Friday, 28 June 2013

Australia: market manipulation and the meaning of 'artificial price'

The High Court - the highest court in Australia's judicial system - gave judgment yesterday in Director of Public Prosecutions (Cth) v JM [2013] HCA 30 (on appeal from [2012] VSCA 21). This is an important and very interesting decision concerning section 1041A of the Corporations Act 2001. Section 1041A prohibits the carrying out, or taking part in, a transaction that has or is likely to create an artificial price for trading in financial products on a financial market operated in Australia.

The court unanimously held that section 1041A covered transactions the sole or dominant purpose of which was to set or maintain the price at a particular level. In doing so it rejected the view that 'artificial price' should be construed more narrowly to refer to market prices resulting from practices such as cornering and squeezing (as considered in the American decision Cargill Inc v Hardin [1971] USCA8 443). The court stated (at paras. [71] and [72]):
The forces of "genuine supply and demand" are those forces which are created in a market by buyers whose purpose is to acquire at the lowest available price and sellers whose purpose is to sell at the highest realisable price. The references in s 1041A to a transaction which has, or is likely to have, the effect of creating an "artificial price", or maintaining the price at a level which is "artificial", should be construed as including a transaction where the on-market buyer or seller of listed shares undertook it for the sole or dominant purpose of setting or maintaining the price at a particular level. It is, however, important to emphasise that whether there are other kinds of transaction which have the effect of creating or maintaining an artificial price in a market for listed shares is not, and, given the terms of the case stated, should not be, decided.

The price that results from a transaction in which one party has the sole or dominant purpose of setting or maintaining the price at a particular level is not a price which reflects the forces of genuine supply and demand in an open, informed and efficient market. It is, within the meaning of s 1041A, an "artificial price". The offer to supply or acquire of the kind described is made at a price which is determined by the offeror's purpose of setting or maintaining the price. It is not determined by the offeror's purpose, if buying, to minimise, or, if selling, to maximise, the price paid, and it is not determined by the competition between other buyers whose purpose is to minimise the price and other sellers whose purpose is to maximise the price. If the offer results in a transaction, that is a transaction which can be characterised as at least likely to have the effect of creating or maintaining an artificial price for trading in the shares."

A summary of the decision is available here (pdf). Background materials - including the parties' written submissions - are available here.

UK: financial regulation reform - transferring consumer credit regulation to the Financial Conduct Authority

Earlier this year HM Treasury and the Department for Business, Innovation and Skills published a consultation paper setting out proposals to transfer the regulation of consumer credit to the new Financial Conduct Authority: see here (pdf). A summary of responses has been published - see here (pdf) - and amended draft legislation laid before Parliament on 25 June.

Cyprus: ICFCBS publishes interim report

The Independent Commission on the Future of the Cyprus Banking Sector was formed in 2012 by the Central Bank of Cyprus and asked to make recommendations to strengthen the banking sector, improve supervision and promote competition. Earlier this week the Commission published its interim report: see here (pdf). An executive summary is available here (pdf). The interim report contains many recommendations including some relating to the governance of banks, having identified many governance failures including boards where the culture was one of deference rather than challenge (see, in particular, chapter 6).

UK: BIS publishes corporate responsibility consultation paper

The Department for Business, Innovation and Skills has published a consultation paper titled Corporate responsibility - a call for views: see here (pdf). The paper will contribute to work being undertaken the purpose of which is to produce, by the end of 2013, what is described as a "framework for action on corporate responsibility".

Belgium: no need to update 2009 Code says Code Committee

In the light of a study conducted by Allen and Overy, and meetings with company chairman and chief executives, the Belgium Corporate Governance Committee has decided that there is no need to update its corporate governance code, last updated in 2009: see here. A copy of the Allen and Overy study, which compares Belgium's code with those of its neighbours, is available here (pdf).

Thursday, 27 June 2013

Europe: Commission proposes new framework for European Long-Term Investment Funds

The European Commission has published proposals to create a new investment fund framework: European Long-Term Investment Funds. For further information see: press release | FAQs | text of the proposed Regulation (pdf) | impact assessment (pdf) | impact assessment - executive summary (pdf) |.

