Monday, 8 February 2016

UK: BIS announces new review of women on boards

A new review, focusing on increasing the number of women holding executive directorships of FTSE350 companies, has been announced by the Department for Business, Innovation and Skills: see here. The terms of reference have not yet been finalised.

Friday, 5 February 2016

Gibraltar: setting up the Financial Services Ombudsman

A copy of the Financial Services Ombudsman Act 2016 has been published in the Gibraltar Gazette: see here (pdf). The Act establishes the new Financial Services Ombudsman and will require financial service providers to participate in the Ombudsman's dispute resolution procedures.

Denmark: Stewardship Code to be developed, instigated by Government

The Minister for Business and Growth, Troels Lund Poulsen, has asked the Committee on Corporate Governance to prepare a Stewardship Code containing recommendations for active ownership by institutional investors: see here. The Minister, in his announcement, cited as an example the UK Stewardship Code.

Thursday, 4 February 2016

Ireland: Court of Appeal sends a clear message on directors' responsibilities and disqualification

An important decision on the making of disqualification orders and restriction orders was given by the Irish Court of Appeal last month in Director of Corporate Enforcement v Walsh [2016] IECA 2. At first instance, the trial judge (Barrett J., in [2014] IEHC 365) was asked to make such orders against several individuals but declined to do so. The Director of Corporate Enforcement appealed, arguing that the trial judge was in error in not making the orders and had also made in his judgment several statements that created undesirable confusion in the context of corporate regulation.

The judgment of the Court of Appeal was delivered by the President of the High Court, Mr Justice Peter Kelly, sitting with Justices Mary Irvine and Gerald Hogan. The President held that case was one where the discretion not to make a disqualification should be exercised; it was, however, a case where restriction orders, for a period of five years, should be made.

The judgment is of interest for several reasons. The President rejected as relevant to the court's discretion some of the factors that the trial judge had identified, and stated that the "whole thrust of the legislative provision is to ensure that all directors of all companies comply with their obligations. It matters not that they be directors of family companies, or be at the helm of large or quoted enterprises. Neither do the qualifications of the directors or the economic challenges that the companies may be facing affect the obligations of directors to act responsibly in respect of an insolvent company" (para. [60]).

Also of interest is what was said about passive directorships. The President rejected the suggestion, in the trial judge's judgment, that the disqualification or restriction of passive directors should require "real moral blame" on their part. To quote the President: "It would be contrary to the whole notion of proper corporate regulation that passive directors would be exonerated from liability or relieved from disqualification or restriction on the basis of the passive nature of their role" (para. [70]).

Wednesday, 3 February 2016

UK: Northern Ireland: new edition of the code of good governance for the voluntary and community sector

A revised code of good governance, for the voluntary and community sector, has been published by the Developing Governance Group and endorsed by the Charity Commission of Northern Ireland: see here. A copy of the revised code is available here (pdf).

Tuesday, 2 February 2016

India: Companies Act 2013 - Companies Law Committee report published

The Committee formed to make reform recommendations in respect of the issues arising from the implementation of the Companies Act 2013 has published its report: see here (pdf). Over one hundred changes are proposed, including some on core aspects of the governance framework (e.g., the circumstances in which a director will be regarded as independent) and others to make it easier for companies to identify the beneficial owners of shares.

Monday, 1 February 2016

UK: CDSB review of FTSE350 companies' environmental reporting

The Climate Disclosure Standards Board has published a review of FTSE350 companies' environmental reporting and greenhouse gas emission disclosures in annual reports, following the implementation of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013: see here (pdf). The report found, amongst other things, that 41% of companies considered environmental risks in their analysis of the company's principal risks; 87% of companies disclosed environmental policies; and 27% made use of environmental KPIs.

Friday, 29 January 2016

UK: Wales: ColegauCymru publishes new governance code

A governance code for further education institutions (including sixth form colleges) has been published by ColegauCymru: see here (pdf). The code - according to the accompanying press release - "sets out the shared values and expectations of good college governance under their new legal status as not-for-profit institutions that exist to serve the public". For further information about these changes in legal status, see the notes and materials accompanying the Further and Higher Education (Governance and Information) (Wales) Act 2014.

