Monday, 12 October 2015

UK: Financial Advice Market Review - call for input

In August, HM Treasury announced that start of a review to consider the regulatory and legal framework governing the provision of financial advice and guidance to consumers and its effectiveness: see here. Today, as part of the review, a joint paper was published by HM Treasury and the Financial Conduct Authority seeking input in respect of a wide range of issues including, for example, the extent of the 'advice gap' and the regulatory barriers faced by firms in giving advice: see here (pdf).

Friday, 9 October 2015

UK: Takeover Code - new practice statements published

The Takeover Panel has published two new practice statements: No 29 ("Rule 21.2 – Offer-related arrangements") and No 30 ("Rule 20.2 – Information required for the purpose of obtaining regulatory consents"): see, respectively, here (pdf) and here (pdf).

UK: The Transparency Regulations 2015

The Transparency Regulations 2015 were made yesterday and laid before Parliament today: see here or here (pdf). The purpose of the Regulations is to implement, in part, Directive 2013/50/EU (which amended the Transparency Directive 2004/109/EC). Further information is available in the accompanying explanatory memorandum: see here (pdf).

Thursday, 8 October 2015

UK: The FRC's project on boards and corporate culture

The Financial Reporting Council has published more information about its project on corporate culture and boards, including an invitation to participate: see here. The project contains several work streams, including the role of the board in delivering sustainable success and what is called "People issues" (aligning culture, values, human resource practices and performance reward systems). The FRC intends that the project will lead to new guidance, with culture at its centre, replacing the guidance it published in 2011 on board effectiveness (here, pdf).

Wednesday, 7 October 2015

UK: FCA policy statement - whistleblowing in deposit-takers, PRA-designated investment firms and insurers

The Financial Conduct Authority has published a policy statement titled Whistleblowing in deposit-takers, PRA-designated investment firms and insurers: see here (pdf). The statement contains the FCA Handbook rules being introduced by the Accountability and Whistleblowing Instrument 2015 (pdf) which will, according to the FCA, "build-on and formalise examples of good practice already found in the financial services industry. These rules aim to encourage a culture in which individuals raise concerns and challenge poor practice and behaviour" (para. 1.1.).

Tuesday, 6 October 2015

Europe: ESMA guidelines on alternative performance measures for listed issuers

The European Securities and Markets Authority has published guidelines for listed issues on alternative performance measures (APMs): see here (pdf). The purpose of the guidelines is, amongst other things, to improve the comparability and reliability of APMs when used in prospectuses or regulated information.

Monday, 5 October 2015

UK: The Deregulation Act 2015 (Commencement No.3 and Transitional and Saving Provisions) Order 2015

The Deregulation Act 2015 (Commencement No 3 and Transitional and Saving Provisions) Order 2015 was made late last month: see here or here (pdf). The Order, as its title suggests, brings into force various provisions of the Deregulation Act 2015 including, on 1 October, those relating to the authorisation of insolvency practitioners (section 17), the cessation of office by auditors (section 18) and certain parts of Schedule 6 (insolvency and company law).

Friday, 2 October 2015

Isle of Man: crowd funding - second consultation on regulatory framework

The Isle of Man's Financial Supervision Commission has published a second consultation paper on the regulatory framework for crowd funding: see here (pdf). This second paper includes a summary of responses received in respect of the first consultation paper (available herepdf) and sets out more detailed proposals.

Thursday, 1 October 2015

Europe: capital markets union action plan published

The European Commission yesterday published its capital markets union action plan and announced the first set of measures it proposes to take relating to securitisation and the promotion of long-term investment in infrastructure. Two consultations have also begun: the first on venture capital funds and the second on covered bonds. A call for evidence has also been opened on the impact of the EU financial legislation. The Commission also announced that changes to the Prospectus Directive will be published later this year, following the consultation that took place earlier this year.

For further information see: action plan (pdf) | economic analysis accompanying the action plan (pdf) | feedback on earlier green paper (pdf) | FAQs | press conference videospress release |.

Wednesday, 30 September 2015

UK: EY report - annual reporting in 2014 by FTSE350 companies

EY has published a review of annual reporting by FTSE350 companies: see here (pdf). The report is wide-ranging. Focussing on one aspect of the UK governance framework - comply or explain - the report found that 59% of companies complied with every provision of the UK Corporate Governance Code; 85% complied with all or all but one provision. 3% of companies reported non-compliance with more than two provisions and whilst explanations for such non-compliance were provided, the report found that such explanations were of variable quality.

