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) " 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.

Tuesday, 28 March 2017

UK: FCA orders compensation for market abuse

The Financial Conduct Authority has, for the first time, used powers given to it under section 384 ("Power of Authority to require restitution") of the Financial Services and Markets Act 2000, to require a listed company - Tesco plc - to pay compensation for market abuse in respect of a trading update that gave a false or misleading impression as to Tesco plc shares and certain Tesco group bonds. Compensation will be paid to purchasers of Tesco shares and bonds, equal to the 'inflated amount' for each share or bond. This amount has been determined by an independent expert appointed by the FCA. Further information is available in the final notice issued to Tesco plc (and Tesco Stores Ltd) by the FCA: see here (pdf). It is also available on the website setup by the firm, KPMG, administering the compensation scheme: see here.

Monday, 27 March 2017

India: IRDAI's Stewardship Code for Insurers

The Insurance Regulatory and Development Authority of India (IRDAI) has written to the chief executives of insurance companies to explain what is expected of insurers under IRDAI's new Stewardship Code for Insurers: see here. A draft Code was published earlier this year; IRDAI's letter suggests that a final version has been agreed but it has not yet been published on IRDAI's website.

Friday, 24 March 2017

UK: Banking Standards Board panel event on law, ethics and culture in banking

Earlier this week the Banking Standards Board organised a panel event titled 'Worthy of Trust?' Law, Ethics and Culture in Banking'. The Panel comprised the Governor of the Bank of England, the President of the New York Federal Reserve and the Lord Chief Justice of England and Wales. A recording of the event was made and is available below:

Thursday, 23 March 2017

UK: OECD report on the implementation of the OECD Anti-Bribery Convention

The OECD has published a report concerning the UK's implementation of the OECD Anti-Bribery Convention: see here (pdf). A summary of the report, produced by the OECD Working Group on Bribery, is available here. Whilst noting the strong progress that the UK has made, the report nevertheless highlights areas of concern including: the questions that remain regarding the role of the Serious Fraud Office in foreign bribery cases; and extent to which the UK is doing enough, working with the Crown Dependencies and Overseas Territories, to detect foreign bribery.

Wednesday, 22 March 2017

UK: England and Wales: FCA notices - third party rights and identification

The Supreme Court gave judgment earlier today in Financial Conduct Authority v Macris [2017] UKSC 19. A press summary is available here (pdf). At issue was whether an individual, Mr Macris, had been identified in penalty notices given to his former employer. Individuals identified in such notices are given certain 'third party' rights under section 393 of the Financial Services and Markets Act 2000, including receiving a copy of the notice and the right to make representations about its contents. Mr Macris had been JP Morgan's International Chief Investment Officer and whilst the notices did not name him they were critical of JP Morgan's Chief Investment Office in London and New York.

The Court of Appeal (see [2015] EWCA Civ 490) and Upper Tribunal (see [2014] UKUT B7 (TCC)) held that Mr Macris had been identified. The Supreme Court has held, by a majority of 4 to 1, that Mr Macris had not been identified. The lead judgment was delivered by Lord Sumption and he observed (at para. [11]):
In my opinion, a person is identified in a notice under section 393 if he is identified by name or by a synonym for him, such as his office or job title. In the case of a synonym, it must be apparent from the notice itself that it could apply to only one person and that person must be identifiable from information which is either in the notice or publicly available elsewhere. However, resort to information publicly available elsewhere is permissible only where it enables one to interpret (as opposed to supplementing) the language of the notice. Thus a reference to the “chief executive” of the X Company may be elucidated by discovering from the company’s website who that is. And a reference to “CIO London Management” would be a relevant synonym if it could be shown to refer to one person and that person so described was identifiable from publicly available information. What is not permissible is to resort to additional facts about the person so described so that if those facts and the notice are placed side by side it becomes apparent that they refer to the same person".

Tuesday, 21 March 2017

Monday, 20 March 2017

UK: reporting on payment practices and performance - secondary legislation made

Section 3 of the Small Business, Enterprise and Employment Act 2015 gave the Secretary of State the power, through secondary legislation, to require certain companies to publish information regarding their payment practices and policies, together with their performance in respect of those policies and practices. Secondary legislation was made last week and comes into force on 6 April.

Two statutory instruments were made, one for companies and one for limited liability partnerships: see, respectively, the Reporting on Payment Practices and Performance Regulations 2017 (here or herepdf) and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 (here or herepdf). Further information is available in the explanatory memorandums accompanying the Regulations: see here (pdf) and here (pdf). The Regulations contain the threshold conditions that must be met before a company, or limited liability partnership, becomes subject to these new reporting obligations.

UK: culture in financial institutions - a speech by the chief executive of the Financial Conduct Authority

Andrew Bailey, the Chief Executive of the Financial Conduct Authority, delivered a speech last week at the Hong Kong Monetary Authority's inaugural conference for independent non-executive directors: see here. The speech is interesting not least because of Mr Bailey's comments on the development of corporate governance over the past 25 years. This period began with the dominance of agency theory in shaping the role and definition of governance; governance is now being shaped by a substantial broadening of the public interest in the behaviour of firms.


The HKMA has recently written to bank chief executives setting out further expectations regarding culture and governance: see here (pdf).

