UK: England and Wales: on the definition of 'persons discharging managerial responsibility'

The catching-up (also known as "101 ways to avoid marking, number 42") continues with a post to note that the ICLR has published a summary of the High Court decision Allianz Global Investors GmbH v G4S Ltd [2022] EWHC 1081 (Ch): see [2022] WLR(D) 206. The case concerned an issuer's liability under section 90A of the Financial Services and Markets Act 2000 for untrue or misleading statements. Such liability arises only if a 'person discharging managerial responsibilities' within the issuer knew that the statement was untrue or misleading, or was reckless as to whether this was so. The court held (to quote the summary):

The definition in paragraph 8(5) of Schedule 10A of “persons discharging managerial responsibility” was clear and unambiguous and should be given its natural reading. Read as a whole, it clearly stipulated that where an issuer had directors the persons discharging managerial responsibility were the directors (including persons occupying the position of director, by whatever name) and only in a case where there were no directors could a senior executive of the issuer have such responsibility". 

UK: England and Wales: unfair prejudice petitions - long delays and acquiescence

The circumstances in which a shareholder's petition under section 994 of the Companies Act 2006 - the unfair prejudice remedy - will be dismissed on the grounds of delay, or acquiescence by the petitioner, have recently been considered by the Court of Appeal in Bailey v Cherry Hill Skip Hire Ltd [2022] EWCA Civ 531. Noting that there was no statutory period of limitation applicable to unfair prejudice petition, and with regard to the issue of delay, Lady Justice Andrews (with whom Snowden and Lewison LJJ agreed) observed (emphasis in the original): 

.... there is a distinction to be drawn between a shareholder who knows he has been excluded from active involvement in the company's affairs and fails to complain about that for many years, and a passive shareholder who knows he is not getting the company's accounts or an invitation to the AGM and is not receiving dividends and does nothing about any of those matters, but then discovers years later that money or corporate opportunities have been diverted from the company for the benefit of its directors ... The distinction lies in the fact that in the absence of evidence to the contrary, a shareholder is entitled to assume that the company is being managed properly by its directors in accordance with their fiduciary and statutory duties, and that its constitution has been followed" (para. [46]). 

 

UK: England and Wales: the director's duty to promote the success of the company

In IBM United Kingdom Ltd v Lzlabs GmbH [2022] EWHC 884 (TCC), Mr Justice Eyre has explored the circumstances in which the director's duty to promote the success of the company, under section 172 of the Companies Act 2006, will be broken where the director causes the company to breach a contract or other legal obligation. Drawing heavily on Antuzis & Ors v DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB), [2019] WLR(D) 254, his Lordship observed (at para. [36]): 

... not every instance of causing a company to breach a contract or a legal obligation will involve a director in a breach of the section 172 duties ... The key will be whether the director was properly acting to promote the success of the company taking account of the matters to which he or she is required by section 172 to have regard. In that exercise it will be necessary to consider the circumstances as a whole. Those will include the motivation of the director and the nature of the duties said to be broken but in addition the nature of the obligations being broken by the company and the consequences of the company's breach can be relevant to the question of whether the director can properly have been said to have been acting in the interests of the company."

 

Germany: DCGK publishes new edition of Code following consultation

The German Corporate Governance Commission, DCGK, has concluded its consultation on proposed changes to the German Corporate Governance Code.The new Code was published last week and submitted to the Federal Ministry of Justice. It takes effect when published in the Federal Gazette. A copy of the Code, in German, is available here. A copy in English is expected soon.

UK: HPC analysis of FTSE350 pay ratios

The High Pay Centre has today published analysis of median CEO/median employee pay ratios in the FTSE350. In 2020/21, the ratio was 44:1, down from 53:1 in 2019/20. The report notes, however, that the 69 companies reporting in the first quarter of 2022 had a ratio of 63:1 - up from 34:1 in 2021. For further information see here.