Thursday, 22 February 2018

UK: Treasury Select Committee launches inquiry into digital currencies and distributed ledger technology

The Commons Treasury Select Committee has launched an inquiry into digital currencies and distributed ledger technologies: see here. The terms of reference are available here.

UK: England and Wales: Law Commission call for evidence on Commonhold

The Law Commission (England and Wales) has published a call for evidence concerning Commonhold, a form of property ownership created by the Commonhold and Leasehold Reform Act 2002: see here (pdf). One element of the commonhold framework is the commonhold association, a private company limited by guarantee. The commonhold association is governed by the commonhold legislation as well as company law. In respect of the application of company law, the Law Commission notes several positions including, for example, the view that commonhold associations should not be be a company subject to company law; another view is that greater guidance and clarity is required in respect of the application of company law.

UK: England and Wales: liquidators' appointment not invalidated by failure to give notice of resolution to floating charge holder

Judgment was given by HHJ Purle QC in Bevan v Walker and others [2018] EWHC 265 (Ch) last week. A summary of the decision has been published by the ICLR: see [2018] WLR(D) 103. At issue was the status of liquidators who had been appointed following the passing of a special resolution by shareholders to place a company in members' voluntary liquidation where there had been a failure to give notice of the resolution to a floating charge holder as required by section 84(2) of the Insolvency Act 1986.

The trial judge, HHJ Purle QC, held that the failure to provide notice did not invalidate the appointment of the liquidator first appointed or the appointment of the liquidator subsequently appointed when the company was placed in a creditors' voluntary winding-up.  In doing so, HHJ Purle QC said that the cases on the appointment of administrators were of "no or limited assistance in the present context", stressing that once the special resolution to wind-up the company was passed, the company was placed in liquidation for the purposes of section 84(1)(b) of the 1986 Act, notwithstanding any failure to give notice as required to any charge holders.

Note: HHJ Purle QC retired as a senior circuit judge earlier this month, and was based in Birmingham's Business and Property Courts.

Monday, 19 February 2018

Luxembourg: Stock Exchange publishes revised edition of its Principles of Corporate Governance

The Luxembourg Stock Exchange has published a revised edition of its Principles of Corporate Governance: see here (pdf).

Friday, 16 February 2018

Australia: ASIC's surveillance of credit rating agencies

The Australian Securities and Investments Commission has published a report titled Surveillance of credit rating agencies: see here (pdf). The report presents the results of ASIC's review of credit rating agencies' governance arrangements, transparency and disclosure, between 1 January 2016 and 31 October 2017. It contains six recommendations. All of the licensed credit rating agencies in Australia - six in total - were part of the surveillance activity conducted under section 912E of the Corporations Act 2001.

UK: England and Wales: parent company liability in tort for harm caused by subsidiaries

The Court of Appeal gave judgment earlier this week in Ogale Community & Ors v Royal Dutch Shell Plc & Anor [2018] EWCA Civ 191 (on appeal from [2017] EWHC 89 (TCC); [2017] WLR(D) 52). At issue was the potential liability in tort of a parent company - Royal Dutch Shell Plc (RDS) - for the environmental damage caused by leaks of oil from pipelines and infrastructure in the Niger Delta, stemming from the operations of a subsidiary company.

It was argued that RDS owed the Nigerian claimants a duty of care because (1) it controlled the pipeline operations in Nigeria from which the leaks occurred, or (2) it had assumed direct responsibility to protect the claimants from the damage caused by the leaks. At first instance it was held that there was no arguable case that a duty of care arose. This finding - albeit with criticism of the way in which the trial judge had reached it - was upheld by a majority in the Court of Appeal (Chancellor and Simon LJ; Sales LJ dissenting).

Thursday, 15 February 2018

UK: PRA consults on proposed expectations regarding firms' governance and risk management of algorithmic trading

The Prudential Regulation Authority has published a consultation paper in respect of its proposed expectations regarding firms' governance and risk management of algorithmic trading: see here (pdf). The consultation paper includes, as an appendix, the supervisory statement that the PRA intends to publish. The PRA is proposing that a firm's governing body should be required to explicitly approve the governance framework for algorithmic trading. A review of firms by the PRA completed between November 2014 and March 2017 revealed that not all firms’ algorithmic trading activities were adequately captured in their governance frameworks.

