UK: Government consults on company law changes - company names and micro-entity financial reporting

The Government has announced some preliminary findings following its 'red tape challenge' in the field of company and commercial law: see here. Two consultations have also been launched. The first seeks views on possible changes to the Regulations regarding company and business: see here. The second concerns the implementation of Directive 2012/6/EU on the annual accounts of certain types of companies as regards micro-entities (the so-called 'Micros Directive'): see here. This consultation seeks views on the extent to which companies falling within the definition of micro-entity should receive the exemptions from certain financial reporting obligations which the Directive permits Member States to provide. More specific questions are asked with regard to the introduction and implementation of these exemptions.

UK: England and Wales: multiple derivative actions not abolished by the Companies Act 2006

Judgment was given yesterday in Universal Project Management Services Ltd v Fort Gilkicker Ltd & Ors [2013] EWHC 348 (Ch). This is an important and interesting decision in which the trial judge held that the Companies Act 2006 did not remove the multiple derivative action at common law. The trial judge, Briggs J., observed (paras. [44] to [46]):

I have come on balance to the conclusion that the 2006 Act did not do away with the multiple derivative action. My reasons follow. First, there was before 2006 a common law procedural device called the derivative action by which the court could permit a person or persons with the closest sufficient interest to litigate on behalf of a company by seeking for the company relief in respect of a cause of action vested in it. Those persons would usually be a minority of the company's members, but might, if the company was wholly owned by another company, be a minority of the holding company's members. These were not separate derivative actions, but simply examples of the efficient application of the procedural device, designed to avoid injustice, to different factual circumstances.

In 2006 Parliament identified the main version of that device, namely where locus standi is accorded to the wronged company's members, labelled it a "derivative claim" and enacted a comprehensive statutory code in relation to it. As a matter of language, section 260 applied Chapter 1 of Part 11 only to that part of the old common law device thus labelled, leaving other instances of its application unaffected.

Applying the well established relevant principle of construction, Parliament did not expressly abolish the whole of the common law derivative action in relation to companies, even though by implication from the comprehensiveness of the statutory code it did do so in relation to derivative claims by members (as defined) of the wronged company. Beyond that, the assertion that the remainder of the common law device was abolished fails because abolition was neither express nor a clear or necessary implication.

Update (28 February 2013) - a summary of the judgment has been provided by the ICLR: see here.

Update (14 February 2014) - the conclusion and reasoning of Briggs J was endorsed yesterday by Mr Justice David Richards in Abouraya v Sigmund & Ors [2014] EWHC 277 (Ch).

UK: Competition Commission publishes full provisional findings report for statutory audit market inquiry

Last week the Competition Commission published a summary of its preliminary findings in respect of its inquiry into the market for statutory audit services: see here. The Commission provisionally concluded that there were features of the market that created an adverse affect on competition and that this resulted in companies being offered higher prices, lower quality and less innovation (and differentiation of offering) than would be the case in a market without the adverse features. The full report containing the Commission's findings is now available: see here (pdf). The supporting appendices are available here.

UK: England and Wales: Law Commission to examine fiduciary duty in the investment context

One of the recommendations made by Professor John Kay, in his Review of UK Equity Markets and Long-Term Decision Making (here, pdf), was that the Law Commission should be asked to review the legal concept of fiduciary duty as applied to investment in order to address uncertainties and misunderstandings on the part of trustees and their advisors. This recommendation was accepted by the Government and a request made to the Law Commission (see here, pdf). The Law Commission has started the preparation needed to undertake this new project: it has advertised for a lawyer to lead this project (see here).

UK: Lord Turner on global financial and Eurozone reform

Earlier this month Lord Turner, the chairman of the Financial Services Authority, delivered a speech titled Global Financial and Eurozone Reform: Five Questions on a Common Theme: see here (pdf). In a wide-ranging speech, Lord Turner considered the desirability of the single market right available to banks in one Member State to operate through a branch in another Member State. He argued that there was a reasonable case for giving national authorities within the EU the power to require banks from other Member State to operate as subsidiaries not branches, particularly where the bank's operations involved accepting significant retail deposits.