Thursday 15 July 2021

Hong Kong: winding-up and dispositions of property - Court of Final Appeal considers section 182

Rather belatedly, I note a significant decision of the Court of Final Appeal from earlier this year - Hsin Chong Construction Company Ltd v Build King Construction Ltd [2021] HKCFA 14 - which provides important guidance on the operation of section 182 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance. Section 182 provides that "In a winding up by the court, any disposition of the property of the company, including things in action, and any transfer of shares, or alteration in the status of the members of the company, made after the commencement of the winding up, shall, unless the court otherwise orders, be void". 

The Court of Final Appeal held, amongst other things, that the section's purpose was to preserve the company's property for distribution and, in deciding whether a disposition should be validated, the interests of the general body of creditors was of central importance. The analysis of the trial judge and Court of Appeal was rejected.  A summary of the decision, in English, is available here

Wednesday 14 July 2021

Ireland: The Companies (Rescue Process for Small and Micro Companies) Bill 2021 - an update

The Companies (Rescue Process for Small and Micro Companies) Bill 2021, the purpose of which is to amend the Companies Act 2014 in order to introduce a new rescue process for small and micro companies, was introduced in the Dáil Éireann last month. A copy of the Bill, as introduced, is available here. Yesterday the Bill completed its passage through the Seanad Éireann and will become law on receiving the assent of the President. The explanatory memorandum published to accompany the Bill is available here (pdf). A copy of the Act will be published here in due course.

UK: FRC report - key facts and trends in the accountancy profession

The Financial Reporting Council has today published the latest edition of its annual publication Key Facts and Trends in the Accountancy Profession: see here (pdf). The report notes - and this comes as no great surprise - that only the 'Big Four' firms now undertake the external audits of FTSE100 companies. The report notes, nevertheless, that there has been an increase in the number of FTSE250 external audits completed by firms other than the 'Big Four'.

Tuesday 13 July 2021

UK: England and Wales: company litigation, non-party costs orders and company directors

Judgment was delivered today by the Court of Appeal in Goknur Gida Maddeleri Enerji Imalet Ithalat Ihracat Ticaret Ve Sanayi AS v Aytacli [2021] EWCA Civ 1037. The decision is noteworthy because of what is said about the circumstances in which, under section 51 of the Senior Courts Act 1951, a director of a company may be personally liable for some - or all - of the company's costs liabilities in unsuccessful litigation.

Lord Justice Coulson delivered the only reasoned judgment (with which Dingemans and Lewison LJJ agreed) in which, after setting out a summary of the guidance provided by cases (para. [40]), he stated: "...without being in any way prescriptive, the reality in practice is that, in order to persuade a court to make a non-party costs order against a controlling/funding director, the applicant will usually need to establish, either that the director was seeking to benefit personally from the company's pursuit of or stance in the litigation, or that he or she was guilty of impropriety or bad faith. Without one or the other in a case involving a director, it will be very difficult to persuade the court that a s.51 order is just" (para. [41]).

UK: PRA statement on shareholder distributions by the largest banks

The Prudential Regulation Authority has, today, published an update in respect of its approach to distributions by the UK's largest banks: see here (pdf). The statement, which is made alongside the publication the latest Financial Stability Report from the Financial Policy Committee, notes that banks remain well capitalised and resilient; it is noted, too, that the level of uncertainty, while considerable, has reduced. As such, the PRA has decided to remove, with immediate effect, the additional restrictions (known as the extraordinary guardrails) put in place last year in respect of bank distributions.

Monday 12 July 2021

BCBS: an interim assessment of the Basel reforms in the light of Covid-19

The Basel Committee on Banking Supervision has published an interim assessment of the impact of the implemented Basel reforms in light of the Covid-19 pandemic: see here (pdf). While acknowledging the difficulties in distinguishing between the effect of the reforms and the monetary and policy actions taken by authorities, the report concludes that the reforms (in particular the increased quality and quantity of capital and liquidity) helped banks to absorb (so far) the impact of the pandemic - suggesting (the report states) the reforms have achieved their broad objective of strengthening the resiliency of the banking system.

UK: FRC publishes revised quality management standards for auditors

The Financial Reporting Council has published three revised quality management standards covering audit firm responsibilities in respect of the design, inplementation and operation of quality management systems: see here. The individual standards are available here (pdf), here (pdf) and here (pdf). The feedback statement and impact assessment, which cover all three standards, can be found here (pdf). The standards are based on those approved by the International Auditing and Assurance Standards Board last year: see here.

Sunday 11 July 2021

G20 communique - corporate governance

The G20 communique issued yesterday, following the meeting of finance ministers and central bank governors, has received much attention because of what has been agreed in respect of corporate tax reform: see here (pdf).