UK: FRC publishes feedback statement in respect of disclosure framework discussion paper

Last year the Financial Reporting Council published a discussion paper Thinking about financial reporting disclosures in a broader context: see here (pdf). The purpose of the paper was to seek views on a 'road map' for the development of a disclosure framework for financial reporting. A feedback statement has now been published: see here. The statement notes broad support amongst respondents for a disclosure framework and for the content of the FRC's paper. The FRC also notes that the IASB should take the lead in the development of a disclosure framework and in this regard several recommendations are made.

UK: Scotland: Court of Session considers meaning of 'company' in investment syndicate constitution

Lord Hodge delivered his opinion yesterday in Symphony Equity Investments Ltd. v Shakeshaft [2013] CSOH 102. In doing so he was required to interpret an investment syndicate's constitution, one of the terms of which required a majority of the syndicate's members to approve in advance investments over a certain limit made in a 'single investment company'. The meaning of the word 'company' was disputed. Lord Hodge held that 'company' referred to a single, individual company with its own legal personality. There was, he observed, no ambiguity in the phrase 'single investee company' and he rejected the argument that 'company' should be capable of referring to an undertaking, such as a corporate group, where activities were carried out by different companies. The constitution, he noted, had been drafted by skilled solicitors with extensive commercial experience, who should be taken as being very familiar with the principle of separate corporate personality. Moreover, had they wished to restrict the board's power of investment in companies within a group, they could have chosen words which clearly achieved that result.

Wednesday, 26 June 2013

UK: FPC publishes financial stability report

The Financial Policy Committee has published its first financial stability report under the new financial regulatory framework that came into existence earlier this year: see here. An executive summary, containing the recommendations that the FPC has made to the Prudential Regulation Authority and Financial Conduct Authority, is available here (pdf). Amongst other things, the FPC has requested that the PRA and FCA provide, by September 2013,
an assessment of the vulnerability of borrowers and financial institutions to sharp upward movements in long-term interest rates and credit spreads in the current low interest rate environment. The PRA has also been asked to continue working with banks and building societies to ensure the greater consistency and comparability of their Pillar 3 disclosures, including reconciliation of accounting and regulatory measures of capital.

Stock exchange corporate governance indices

The International Finance Corporation, a member of the World Bank Group, has published a paper reviewing the different approaches used by stock exchanges in building indices including corporate governance: see here (pdf). Indices in the following countries are considered: Brazil, Italy, Peru, South Korea, China, Mexico, South Africa and Turkey.

Financial Stability Board meeting in Basel

The Financial Stability Board met in Basel earlier this week. A summary of the meeting is available here (pdf). The Board discussed the following: vulnerabilities in the financial system; resolution of financial institutions; global systemically important insurers; over-the-counter derivatives reforms; LIBOR and other financial benchmarks; shadow banking; accounting and auditing; and compensation practices.

With regard to LIBOR and benchmarks, the FSB has established a steering group of regulators and central banks in order to ensure the consistency of the reviews of benchmarks being undertaken. The group is being chaired by Martin Wheatley (of the UK's Financial Conduct Authority) and Jeremy Stein (of the US Federal Reserve Board).

UK: United Kingdom Corporate and Individual Tax and Financial Transparency Bill 2013-14

The United Kingdom Corporate and Individual Tax and Financial Transparency Bill 2013-14 received its first reading in the House of Commons last week: see here. The Bill, a Private Members' Bill, was sponsored by the Rt. Hon. Michael Meacher MP. A copy of the Bill has not yet been published, but the Hansard record for the Bill's first reading describes the Bill's purpose as follows: "... to require disclosure of various financial information by large companies; to provide for disclosure of beneficial ownership; to require banks to disclose to Her Majesty’s Revenue and Customs the identity of certain companies holding bank accounts; to require the publication of the tax returns of individuals with an income of more than a certain level and the largest two hundred and fifty UK companies; and for connected purposes".

Japan: independent directors on TOPIX500 company boards

The Tokyo Stock Exchange has published the results of its survey of the number of independent directors on TOPIX500 company boards: see here. The survey found that over 70% of companies had at least one independent director.

Tuesday, 25 June 2013

UK: Remuneration report reforms - legislation published

A final draft of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 was laid before Parliament yesterday and comes into force on 1 October 2013: see here (pdf). The Regulations set out, amongst other things, new contents for the remuneration report that quoted companies are required to publish under section 420 of the Companies Act 2006. Guidance on the new requirements, to be published by the GC100, is expected in September.

