UK: England and Wales: health and safety fines, subsidiary companies and parent company turnover

Judgment was given last week by the Court of Appeal in Bupa Care Homes (BNH) Ltd, R v [2019] EWCA Crim 1691. The court heard an appeal by a company against a fine of imposed by Her Honour Judge Peters at the Crown Court in Ipswich, where the company had pleaded guilty to an office contrary to section 3(1) of the Health and Safety at Work Act 1974.

The fine had been increased by HHJ Peters with reference to the turnover of the company's parent company (at Step Three under the Sentencing Guideline). The Court of Appeal unanimously held that HHJ Peters was wrong to have done this because it did not "properly reflect the economic realities of the situation" (para. [82]). The Court continued (paras. [83] and [84]):

... the Guideline has to be applied in a way which does not infringe ordinary and well-understood principles of company law. Thus, the mere fact that one company may be the wholly owned subsidiary of a larger parent (with larger financial resources) does not mean that the resources of the parent can be treated as available to, or as part of the turnover of, the subsidiary company, because they are not. The Guideline phrase 'economic realities' cannot be extended to mean that the parent's resources belong to the subsidiary simply in order to justify a large increase in fine at Step Three, any more than they can be taken into account to increase the size of the subsidiary's turnover for the purposes of the tables in Step Two .... if it is generally wrong to take into account the parent's turnover so as to increase the subsidiary's turnover at Step Two (which it is) then it is wrong to take it into account to increase the fine at Step Three absent some special factor of the type identified in Tata Steel Ltd [2017] EWCA Crim 704 or NPS London [2019] EWCA Crim 228 (although, as we have observed, these were cases where fines were not reduced because of the parental turnover; they were not cases where fines were increased because of it). We decline to speculate on what such special factors might be; the question will have to be determined as and when it arises".

Australia: financial assistance and pre-emption rights

The High Court gave judgment yesterday in Connective Services Pty Ltd v Slea Pty Ltd [2019] HCA 33. The decision is an important and interesting one on the interaction between pre-emption provisions and the prohibition, within section 260A(1) of the Corporations Act 2001, against a company providing, in certain circumstances, financial assistance to a person in respect of that person's purchase of the company's shares. The court stated (at para. [39]):

Section 260A(1) does not abrogate the power of a company to enforce its constitution. However, together with s 1324(1B), it has the effect that if a company wishes to bring proceedings to enforce pre-emptive rights in its constitution, for the benefit of some of its shareholders but at the company's expense, then the company is liable to be enjoined from doing so unless the assistance is approved by shareholders under s 260B, or unless the company can satisfy the court that bringing the proceedings at its own expense does not materially prejudice the interests of the company or its shareholders or the company's ability to pay its creditors".

UK: England and Wales: just and equitable winding-up

Judgment was given yesterday by the Court of Appeal in Badyal v Badyal [2019] EWCA Civ 1644. At first instance the trial judge had rejected the argument that in order to secure the winding-up of a company under the just and equitable ground - section 122(1)(g) of the Insolvency Act 1986 - it was necessary only to show that mutual trust and confidence between the shareholders had broken down. The Court of Appeal agreed with the trial judge.

Australia: ASIC Corporate Governance Taskforce report - director and officer oversight of non-financial risk

The Corporate Governance Taskforce established by the Australian Securities and Investments Commission has published its first report. The report, on the subject of director and officer oversight of non-financial risk, is available here (pdf). The report found, amongst other things, that there was scope to improve the effectiveness of board risk committees: they ought to meet more regularly and be actively engaged in overseeing material risks in a timely and effective manner.

Canada: the gender diversity of boards

The Canadian Securities Administrators have published data on boards' gender diversity, based on the disclosures under National Instrument 58-101 Disclosure of Corporate Governance Practices, provided by 641 issuers with year ends between 31 December 2018 and 31 March 2019: see here. It is reported that the number of board positions occupied by women has increased to 17%, up from 11% in 2015.