The communique is also worth noting because of what is said about corporate governance and the G20/OECD Principles of Corporate Governance. To quote directly: "We recognise that a more comprehensive assessment of environmental and climate-related macro-economic risks can help develop innovative solutions to make our economies more sustainable, resilient and inclusive. We recognise the importance of good corporate governance and well functioning capital markets to support the recovery. We look forward to the review of the G20/OECD Principles of Corporate Governance and ask the OECD to report back on progress at our first meeting in 2022".  

Ireland: CLRG publications - annual report // the impact of artificial intelligence

A copy of the 2020 annual report for the Company Law Review Group has recently been published on its website: see here (pdf). The report also contains - at annex 4 - a report by the Group on the potential impact of artificial intelligence on company law in the context of corporate governance.

Wednesday 7 July 2021

UK: PRA/FCA discussion paper - diversity and inclusion in the financial sector

The Financial Conduct Authority and Prudential Regulation Authority have published a joint discussion paper titled "Diversity and inclusion in the financial sector – working together to drive change": see here (pdf). Published alongside the discussion paper is a literature review considering the impact of diversity and inclusion: see here (pdf). In the discussion paper several policy initiatives are identified, building on existing requirements or supervisory frameworks, including making senior leaders directly accountable for diversity and inclusion in their firms.  

Tuesday 6 July 2021

UK: New edition (13th) of the Takeover Code published

The thirteenth edition of the UK Takeover Code has been published: see here or here (pdf). A summary of the changes made in the new edition can be found here (pdf). 

Monday 5 July 2021

UK: FCA consultation - primary markets effectiveness review

The Financial Conduct Authority has, today, published a consultation paper the aim of which is to begin a broad discussion of the purpose and value of the UK listings regime alongside seeking views on specific proposals: see here (pdf).

The specific proposals include: [a] in certain circumstances allowing dual class share structures within the premium listing segment; [b] reducing the free float requirement from 25% to 10%; and [c] increasing the minimum market capitalisation for premium and standard listing segments for shares in companies other than funds from £700,000 to £50 million.  In addition, the paper notes that while no specific proposals are being put forward (at this stage) in respect of the track record requirements for listing, the FCA will be providing further information about its willingness to provide "flexibility" in respect of the existing requirements.

Friday 2 July 2021

Australia: draft legislation - electronic execution of documents // hybrid and virtual shareholder meetings

The Treasury is consulting on draft legislation the purpose of which is to make permanent the temporary measures introduced, in response to the COVID-19 pandemic, concerning electronic execution of company documents and the holding of physical, hybrid and virtual shareholder meetings: see here.

A short note:
If you are reading this update in an automated email, please note that the current provider - Google Feedburner - will withdraw this service at some point in July. New arrangements are being investigated in order that the service can continue: visit the blog website for the latest information.

OECD report: The Future of Corporate Governance in Capital Markets Following the COVID-19 Crisis

The OECD has published a report titled 'The Future of Corporate Governance in Capital Markets Following the COVID-19 Crisis": see here. Here is the report's executive summary: 

This report presents indicators and analysis of capital structures, corporate performance, the use of market-based financing, corporate ownership structures and payout policies over the last two decades. It reviews regulatory and financial support measures related to the COVID-19 crisis in the areas of corporate governance and corporate finance. It then presents key indicators relating to the non-financial corporate sector’s use of public equity and corporate bond markets during 2020, and reviews central bank policies related to the corporate bond markets. Using an analysis of structural weaknesses in both the public equity and corporate bond markets worldwide, the report focuses on the role that capital markets can play on the road to recovery and resilience. It also identifies key corporate governance policy issues that may require further attention in the post-crisis era.

Thursday 1 July 2021

UK: Government sets out vision for financial services

Today, in his Mansion House speech and accompanying publications, the Chancellor has set out the Government's vision for the future of financial services in the United Kingdom.  A copy of the speech is available here and the document "A new chapter for financial services" is available here (pdf). Several consultations were also launched (or will shortly launch) including those relating to wholesale capital markets, the UK's prospectus regime and access to cash. In addition, a response to the October 2020 call for evidence in respect of Solvency II was published: see here (pdf). 

Housekeeping: a message for email subscribers

The current (free) service that I use to send automatic email updates to subscribers will end very soon - at some point this month, it seems.  I have not yet decided how to replace it, but will spend the next few weeks or so reaching a decision.  I will make further announcements on the blog website and (I hope) contact all current subscribers to explain what must done to continue receiving the updates.  If you stop receiving email updates, please don't take it personally but visit the blog website for an update!

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