IOSCO publishes principles for the regulation of exchange traded funds

The International Organisation of Securities Commissions has published its final report Principles for the Regulation of Exchange Traded Funds: see here (pdf). The principles relate to exchange traded funds that are organised as collective investment schemes and do not cover other exchange traded products.

Singapore: SGX consults on proposed circuit breaker

The Singapore Exchange has published for consultation revised proposals for a circuit breaker for the SGX-ST market: see here (pdf). Unlike an earlier proposal published in 2011, the new proposal is for a circuit breaker that would be constantly updated to reflect intraday trading activity.

Isle of Man: Bribery Act 2013 published

A copy of the Bribery Act 2013, which received Royal Assent last month, has been published: see here (pdf). The Act is largely modelled on the UK's Bribery Act 2010.

Europe: ESRB recommendation on intermediate objectives and instruments of macro-prudential policy

The European Systemic Risk Board recommendation regarding intermediate objectives and instruments of macro-prudential policy (ESRB/2013/1) has been published in the Official Journal of the European Union: see here (pdf).

Monday, 24 June 2013

France: AFEP-MEDEF corporate governance code for listed companies - revised edition published

A revised edition of the AFEP-MEDEF corporate governance code for listed companies has been published and is available, in French, here (pdf). The press release accompanying publication of the new code is available here (pdf). A 'say on pay' vote is being given to shareholders in respect of executive directors' remuneration and companies' compliance with the code will be monitored by a new committee. The new code also seeks to improve companies' 'comply or explain' disclosures.

Germany: Code Commission rejects statutory 'say on pay' shareholder vote

Earlier this month the Government Commission on the German Corporate Governance Code held its annual corporate governance code conference. A press release published after the conference, and available in English here (pdf), reports that the Commission reaffirmed its view that a statutory, binding 'say on pay' vote should not be introduced.

UK: IFRS, the 'true and fair' view and the Companies Act 2006

Im 2011, the Financial Reporting Council published a paper in which it reiterated the importance of the 'true and fair' requirement under IFRS and UK GAAP: see here (pdf). In doing so, the FRC relied heavily upon a legal opinion written in 2008 by Martin Moore QC: see here (pdf). A more recent legal opinion, prepared by George Bompas QC at the request of a group of investors including the Local Authority Pension Fund Forum, raises questions about the FRC's position and calls for Mr Moore's opinion to be reconsidered: see here (pdf). Mr Bompas concludes his opinion: "It is unsatisfactory that, in such a fundamental matter as the goal to be reached by those producing statutory accounts, there should be any possible confusion as to the goal. For reasons given in this Opinion I believe that there is that possible confusion".

UK: FRC publishes statement in response to the final report of the Parliamentary Banking Standards Commission

The Financial Reporting Council has issued a statement in response to the final report published last week by the Parliamentary Commission on Banking Standards: see here. The FRC states, amongst other things, that it is not convinced by the proposal to remove shareholder primacy in respect of banks, stating that this may affect their ability to attract capital.

Friday, 21 June 2013

Australia: CAMAC begins equity crowdfunding inquiry

The Corporations and Markets Advisory Committee has begun an inquiry concerning crowd sourced equity funding in order to consider the efficacy of the current regulatory framework (principally the Corporations Act 2001 and Australian Securities and Investments Commission Act 2001): see here (pdf).

France: AMF publishes its strategy for 2013-2016

AMF, the financial markets regulator, has published for comment its strategy for 2013-2016, under the title 'Making finance meaningful again': see here (pdf).

UK: BIS Committee publishes 'Women in the workplace' report

The House of Commons Business, Innovation and Skills Select Committee published its report Women in the Workplace yesterday. The report is divided into three volumes: volume one contains the main report (see here and here, pdf); volume two contains oral and written evidence (see here and herepdf). volume three contains additional written evidence (see here and herepdf). Chapter seven of the report considers women in senior positions, including on company boards and in this regard the Committee concludes:

"While we support the voluntary approach of Lord Davies, we are concerned that the number of women appointed to FTSE 100 boards has decreased since December 2012. The Government has put on record its intention to take tougher measures, in the form of quotas, if the voluntary approach does not work. The Government needs to set out clear figures, and a timescale, to outline to businesses what will be done if those targets are not achieved."

