Thursday 21 July 2022

UK: FRC publishes guidance on running effective AGMs and other general meetings

The Financial Reporting Council has, for the first time, published specific guidance on the effective running of AGMs and other general meetings by listed companies: see here (pdf). The guidance contains, in total, seven principles that are organised within four time periods: before the meeting; during the meeting; after the meeting; and engagement throughout the year. 

UK: The Financial Services and Markets Bill

The Financial Services and Markets Bill was introduced in Parliament yesterday, receiving its First Reading in the House of Commons. A copy of the Bill, as introduced, is available here (pdf). Accompanying the Bill are various publications, including explanatory notes, a delegated powers memorandum and a human rights memorandum - these can all be found here. To paint with a very broad brush, the Bill will, amongst other things, revoke retained EU law relating to financial services in order that it can be replaced with UK specific legislation. The Bill will also make changes to the objectives of the UK's financial regulators and it will also bring stablecoins within the regulatory ambit when used as a form of payment.

UK: England and Wales: prejudicial, but not unfair

A good illustration that, in order to succeed in bringing a claim for unfair prejudice, the claimant must establish both unfairness and prejudice, is provided by the recent High Court judgment Hussain v Hussain [2022] EWHC 1880 (Ch). Chief ICC Judge Briggs found that conduct agreed to be prejudicial (withdrawals in excess of declared salaries) was nevertheless not unfair because of, amongst other things, an understanding regarding the rights of the family members to draw on the profits generated by the businesses.

Wednesday 20 July 2022

FSB progress report - Roadmap for addressing financial risks from climate change

The Financial Stability Board has recently published a progress report for its Roadmap for Addressing Financial Risks from Climate Change: see here (pdf). The report notes "encouraging progress" in respect of all four blocks of the Roadmap (firm-level disclosures; data; vulnerabilities analysis; and regulatory and supervisory practices and tools).

With regard to firm-level disclosures, the report describes as a "milestone" the publication of two Exposure Drafts, by the International Sustainability Standards Board, on climate (ED IFRS S2) and general sustainability-related disclosure standards (ED IFRS S1). For an overview of these two Exposure Drafts, and a summary of feedback received as at 7 July 2022, see here (pdf).

UK: FRC publishes audit quality inspection and supervision results

The Financial Reporting Council has today published its annual inspection and supervision results for the seven largest audit firms (BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars and PwC): see here. Three quarters of audits have been rated good or requiring limited improvement; however, at two audit firms - Mazars and BDO - the results are described as unacceptable (half of the audits reviewed at Mazars, and five of the twelve reviewed at BDO, requiring more than limited improvement). 

Tuesday 19 July 2022

UK: Secondary Capital Raising Review - report published

The UK Secondary Capital Raising Review, which launched last October, has today published its report and recommendations: see here (pdf). A summary is available here. The Financial Conduct Authority has welcomed the report: see here.

UK: England and Wales: a fiduciary relationship?

Judgment was delivered today by Mrs Justice Cockerill in Kelly v Baker and Braid [2022] EWHC 1879 (Comm). The case is interesting because of the circumstances in which the trial judge was required to consider whether fiduciary duties were owed to a shareholder (Mr Kelly) by those who had led a management buy-out (Mr Baker and Mr Braid). 

Mr Kelly argued that Mr Baker and Mr Braid (who had worked in, or for, various family companies over the years) had failed to inform him that the transaction - the sale of two family businesses for £100 million - was a management buy-out. Mr Kelly argued that he trusted Mr Baker and Mr Braid implicitly and that they were in a position of trust because of the nature of their relationship with the Kelly family. The trial judge found that no fiduciary relationship existed and observed (at para. [80]):

...there is no set of circumstances remotely akin to the quasi-familial closeness which in some of the cases has been found to exceptionally create a fiduciary relationship. Further I note that even if such a relationship of closeness had been made out that would not have created a fiduciary relationship as regards this particular transaction – here one must have in mind the dicta in such cases as Vald Nielsen (at [744]) as regards the scope of the duty."

Friday 15 July 2022

OECD Corporate Governance Forum - July 14

The OECD held a Corporate Governance Forum yesterday.  The day provided an opportunity for many things including an update on the OECD's review of the G20/OECD Principles of Corporate Governance. The update was provided by the Chair of the OECD's Corporate Governance Committee, Mr. Masato Kanda. His contribution to the day begins, in the below recording, at the 1hr10 mark. The day's agenda and other materials can be found here.

Tuesday 12 July 2022

Singapore: the oppression remedy - buy out orders, valuation and the discount for lack of marketability

Judgment was given earlier this month by the Court of Appeal in Kiri Industries Ltd v Senda International Capital Ltd and another and other appeals and other matters [2022] SGCA(I) 5. The decision is an important one because of the guidance it provides, when valuing shares that are the subject of a buy-out order under the oppression remedy (section 216 of Companies Act (Cap 50)), about the appropriateness of a discount to reflect the lack of control (DLOC) or the lack of marketability (DLOM). The court observed (para. [241], emphasis in the original): 

The approach to the application of a DLOM in the making of a buyout order under s 216(2) of the Companies Act has not been authoritatively determined by the courts in Singapore. The variety of cases which were cited tended to turn on their own facts or were distinguishable in one way or another without enunciating any general principle. In the view of this court, it is appropriate that courts making buyout orders and referring the question of valuation to an independent expert or experts should first determine whether it is appropriate to order a DLOC and/or a DLOM. The answers to those questions respond to a broader principle than the quantification of the discounts, which is properly within the sphere of the experts. This accords with the approach taken by the House of Lords in O’Neill v Phillips [1999] 1 WLR 1092, dealing with the valuation of shares subject to a buyout order under provisions of the Companies Act 1985 (c 6) (UK) that are analogous to s 216(2) of the Companies Act".


UK: The Statutory Auditors and Third Country Auditors (Amendment) Regulations 2022

The Statutory Auditors and Third Country Auditors (Amendment) Regulations 2022 was made earlier this month and come into force on July 27: see here or here (pdf). The accompanying explanatory memorandum is available here (pdf). The Regulations will, amongst other things, grant full adequacy - for an indefinite period - to the competent authorities of the United States (the PCAOB and SEC). 

UK: FRC position paper - the transition to the new regulator and other reforms

The Financial Reporting Council has today published a position paper in which it sets out the steps it will take, in support of the Government's recently announced proposals, to reform the UK's governance and audit framework, including its transition to the Audit, Reporting and Governance Authority: see here (pdf). 

The paper proposes, amongst other things, revisions to the UK Corporate Governance Code and the guidance that supports it on (a) board effectiveness, (b) audit committees and (c) risk management, internal control and related financial and business reporting. No revisions to the UK Stewardship Code are proposed because, towards the end of 2023, a review of the regulatory framework for effective stewardship, including the Code, is planned. This review will be undertaken by the FRC, FCA, Department for Work and Pensions and the Pensions Regulator.

Tuesday 5 July 2022

UK: FRC publishes research exploring impact of the revised Stewardship Code

The Financial Reporting Council has today published commissioned research which set out to explore the impact of the revised UK Stewardship Code: see here (pdf). The research concludes that there has been a positive impact on the practice and reporting of asset managers and owners. For a short overview of the research findings, see here