appellate judges - Kwan VP and Yuen JA - expressed a view, albeit obiter: in their opinion, the appropriate test for the purposes of the 'fraud on the minority' exception was not personal benefit by the wrongdoers, or in loss to the company, but in the lawfulness of the majority vote releasing the defaulting director from liability. Yuen JA stated that the requirement for personal benefit by the wrongdoers, as set out in Microfusion, was "difficult to justify, because if ... not met, even the most egregious breach of duty cannot be brought to court" (para. 86.1).