Monday 31 January 2022

UK: FRC publishes revised financial reporting standards

The Financial Reporting Council has, today, published several revised financial reporting standards including FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (here, pdf), FRS104 Interim Financial Reporting (here, pdf) and FRS105 The Financial Reporting Standard applicable to the Micro-entities Regime (here, pdf).

European Union: Court of Justice considers meaning of 'subscribed share capital'

Judgment was given last week in Zinātnes parks (Structural Funds - Concepts of 'subscribed share capital' and 'undertaking in difficulty' - ERDF - Judgment) [2022] EUECJ C-347/20. The Court of Justice held that the expression 'subscribed share capital', for the purposes of Article 2(18)(a) of Commission Regulation (EU) No 651/2014 and the question of whether a company was 'in difficulty', should be interpreted as meaning all contributions which current or future members or shareholders of a company have made or have irrevocably undertaken to make.

Friday 28 January 2022

UK: FRC research - audit committee chairs and audit quality

The Financial Reporting Council has published research, undertaken on its behalf by YouGov, exploring audit committee chairs' views, and approach to, audit quality: see here (pdf). According to the FRC - see here - the research reinforces the case for developing standards for audit committees to help promote a more consistent approach to audit quality.

UK: England and Wales: the Court of Appeal on 'knowing receipt'

Judgment was delivered yesterday by the Court of Appeal in Byers v The Saudi National Bank [2022] EWCA Civ 43. The decision is an important one on constructive trustees and knowing receipt in which the court unanimously rejected the argument that liability could arise where an individual benefited from trust property regardless of whether he had actually received the property. Liability would not, therefore, arise (to use an example provided by counsel) where a trustee had wrongfully spent trust money on a holiday for the defendant and none of the money had ever passed through the defendant's hands.

Tuesday 25 January 2022

UK: England and Wales: insolvency - cross border - immovable property

The ICLR has published, as part of its WLR(D) series, a summary for the recent Court of Appeal decision Kireeva v Bedzhamov [2022] EWCA Civ 35: see here

The court held (to quote directly from the summary): "While a foreign office holder might be able to obtain the court’s assistance either under section 426 of the Insolvency Act 1986 and common law recognition, the same assistance was not available in both positions and they could not be equated. Section 426 specifically authorised the English court to assist foreign courts sharing the same legal tradition but it could not be inferred that assistance under that provision could also be provided to immovable property without any statutory sanction to a court anywhere in the world and regardless of the legal tradition in that jurisdiction".

UK: England and Wales: the 'nerve centre' and de facto directors

Mr Justice Edwin Johnson delivered judgment last week in Umbrella Care Ltd v Nisa & Ors [2022] EWHC 86 (Ch). Amongst the matters he considered was whether an individual was a de facto director of a company. 

I note his judgment here because it provides a further illustration of what we might call the 'nerve centre' test: was the individual the nerve centre, or one of the nerve centres, from which the activities of the company radiated?  As the trial judge noted - like HHJ Hodge before him in Ingram v Singh [2018] EWHC 1325 (Ch) - asking if an individual was part of the company's governance structure, an approach endorsed in Holland v HMRC [2010] UKSC 51, may be of less assistance in determining if they are a de facto director where the company's affairs have been conducted informally in the absence of any formal governance structure.

UK: FCA consultation - guidance for firms seeking to limit their liabilities through compromises

The Financial Conduct Authority has published, for consultation, proposed guidance for firms seeking to limit their liabilities through compromises including schemes of arrangement, restructuring plans and voluntary arrangements: see here (pdf). In the consultation paper, the FCA explains (at para.1.2):

With this guidance we aim to help firms understand what information we need and how we approach compromises in line with our statutory objectives to protect consumers and the integrity of markets, with a view to reducing the number of proposed compromises that we do not consider to be appropriate. We also remind firms of their regulatory obligations, in line with Principle 11, to notify usimmediately and provide relevant information at an early stageif they are considering proposing a compromise. Where firms determine there is no better alternative outcome for consumersthan to propose a compromise, the guidance will help firms to propose acceptable compromises that are compatible with our rules, including the Principles for Businesses, and statutory objectives. In particular, if firms do propose a compromise in respect of redress liabilities, they should ensure it is the best proposal that the firm can make, which includes the firm providing the maximum amount of funding for the compromise so that consumers receive the greatest proportion of what is owed to them."

