Singapore: director disqualification and corporate governance

A copy of the High Court decision Ong Chow Hong (alias Ong Chaw Ping) v Public Prosecutor [2011] SGHC 93, delivered earlier this month, has been published on the Singapore Law Watch website: see here. The case is noteworthy because of the interesting discussion of the purpose of the regime for the disqualification of directors, the relationship between disqualification and corporate governance standards, as well as the duties of listed company directors. It concerned the disqualification of the chairman of a listed company following a breach of Section 157(1) of the Companies Act (the chairman had approved the release of a public announcement concerning the company without reviewing its contents).

The trial judge, with reference to the disqualification regimes in the UK and Australia, concluded that in Singapore the predominant purpose of disqualification was the protection of the public (the judge below held that the purpose was predominantly punitive) and proceeded to note that this "shield of protection" had two sides (paras. [22] and [23]):

"On one hand, the public ought to be protected from an individual who has failed to discharge his obligations qua director. This side of protection may be viewed as specific protection, or what I would prefer to term as the “thin” definition of protection. To date, case law in Singapore appeared to have been largely focused on this narrower aspect of protection as being the only appropriate consideration. On the other hand, there is another side of protection that has been overlooked. This side is equally, if not even more, significant in some matters, particularly those involving listed companies. This is the need to generally protect the public from all errant directors by an uncompromising reaffirmation of the expected exemplary standards of corporate governance".

The trial judge held that the one year period of disqualification originally imposed was inadequate and doubled its length. In reaching this decision, the trial judge made these comments on directors' reliance on others (para. [34]):

Directors of listed companies in Singapore have to appreciate that our present disclosure based regime requires accurate and prompt disclosure to function effectively. It would never be sufficient or acceptable for a director to say that he expected his co-directors to do “right” by the company. Every director has to ensure that he discharges his responsibilities with due diligence in all pertinent matters. Therefore, any reliance on professionals or any reliance placed on “specialised” directors must be balanced against the responsibility that the law placed upon every individual director to bring to bear their own judgment in evaluating the advice received. Directors cannot adopt a silo approach and invariably seek shelter behind other “specialised” directors on the notion of reliance ..."

Note: the next update will be on Tuesday, May 3.

UK: England and Wales: parent company owed duty of care to employee of subsidiary

Earlier this month, in Chandler v Cape plc [2011] EWHC 951 (QB), the trial judge held that a parent company (Cape plc) owed a duty of care to one of the employees of a subsidiary company (Cape Products). A copy of the judgment is not yet available on BAILII but has been published by Devereux Chambers: see here (Word). A short summary of the case has been published by LexisWeb: see here. Before considering whether a duty of care was owed, in accordance with the three stage test in Caparo Industries Plc v Dickman [1990] 2 AC 605, the trial judge made these important points (para. [66]):

... it is necessary to dispel certain possible misunderstandings which might arise in cases of this type or upon a cursory reading of this judgment. First, the fact that the Claimant was owed a duty of care by Cape Products does not prevent such a duty arising between the Claimant and other parties. No doubt, the fact that a duty situation exists between the Claimant and his employer is a factor to be taken into account when deciding whether another party owes the Claimant such a duty. But, to repeat, the existence of the duty between the Claimant and his employer cannot preclude another person being fixed with a duty of care. Second, the fact that Cape Products was a subsidiary of the Defendant or part of a group of companies of which the Defendant was the parent cannot mean by itself that the Defendant owes a duty to the employees of Cape Products. So much is clear from Adams v Cape Industries plc [1991] 1 AER 929. Equally, the fact that Cape Products was a separate legal entity from the Defendant cannot preclude the duty arising. Third, this case has not been presented on the basis that Cape Products was a sham – nothing more than a veil for the activities of the Defendant. Accordingly, this is not a case in which it would be appropriate to 'pierce the corporate veil' ".

UK: England and Wales: execution of documents by a company

The ICLR, as part of its free case summary service, has provided a summary for the recent Court of Appeal decision Williams v Redcard Ltd. [2011] EWCA Civ 466: see here. To quote from the ICLR's headnote for the decision:

Under section 44 of the Companies Act 2006 a company document could validly be signed by signatories acting for the company even though the execution did not take place either with the common seal of the company or by expressly being signed 'for or on behalf of the company' ".

Switzerland: Governance Guide for Families and their Businesses

The codes and principles index maintained by the European Corporate Governance Institute has been updated to include a copy in English of the Governance Guide for Families and their Businesses published by Vereinigung der Privaten Aktiengesellschaften (VPAG), Prager Dreifuss and Continuum AG: see here (pdf).

UK: FSA consults on remuneration code guidance

The Financial Services Authority has published for consultation guidance on its Remuneration Code: see here. Included with the guidance are tools to help firms comply with the Code which, the FSA states, firms can begin to use immediately.

Note on Easter updates: the next update will appear on Tuesday, 26 April.