Thursday, 20 June 2013

UK: FRC prohibits direct assistance by internal audit staff on the external audit team

The Financial Reporting Council has decided to prohibit external auditors from using internal audit staff as 'direct assistance' members of the audit team: see here. The prohibition comes into effect for audits of financial statements for periods ending on or after 15 June 2014. The prohibition is introduced by way of amendments to International Standard on Auditing (UK and Ireland) 315 and International Standard on Auditing (UK and Ireland) 610, revised editions of which are available here (pdf) and here (pdf).

Europe: new credit rating agency rules come into force

New rules governing credit rating agencies came into force today. For further information see: Commission press release | FAQs. The legislation is available here. Note, too, that earlier this week the European Securities and Markets Authority published its final report Guidelines and Recommendations on the Scope of the CRA Regulation: see here (pdf).

UK: Parliamentary Commission on Banking Standards - a response from the Chancellor

The Chancellor delivered his annual Mansion House speech yesterday evening: see here. He commented on the final report published earlier in the day by the Parliamentary Commission on Banking Standards and stated:
"...The Commission’s central judgment is absolutely right. As they put it: 'High standards in banking should not be a substitute for global success. On the contrary, they can be a stimulus to it. There’s a lot of detail here – I will respond more fully next month. We’ve already supported the recommendations on new criminal sanctions and cancelling bonuses where banks are bailed out. And let me be clear: where legislation is needed, the Banking Bill currently before Parliament will be amended to ensure the recommendations can be quickly enacted."

Wednesday, 19 June 2013

UK: Government 'Action Plan to prevent the misuse of companies and legal arrangements'

The Government has published a short plan to prevent the misuse of companies and legal arrangements: see here (pdf). The plan includes proposed amendments to the Companies Act 2006 in order create a central registry of information on companies' beneficial ownership to be maintained by Companies House. A consultation on the proposals, including whether the registry should be publicly available, is expected later this year. For further information see here.

UK: 'Changing banking for good' - Banking Standards Commission publishes final report

The Parliamentary Commission on Banking Standards, established in July last year, published its fourth and final report today. Titled 'Changing banking for good', the report makes recommendations the purpose of which are to improve standards across the banking industry. The report is divided into two sections: volume one contains the summary, conclusions and recommendations (here or here, pdf); volume two contains chapters one to eleven, annexes and formal minutes (here or here, pdf).

There is much in the wide-ranging report concerning corporate governance, most specifically in chapter seven which is titled 'Bank governance, standards and culture'. The Commission states that there is no quick single fix but is wary of making many recommendations which, in its view, "may do little more than create yet more lucrative work for corporate governance professionals" (para. 676). This said, some recommendations are made against the background of the Commission's view that relying on greater shareholder empowerment is not the answer, given the misalignment between asset manager incentives and the long-term interests of a company, together with the fact that shareholders contribute only a small proportion of a bank’s capital. The Commission's recommendations in chapter seven include the following:
  • The Financial Reporting Council should publish proposals, within six months, designed to address the widespread perception that some ‘natural challengers’ are sifted out by the nomination process. Consideration should be given to whether the Nomination Committee should be chaired by the Chairman of a bank or by the Senior Independent Director. 
  • Regulators should examine the merits of requiring each non-executive vacancy on the board of a bank above the ring-fence threshold to be publicly advertised.
  • The UK Corporate Governance Code should be amended to require directors of banks to attach the utmost importance to the safety and soundness of the firm.
  • The PRA Principles for Businesses should be amended to include a requirement that a bank must operate in accordance with the safety and soundness of the firm and that directors’ responsibilities to shareholders are to be interpreted in the light of this requirement.
  • The Government should consult on a proposal to amend section 172 of the Companies Act 2006 to remove shareholder primacy in respect of banks, requiring directors of banks to ensure the financial safety and soundness of the company ahead of the interests of its members.
  • A full-time Chairman should be the norm; the Chairman should not usually hold any other large commercial non-executive or executive positions.
Elsewhere in the report, recommendations are made with regard to remuneration (see chapter eight) and for reform of the approved persons regime (chapter six). Chapter ten makes recommendations concerning sanctions and enforcement, including the Commission's view - widely reported in today's press - that there is a strong case in principle for a new criminal offence of reckless misconduct in the management of a bank.

Update (20 June 2013) - further volumes (numbered three to nine) have been published and these contain the written and oral evidence submitted to the Commission: see here.