Friday 21 January 2022

UK: Prospectus regime review - update

Last summer a consultation on the UK's prospectus regime took place. Shortly before Christmas the Government published a summary of responses (here, pdf) and announced: "The vast majority of respondents supported the Government’s overall approach to reforming the UK prospectus regime. The Government will set out its intended next steps in due course".

Thursday 20 January 2022

India: OECD report - company groups

The OECD has published a report, working with SEBI, on company groups in India: see here (pdf). The report, to quote directly from its foreword, "presents an overview of company groups in India, including group structures (e.g. hierarchical structures and cross-shareholdings), promoters, and related party transactions. It also covers the legal and regulatory approaches to addressing issues relating to company groups".

Jersey: bank recovery and resolution framework coming into force this month

The Bank (Recovery and Resolution – Commencement of Law) (Jersey) Act 2022 came into force yesterday and will bring into force, on 31 January 2022, the Bank (Recovery and Resolution) (Jersey) Law 2017.

Wednesday 19 January 2022

UK: The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022

The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 were made earlier this week and come into force on 6 April: see here or here (pdf). The accompanying explanatory memorandum, available here (pdf), explains that the Regulations "... will require certain companies to report climate-related financial information in the Non-Financial and Sustainability Information statement which forms part of the Strategic Report. The information to be disclosed will be descriptions by the company of the climate-related risks and opportunities it identifies as material for its business; its governance and risk management approaches to these; how these risks and opportunities impact its strategy and business model; and the targets and performance indicators it applies to managing them" (para. 7.5). 

UK: Cryptoasset promotions - Government proposals confirmed

HM Treasury has confirmed the measures it will take to bring the promotion of certain cryptoassets within the current financial services promotions regime overseen by the Financial Conduct Authority: see here (pdf). For this purpose, the following definition of cryptoasset is now proposed (subject to further consideration when the legislation is drafted): 'any cryptographically secured digital representation of value or contractual rights which is fungible and transferable'. 

The Government no longer believes that it is appropriate for the definition to specify the underlying technology: the reference to distributed ledger technology, included in the previous definition, has therefore been removed. The Government has retained the requirement for fungibility, recognising explicitly that non-fungible tokens will in consequence be excluded from its proposals. 

Update (19 January 2022): The Financial Conduct Authority has also announced, for consultation, further proposals to strengthen the framework governing the selling of high-risk investments: see here. These proposals have been informed by behavioural research in respect of which three research notes have been published: see here. These notes consider risk warnings as well as decision points in the consumer journey and self-certification process.

Tuesday 18 January 2022

UK: The Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022

The Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022 were laid before Parliament today and come into force on 6 April: see here or here (pdf). Their purpose is to require certain large UK LLPs to report climate-related financial information in their Strategic Reports or Energy and Carbon Reports. Further information is available in the accompanying explanatory memorandum: see here (pdf).

UK: Supreme Court hearing this week - Stanford International v HSBC

This week, on Wednesday, the UK Supreme Court hears an appeal from Stanford International Bank Ltd v HSBC Bank Plc [2021] EWCA Civ 535, [2021] WLR(D) 214. Proceedings will be broadcast: watch here. The issue before the court, to quote directly from its summary, is this: "Does an insolvent company suffer any loss if payments are made out of its bank accounts which discharge a debt owed by that company in an equivalent amount?"

Singapore: Companies Act 1967 - revised edition as part of the Plus Initiative

As part of the Plain Laws Understandable by Singaporeans (Plus) initiative, the Attorney General's Chambers has announced that it has completed a revision of over five hundred Acts of Parliament, the aim of which was to incorporate the greater use of plain English and gender-neutral language, replace archaic words and long expressions with simpler alternatives, and provide an expanded legislative history at the end of each Act. 

The revised law - the 2020 Revised Edition of Acts - came into force at the end of 2021. The Companies Act 1967 has been revised and the changes made include replacing 'chairman' with 'chairperson' and introducing the expression 'he or she' in place of 'he'.  The word 'notwithstanding' has largely disappeared from the Act (it is now used only once) with 'despite' now being preferred. Greater use is also made of 'must' in preference to 'shall'. 

Monday 17 January 2022

UK: shadow directors and the register of directors

In a recent decision of the First-tier Tax Tribunal - Bagri Services Ltd v HMRC [2021] UKFTT 482 (TC) - an interesting question arose: is there an obligation to include, as part of the register of directors required by the Companies Act 2006, details for shadow directors? The Tribunal held that no such obligation existed, although it noted that the position was different under the Companies Act 1985 with section 288(6) making explicit, for the purposes of the register of directors and secretaries, that "a shadow director of a company is deemed a director and officer of it".

