Friday, 19 May 2017

Japan: TSX white paper on the corporate governance of listed companies

The Tokyo Stock Exchange has published the latest edition of its corporate governance white paper: see here (pdf). The white paper - that is what it is called in the English version, although it's not a white paper in the more traditional sense that this term is used in the UK - presents a very comprehensive analysis of listed companies' corporate governance practices as well their compliance with the 2015 corporate governance code.

Thursday, 18 May 2017

UK: Corporate governance and the Conservative Party's manifesto

The Conservative Party published its election manifesto today: see here (pdf). This sets out several commitments concerning corporate governance - under the banners of "fairer corporate governance" and "better corporate governance" - that we can expect to see in a white paper when/if the Party is re-elected to Government (if the election had not been called, it's likely that we would have had the white paper by now, following on from the green paper last autumn). There are also commitments to reform the rules on takeovers and mergers.

With regard to governance, there appears to be a commitment to introduce through legislation an annual binding vote on remuneration (the wording in the manifesto is not as clear as it could be); it is also said that companies will be required to publish pay ratios. Change to the law is also promised to require listed companies to introduce a mechanism for greater employee voice on the board. Several options for achieving this are given including having an employee nominated director, creating an employee advisory council or assigning responsibility for employee representation to one of the non-executive directors. There is also a pledge to consult on how to strengthen the governance of private companies.

EU: Commission begins company law consultation

The European Commission has begun a consultation seeking views on how to promote the use of online tools throughout a company's life, as well as the problems that currently exist in cross-border restructuring and operations (including conflict of law rules): see here.

Wednesday, 17 May 2017

UK: 'Strengthening accountability' - PRA publishes updated policy statements

The Prudential Regulation Authority has published updated supervisory statements in respect of the accountability framework for banking and insurance (including the Senior Managers and Certification regime): see here.

Tuesday, 16 May 2017

Pakistan: Senate passes the Companies Bill, 2017

The SECP has announced that Senate has approved the Companies Bill, 2017: see here (pdf). This follows approval from the Senate Standing Committee on Finance, Revenue, Economic Affairs, Statistics and Privatization earlier this month and approval from the National Assembly in February. The Bill, once enacted and in force, will replace the Companies Ordinance, 1984.

Monday, 15 May 2017

UK: Pre-Pack Pool publishes its first annual report

The Pre-Pack Pool has published its first annual report: see here (pdf). The Pool was launched in November 2015, in response to one of the key recommendations in the Graham Review. The Pool was set up to provide  an independent review of proposed connected party pre-pack transactions before they are completed, thereby providing an assurance for creditors.

The report notes that between 1 November 2015 and 31 December 2016, the Pool received for review 53 proposed connected party pre-pack purchases. The majority of these received a 'not unreasonable' opinion; six received a 'case not made' opinion. The report also notes that the number of pre-packs has fallen faster than the overall decline in administrations, and that the number of connected party purchases has also fallen.

Australia: extending crowd-sourced equity funding to proprietary companies

The Treasury is seeking views on draft legislation the purpose of which is to extend crowd-sourced equity funding to proprietary companies. A copy of the Corporations Amendment (Crowd-Sourced Funding for Proprietary Companies) Bill 2017 is available here (pdf). An explanatory memorandum is available here (pdf) and further background information is available here.

Friday, 12 May 2017

Bhutan: the Companies Act 2016 and the pursuit of gross national happiness

A copy (in English) of the Companies Act 2016, which contains Bhutan's new company law framework, is now available: see here (pdf). The influence of the UK's Companies Act 2006 can be seen: compare, for example, sections 161 and 162 of the 2016 Act with section 172 of the UK's Companies Act 2006. The differences between the UK and Bhutan become apparent, however, when looking at section 163 of the 2016 Act, which requires (to quote the English translation), the establishment of "...a Code of Conduct for the governance of companies which shall promote those conditions that will enable the pursuit of Gross National Happiness in accordance with Article 9, section 2 of the Constitution of the Kingdom of Bhutan".

