UK: England and Wales: directors' liability for inaction

Yesterday the Court of Appeal gave judgment in Lexi Holdings Plc v Luqman & Ors [2009] EWCA Civ 117, a case concerning the liability of directors for inaction. The Court of Appeal found the directors' liability more extensive than the judge at first instance ([2008] EWHC 1639 (Ch)). A more complete summary will be posted soon...

Europe: the 'micro entity' and financial reporting - Commission consultation

The European Commission has published a proposal for a Directive amending Directive 78/660/EEC (the Fourth Company Law Directive). The proposed Directive will provide Member States with the option to create a 'micro entity' category of company that will be exempt from the accounting requirements of the Fourth Company Law Directive. The proposal defines a micro entity as one which meets two of the following criteria:

• A balance sheet total of not more than EUR 500,000;
  
• A net turnover of not more than EUR 1, 000,000;
  
• Not more than ten as average number of employees during the financial year.

For further information see: press release | FAQs | citizens' summary | impact assessment |

The Commission is also undertaking a wider review of the Fourth and Seventh Company Law Directives: see here for further information. 

UK: FSA publishes draft code of practice on remuneration policies

The Financial Services Authority has today published a draft code of practice on remuneration policies, relevant to all FSA regulated firms. The aim of the code is to ensure that firms adopt remuneration policies which are consistent with sound risk management and which do not expose them to excessive risk. In the accompanying press release it is stated that the FSA will consult on the draft code and further proposals for remuneration policy in March.

South Africa: the King III Report on Corporate Governance

South Africa's Institute of Directors has published in draft the third edition of the King Report on Corporate Governance and Code (King III). Comments are invited by 25 April 2009. 

OECD report - corporate governance lessons from the financial crisis

It is turning into a month for reports. The OECD has published a report titled Corporate Governance Lessons from the Financial Crisis. This examines governance issues across countries, drawing upon company investigations, parliamentary enquiries and other regulatory reports. The report concludes:

... the financial crisis can be to an important extent attributed to failures and weaknesses in corporate governance arrangements. When they were put to a test, corporate governance routines did not serve their purpose to safeguard against excessive risk taking in a number of financial services companies. A number of weaknesses have been apparent. The risk management systems have failed in many cases due to corporate governance procedures rather than the inadequacy of computer models alone ... In other cases, boards had approved strategy but then did not establish suitable metrics to monitor its implementation ... Accounting standards and regulatory requirements have also proved insufficient in some areas ... Last but not least, remuneration systems have in a number of cases not been closely related to the strategy and risk appetite of the company and its longer term interests".