UK: rent repayment order cannot be made against director of a corporate landlord

The decision of the UK Upper Tribunal (Lands Chamber) in Kaszowska v White [2022] UKUT 11 (LC) was given last week. The decision is short but important because it makes clear that a rent repayment order under section 40(2) of the Housing and Planning Act 2016 cannot be made against the director of a corporate landlord.  In reaching this conclusion, the Tribunal observed (para. [27]): 

It is true that, without the opportunity to proceed against the directors of an insolvent company which was their landlord, some tenants will fall outside the scope of rent repayment orders and the statutory policy of combatting the activities of rogue landlords may be less effective as a result. But, as Arnold LJ put it in Rakusen at [40]: 'It nevertheless remains the case that Parliament has legislated to implement that policy only to the extent provided for by the language of section 40(2)'.

UK: Future Regulatory Framework Review: Central Counterparties and Central Securities Depositories

Today the Government launched a consultation, part of the Future Regulatory Framework Review, concerning the regulation of central counterparties (CCPs) and central securities depositories (CSDs): see here. The consultation sets out the Government's intention to create a new framework, providing the Bank of England with greater rule-making powers in respect of CCPs and CSDs.

Friday 14 January 2022

UK: England and Wales: the time value of money and a fraudster's liability

The second of the two Court of Appeal judgments to catch my eye today is Tuke v Hood [2022] EWCA Civ 23.  In this case, the court unanimously rejected the argument that, in a computation of damages where the victim of a fraudster was to be compensated, the victim was obliged to give credit to the fraudster not only for the cash received (as part of the fraudulent transaction) but also for the 'time value' of that money for the period between the transaction and the trial.

The argument was rejected for several reasons, including policy: as Lord Justice Coulson stated, in agreeing with the lead judgment delivered by Lady Justice Andrews, "the suggestion that a fraudster could reduce his or her ultimate liability to the victim by obtaining credit for the 'time value' of the money, would only encourage the fraudster to hide the deception for as long as possible. That is not the law" (para. [62]).

UK: England and Wales: Court of Appeal considers ultra vires and directors' liability

Today has seen several Court of Appeal judgments handed down and published on the BAILII website. Two have caught my eye, the first of which is Ceredigion Recycling & Furniture Team v Pope [2022] EWCA Civ 22. Of note is what the court said about the operation of section 39 ("A company's capacity") of the Companies Act 2006. To quote the Chancellor: "The fact that section 39 abolishes the ultra vires doctrine as between the company and third parties does not relieve the directors from liability to the company for their breach of duty or wrongdoing merely because, qua members, they agreed with the course which was taken" (para. [47]). 

France: AMF report on listed companies' corporate governance - copy in English now available

AMF - Autorité des Marchés Financiers, the financial market regulator - published the latest edition of its annual report on listed companies' corporate governance, including executive remuneration, last December. A copy of the report, in English, is now available: see here (pdf).

Ireland: The Small Company Administrative Rescue Process

The Department for Enterprise, Trade and Employment has published a guide for the new small company administrative rescue process, introduced by the Companies (Rescue Process for Small and Micro Companies) Act 2021: see here (pdf).

Pakistan: The Companies (Amendment) Act 2021

The Companies (Amendment) Act 2021 came into force last month. A copy of the Act is available here (pdf). An overview of the Act, published by the SECP, is available here (pdf). Amongst other things, the Act has reduced from ten to five per cent the threshold required for shareholders to call a meeting.

India: MCA proposes changes to the Insolvency and Bankruptcy Code 2016

The Ministry of Corporate Affairs is consulting on changes to the Insolvency and Bankruptcy Code 2016: see here (pdf).

IAASB consultation on new standard for the audits of less complex entities

The deadline for responding to the IAASB consultation on a new standard for the audits of less complex entities, 31 January 2022, is fast approaching. For further information, see here.

Hong Kong: HKEX confirms corporate governance reforms

The Hong Kong Exchange (HKEX) has confirmed, following the conclusion of a consultation last year, the changes it will make to its corporate governance code and listing rules: see here (pdf). A corporate governance guide for boards has also been published: see here (pdf).

UK: Government consults on implementing OECD Pillar 2 Model Rules

The Government has published a consultation paper concerning its implementation of the OECD's Pillar 2 Model Rules (the framework designed, amongst other things, to introduce, internationally, a minimum rate of corporation tax): see here (pdf). An overview of the OECD's Rules can be found here (pdf).