UK: statements of capital under the Companies Act (2006) - BIS consultation

The Department for Business, Innovation and Skills has published a consultation paper concerning the financial information required in statements of capital under the Companies Act (2006). The consultation highlights problems with the current requirements - some of which were highlighted by ICSA earlier this year - and sets out a proposed response involving changes in the Act which BIS believes would simply the information required and avoid the need to disaggregate any information below the level of class of share.

UK: the disclosure of directors' loans in company accounts

Earlier this year the Department for Business, Innovation and Skills published a consultation paper concerning the scope of the requirement for disclosure of directors' loans in company accounts under Section 413 of the Companies Act (2006). The paper outlined various proposals for amending Section 413 as part of the Government's review of the adequacy of information provided to shareholders and other users of accounts in respect of directors' loans.

Responses to the consultation have now been published (see here - .zip file) along with the Government's response (see here - pdf). The Government proposes, in the short-term, amending the 2006 Act in order to clarify the disclosure required by banks in respect of directors loans, credits and guarantees.

UK: Scotland: remedies for unfairly prejudicial conduct and the powers of the court

The Court of Session (Inner House) has today given its opinion in Li v Holouis Ltd [2009] CSIH 87. The principal issue before the court concerned the remedies available to the Sheriff court when granting relief for unfairly prejudicial conduct under Section 996 of the Companies Act (2006). Lord Carloway delivered the opinion of the court and, at paras. [14] and [15], stated:

Section 994 of the Companies Act 2006 provides, inter alia, that a shareholder can apply to the Court for relief in a situation where a company's affairs are being, or have been, conducted in a manner unfairly prejudicial to him. Section 996 allows the Court to "make such order as it thinks fit". It is recognised that this gives a court the "widest possible discretion" in the selecting the remedy (Wilson v Jaymarke Estates Ltd 2006 SCLR 510, Lord President (Cullen) at para [12]). However, this does not mean that the court can create new remedies, of a type which it otherwise has no power to grant. Thus, it can select from its armoury of competent remedies the one which it thinks appropriate to a given situation. Obvious examples will be orders for payment, ad factum praestandum and interdict. But, in the absence of an express statutory provision, a court cannot grant a remedy which it has no general power to grant.

The Sheriff Court has no jurisdiction to grant the remedy of reduction of documents (Dobie: Sheriff Court Practice, p 22, under reference to Donald v Donald 1913 SC 274). As distinct from the situation where a statute permits the Sheriff Court to "set aside" a decision or other matter as between the parties to a cause or where reduction ope exceptionis constitutes a defence, reduction of deeds can have a much wider effect. It can affect third parties, over which the Sheriff Court may have no general jurisdiction. In the case of heritable rights, any potential Sheriff Court jurisdiction may rest exclusively in another Sheriffdom. Hence, reduction has tended to be restricted to the Court of Session. It may be that this will change in the future (Report of the Scottish Civil Courts Review chapter 4, para 141, recommendation 29) but that is the law at present. The Sheriff's objections to it, however well reasoned in practical terms, cannot change that. In short, the Sheriff Court has no power to grant reduction in a petition under section 994".

Note: a glossary of Scottish legal terms is available here. 

Singapore: new governance council + code review

The chief executive of the Monetary Authority of Singapore - Mr Heng Swee Keat - yesterday announced the formation of a corporate governance council to promote high standards of corporate governance in listed companies. An immediate task for the Council, he said, would be a review of Singapore's Code of Corporate Governance, published in 2005.

New Zealand: Commission finds lack of transparency in financial statements

Issue 49 (October 2009) of the quarterly newsletter of the New Zealand Securities Commission has been published: see here (html). This contains, inter alia, a brief summary of the Commission's analysis of the financial statements of 20 companies. The Commission found what it described as a "widespread lack of transparency", particularly with regard to the disclosure of related party transactions and the underlying assumptions used to value assets. The chairman of the Commission, Jane Diplock, observed:

... all directors should remember that ensuring financial statements comply with the law is a primary duty of company directors. NZ IFRS have been mandatory in New Zealand since 2007. New Zealand companies have had long enough to comply with NZ IFRS. The standards demand greater transparency and if their financial statements are not fully compliant, then company directors should be concerned that they are failing one of their basic duties to shareholders. Company directors are personally responsible to ensure that financial statements tell an entity's story completely and transparently. They should remember that they can be prosecuted under the Financial Reporting Act if their company publishes non-compliant financial statements. If misleading financial information is published in a prospectus, directors can also face prosecution under the Securities Act".