Tuesday, 13 February 2018

UK: The Scotland Act 1998 (Insolvency Functions) Order 2018

The Scotland Act 1998 (Insolvency Functions) Order 2018 came into force earlier this month. The Order will result in the Scottish Ministers and a Minister of the Crown being able to make rules for the winding-up of companies in Scotland, irrespective of whether those rules relate to reserved matters under Schedule 5 of the Scotland Act 1998. Further information is available in the note at the end of the Order as well as the accompanying explanatory memorandum: see, respectively, here and here (pdf).

Monday, 12 February 2018

Canada: corporate governance reform - an update

Here is a further update on the Bill that will, when enacted, make changes to the governance framework by amending the Canada Business Corporations Act, the Canada Cooperatives Act, and the Canada Not-for-profit Corporations Act. The Bill has begun Third Reading in the Senate, with debate starting last Thursday.  Hansard, the record of debate, is available here and the text of the Bill is available here. Among the changes proposed are those relating to the election of directors (including annual elections and votes for individual directors), the disclosure of information regarding board diversity and communications with shareholders.

Thursday, 8 February 2018

UK: PRA policy statement - insurers - board diversity and separation of the CEO and chair roles

The Prudential Regulation Authority has published Policy Statement 1/18 Strengthening Individual Accountability in Insurance - Optimisations to the SIMR: see here (pdf). The statements confirms various changes being made to the PRA Rulebook in respect of insurers, including requiring the separation of the chief executive and chairman roles at large insurance firms and, for solvency II firms and large non-directive insurers, to put in place a policy promoting diversity on the governing body.

Wednesday, 7 February 2018

UK: The Taxation of Securitisation Companies (Amendment) Regulations 2018

The Taxation of Securitisation Companies (Amendment) Regulations 2018 were laid before Parliament today come into force on 28 February: see here. The explanatory memorandum (here, pdf) accompanying the Regulations explains their purpose: to make provision for specific areas of uncertainty over the appropriate tax treatment of securitisation companies, through amendments to the existing Taxation of Securitisation Companies Regulations 2006.

Tuesday, 6 February 2018

UK: PLSA AGM review for 2017

The Pensions and Lifetime Savings Association has published its review of AGM voting in 2017, focusing in particular on identifying cases of significant shareholder dissent (20% or more of the votes cast) in FTSE350 companies: see here (pdf). The PLSA found that 56 FTSE250 companies and 17 FTSE100 companies experienced significant dissent in respect of at least one AGM resolution in 2017.

Monday, 5 February 2018

UK: FCA consults on EU Benchmarks Regulation implementation

The Financial Conduct Authority has published a consultation paper setting out proposed changes to its Handbook in respect of the changes introduced by the EU Benchmarks Regulation (EU 2016/1011) and the UK's Financial Services and Markets Act 2000 (Benchmarks) Regulations 2018: see here. The 2018 Regulations were laid before Parliament today, accompanied by an explanatory memorandum (here, pdf). Updated Q&As were also published yesterday by ESMA in respect of the EU Regulation: see here (pdf).

Friday, 2 February 2018

Singapore: High court finds 'insider reverse piercing' contrary to principle and unsupported by authority

The High Court decision Jhaveri Darsan Jitendra v Salgaocar Anil Vassudeva [2018] SGHC 24, handed down earlier this week and available here (pdf), is noteworthy because of the discussion it contains of 'reverse piercing' and, in particular, 'insider reverse piercing'. The latter arises where a controlling or dominant shareholder attempts to disregard the company's separate legal personality in order that they can bring or benefit from company claims against third parties. Such piercing was held by the court to be unsupported by authority and contrary to the fundamental principle that the company is an entity separate from its shareholder.  Moreover, Kannan Ramesh J. stated (at para. [74]):
Where one chooses to conduct one’s affairs using a company, one takes advantage of the independent legal status of the company and the consequences that flow from that, including the fact that the property of the company does not belong to the shareholder and vice versa. It did not seem correct as a matter of principle that, having chosen to claim the benefits of separate legal personality, a shareholder could then avoid the disadvantages of the same by inviting the court to allow insider reverse piercing".