Thursday, 11 May 2017

New Zealand: new edition of the NZX corporate governance code published

NZX has published an updated edition of its corporate governance code: see here (pdf). The Code will apply to all NZX Main Board listed issuers for reporting periods ending on and after 31 December 2017. For further information, see here and here.

Wednesday, 10 May 2017

Thailand: SEC publishes new governance code and new code for institutional investors

Earlier this year the Securities and Exchange Commission published a new edition of its Corporate Governance Code for Listed Companies as well as a new Investment Governance Code for Institutional Investors: see, respectively (both in English), here (pdf) and here. It is interesting to note the emphasis placed upon innovation and responsible business in the governance code. The new code for institutional investors contains most (if not all) of the principles that are becoming commonplace in such codes (e.g., disclosure; monitor and engage; have policies on engagement and the exercise of voting rights; manage conflicts of interest; act collectively where appropriate).

Tuesday, 9 May 2017

Europe: freedom of establishment and cross-border conversions

Advocate-General Kokott delivered her opinion last Thursday in Polbud-Wykonawstwo sp. z o.o., in liquidation (Case C-106/16). The provisional text of the opinion is available here.

The case concerned a Polish private limited company that wanted to transfer its legal seat to Luxembourg. The mechanism for doing so under Polish law required the company to be removed from the Polish commercial register, the process for which also demanded that the company was wound-up.  Did this requirement for winding-up undermine freedom of establishment under the Treaty on the Functioning of the European Union?  Yes, according to the Advocate-General; to quote directly from her opinion:
"In the case where a company incorporated under the law of one Member State has actually established itself, or intends to establish itself, in another Member State for the purpose of carrying on genuine economic activity there, and converts itself into a company governed by the law of the latter Member State, the application of national legislation under which the removal of that company from the commercial register of the Member State of origin is subject to the condition that that company must first be wound up after having been liquidated restricts the freedom of establishment".

Monday, 8 May 2017

UK: The Criminal Finances Act 2017

A copy of the Criminal Finances Act 2017, which became law last month, has now been published: see here or here (pdf). Part 3 contains two new corporate offences: the failure to prevent the facilitation of UK tax evasion offences (section 45); and the failure to prevent the facilitate of foreign tax evasion offences (section 46). It is for the Treasury to determine when Part 3 will be brought into the force (section 58).

Germany: new edition of governance code published in Federal Gazette

A copy of the new edition of Germany's Corporate Governance Code has been published in the Federal Gazette: see here and here (pdf). An English translation will be available soon. For background information about the new Code, see here.

Friday, 5 May 2017

Pakistan: Companies Bill, 2017 approved by Senate Standing Committee

The Senate Standing Committee on Finance, Revenue, Economic Affairs, Statistics and Privatization has approved, with changes, the Companies Bill, 2017. The Bill, which was passed by the National Assembly in February, now requires Senate approval. Further information is available in an announcement from the SECP: see here (pdf). The Bill, once enacted and in force, will replace the Companies Ordinance, 1984.

Thursday, 4 May 2017

BCBS publishes twelfth update on Basel III implementation

The Basel Committee on Banking Supervision has published its twelfth update on the implementation of the Basel III regulatory reforms: see here (pdf). The update notes, amongst other things, that all of the 27 jurisdictions comprising the Basel Committee have final risk-based capital rulesLCR regulations and capital conservation buffers in force.

Wednesday, 3 May 2017

UK: FCA policy statement (and final rules) - remuneration in CRD IV firms

The Financial Conduct Authority has published a policy statement explaining the changes its has made to its Handbook in order to implement guidelines from the European Banking Authority on the implementation of the remuneration requirements in the Capital Requirements Directive IV: see here (pdf).

Tuesday, 2 May 2017

FSB publishes thematic peer review report of corporate governance

The Financial Stability Board has published the results of its thematic peer review of corporate governance, looking at the implementation of the G20/OECD Principles of Corporate Governance by FSB member jurisdictions: see here (pdf). The report makes twelve recommendations, including enhancing the effectiveness of whistle-blowing and the policies that protect whistle-blowers.