Tuesday, 29 September 2015

Zambia: new Companies Bill promised by the President

The President, Edgar Chagwa Lungu, opened a new session of the National Assembly earlier this month and delivered his presidential address: see here. New companies legislation is promised; to quote directly from the President: "a new Companies Bill will be presented to this House aimed at strengthening corporate governance and providing for the start-up and functioning of small companies".

UK: FRC consultation - audit framework - Ethical and Auditing Standards, UK Corporate Governance Code and Audit Committee Guidance Guidance

The Financial Reporting Council has published a consultation paper titled Enhancing Confidence in Audit in which it sets out proposed revisions to its ethical and auditing standards, UK Corporate Governance Code and Audit Committee Guidance: see here and here. The revisions being proposed to the Code, available here (pdf), relate principally to the competence of the audit committee and its members; they are being made to reflect changes in the EU statutory audit framework (in particular Article 39 of the revised Statutory Audit Directive 2006/43/EC).

Monday, 28 September 2015

Malaysia: securities law changes - an update

A short overview of the changes made to the securities law framework by the Capital Markets and Services (Amendment) Act 2015 and Securities Commission (Amendment) Act 2015, which came into force on 15 September 2015, has been published by the Securities Commission of Malaysia: see here.

Friday, 25 September 2015

UK: Scotland: Crown disclaimer and the effect of a court order for restoration to the register

The opinion of the Court of Session (Inner House) in ELB Securities Ltd v Love [2015] CSIH 67 was delivered earlier this month by Lady Paton (sitting with Lady Smith and Sheriff Principal Stephen QC). The case, which is now a leading authority, concerned the operation of section 1032 of the Companies Act 2006 and, in particular, its relationship with other sections within Chapter 3, Part 31, of the Act. Section 1032 sets out the general effect of an order for restoration to the register of companies: "the company is deemed to have continued in existence as if it had not been dissolved or struck off the register".

The case concerned a company that had been dissolved and struck off the register on 14 June 2013. On this date, under section 1012, the rights it had enjoyed under a lease vested in the Crown as bona vacantia but, on 15 July 2013, the Queen's and Lord Treasurer's Remembrancer - acting for the Crown - disclaimed the lease under section 1013. A few months later the company was restored to the register and at issue was the status of the earlier disclaimer: was the effect of the section 1032 order that the company retained an interest in the lease as if the disclaimer had not occurred?

Lady Paton stated that section 1032 "merely provides for the general approach ... but that general approach must give way to the specific and detailed provisions concerning the company's property as set out in section 1012 to 1014 and 1020 to 1022" (para. [26]). In her opinion, the company's rights in the lease ended on 15 July 2013 and, when the company was restored to the register, it no longer had any rights under the lease. To hold that the statutory scheme provided otherwise would, she said, lead to "uncertainty and confusion in the commercial world" (para. [28]).

Thursday, 24 September 2015

Sweden: code compliance and the Nordic model of corporate governance

The Swedish Corporate Governance Board has published, in English, a copy of its 2015 annual report: see here (pdf). The report contains an analysis of companies' compliance with the Board's corporate governance code; it also summarises the Board's past actions and future plans; also provided is an overview of recent research exploring the common features of the Nordic model of corporate governance. The report also refers to the recent review of the Code, a new edition of which is expected soon.

Wednesday, 23 September 2015

Romania: Bucharest Stock Exchange publishes new edition of its corporate governance code

The Bucharest Stock Exchange has published a new edition of its corporate governance code. A copy of the new code, in English, is available here (pdf).

Tuesday, 22 September 2015

UK: 'Three Truths for Finance' - a speech by Mark Carney

Yesterday, the Governor of the Bank of England, Mark Carney, delivered a speech titled Three Truths for Finance: see here (pdf). In setting out these three truths, Dr Carney exposed three lies: this time is different; markets always clear; and markets are moral. He argued that more needed to be done to restore trust and fairness, and stated:

Individuals need to be held more to account for their actions. Doing so will require new common standards, cast in clear language, better training and higher qualifications, and ways to ensure that when employees are fired, their history is known to those who consider hiring them. Firms must take responsibility for the system by improving the understanding of acceptable trading practices. The industry has already taken the lead by establishing a new FICC Markets Standards Board that will establish common standards of market practice that are well understood, widely followed and keep pace with markets. Regulators need to take a tough line on market abuse, including extending criminal sanctions to every corner of currency and fixed income markets. And to consign the Age of Irresponsibility well and truly to history, London, as the largest global market, must lead the development of global standards."