Thursday, 1 February 2018

UK: England and Wales: abuse of law and cross-border mergers

A belated note for the Court of Appeal decision Easynet Global Services Ltd, Re [2018] EWCA Civ 10, on appeal from [2016] EWHC 2681 (Ch). Handed down last month, the principal question was whether the Companies (Cross-Border Mergers) Regulations 2007 applied to a merger involving UK companies and a single Dutch company. The Dutch company was dormant and had never traded, but its inclusion meant that the merger would be a cross-border merger for the purposes of the Regulations (the Regulations implementing the Cross-Border Mergers Directive 2005/56/EC).

At first instance, the trial judge, Birss J., held that the merger did not fall within the Regulations. The cross-border character of the proposed merger was, in his view, "only the result of a device" (para. [20]). The Court of unanimously disagreed: the proposed merger constituted a cross-border merger within the scope of the 2005 Directive and Regulations and did not involve any abuse of law.

Tuesday, 30 January 2018

UK: creating a corporate governance code for large private companies

Further information about the group formed to develop a corporate governance code for large private companies has been published today by the Government: see here. The group met for the first time yesterday under the chairmanship of James Wates, the chairman of Wates Ltd one of the UK's largest private construction companies (a copy of his acceptance letter is available here, pdf). Mr Wates also chairs Tomorow's Company.

Monday, 29 January 2018

Denmark: new corporate governance recommendations - now available in English

The new Corporate Governance Recommendations, published at the end of last year by the Corporate Governance Committee, are now available in English: see here (pdf).

OECD report: corporate governance rules and the role of stock exchanges in Asia

The OECD has published a report titled The evolving role of stock exchanges in Asia - standard setting, supervision and enforcement of disclosure obligations and corporate governance rules: see here (pdf). In respect of the jurisdictions reviewed, the report notes that most stock exchanges play a secondary role in monitoring corporate governance standards, with the securities regulator the principal custodian of the relevant Codes and Principles.

Friday, 26 January 2018

A quiet anniversary

It is - give or take a day or two - ten years since this blog was launched. And we are still together, a little over 4,400 posts later.* With best wishes, Robert.

* - Yes, I know: I still have not got round to tidying-up the collection of links!

Switzerland: establishing a register of beneficial ownership for companies

The Swiss Federal Council has begun a consultation on a Bill that will, amongst other things, require (a) the conversion of bearer shares into registered shares and (b) the introduction of a register of shareholders and beneficial owners: see here.

UK: Companies House publishes statistics release for Oct-Dec 2017

In its latest statistics release, Companies House reports that on 31 December 2017 there were 3,993,232 companies on the total register and 3,725,610 companies on the effective register (the latter excluding companies in the process of liquidation or dissolution): see here. Of those on the effective register, 5,960 were public companies.

UK: the ownership of quoted company shares

Somewhat belatedly I note that the Office for National Statistics has published updated analysis on the ownership of UK quoted company shares: see here. The report notes that at the end of 2016, 53.9% of shares (in terms of value) were held by investors outside of the UK. Twenty years ago this figure was 30.7%. The following chart indicates the other ownership categories and is taken directly from the ONS report.

The "rest of the world" category is comprised as follows:

Wednesday, 24 January 2018

Nigeria: FRC Technical Committee formed to review suspended Codes

At about this time last year, a Federal Government directive suspended the new National Codes of Corporate Governance introduced by the Financial Reporting Council. Several days ago the FRC announced that a Technical Committee had been created to review the suspended Code with a view to making revisions and republished the Codes: see here.

Monday, 22 January 2018

Zambia: the Companies Act 2017

A new framework for companies in Zambia - the Companies Bill 2017 - was introduced in the National Assembly early last year and has now become law as the Companies act 2017. A copy of the Act is available here (pdf).

Friday, 19 January 2018

UK: The Office for Professional Body Anti-Money Laundering Supervision

The Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017 came into force yesterday. The Regulations give the Financial Conduct Authority a new role, in the form of the new Office for Professional Body Anti-Money Laundering Supervision: overseeing the anti-money laundering and counter terrorist financing supervision undertaken by 22 self-regulatory organisations. Further information can be found in the explanatory memorandum accompanying the Regulations: see here (pdf).