Thursday, 28 January 2016

UK: The Profit-Sharing and Company Governance (Employees' Participation) Bill 2015-16

The Profit-Sharing and Company Governance (Employees' Participation) Bill 2015-16 received its first reading in the House of Commons earlier this week: see here. Introduced by Gareth Thomas MP as a Ten Minute Rule Bill, under Standing Order 23, its purpose is (in very general terms) to require employee representation on company boards and profit sharing amongst employees.

A copy of the Bill has not yet been published (as is common with Private Members' Bills at this stage in the parliamentary process) but this will be done nearer the time of second reading (scheduled for 11 March). The short speech delivered by Mr Thomas on introducing his Bill can be read here. Without Government support the Bill is unlikely to become law; it will, nevertheless, provide an opportunity for debate. The Bill's progress can be followed here.

Wednesday, 27 January 2016

UK: FCA clarification - the Senior Managers Regime and responsibility for a firm's legal function

The Financial Conduct Authority has today announced that it will soon consult on whether an individual within a firm having responsibility for the legal function should require approval within the Senior Managers Regime: see here. The FCA also provides, in its statement, a clarification of its current position, and an explanation of the approach it will adopt in respect of firms' decisions in the interim period given the uncertainty that exists.

Tuesday, 26 January 2016

Ireland: insolvency - CLRG recommends Companies Act 2014 amendment following Supreme Court decision in JD Brian Ltd

Last year the Supreme Court gave judgment in In the matter of J.D. Brian Ltd (in Liquidation) t/a East Coast Print and Publicity [2015] IESC 62. The decision concerned section 285 of the Companies Act 1963 (now section 621 of the Companies Act 2014), which provides for certain debts to be granted preferential status (and therefore a priority) in a winding-up. It also provides, in subsection 7(b), that such preferential debts, "so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge" (italics added).

At issue before the Supreme Court was this italicised phrase. The Supreme Court unanimously held that it meant a floating charge that existed at the commencement of the winding up: it did not include a charge that on creation was a floating charge but had been converted into a fixed charge, by virtue of express crystallisation in accordance with the terms of the debenture, prior to the commencement of the winding up. The decision was referred to the Company Law Review Group and its report was published earlier this month: see here (pdf). The CLRSG has recommended that the Companies Act 2014 is amended to make clear that floating charge means a floating charge as created. This, the CLRSG states, restores the position to what it effectively was in practice if not in law.

Monday, 25 January 2016

Ireland: Government instigates two reviews of company law

The Minister for Jobs, Enterprise and Innovation (Richard Bruton TD) and the Minister for Business and Employment (Ged Nash TD) have announced that two separate reviews of the company law framework are to be undertaken. The reviews will focus on the issues arising in corporate restructuring, particularly where assets are moved between companies in a corporate group, and the protections provided to employees. Concern has been expressed with the way in which the framework operates, particularly following the collapse of Clerys (about which, see here).

The first will be undertaken by the chair of the Labour Court, Kevin Duffy, and Nessa Cahill BL. They have been given eight weeks in which to write a report considering the following questions: (a) could more effective use be made of current legislation to safeguard employees’ interests? (b) at what point in time could any new measures to protect employees’ interests be triggered? (c) are there changes to employment rights legislation that could be considered, or changes at the interface of employment law and company law, including powers to set aside transfers of assets and time periods for same? (d) what solution/framework of measures is required?

A more wide-ranging inquiry, and one that goes to the core of the company law framework, will be undertaken by the Company Law Review Group. The CLRSG has been asked to explore: (a) instances where the corporate veil should be lifted; (b) the strengthening of directors’ duties to employees; (c) checks and balances to strengthen obligations to employees for better protection in company restructuring; and (d) the circumstances in a liquidation of an insolvent company where company liabilities can be met from solvent companies in the same group or in related companies.

Friday, 22 January 2016

UK: PRA policy and supervisory statements - external auditor engagement with supervisors and external auditor reports

The Prudential Regulation Authority has published a policy statement on the engagement between external auditors and supervisors: see here (pdf). The policy statement is accompanied by a supervisory statement concerning the reports written by external auditors to the PRA: see here (pdf).

