New Zealand: first reading for Companies and Limited Partnerships Amendment Bill

The Companies and Limited Partnerships Amendment Bill has received its first reading: see here. The Bill provides, amongst other things, for the criminalisation of certain breaches of directors' duties (see clause 4) and the requirement for New Zealand registered companies to have a resident agent (responsible for reporting and recording keeping obligations) if they do not have a director who lives in New Zealand or in a country in which New Zealand judgments imposing regulatory fines can be enforced (see subpart 2 of the Bill). The explanatory note accompanying the Bill is available here.

UK: England and Wales: agency - acting for competing principals

The Court of Appeal gave judgment last Friday in Rossetti Marketing Ltd & Anor v Diamond Sofa Company Ltd [2012] EWCA Civ 1021. The case contains, amongst other things, some interesting discussion regarding the circumstances in which an agent may act for competing principals (at paras. [22], [23] and [27], per Lord Neuberger MR):

An agent can act for two principals with conflicting interests in two types of case. The first is, as already indicated, where both principals agree. In such a case, it is for the agent to show that the principal not merely consented, but that the consent was given on a fully informed basis – i.e. that the agent had made full disclosure to the principal – see per Tuckey LJ in Hurstanger Ltd v Wilson [2007] EWCA Civ 299, [2007] 1 WLR 2351, para 35 ... The second type of case where an agent can act for competing principals is where, as in Kelly [1993] AC 205, the principal must have appreciated that the nature of the agent's business (in that case a residential estate agent) is 'to act for numerous principals'. More generally, I agree ... that, particularly as 'estate agents are only imperfectly agents and are known to act for many principals', it is highly questionable whether the reasoning in Kelly [1993] AC 205 should be extended to other cases of agency, at least in the absence of clear evidence to support such an extension".

Europe: ESMA responds to Commission's shadow banking green paper

The European Securities and Markets Authority has published its response to the European Commission's green paper on shadow banking: see here (pdf). Amongst other things, ESMA argues that the definition of shadow banking adopted by the Commission should be more focused on activities rather than with the entity performing the activity.

UK: LIBOR and the Wheatley Review

HM Treasury has published further information about the review of LIBOR to be undertaken by Martin Wheatley, the chief executive designate of the new Financial Conduct Authority and current head of the Conduct of Business Unit at the Financial Services Authority: see here. A discussion paper will be published on 10 August and Mr Wheatley's report is expected by the end of the summer in order to permit the Government to include, if necessary, legislative changes in the Financial Services Bill currently before Parliament.

UK: England and Wales: restructuring, exit consent and the limits of majority power

Mr Justice Briggs, sitting in the High Court, gave judgment last Friday in Assenagon Asset Management SA v Irish Bank Resolution Corporation Ltd [2012] EWHC 2090 (Ch). His decision is important and potentially far reaching. It is the first English law authority to consider the operation of a so-called exit consent mechanism in debt restructuring. Broadly put, the purpose of an exit consent mechanism is to deal with creditor holdout where an issuer proposes to restructure its existing debt. Existing bondholders may, for example, be invited to accept replacement bonds whilst also voting to amend the terms of the existing bonds in a way that reduces (or destroys) their value. Pressure is thereby put on minority bondholders to accept the issuer's offer not least because it is difficult for them to know how other bondholders will vote.

Whilst courts in other jurisdictions have considered the use of exit consent techniques in relation to purported duties of good faith owed by the issuer to the bondholders (see, e.g., Katz v Oak Industries Inc. (1986) 508 A.2d 873 in Delaware), what makes the current case of interest is that argument centred on the power of the majority bondholders to bind the minority. Mr Justice Briggs held that this power was not unlimited, referring to English authorities where limitations have been recognised on the power of a majority to bind a minority within a class. He accepted that it was not lawful for a majority bondholder to use its voting power to "lend its aid" to the coercion of a minority by voting for a resolution under which the minority's rights were expropriated for nominal consideration and, with regard to the the coercive use of exit consent techniques, he stated (at paras. [84] - [86]):

The exit consent is, quite simply, a coercive threat which the issuer invites the majority to levy against the minority, nothing more or less. Its only function is the intimidation of a potential minority, based upon the fear of any individual member of the class that, by rejecting the exchange and voting against the resolution, he (or it) will be left out in the cold. This form of coercion is in my judgment entirely at variance with the purposes for which majorities in a class are given power to bind minorities, and it is no answer for them to say that it is the issuer which has required or invited them to do so. True it is that, at the moment when any individual member of the class is required (by the imposition of the pre-meeting deadline) to make up his mind, there is at that point in time no defined minority against which the exit consent is aimed. But it is inevitable that there will be a defined (if any) minority by the time when the exit consent is implemented by being voted upon, and its only purpose is to prey upon the apprehension of each member of the class (aggravated by his relative inability to find out the views of his fellow class members in advance) that he will, if he decides to vote against, be part of that expropriated minority if the scheme goes ahead. Putting it as succinctly as I can, oppression of a minority is of the essence of exit consents of this kind, and it is precisely that at which the principles restraining the abusive exercise of powers to bind minorities are aimed".

Update (3 August 2012): the ICLR has published a summary of the judgment here.