Wednesday, 17 January 2018

Singapore: MAS consults on revised corporate governance code

The Monetary Authority of Singapore has published a consultation paper seeking views on proposed changes to its Corporate Governance Code: see here. The new code is based on mandatory Principles supported by Provisions. The provisions are subject to 'comply or explain'. The proposed changes are designed, amongst other things, to strength board independence and diversity.

Tuesday, 16 January 2018

Denmark: updated Corporate Governance Recommendations

The Corporate Governance Committee has published a revised edition of its Corporate Governance Recommendations: see here (pdf, Danish). A copy of the new Recommendations, in English, has not yet been published.

Update (28 January 2018) - now available in English: see here (pdf).

Monday, 15 January 2018

Japan: FSA plans for a new supervisory approach

The Financial Services Agency - the regulator for banks, insurance companies and capital markets - is seeking views on plans to adopt a new supervisory approach. Further information about this new approach, in English, is available in the report published by the FSA setting out its proposals: see here (pdf, English). The FSA proposes moving away from its current approach - described as being too focused on form and the past - to one where judgment is exercised holistically, examines substance and is forward looking.

Friday, 12 January 2018

UK: CUC publishes draft Higher Education Remuneration Code

The Committee of University Chairs has published for comment a draft remuneration code: see here. It seems uncharitable to say that the Code appears to have been produced somewhat hastily. In places there are missing words and/or typographical errors and the general tenor appears somewhat defensive of the status quo.  The structure of the Code is not particularly helpful and what an institution needs to do in order to claim compliance with the Code is set low. This said, it is not clear if the explanatory notes accompanying the Code are part of the Code for compliance purposes (the notes are said to "support" the Code). These notes are more extensive than the Code itself and contain much of the detail covered in media reports (see here for example).

One aspect of the Code is striking given the changes that were made several years ago to the UK's Corporate Governance Code in respect of remuneration. The CUC's draft Code states that remuneration should be "sufficient to recruit, retain and motivate staff of appropriate calibre in the context of the market for that role, balanced with the need to demonstrate the achievement of value for money in the use of resources" (para. 21).  The first part of this quotation - with its emphasis on recruitment, retention and motivation - mirrors closely what was one of the Main Principles in the 2012 edition of the UK Corporate Governance Code (here, pdf). But in the 2014 edition of the Code (here, pdf) the references to recruitment, retention and motivation were removed and the Principle amended to stress that remuneration should be designed to promote the long-term success of the company. The FRC made this change because it wanted to make clear that remuneration policies should be designed to achieve long-term benefit for companies rather than short-term benefits for management (see here, pdf).

Thursday, 11 January 2018

UK: LSE proposes 'comply or explain' code requirement for AIM companies

Last month, the London Stock Exchange published a feedback statement (including consultation questions) in respect of the AIM rules discussion paper (herepdf) published earlier in the year: see here (pdf). It is the LSE's intention that AIM companies should be subject to a 'comply or explain' requirement in respect of a relevant corporate governance code (to be achieved through amendments to Rule 26 of the AIM rules). This would, subject to the outcome of the consultation, take effect from 30 June 2018. At present, Rule 26 does not require AIM companies to adopt a particular governance code (where no code has been adopted this should be stated and the company's governance arrangements disclosed).

Wednesday, 10 January 2018

UK: Scotland: the Takeover Code and enforcement by the court under the Companies Act 2006

Shortly before the end of last year, Lord Bannatayne, sitting in the Outer House of the Court of Session, delivered his opinion in The Panel on Takeovers and Mergers v King [2017] CSOH 156: see here (pdf). The opinion is an important one on the operation of section 955 ("Enforcement by the court") of the Companies Act 2006 and Rule 9 of the Takeover Code (the mandatory bid rule). Section 955 provides, on application by the Takeover Panel, that if the court is satisfied that a person has contravened a rule-based requirement or a disclosure requirement, the court "may make any order it thinks fit to secure compliance with the requirement". In respect of section 955, Lord Bannatayne stated (paras. [80] - [82]):
The intent of the provision clearly is to provide a means whereby the Panel can seek to have its decisions enforced. However, that does not mean that the court’s function is to act as no more than a rubberstamp ... The court I believe, in nearly all cases, if asked by the Panel to enforce its decision by granting an order will do so. However, there may be very rare cases where it may not do so. I do not believe that in holding that the court has discretion to refuse to pronounce an order, in what undoubtedly would be very exceptional circumstances, undermines the functioning of the Panel".