Tuesday, 18 June 2013

UK: England and Wales: client money distribution and the jurisdiction of the court

The ICLR, as part of its free case summary service, has provided a summary for the recent High Court decision Re MF Global UK Ltd (in special administration) [2013] EWHC 1655 (Ch): see here. The headnote reads: "The court had an inherent jurisdiction to give such directions as would enable the administrators of a regulated investment firm, holding client money under rules imposing a statutory trust, to put in place a client money distribution procedure for dealing with rejected claims and unknown claims which could provide a degree of certainty and protection and ensure a timely return of client money."

Europe: EBA, ESMA and EIOPA publish annual reports for 2012

The European Banking AuthorityEuropean Securities and Markets Authority and European Insurance and Occupational Pensions Authority have published their annual reports for 2012: see, respectively, here (pdf), here (pdf) and here.

Monday, 17 June 2013

UK: financial stability and foreign bank branches

Last Friday the Bank of England published Financial Stability Paper No. 22 - Which way do foreign branches sway? Evidence from the recent UK domestic credit cycle: see here (pdf). The report notes that lending to the UK economy by foreign branches has been more volatile than by UK-incorporated banks, UK-owned banks and foreign subsidiaries. Close monitoring of the risks posed by foreign branches with respect to financial stability is recommended, as is the need for the Bank of England’s Financial Policy Committee to monitor closely the growth in domestic lending not only in aggregate but also by different types of banks and to different sectors of the economy.

Guernsey: GFSC proposes consolidation of the financial supervisory legislation

The Guernsey Financial Services Commission has published a consultation paper in which it sets out proposals to consolidate much of the legislation relating to its supervisory functions: see here (pdf).

In addition, some changes to the legislative framework are proposed, including extending the activities requiring a licence from the GFSC as well amending the minimum licensing criteria to include a requirement that a licensee’s board of directors should discharge its functions with the necessary skills, knowledge and experience in relation to the company’s activities and associated risks. It is also proposed that the minimum criteria should be standardised to provide that the board of directors include such number of executive directors and non-executive directors as the GFSC considers appropriate.

Friday, 14 June 2013

Singapore: MAS censures banks for benchmark deficiencies and outlines new framework

The Monetary Authority of Singapore has censured twenty banks for deficiencies in their governance, risk management, internal controls, and surveillance systems, with regard to financial benchmarks including SIBOR. The banks - listed here (pdf) - have been directed to take corrective action and to subject such action to independent review. One hundred and thirty three traders were found to have engaged in several attempts to inappropriately influence the benchmarks. The Authority has also outlined proposals for a new regulatory framework for financial benchmarks: see here. The Authority's consultation paper is available here (pdf).

UK: The Enterprise and Regulatory Reform Act 2013 (Commencement No. 1, Transitional Provisions and Savings) Order 2013

The Enterprise and Regulatory Reform Act 2013 (Commencement No. 1, Transitional Provisions and Savings) Order 2013 - the first commencement order to made under the Enterprise and Regulatory Reform Act 2013 - was made on June 8: see here or here (pdf).

Europe: EBA opinions - good practice in responsible mortgage lending and treating borrowers in difficulty

The European Banking Authority has published two opinions, directed at competent authorities within the Member States, setting out good practice in respect of responsible mortgage lending and the treatment of borrowers experiencing payment difficulties: see, respectively, here (pdf) and here (pdf). One of the EBA's aims in publishing the opinions is to promote common practice by the authorities.

UK: FRC consults on auditor regulatory sanctions procedure guidance

The Financial Reporting Council has published for consultation a draft of proposed guidance in respect of its auditor regulatory sanctions procedure: see here (pdf). The guidance is intended for members of the FRC's Monitoring Committee and the Independent Sanctions Tribunal.

Thursday, 13 June 2013

UK: Government to raise the credit union maximum interest rate cap

HM Treasury began a consultation last year in which it sought views on raising the maximum monthly interest rate cap that credit unions can charge their members from the current two percent to three percent: see here (pdf). Yesterday the Treasury published its response to the consultation - see here (pdf) - and announced that it would go ahead with the proposed increase. Legislation is expected in the autumn.

UK: Key facts and trends in the accountancy profession

Earlier this week the Financial Reporting Council published its annual publication Key facts and trends in the accountancy profession: see here (pdf). It is reported, amongst other things, that there has been little change in recent years in the proportion of listed companies audited by the larger registered audit firms outside of the so-called Big Four.

