UK: Government confirms proposals for audit and governance reform

The Department for Business, Energy and Industrial Strategy today published its response, and proposals, following last year's white paper consultation Restoring Trust in Audit and Corporate Governance: see here (pdf). The accompanying press release is available here.    

The Financial Reporting Council - set to become the Audit, Reporting and Governance Authority (ARGA) with new powers through legislation under the Government's plans - has welcomed the Government's proposals although its chief executive, Sir Jon Thompson, described as a "missed opportunity" the decision not to introduce a statutory version of the Sarbanes-Oxley internal control statement: see here. Instead, the Government will invite the FRC/ARGA to include such a statement in the UK Corporate Governance Code as part of a review of its internal control principles and provisions.

Dramatic changes to the auditing profession now seem most unlikely, the Government having decided against seeking to establish, at this stage, a new corporate auditing framework or a new professional body for auditing. Instead, ARGA is to be invited to work with the existing professonal bodies to improve auditor education and continuing professional development.

Other proposals include giving ARGA the power to set new minimum requirements for audit committees.  It will also be given the power to investigate and sanction certain breaches of reporting and auditing responsibilities by directors of public interest entities.

UK: NHS England consults on revised Code of Governance for NHS provider trusts

NHS England has published for consultation an updated edition of its Code of Governance for NHS provider trusts: see here. The Code will apply to NHS foundation trusts and, for the first time, NHS trusts, the consultation noting that "[d]espite their different constitutions, there are overarching principles of corporate governance that apply to both" (para. 2.6). The Code, as with the UK Corporate Governance Code, contains principles and provisions and operates on the basis of 'comply or explain'.

UK: FCA sets out plans for single segment listing regime

The Financial Conduct Authority has published a discussion paper, as part of its Primary Markets Effectiveness Review, in which it seeks views on reforms to the listing regime: see here (pdf). The FCA is proposing to introduce a single segment regime for commercial companies. Under this regime, companies would be subject to the same eligibility criteria and mandatory continuing obligations, but there would be the option to adopt supplementary obligations. 

Under the FCA's proposal, the mandatory continuing obligations would include, amongst other things, the UK Corporate Governance Code and its 'comply or explain' approach. The current controlling shareholder regime would, however, become supplementary.

India: Company Law Committee report published by MCA

The Ministry of Corporate Affairs published, last month, a report by the Company Law Committee in which wide-ranging reforms were proposed: see here. The Committee has recommended, amongst other things, that the Companies Act 2013 is amended to (a) provide the Central Government with the power to require certain companies to be subject to joint audit; (b) recognise Special Purpose Acquisition Companies (SPACs); and (c) give Central Government the power to prescribe Rules to provide for greater use of electronic communication and the format (physical, electronic, hybrid) of shareholder meetings.

UK: England and Wales: Court of Appeal considers application of section 168(5) of the Insolvency Act 1986

Earlier this month the Court of Appeal gave judgment in Re Edengate Homes (Butley Hall) Ltd [2022] EWCA Civ 626. The case is of interest because of the discussion it contains concerning the application of section 168(5) of the Insolvency Act 1986. This provision provides that where "any person is aggrieved by an act or decision of the liquidator, that person may apply to the court; and the court may confirm, reverse or modify the act or decision complained of; and make such order in the case as it thinks just." Males LJ, with whom Stuart-Smith and Aplin LJJ agreed, stated (at para. [36]): 

It is not sufficient that an applicant for relief under section 168(5) is a creditor of the insolvent company. It must in addition have a legitimate interest in the relief sought. Where the application is to set aside a disposal of property by the liquidator, including the assignment of a claim, an applicant will have a legitimate interest if it is acting in the interests of creditors generally. Typically that will be the case when the effect of the relief sought will be to maximise the assets of the estate. But an applicant will not have standing if the relief sought is contrary to the interests of the creditors as a class, as it will be where that will result in a lesser recovery."

The case reached the Court of Appeal because, it seems, the trial judge was of the view that the case law authorities were inconsistent. This view was rejected by the Court of Appeal, with Males LJ observing: "the principles are clear and have been consistently applied" (para. [37]).