Thursday, 21 January 2016

UK: The Bank of England and Financial Services Bill - update

The Bank of England and Financial Services Bill, which will (amongst other things) make changes to the governance of the Bank of England, has passed through the House of Lords and has now begun its journey in the House of Commons. First reading in the Commons took place earlier this week: see here. A copy of the Bill, as introduced in the Commons, is available here or here (pdf). Explanatory notes for this version of the Bill are available here or here (pdf).

Wednesday, 20 January 2016

UK: Scotland: The Higher Education Governance (Scotland) Bill - stage one completed

The Higher Education Governance (Scotland) Bill completed stage one in the Scottish Parliament last Thursday. The official record of debate - the minutes of proceedings - is available here (pdf). This records that a vote was taken, with the following results: For (84), Against (20) and Abstentions (0). The Bill now proceeds to stage two, and will be considered by the Education and Culture Committee on 9 February. Further information about the Bill, including committee reports with responses from the Scottish Government, is available here.

Tuesday, 19 January 2016

UK: Insurance Fraud Taskforce final report recommends board level ownership of fraud

The Insurance Fraud Taskforce, set up with the aim of investigating the causes of fraudulent behaviour and recommending solutions to reduce the level of insurance fraud, has published its final report: see here (pdf). The report recommends, on the basis of good practice identified amongst insurers, that there should be board level of ownership of counter fraud activity.

The report states (para. 4.28): "By assigning Board level ownership and ensuring responsibility rests with the most senior decision-makers, firms are better placed to manage potential conflicts of interest between departments and to establish a culture and strategy for tackling fraud. It is for individual firms to decide their own governance structures, but in practical terms the Taskforce considers that fraud would appear on the risk register and be a standing item at Board meetings".

Europe: Commission consultation - non-financial reporting - non-binding guidance methodology

The European Commission is seeking views on the non-binding guidance on methodology it proposes to publish in respect of the new non-financial reporting requirements imposed on certain large companies by Directive 2014/95/EU (on disclosure of non-financial and diversity information by certain large undertakings and groups): see here.

Monday, 18 January 2016

UK: audit reform - BIS consultation - public responses published

The Department for Business, Innovation and Skills has published the responses received in respect of its consultation on the implementation of the new EU statutory audit framework: see here.

Friday, 15 January 2016

UK: Exploring the intermediated shareholding model - BIS research paper

The second BIS research paper for 2016 was published yesterday. Titled 'Exploring the Intermediated Shareholding Model', the paper presents the results of important and interesting research concerning the chains of ownership and voting between individual and institutional investors and the companies in which they have invested. The research found, for example, that interest in attending and voting at the annual general meeting was low amongst individual shareholders. A copy of the paper is available here (pdf).

Thursday, 14 January 2016

UK: FRC report - developments in corporate governance and stewardship

The Financial Reporting Council has published its (now) annual report on developments in corporate governance and stewardship: see here (pdf). The report provides an assessment of corporate governance and stewardship in the UK; reports on the quality of compliance with, and reporting against, the UK's governance and stewardship codes; reports findings on the quality of engagement between companies and shareholders; and indicates where the FRC would like to see changes in governance behaviour or reporting.

Wednesday, 13 January 2016

UK: PRA proposes new rule on buy-outs of variable remuneration by new employers

The Prudential Regulation Authority published a consultation paper today in which it set out proposals for a new rule, to be included in the Remuneration Part of the PRA Rulebook, covering the practice whereby firms recruiting new employees "buy-out" deferred bonus awards that were cancelled by the employees' previous employer. The new rule will apply (subject to certain proportionality exceptions) to all material risk takers at PRA-regulated banks, building societies and designated investment firms. It is based on a model requiring a contract between the employee and new employer, providing for the possibiltiy of malus and clawback to be applied to bought-out awards, based on a determination by the old employer.

A copy of the consultation paper is available here (pdf).

Tuesday, 12 January 2016

Nigeria: an update on the proposed National Code of Corporate Governance

In the spring last year the Financial Reporting Council published for comment a draft National Code of Corporate Governance: see here. The Code was divided into three parts: private sector, public sector and not for profit. A couple of weeks ago, the FRC published a revised draft of this Code, inviting comments by the end of January: see here.