UK: England and Wales: sovereign immunity claim rejected in unfair prejudice case

The ICLR has provided a summary of the Court of Appeal's decision in Al Saud v Apex Global Management Ltd. [2013] EWCA Civ 642: see here. The court upheld the trial judge's decision to dismiss the application by two Saudi Arabian princes in which they claimed sovereign immunity in respect of claims made against them under section 994 of the Companies Act 2006 (the unfair prejudice remedy).

Europe: ESMA Guidelines on remuneration policies and practices (MiFID)

The European Securities and Markets Authority has published its final report Guidelines on remuneration policies and practices (MiFID): see here (pdf). The purpose of the guidelines is to ensure the consistent and improved implementation of the existing MiFID conflicts of interest and conduct of business requirements in the area of remuneration.

Wednesday, 12 June 2013

UK: Supreme Court gives judgment in Petrodel - appeal allowed - corporate veil not pierced but resulting trust found

The Supreme Court gave judgment today in Prest v Petrodel Resources Limited & Others [2013] UKSC 34, one of the most important recent company law cases. A copy of the judgment is available here or here (pdf). A summary is available here (pdf).

The court unanimously held, in the context of proceedings for financial remedies following a divorce, that there were three possible legal bases on which company assets might be available to satisfy a lump sum order against the husband: (1) where, exceptionally, the court may disregard the corporate veil in order to give effective relief; (2) that section 24 of the Matrimonial Causes Act 1973 confers a distinct power to disregard the corporate veil in matrimonial cases; or (3) that the companies hold the properties on trust for the husband, not because of his status as sole shareholder and controller of the company, but in the particular circumstances of the case.

The court held that the facts before it fell into the third category, finding that the properties were held on a resulting trust by the company for the husband. Nevertheless, the judgment contains much discussion of the boundaries of the first category. Lord Sumption, delivering the leading opinion, stated (at paras.[27] and [28]):

.... the principle that the court may be justified in piercing the corporate veil if a company’s separate legal personality is being abused for the purpose of some relevant wrongdoing is well established in the authorities. It is true that most of the statements of principle in the authorities are obiter, because the corporate veil was not pierced. It is also true that most cases in which the corporate veil was pierced could have been decided on other grounds. But the consensus that there are circumstances in which the court may pierce the corporate veil is impressive. I would not for my part be willing to explain that consensus out of existence. This is because I think that the recognition of a limited power to pierce the corporate veil in carefully defined circumstances is necessary if the law is not to be disarmed in the face of abuse. I also think that provided the limits are recognised and respected, it is consistent with the general approach of English law to the problems raised by the use of legal concepts to defeat mandatory rules of law.

The difficulty is to identify what is a relevant wrongdoing. References to a “facade” or “sham” beg too many questions to provide a satisfactory answer. It seems to me that two distinct principles lie behind these protean terms, and that much confusion has been caused by failing to distinguish between them. They can conveniently be called the concealment principle and the evasion principle. The concealment principle is legally banal and does not involve piercing the corporate veil at all. It is that the interposition of a company or perhaps several companies so as to conceal the identity of the real actors will not deter the courts from identifying them, assuming that their identity is legally relevant. In these cases the court is not disregarding the “facade”, but only looking behind it to discover the facts which the corporate structure is concealing. The evasion principle is different. It is that the court may disregard the corporate veil if there is a legal right against the person in control of it which exists independently of the company’s involvement, and a company is interposed so that the separate legal personality of the company will defeat the right or frustrate its enforcement. Many cases will fall into both categories, but in some circumstances the difference between them may be critical. This may be illustrated by reference to those cases in which the court has been thought, rightly or wrongly, to have pierced the corporate veil."