UK: directors' disqualification and company returns - three new statutory instruments laid before Parliament

The following statutory instruments were laid before Parliament last week: the Small Business, Enterprise and Employment Act 2015 (Commencement No. 2 and Transitional Provisions) Regulations 2015; the Companies and Limited Liability Partnerships (Filing Requirements) Regulations 2015; and the Companies (Disclosure of Date of Birth Information) Regulations 2015. Explanatory notes for each of these can be found here, here and here. Explanatory memoranda for the second and third instruments are also available: see here (pdf) and here (pdf).

Monday, 21 September 2015

UK: The FCA's approach to the supervision of fixed and flexible portfolio firms

The Financial Conduct Authority has published two documents setting out the approach it will take to the supervision of fixed and flexible portfolio firms: see, respectively, here (pdf) and here (pdf). Governance is one of the areas discussed in the documents.

Friday, 18 September 2015

UK: PRA consultation papers - audit committee rules and ring-fencing transfer schemes

The Prudential Regulation Authority published several consultation papers today. One of the papers sets out the PRA's proposed rules in respect of its implementation of the audit committee requirements under the new EU statutory audit framework (more specifically, article 39 of the Statutory Audit Directive (Directive 2006/43/EC), as amended by Directive 2014/56/EU): see here (pdf). Another paper seeks views on a draft statement of policy regarding the PRA's approach to ring-fencing transfer schemes: see here (pdf).

Thursday, 17 September 2015

Guernsey: insolvency - court grants application to pool assets of two insolvent companies

The Royal Court (Ordinary division) gave judgment earlier this month in In the matter of Huelin-Renouf Shipping (Guernsey) Limited (in liquidation) (case 46/2015). A copy of the decision is available here (but note that registration - free of charge - may be required to access the decision). This is an important decision - now the leading authority - in which Deputy Bailiff McMahon held that it was open to him to grant an application by liquidators to transfer the assets and liabilities arising from the liquidation of a Guernsey company into the insolvent estate of a Jersey company. The purpose was to consolidate the assets and liabilities of the two companies, the affairs of which were heavily interwoven, and to pay the creditors from the pooled assets.

The decision also provides a good illustration of the way in which Guernsey's insolvency law is shaped by developments in other jurisdictions including near neighbour Jersey and, further away, England and Wales.

Wednesday, 16 September 2015

Europe: ESMA says securities market risk 'very high'

The European Securities and Markets Authority has published its second Trends, Risks and Vulnerabilities Report on European Union Securities Markets for 2015 and its third risk dashboard of the year: see, respectively, here (pdf) and here (pdf). ESMA notes that market risks have increased and it has raised its risk indicator to 'very high', its highest level. The increase in risk is attributed to high volatilities and fluctuating performances across asset classes.

Tuesday, 15 September 2015

UNEP inquiry - designing a sustainable financial system

As part of the Inquiry into the Design of a Sustainable Financial System, being led by the United Nations Environment Programme, a couple of reports have recently been published. The first, titled Fiduciary Duty in the 21st Century, explores the content of fiduciary duty across several jurisdictions and finds that it is not an obstacle to asset owner action on environmental, social and governance factors: see here (pdf). The second, titled Financial Reform, Institutional Investors and Sustainable Development, provides a review of current policy initiatives and also calls for policies that better align institutional investors with sustainable development goals; it is published in association with CalPERS and is available here (pdf).

UK: Scotland: the Higher Education Governance (Scotland) Bill

The Higher Education Governance (Scotland) Bill was introduced in the Scottish Parliament earlier this year: see here. A copy of the Bill, as introduced, is available here (pdf). The Bill, which includes provisions concerning the composition of the governing bodies of higher education institutions, is currently being considered by the Education and Culture Committee: see here. The Committee's call for evidence closed earlier this month and the responses have now been published: see here. Opposition to the Bill looks strong.

Monday, 14 September 2015

Kenya: the new company law framework - the Companies Act 2015

Kenya's new company law framework - as set out in the Companies Bill 2015, introduced earlier this year in the National Assembly by the Hon. Aden Duale MP - was signed by the President last week and has, therefore, become law: see the announcement below, made on Twitter. The Bill completed third reading in the National Assembly in August: see here. A copy of the new Act is not yet available; a copy of the Bill as introduced (and published in the Kenya Gazette) is available here (pdf).

Friday, 11 September 2015

UK: The Companies, Partnerships and Groups (Accounts and Reports) (No. 2) Regulations 2015

The Companies, Partnerships and Groups (Accounts and Reports) (No. 2) Regulations 2015 were laid before Parliament yesterday and come into force on 1 October 2015: see here or here (pdf). The main purpose of the Regulations is to correct an oversight in the UK's transposition of the Accounting Directive 2013/34/EU. Further information is available in the explanatory note at the end of the Regulations and also in the accompanying explanatory memorandum.