UK: England and Wales: the principle in Ex Parte James

A few days ago judgment was given by Mr Justice Hildyard in TOC Investments Corporation v Beppler & Jacobson Ltd [2016] EWHC 20 (Ch). The decision is interesting for several reasons, one of which is the endorsement provided for the expansive view taken by Mr Justice David Richards (as he then was), in Lomas v Burlington Loan Management Ltd [2015] EWHC 2270 (Ch), of what is known as the principle in Ex parte James. Mr Justice Richards observed (at para. [174]):

The principle in Ex parte James has been described as anomalous but it is a well-established principle providing a means by which the court can control the conduct of its officers. Administrators, liquidators in a compulsory winding-up and trustees in bankruptcy are all officers of the court and subject to this jurisdiction. The case to which the principle owes its name, like a number of cases immediately following it, concerned the retention by a liquidator or trustee in bankruptcy of money paid under a mistake of law. At that time, money paid under a mistake of law was not recoverable, but the court directed that its officer should not stand on his strict legal rights but should return the funds, notwithstanding that the effect was to deprive the creditors of funds which would otherwise be available for distribution among them. The rationale for the principle was that, although irrecoverable at law, the officer of the court could not in all conscience retain the money, given the circumstances in which it had been paid. It would amount to an unjust enrichment of the estate. Although the principle was first developed and exercised in these circumstances, subsequent cases applied it in other circumstances and it cannot now be said to be confined to particular categories of case".

Monday, 11 January 2016

UK: Supreme Court to hear appeal this week in collective investment scheme case

Later this week, on Wednesday, the Supreme Court will to hear argument in Asset Land Investment Plc v The Financial Conduct Authority (on appeal from [2014] EWCA Civ 435), in which the principal question will be the meaning of collective investment scheme within section 235 of the Financial Services and Markets Act 2000.

Friday, 8 January 2016

Europe: Commission consults on sustainability and investment decisions

The European Commission has begun a consultation seeking information on how institutional investors, asset managers and other service providers in the investment chain, factor in sustainability information and performance of companies or assets into investment decisions: see here.

Thursday, 7 January 2016

Jersey: companies regarded as resident in Jersey

A copy of the Finance (2016 Budget) (Jersey) Law 201- has been published on the Jersey Law website, following its adoption by the States: see here. An amendment is being made to Article 123 ("Bodies corporate") of the Income Tax (Jersey) Law 1961 in order to change the test used to determine if a company is resident in Jersey. Under the current law, a company incorporated under the Loi (1861) sur les Sociétés à Responsabilité Limitée or the Companies (Jersey) Law 1991, will be resident in Jersey for tax purposes unless (a) its business is centrally managed and controlled outside Jersey in a country or territory where the highest rate at which any company may be charged to tax on any part of its income is 20% or higher; and (b) the company is resident for tax purposes in that country or territory. The amendment will replace 20% with 10%, and is clearly driven by the downward trend in corporation rates, including in the United Kingdom where it was announced in the Summer Budget 2015 that rates will fall to 19% in 2017 and 18% in 2020.

Wednesday, 6 January 2016

IOSCO report and statement on the regulation of crowdfunding

The International Organization of Securities Commissions has published the results of its survey of the regulation of crowdfunding (here, pdf) and a statement (here, pdf). In the statement the IOSCO provides a brief summary of the results of its survey and explains that it is not proposing a common international approach to the oversight or supervision of crowdfunding. The IOSCO does, however, highlight for the benefit of regulators the risks relating to crowdfunding.

Tuesday, 5 January 2016

Cayman Islands: Limited Liability Companies Bill 2015 published

A copy of the Limited Liability Companies Bill 2015 has been published in the Cayman Islands Gazette: see here (pdf). The Bill contains the framework for the introduction of a new corporate form - the LLC, or Limited Liability Company - in the Cayman Islands.

Monday, 4 January 2016

India: a new legal framework for insolvency - Bill introduced in the Lok Sabha

The Insolvency and Bankruptcy Code, 2015, was introduced in the Lok Sabha on 21 December: see here. A copy of the Bill as introduced is available here (pdf); it is accompanied by a list of corrigenda (here, pdf). The Bill was produced by the Bankruptcy Law Reforms Committee and further information about its purpose and content is available in the Committee's final report, published last November: see here (pdf).