Monday, 1 May 2017

UK: Scotland: good college governance consultation paper

The Scottish Government has published Good College Governance, a consultation paper in which it seeks views on two of the recommendations made in the College Good Governance Task Group Report: see here (pdf).

Friday, 28 April 2017

UK: The Criminal Finances Act 2017

The Criminal Finances Bill received Royal Assent yesterday, becoming the Criminal Finances Act 2017: see here and here. A copy of the Act is not yet available, but documents prepared to accompany the Bill's passage through Parliament, together with earlier versions of the Bill, can be found here. There is further background information here. Part 3 of the Act introduces a new corporate criminal offence: the failure to prevent the facilitation of tax evasion.

Thursday, 27 April 2017

UK: preliminary announcements and the role of auditors

The Financial Reporting Council has today published a discussion paper on the use and value of companies' preliminary announcements of annual results and the role of auditors in respect of such announcements: see here (pdf).

Wednesday, 26 April 2017

Malaysia: new edition of the Malaysian Corporate Governance Code published

The Securities Commission has today published a new edition of the Malaysian Code on Corporate Governance: see here (pdf). An overview of the changes made in the new edition is available here and there are some FAQs here. The new Code has moved away from 'comply or explain' towards an approach described as CARE: comprehend, apply and report.

Tuesday, 25 April 2017

Japan: updating the Stewardship Code - draft published for public comment

The Council of Experts on Japan’s Stewardship Code has published for public comment an updated edition, in English, of Japan's Stewardship Code: see here (pdf). A copy of the draft Code in Japanese is available here. The deadline for submitting comments, in English or Japanese, is 8 May: see here for further information.

Monday, 24 April 2017

UK: cyber security, non-executive directors and investors

Nausicaa Delfas, Acting Chief Operating Officer at the Financial Conduct Authority, today delivered a speech titled "Expect the unexpected - cyber security - 2017 and beyond" at the Financial Information Security Network: see here. Of interest is what was said about the role of non-executive directors and investors. To quote directly from the speech:

Then there is also the role of the Non Executive Directors (NEDs) – using them to help to share experiences from other businesses, and to ask challenging questions of their board colleagues, and of the senior leaders within an organisation. In 2014 the UK Government released guidance for NEDs on the types of questions that should be asked, and we very much support this advice. NEDs should be able to satisfy themselves that an organisation is managing cyber risk effectively; the Institute of Directors specifically calls for NEDs to satisfy themselves 'that systems of risk management are robust and defensible'.

Another development we are seeing is security being taken beyond the boardroom, and becoming an investor led conversation. We are seeing the emergence of a number of institutional investors now questioning boards as to how they effectively manage this risk, which in turn is driving increased focus in the Board room. We would encourage investors to ask questions about cyber defences, to use a firm’s cyber maturity as a key indicator of resilience, and to push firms to improve in this space. We have seen how cyber can have an impact on a firm beyond the operational disruption caused, extending into equities pricing, and harming the balance sheet. It’s a key consideration and we will be considering how investors can be better equipped to ask the right questions."

Thursday, 20 April 2017

Singapore: MAS consults on the introduction of a new corporate structure - the variable capital company

Last month the Monetary Authority of Singapore began a consultation on the legal framework for a new corporate structure for collective investment schemes: the variable capital company. These new companies will have their own legal framework, set out in the Singapore Variable Capital Companies Act, and will have the ability to create sub-funds with segregated assets and liabilities. Directors will be subject to a fit and proper persons test. For further information, see the consultation paper (herepdf) and the draft Variable Capital Companies Act (herepdf).

Wednesday, 19 April 2017

UK: ICAEW / ICAS technical guidance - realised and distributable profits under the Companies Act 2006

The ICAEW and ICAS have published an updated edition of their technical note on realised and distributable profits under the Companies Act 2006: see here (pdf).