Thursday, 10 September 2015

UK: England and Wales: Law Commission consultation on Bills of Sale

The Law Commission for England and Wales has published a consultation paper as part of its project reviewing the law governing bills of sale. The Commission has proposed, provisionally, the repeal of existing legislation, to be replaced by a new Goods Mortgages Act. For further information see here.

UK: ONS publishes latest quoted company share ownership survey

The Office for National Statistics has published the results of its survey of the ownership of the shares of UK quoted and domiciled companies as at the end of 2014: see here (pdf). A short summary of the main points is available here. Over half of the shares by value are owned by individuals and organisations outside of the UK, with the other ownership categories as shown in the below chart (taken from page 3 of the ONS report):

The ONS report provides a geographic breakdown of the "rest of the world" category (chart taken from page 16 of the report):

Wednesday, 9 September 2015

UK: The Financial Services (Banking Reform) Act 2013 (Transitional and Savings Provisions) (Amendment) Order 2015

The Financial Services (Banking Reform) Act 2013 (Transitional and Savings Provisions) (Amendment) Order 2015 was laid before Parliament today and comes into force on 1 October this year: see here or here (pdf). Further information about the Order, including its purpose, is set out in the accompanying explanatory memorandum: see here (pdf). A shorter explanatory note appears at the end of the Order.

OECD Guidelines on the Corporate Governance of State Owned Enterprises - new edition published

The OECD has published a new edition of its Guidelines on Corporate Governance of State Owned Enterprises: see here (pdf). Further information about the Guidelines, and the review process that led to this new edition, can be found here.

UK: investment management group seeks "radical simplification" of executive pay

The Investment Association - a trade body representing UK investment managers - has set up a working group and asked it to develop proposals for the "radical simplification" of executive pay: see here. According to the Investment Association, there are concerns that the complexity of pay structures had led to a lack of clear incentives for executives to act in the best long-term interests of companies and their shareholders. The working group's proposals are expected in the spring next year.

Tuesday, 8 September 2015

New edition of the G20/OECD Principles of Corporate Governance published

A revised edition of the OECD's Principles of Corporate Governance - now styled the G20/OECD Principles of Corporate Governance - has been published: see here. The Principles are contained in six chapters, one of which - "Institutional investors, stock markets and other intermediaries" - is new. The emphasis in this new chapter is on disclosure. The first principle states, for example, that institutional investors acting in a fiduciary capacity should disclose their corporate governance and voting policies with respect to their investments, including the procedures that they have in place for deciding on the use of their voting rights.

Monday, 7 September 2015

Sir Adrian Cadbury (1929-2015) - some memories and reflections

Graduation Ceremony: Thursday 18th July 2013
Sir Adrian Cadbury, pictured in July 2013, following an Aston University graduation ceremony at the Town Hall, Birmingham, and flanked by Dr Sarindar Singh Sahota and Sir John Sunderland (Chancellor of the University). 

Sir Adrian Cadbury died last Thursday. He was 86. He led a full life, a remarkable life, a good life. Obituaries have appeared in several newspapers, including The GuardianThe Daily Telegraph, The Times and Financial Times. The Times obituary has a striking photograph of Adrian as a young man and athlete, taken in 1952 when he represented Great Britain at the Helsinki Olympic Games.

I first met Adrian much later in his life, about ten years ago. I had started teaching at Aston University and had created a new course in corporate governance; he had recently stepped down as Chancellor of the University, a position he held for 25 years. Would he, I wondered, be prepared to come and speak to my students about his chairmanship of the Cadbury Committee? Yes was his answer but he gave much more: for several years he came to many of the classes, describing his role – with typical humility and humour – as that of a teaching assistant.

The students warmed to him immediately. He put me at ease and was very supportive. He would, for example, find a way to agree with something that I had said when contributing to lectures and answering questions. If a student arrived a little late, Adrian would be the first to get up from his seat and make sure they had the lecture materials. Together we listened to student presentations on governance frameworks across the world, often learning of the influence of the Cadbury Committee’s Report and Code. Adrian always spoke of the Committee’s work collectively – we, not I – but I wonder if, with a different chairman, the Committee’s work would have had the impact that it did.

