Section 175 of the Companies Act (2006) codifies the fiduciary no-conflict rule with regard to company directors. It provides: "A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company". It comes into force on 1 October 2008 (for details of this and other implementation dates, click here).
GC100 - the Association of General Counsel and Company Secretaries of the FTSE100 - has published guidance on Section 175. The document identifies situations in which Section 175 is likely to be breached and provides guidance for company secretaries when dealing with directors' conflicts of interest. The guidance is available here.
Friday, 25 January 2008
UK: FSA review of the Listing Regime
The Financial Services Authority has published a consultation paper concerning proposed changes to the Listing Regime. According to the FSA:
"To continue the Listing Regime's contribution to the success of UK markets, the paper sets out a new structure for the regime in which securities subject to higher standards will be more clearly separated from directive minimum standards. It proposes re-labelling Primary Listing 'Tier One Listing' and Secondary Listing and GDRs 'Tier Two Listing'. Alternatively, it suggests reclassifying Secondary Listing and GDRs. The securities would continue to be admitted to trading and subject to appropriate EU directive based obligations, but they would not be 'Officially Listed' by the FSA".
For further information click here.
"To continue the Listing Regime's contribution to the success of UK markets, the paper sets out a new structure for the regime in which securities subject to higher standards will be more clearly separated from directive minimum standards. It proposes re-labelling Primary Listing 'Tier One Listing' and Secondary Listing and GDRs 'Tier Two Listing'. Alternatively, it suggests reclassifying Secondary Listing and GDRs. The securities would continue to be admitted to trading and subject to appropriate EU directive based obligations, but they would not be 'Officially Listed' by the FSA".
For further information click here.
UK: Non-executive directors on the increase
At the end of December, the Financial Times reported (in an article titled "Big companies cut executives from boards"):
"Britain’s largest listed companies have sharply reduced the number of senior managers on their boards in the past five years, with non-executive directors now outnumbering executive directors in the FTSE 100 by more than two to one. Figures compiled by Cranfield management school show the number of executive directors of the 100 largest listed companies has fallen 27 per cent since the Higgs report called for a better balance between executives and non-executives. The fall has left more than a fifth of the FTSE 100 boards with only two executive directors – among them British Airways, Diageo and J.Sainsbury. There were just 12 when the Higgs report was published in January 2003. The changes mean that leading UK companies increasingly resemble their US counterparts, where an all-powerful chairman/chief executive and chief financial officer are the main source of information for the independent directors".
For further information click here.
"Britain’s largest listed companies have sharply reduced the number of senior managers on their boards in the past five years, with non-executive directors now outnumbering executive directors in the FTSE 100 by more than two to one. Figures compiled by Cranfield management school show the number of executive directors of the 100 largest listed companies has fallen 27 per cent since the Higgs report called for a better balance between executives and non-executives. The fall has left more than a fifth of the FTSE 100 boards with only two executive directors – among them British Airways, Diageo and J.Sainsbury. There were just 12 when the Higgs report was published in January 2003. The changes mean that leading UK companies increasingly resemble their US counterparts, where an all-powerful chairman/chief executive and chief financial officer are the main source of information for the independent directors".
For further information click here.
UK: Combined Code: Proposed Changes
In December 2007, the FRC began a consultation with regard to two changes to the Combined Code on Corporate Governance:
(1) the removal of the restriction preventing an individual from chairing more than one FTSE100 company
(2) for listed companies outside of the FTSE350, to allow the chairman to be a member of, but not chair, of the audit committee providing he or she was considered independent on appointment.
For further information click here.
(1) the removal of the restriction preventing an individual from chairing more than one FTSE100 company
(2) for listed companies outside of the FTSE350, to allow the chairman to be a member of, but not chair, of the audit committee providing he or she was considered independent on appointment.
For further information click here.
Scotland: Non-executive directors' fiduciary duties
Shortly before Christmas, Lord Reed gave his opinion in Commonwealth Oil & Gas Company Ltd v Baxter & Anor [2007] ScotCS CSOH198. This important decision deserves attention in and beyond Scotland for several reasons:
(1) it is one of the most important Scottish company law decisions of recent years
(2) it sends a clear message that the holding of directorial office should not be assumed lightly
(3) Lord Reed states that non-executive directors are subject to the same fiduciary duties as executive directors.
Postscript (24 April 2008): It has been reported that Mr Baxter, the non-executive director whose actions were found in breach of fiduciary duty, is to appeal.
(1) it is one of the most important Scottish company law decisions of recent years
(2) it sends a clear message that the holding of directorial office should not be assumed lightly
(3) Lord Reed states that non-executive directors are subject to the same fiduciary duties as executive directors.
Postscript (24 April 2008): It has been reported that Mr Baxter, the non-executive director whose actions were found in breach of fiduciary duty, is to appeal.
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