Tuesday, 18 April 2017

UK: FCA publishes mission and business plan

The Financial Conduct Authority today published, for 2017/18, its mission and business plan: see, respectively, here (pdf) and here (pdf). Amongst the cross-sector priorities identified is the culture and governance of firms. Within this area, work will continue developing an accountability regime for all regulated firms. The FCA wants this new regime (to quote directly from the business plan) "...to be simple practicable for firms to understand and implement, and for the FCA to oversee and regulate. We plan to tailor the new regime to reflect the different risks, impact and complexity of firms".

Friday, 14 April 2017

UK: England and Wales: capital gains tax and the state or nature of shares

The ICLR has provided a summary for the Court of Appeal decision Blackwell v HM Revenue & Customs [2017] EWCA Civ 232: see here. The decision is an interesting one concerning the nature of shares for the purposes of capital gains taxation. To quote directly from the ICLR summary:
The state or nature of the shares was to be identified for the purposes of section 38(1)(b) of the 1992 Act by reference to the rights and obligations which those shares conferred or imposed on a shareholder pursuant to the company’s articles of association, and the state or nature of the asset was unaffected by the making or subsequent discharge of the relevant agreement because it was a purely personal agreement between the taxpayer and a third party. The agreement imposed inhibitions on the taxpayer’s exercise of his rights as a shareholder, but the nature and state of the asset constituted by the shares remained the same throughout. It was not uncommercial to apply a juristic analysis of the intangible asset constituted by shares in a company for the purpose of ascertaining its state or nature at any particular time; and to draw a distinction between the rights and obligations conferred and imposed by the shares themselves and personal undertakings by a shareholder to a third party which might restrict the exercise of those rights was both businesslike and legally correct"
.

Thursday, 13 April 2017

UK: PRA supervisory statement on remuneration

The Prudential Regulation Authority has published an updated supervisory statement on remuneration: see here (pdf). The purpose of the statement is to set out the expectations of the PRA on how firms should comply with the Remuneration Part of the PRA Rulebook.

Wednesday, 12 April 2017

Australia: corporate insolvency law reforms

The Treasury has published an exposure draft of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017: see here (pdf). The purpose of the Bill is to make some significant changes to the corporate insolvency regime, including: (a) the introduction of a safe harbour regime for company directors from personal liability for insolvent trading in the context of a restructuring; and (b) making unenforceable, where a company is being restructured, 'ipso facto' clauses in contracts which permit one party to terminate or modify the contract due to an insolvency event.

Further information is available in the draft explanatory memorandum accompanying the Bill: see here (pdf).

Tuesday, 11 April 2017

UK: FCA discussion paper on distributed ledger technology

The Financial Conduct Authority has published a discussion paper on distributed ledger technology (DLT): see here (pdf). To quote directly from the discussion paper, the FCA has published the paper in order "to start a dialogue on the potential for future development of DLT in the markets we regulate. We are particularly interested to explore where the balance of risk and opportunities may lie in relation to DLT". The FCA also notes that there has been "a broad range of reactions to DLT. We remain aware that exponents of new technologies, particularly vendors, will often hype or oversell new technologies. Equally, detractors will remain sceptical about their capabilities. One of the purposes of this DP is, therefore, to invite debate and clarify what the real benefits and risks of DLT may be, and how they might impact our objectives".

Monday, 10 April 2017

UK: the new charity governance code - an update

A consultation began last year in respect of proposed changes to the code of governance for the voluntary and community sector: see here. The steering group leading the review proposed, amongst other things, that the code should be renamed the "Charity Governance Code". The consultation period has now closed and the steering group is now drafting the new code. Meanwhile, a summary of the consultation responses has been published: see here (pdf).

Friday, 7 April 2017

Europe: ESMA report on shareholder identification and communication systems

The European Securities and Markets Authority has published the results of a survey of the harmonisation of national regulatory frameworks for shareholder identification and communication systems: see here (pdf). The report is intended to assist the European Commission in respect of the implementing acts needed under Article 3 of the new Shareholder Rights Directive (the latter was approved by the Council of the European Union earlier this week: see here and here, pdf).