Thursday, 24 December 2015

Season's greetings and best wishes for the new year

Season's greetings to all blog visitors and those receiving the daily email updates. I hope that you have found the contents useful and interesting over the past year (any feedback is welcome; a major task for the new year will be updating the collections of links).

The first blog post and email update for 2016 will appear on January 4.

With best wishes for 2016,

UK: introducing the PSC register - Government implementation plan

Following a consultation earlier this year, the Department for Business, Innovation and Skills (BIS) has confirmed the Government's plans for the introduction of the new Register of People with Significant Control: see here (pdf). Secondary legislation - the People with Significant Control Regulations - will be laid before Parliament in January 2016, and companies will be required to keep a PSC register from 6 April 2016. Legislation will be introduced to bring LLPs into the PSC regime alongside companies. Finalised guidance will be published in January 2016. Further information is available here.

South Africa: introducing 'twin peaks' - the Financial Sector Regulation Bill

The legislation that will introduce the twin peaks financial regulatory framework in South Africa has been introduced in Parliament. A copy of the Bill - the Financial Sector Regulation Bill - is available here (pdf) and its progress can be followed here. Further background information is available here.

Philippines: SEC publishes corporate governance blueprint

The Philippines Securities and Exchange Commission has published a corporate governance blueprint, containing best practice recommendations that will form the basis for a governance code to be published in 2016. A copy of the blueprint, in English, is available here (pdf).

Wednesday, 23 December 2015

UK: FRC publishes draft plan and budget for 2016/17

The Financial Reporting Council has published its draft plan and budget for 2016/17: see here (pdf). As well as setting out priorities for the year ahead (including forthcoming publications), the FRC's plan also seeks views on proposed indicators of governance quality, including the proportion of FTSE350 companies stating that they have met all, or all but one, of the provisions in the UK Corporate Governance Code and the perceived quality of 'comply or explain' explanations.

Poland: Warsaw Stock Exchange publishes new corporate governance code

A new corporate governance code - titled 'Best Practice of GPW Listed Companies 2016' - has been published by the Warsaw Stock Exchange (GPW) and comes into force on 1 January 2016. A copy of the code is available here (pdf) and further information is available here.

Ireland: Central Bank - new corporate governance 'requirements' published

The Central Bank of Ireland has, in the past few months, published new corporate governance requirements (formerly known as codes) for: captive insurance and captive reinsurance undertakings; insurance undertakings; and credit institutions. The new requirements documents can be found here.

Netherlands: corporate governance code review to begin in February 2016

The Dutch Corporate Governance Code Monitoring Committee has announced that it will publish on 11 February 2016 a consultation paper containing proposed reforms to the Dutch Corporate Governance Code: see here.

Tuesday, 22 December 2015

Sweden: new edition of the Swedish Corporate Governance Code

The Swedish Corporate Governance Board has published a new edition of the Swedish Corporate Governance Code, following a consultation earlier this year. A copy of the new Code, in English, is available here (pdf).

Finland: new edition of the Finnish Corporate Governance Code published

Following a review earlier this year, the Securities Market Association has published a new edition of the Finnish Corporate Governance Code, effective from 1 January 2016: see here (English, pdf).

Monday, 21 December 2015

UK: England and Wales: articles of association - interpretation and implied terms

Judgment was given last Friday in Cosmetic Warriors Ltd v Gerrie & Anor [2015] EWHC 3718 (Ch). A first instance decision concerning the interpretation of terms in a set of articles of association would not, ordinarily draw much attention. The judgment comes, however, after two important Supreme Court decisions concerning contract construction and implied terms - Arnold v Britton [2015] UKSC 36 and Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd (Rev 1) [2015] UKSC 72 - and, in particular, observations therein concerning the approach adopted by Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10.

The trial judge held, amongst other things, that there was no absolute prohibition on considering extrinsic material for the purpose of interpreting the articles of association of a company; however, that admissible background was, for the purposes of construction, limited to what any reader of the articles would reasonably be supposed to know. In contrast, the trial judge held, the implication of a term based on extrinsic evidence of which only a limited number of people would have known was impermissible.