In the last lecture that Adrian attended, the students presented him with an album containing hand written messages and copies of some of the photos they had taken of themselves with him: a tangible record of their appreciation for a man who, in listening, speaking and engaging with them, had enriched their lives. I was touched when, a little later, he wrote to describe the fun he had had taking part. He had done more than share his knowledge and experience. We learned much from his tone, demeanour and actions: the effort he took in learning individuals’ names, regardless of their place or position; his genuine interest in the students’ academic and wider university experience; the delight he took in sharing his knowledge.

Working with Adrian was a privilege. I will remember, in particular, his humility, his laugh and his ability to inspire others to do their best. He recognised the contribution that everyone was capable of making and will, of course, be remembered for his contribution to the field of corporate governance. The less well known is no less significant. Few probably know the full extent of his public service and charitable work. Much was done in a quiet way across Birmingham, the West Midlands and further afield. Recognition came more publicly and I was pleased that Adrian was able, earlier this year, to receive in person the membership badge of the Order of the Companions of Honour from The Duke of Cambridge at Buckingham Palace.

Friday, 4 September 2015

South Africa: business rescue - arbitration and the moratorium on bringing legal proceedings

This year the Supreme Court of Appeal has heard several cases concerning the business rescue framework contained in the Companies Act 2008. Within this framework, section 133 of the Act imposes a moratorium on the bringing or continuing of legal proceedings, including enforcement action. Today, in Chetty v Hart (20323/14) [2015] ZASCA 112, the court held this moratorium applied to arbitration proceedings. A summary is available here (pdf).

Earlier this year, in Cloete Murray NO v FirstRand Bank Ltd (20104/2014) [2015] ZASCA 39, the court held that 'enforcement action' under section 133 did not include the cancellation of an agreement concluded prior to the start of the business rescue proceedings. A summary is available here (pdf).

UK: FCA quarterly consultation - EU statutory audit framework - proposed DTR changes in respect of audit committees

At the end of last month, the Department for Business, Innovation and Skills published an update in respect of the UK's implementation of the new EU statutory audit framework: see here. This update noted the work being done by the Financial Reporting CouncilPrudential Regulation Authority and Financial Conduct Authority. In this regard, the Financial Conduct Authority has today published one of its quarterly consultation papers and this contains, amongst other things, proposed changes to the Disclosure Rules and Transparency Rules (DTR) in respect of the composition of audit committees. The paper also explains that the FCA does not intend to adopt an option requiring annual election by the shareholders of the audit committee chairman. A copy of the paper is available here (pdf).

Thursday, 3 September 2015

UK: Scotland: consolidation of the bankruptcy legislation

The Scottish Government published its 2015/16 programme for government earlier this week: see here. Amongst the Bills proposed is one to consolidate bankruptcy legislation, which will take up the recommendations published in 2013 by the Scottish Law Commission.

Wednesday, 2 September 2015

Europe: freedom of establishment and the tax treatment of dividends

The opinion of the Court of Justice in Groupe Steria SCA v Ministère des Finances et des Comptes publics (Case C-386/14) was delivered today. The court held that a particular rule of French tax law - the effect of which was, in certain circumstances, to treat dividends received by a parent company differently depending on whether the subsidiary was resident in France or another Member State - was not compatible with Article 49 ("Right of establishment") of the Treaty on the Functioning of the European Union. A summary of the opinion is available here (pdf).

Tuesday, 1 September 2015

UK: Companies House - 2014/15 register activities

Companies House has published its annual statistical release for the year to 31 March 2015, with information concerning the companies (and other corporate bodies) on the register of companies: see here (pdf). According to the release, the average number of shareholders per company is two and the average age of companies on the register is 8.4 years. 96% of companies on the register are private limited companies.

Monday, 31 August 2015

Canada: OSFI draft guideline - operational risk management

The Office of the Superintendent of Financial Institutions has published for consultation a draft guideline on operational risk management: see here (pdf). The guideline contains four principles, the second of which states that operational risk management supports the overall corporate governance structure of FRFIs (federally regulated financial institutions). Further accompanying materials are available here.

Friday, 28 August 2015

UK: Scotland: joint ventures and pre-contractual disclosure

Earlier this month Lord Tyre delivered his opinion in The University Court of the University of St Andrews v Headon Holdings Ltd [2015] CSOH 113. The opinion contains some interesting discussion, with references to Scottish and English authorities, about the circumstances in which pre-contractual duties of disclosure arise. In the case before him, which concerned a joint venture and not (importantly) a partnership, Lord Tyre rejected the argument that a pre-contractual duty of disclosure arose, stating that it would be " innovation supported by neither principle nor precedent" (para. [18]).

Correction (2 September 2015): the word 'ventures' is now spelled correctly in the title. Apologies for the original misspelling.