Thursday, 6 April 2017

UK: The Statutory Auditors and Third Country Auditors Regulations 2017

The Statutory Auditors and Third Country Auditors Regulations 2017 were made on the 30th of March and laid before Parliament yesterday: see here or here (pdf). The Regulations continue the UK's implementation of the EU Statutory Audit framework (Directive 2014/56/EU and Regulation 537/2014) in respect of the audit of limited companies and other entities classified as public interest entities. An explanatory memorandum is available here (pdf).

Wednesday, 5 April 2017

UK: Creating a register of beneficial ownership for overseas companies owning property in the UK

The Government has today published a call for evidence as part of its plan to introduce a register of beneficial ownership for overseas companies (and other legal entities) owning property in the UK: see here (pdf). The register will also apply to entities wishing to participate in central government procurement.

UK: BEIS Committee publishes its corporate governance inquiry report

The Business, Energy and Industrial Strategy Committee published its corporate governance inquiry report this morning: see here or here (pdf). A summary of the report's conclusions and recommendations is available here.

Some of the recommendations are addressed to the Financial Reporting Council (FRC) and include, for example, suggested amendments to the UK Corporate Governance Code to require companies to report on how they ensure they meet section 172 of the Companies Act 2006; extending the FRC's enforcement powers; and reviewing the UK Stewardship Code to provide more explicit guidance on what constitutes high quality engagement.

Amongst the recommendations addressed to the Government is one advocating the creation of a target that from May 2020 at least half of all new appointments to senior and executive management level positions in listed companies should be women.

Tuesday, 4 April 2017

OECD publishes new edition of its Corporate Governance Factbook

The OECD has today published the 2017 edition of its Corporate Governance Factbook: see here (pdf). The factbook covers 47 jurisdictions and provides information in four areas: (1) the corporate landscape (including the ownership structure of listed companies); (2) the corporate governance framework; (3) the rights of shareholders and key ownership functions; and (4) the board of directors.

The Factbook contains much of interest including the extent to which the 'comply or explain' approach has been adopted internationally as well as the increasing significance of jurisdictions with concentrated forms of ownership.

Monday, 3 April 2017

South Africa: unalterable provisions of the Companies Act and the appointment of proxies

Judgment was given last month by the Supreme Court of Appeal in Richard Du Plessis Barry v Clearwater Estates NPC and others (187/2016) [2017] ZASCA 11: see here or here (pdf). A press summary is available here (pdf). At issue was the validity of a provision in a company's memorandum of incorporation requiring notice to be served at least 48 hours before a general meeting where a shareholder wished to appoint a proxy.

Swain JA delivered the judgment (Leach, Willis, Mbha JJA and Schippers AJA concurring) and held that this provision was void because it was inconsistent with an unalterable provision of the Companies Act 2008 - section 58 - which stated that a proxy could be appointed at any time. It had been argued before the court that such a conclusion would impose practical difficulties on companies, to which Swain JA responded (para. [22]):
It was submitted that should a corporation be unable to regulate the submission of proxies by the imposition of a deadline before a meeting, general meetings of corporations, particularly large corporations, will become unworkable. The situation is postulated of a large company with thousands of shareholders being hamstrung by the submission of thousands of proxies on the day of a scheduled meeting ... If these practical difficulties are real and not simply apparent, their resolution lies not in a strained interpretation of the Act, but by legislative intervention".

Friday, 31 March 2017

UK: FRC budget and plan for 2017/18

The Financial Reporting Council has published its plan and budget for 2017/18: see here (pdf). Its priorities include a comprehensive review (and update) of the UK Corporate Governance Code and work to improve audit quality.

Thursday, 30 March 2017

UK: The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2017

The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2017 was laid before Parliament today and comes into force on 3 January 2018: see here or here (pdf). The purpose of the Order is - to quote directly from the accompanying explanatory memorandum (herepdf) - "to allow regulated firms to provide more help and guidance to their customers without inadvertently crossing the boundary into regulated financial advice".

Wednesday, 29 March 2017

Latvia: corporate governance in Latvia - an OECD report

The OECD has published the review of corporate governance in Latvia that it undertook as part of Latvia's accession to OECD membership in 2016: see here.