Tuesday, 9 January 2018

Sierra Leone: draft of national corporate governance code published

The Corporate Affairs Commission has published for consultation a draft corporate governance code: see here (pdf). The Code is intended to apply to companies, partnerships, state-owned enterprises, non-governmental organisations and trade unions. It will operate on the basis of 'comply or explain' or, where legislation requires it, 'comply or else'.

UK: Revised edition of the Takeover Code published

A revised edition of the City Code on Takeovers and Mergers (aka the Takeover Code) was published yesterday: see here (pdf). Further information about the revisions made is available here (pdf).

Tuesday, 12 December 2017

UK: Government publishes its anti-corruption strategy for 2017-2022

The Government has published its anti-corruption strategy for 2017-2022: see here (pdf). The strategy identifies priorities and proposed actions. It states, amongst other things, that in the current session of Parliament a draft Bill will be published for establishing a public register of beneficial ownership of overseas legal entities where they own or purchase property in the UK or participate in central government contracts (the creation of such a register was the subject of a consultation exercise that concluded earlier this year).

Monday, 11 December 2017

UK: FRC publishes revised ISA (UK) 250 Section A - Consideration of laws and regulations in an audit

The Financial Reporting Council has published a revised edition of one of its auditing standards: ISA (UK) 250 Section A - Consideration of laws and regulations in an audit of financial statements. The revised standard - effective for audits of financial statements for periods commencing on or after 15 December 2017 - is available here (pdf). It includes a new appendix providing updated guidance on the auditor's responsibilities in respect of money laundering, terrorist financing and proceeds of crime legislation.

Friday, 8 December 2017

Burma: English translation of the new Companies Law published

A copy of the new company law framework - the Companies Law - has now been published in English by the Directorate of Investment and Company Administration: see here (pdf).

Finalising the Basel III reforms

The Basel Committee oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), has endorsed the Committee's final Basel III reforms: see here. A high level summary of the Basel III reforms is available here (pdf). A video recording of the press conference at which GHOS approval was announced is available below and the accompanying press release is available here:

Thursday, 7 December 2017

Burma: new company law framework - Companies Bill becomes law

The Myanmar Times reports that the Companies Bill has become law following its receiving the signature of the President: see here. A copy of the Bill, as approved by the Pyidaungsu Hluttaw was published in English at the end of November by the Directorate of Investment and Company Administration: see here (pdf). It seems very likely that this version of the Bill has become the new Companies Act.

Update (8 December 2017) - a copy of the new Companies Law has been published: see here (pdf).

Wednesday, 6 December 2017

UK: Scotland: 2017 edition of the Scottish Code of Good Higher Education Governance

Rather belatedly, I note publication of the 2017 edition of the Scottish Code of Good Higher Education Governance: see here (pdf). Background information is available here.

It is interesting to note - given the publicity around vice chancellor pay in England and the remuneration setting process - that the Scottish Code requires the remuneration committee " seek the views of representatives of students and staff of the Institution, including representatives of recognised trade unions, in relation to the remuneration package of the Principal and the senior executive team". This goes beyond what is (currently) expected by the UK Higher Education Governance Code (here, pdf).

Spain: CNMV annual reports on corporate governance and directors' remuneration

The ComisiĆ³n Nacional del Mercado de Valores (CNMV) has published the latest editions of its annual reports on corporate governance and directors' remuneration: see, respectively, here (pdf) and here (pdf). A summary, in English, is available here (pdf). Of particular interest, in respect of companies' compliance with the Good Governance Code (pdf), are those recommendations not widely followed: these include the recommendations on (a) live broadcasting of the shareholder meetings and (b) the formation of separate appointments and remuneration committees for the largest companies.