Friday, 17 March 2017

Europe: a statute for social and solidarity based enterprise

A report exploring the legal frameworks within Member States governing social and solidarity based enterprises has been published: see here (pdf). The study was commissioned by the European Parliament’s Committee on Legal Affairs. The report recommends the introduction of legislation in order to permit the recognition of entities called European Social Enterprises (or ESEs).  Such entities would be those meeting qualifying conditions, and would include companies, cooperatives and foundations. The suggested conditions include having an exclusive (or dominant) community or social purpose as well as constraints on profit distribution.

Europe: the 'right to be forgotten' and company registers

The Court of Justice of the European Union gave judgment earlier this month in Camera di Commercio, Industria, Artigianato e Agricoltura di Lecce v Salvatore Manni (C-398/15). The court held that there was no 'right to be forgotten' in respect of information in company registers. It was, however, open to Member States to provide for restricted access to such data after a sufficiently long period has elapsed from the date of the company's dissolution. A summary of the decision is available here (pdf).

Thursday, 16 March 2017

UK: OPBAS and updated Money Laundering Regulations

The Government yesterday announced the creation of a new organisation: the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), as part of work updating the Anti-Money Laundering (AML) supervisory regime: see here. OPBAS will be hosted by the Financial Conduct Authority and will be funded through a fee paid by professional body supervisors. In general terms, the role of OPBAS will be to work with the supervisors to ensure compliance with the Anti-Money Laundering Regulations. The Government is seeking views on the precise mandate and powers of OPBAS: see here (pdf). It is also seeking views on draft Money Laundering Regulations 2017 that were also published yesterday: see here.

Wednesday, 15 March 2017

Europe: Parliament approval for Shareholders' Rights Directive

The European Parliament, in a Plenary session yesterday, approved the proposed Shareholders' Rights Directive: see here. The resolution was passed by 646 votes to 39 (there were 13 abstentions). The Directive now requires approval by the EU Council of Ministers. Further information about the Directive, in the form of FAQs published by the European Commission following the vote, is available here. The Directive contains provisions designed to make it easier for shareholders to exercise their voting rights; it also sets out a framework for a shareholder 'say on pay' vote in respect of remuneration; and it also sets out provisions for greater disclosure by institutional shareholders and asset managers (largely reflecting the provisions found in the stewardship codes that are being introduced across the world, including the UK).

Update (17 March 2017) - the European flag now appears; the UK flag inadvertently appeared at first.

Tuesday, 14 March 2017

UK: The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017

The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 were made earlier this month and come into force on 31 March: see here or here (pdf). The Regulations have several purposes including the extension of new gender pay gap reporting to the public authorities specified in Schedule 2 of the Regulations. Further information is available in the accompanying explanatory memorandum: see here (pdf).

Monday, 13 March 2017

UK: The Insolvency (England and Wales) (Amendment) Rules 2017

The Insolvency (England and Wales) (Amendment) Rules 2017 were laid before Parliament today and come into force on 6 April: see here or here (pdf). Their purpose is to amend the Insolvency (England and Wales) Rules 2016 in order to make minor corrections and clarifications. Further information is available in the accompanying explanatory memorandum is available here (pdf).

Friday, 10 March 2017

UK: Criminal Finances Bill - second reading in the House of Lords

The Criminal Finances Bill was introduced in the House of Commons last year and is now proceeding through the House of Lords. Yesterday the Bill received its second reading: see here. The Bill contains, amongst other things, provisions that will introduce a new corporate offence of the failure to prevent the facilitation of tax evasion. Further background information about this new offence is available here. Draft Government guidance is also available: see here (pdf).

Second reading provided an opportunity for general debate and one topic dominated: the transparency of beneficial ownership information in the Crown Dependencies and British Overseas Territories, and the extent to which the Government should through legislation take action to bring about more rapid improvements in the information that is publicly available.

Thursday, 9 March 2017

UK: the governance of charities - updated HMRC guidance on the 'fit and proper test' for charity trustees and directors of corporate charities

The Finance Act 2010 (section 30 and schedule 6) introduced a definition for tax purposes of charities and other organisations entitled to UK charity tax reliefs, including a 'management condition' that is satisfied where the managers of a body of persons or trust are 'fit and proper persons to be managers of the body or trust'. The legislation does not define or explain what is meant by 'fit and proper'. HMRC does, however, provide guidance and an updated version of this guidance was published today: see here.

Wednesday, 8 March 2017

Mauritius: launch of new corporate governance code

The National Committee on Corporate Governance officially launched Mauritius's new corporate governance code last month. A copy of the code, which operates on the basis of 'apply and explain', is available here (pdf).

Tuesday, 7 March 2017

UK: England and Wales: the Bhullar family derivative claim litigation

In the early summer of 2015, Mr Justice Morgan, in Bhullar v Bhullar [2015] EWHC 1943 (Ch), granted permission to continue certain parts of a derivative claim under Part 11 of the Companies Act 2006.  The case involved a family well known to company lawyers (see [2003] EWCA Civ 424). The claim was heard in January this year and the next episode in the story - the judgment Bhullar v Bhullar [2017] EWHC 407 (Ch) - published a few days ago. The trial judge held that the claim for equitable compensation for breach of fiduciary duty was successfully made.

Monday, 6 March 2017

UK: FCA consults on reforms to the availability of information in the UK equity IPO process

The Financial Conduct Authority has published a consultation paper titled Reforming the availability of information in the UK equity IPO process: see here (pdf). A key objective of the proposed reforms is to restore the centrality of the prospectus document in the IPO process.