Lord Sumption also stated (at para. [52]):

Whether assets legally vested in a company are beneficially owned by its controller is a highly fact-specific issue. It is not possible to give general guidance going beyond the ordinary principles and presumptions of equity, especially those relating to gifts and resulting trusts. But I venture to suggest, however tentatively, that in the case of the matrimonial home, the facts are quite likely to justify the inference that the property was held on trust for a spouse who owned and controlled the company. In many, perhaps most cases, the occupation of the company’s property as the matrimonial home of its controller will not be easily justified in the company’s interest, especially if it is gratuitous. The intention will normally be that the spouse in control of the company intends to retain a degree of control over the matrimonial home which is not consistent with the company’s beneficial ownership. Of course, structures can be devised which give a different impression, and some of them will be entirely genuine. But where, say, the terms of acquisition and occupation of the matrimonial home are arranged between the husband in his personal capacity and the husband in his capacity as the sole effective agent of the company (or someone else acting at his direction), judges exercising family jurisdiction are entitled to be sceptical about whether the terms of occupation are really what they are said to be, or are simply a sham to conceal the reality of the husband’s beneficial ownership.

A recording of Lord Sumption, delivering the court's opinion this morning, is available below:

UK: Enterprise and Regulatory Reform Act 2013 - guide published

The Enterprise and Regulatory Reform Act 2013 received Royal Assent earlier this year: see here. A copy of the Act is available here or here (pdf). Yesterday the Government published a short guide to the Act: see here (pdf). The Act contains, amongst other things, some of the provisions necessary to introduce the new regime for shareholder approval of quoted company directors' remuneration. These are briefly explained in chapter 13 of the new guide. More detailed information is available in the explanatory memorandum accompanying the Act: see here.

UK: The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013

A draft of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 was published yesterday: see here (pdf). The Regulations make amendments to existing legislation, including the Companies Act 2006, in order to implement the new narrative reporting regime for companies (including the preparation of a strategic report). The Regulations come into force on 1 October 2013.

Tuesday, 11 June 2013

Europe: ESMA reports on prospectus liability regimes within the Member States

The European Securities and Markets Authority has published a report in which it reports on prospectus liability regimes within the Member States: see here (pdf).

UK: Treasury Select Committee begins new inquiry - appointment and conduct of FPC, MPC and Court members

The House of Commons Treasury Select Committee has begun an inquiry considering the rules governing the appointment and conduct of members of the Bank of England’s Financial Policy Committee, Monetary Policy Committee and Court, as well as the independence of the Financial Policy Committee: see here.

UK: The supervision of central counterparties by the Bank of England

The Bank of England published its latest quarterly bulletin yesterday: see here (pdf). The bulletin explains the role of central counterparties and the Bank's approach to their supervision.

Monday, 10 June 2013

New Zealand: Government tables amendments to the Companies and Limited Partnerships Amendment Bill

Last week a supplementary order paper was tabled in Parliament containing amendments to the Companies and Limited Partnerships Amendment Bill: see here (pdf). Four main proposals are contained within the amendments, one of which is new: granting the Registrar of Companies to identify the controllers of companies. Other amendments concern Clause 4 of the Bill, which has been redrafted and now provides that a director will commit a criminal offence where he exercises powers or performs duties as a director (or omits to exercise powers or perform duties) in bad faith towards the company and believing the conduct is not in the best interests of the company and knowing, or being reckless whether, the conduct will cause [i] serious loss to the company, or [ii] benefit or advantage to a person who is not the company (including, for example, the director).

Friday, 7 June 2013

UK: England and Wales: company assets not controlled by sole director/shareholder for purposes of freezing order

Judgment was given yesterday in Group Seven Ltd v Allied Investment Corporation Ltd [2013] EWHC 1509 (Ch). At issue was whether an asset of a company, a chose in action, was to be treated as an asset of the company's sole director (also its only shareholder) for the purposes of a freezing order to which the director was subject. The freezing order was drafted so as to apply to all of the director's assets "whether or not they are in his own name ... For the purposes of this order the [director's] assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own".

The trial judge held that a company with a sole director, who also owned all its shares, did not hold or control its assets in accordance with that director/shareholder's direct or indirect instructions within the terms of the freezing order. The judge stated that this finding was mandated by settled principles of company law, referring to the judgments of Rimer and Patten LJJ in Petrodel Resources Ltd v Prest [2012] EWCA Civ 1395, [2013] 2 WLR 557. His answer was, he stated, one that "may dilute the efficacy of the standard CPR form of freezing order, and surprise and unsettle not a few; but to my mind, there is no escape from it." (para. [65]).

Note: Petrodel was the subject of an appeal to the Supreme Court, heard by a panel of seven justices earlier this year. Judgment will be given next Wednesday.

Update (12 June 2013) - a summary of the case has been provided by the ICLR: see here.