Monday, 24 November 2014

Norway: revised corporate governance code published

A copy, in English, of the revised Norwegian Corporate Governance Code has been published by the Norwegian Corporate Governance Board: see here (pdf). A copy of the Code, highlighting the amendments that have been, is available here (pdf).

Friday, 21 November 2014

UK: bank remuneration - a letter to the Governor and an Advocate General's opinion

The Chancellor, in a letter published yesterday and sent to the Governor of the Bank of England (Mark Carney), outlined his concerns regarding the growth in fixed elements of bank remuneration following the introduction of a bonus cap in Directive 2013/36/EU: see here (pdf). He explained that he would be asking the Fair and Effective Markets Review to consider the implications of the move towards increased levels of fixed remuneration.

The Chancellor also stated that the Government had decided not to pursue its case (reference C-507/13) before the Court of Justice of the European Union challenging the validity of the bonus cap. This decision follows the publication yesterday of the opinion of First Advocate General Jääskinen, in which he advised the court to reject all of the UK's pleas and to dismiss the action: see here. A summary of the opinion is available here (pdf).

UK: The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2014

The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2014 were laid before Parliament yesterday and come into force next month on 15 December: see here or here (pdf). The purpose of the Regulations is to extend the prohibition on market manipulation in section 118(8) of the Financial Services and Markets Act 2000 until the new civil regime on market abuse under Regulation EU No 596/2014 takes effect on 3 July 2016. Further information is available in the accompanying explanatory memorandum: see here (pdf).

UK: The 'over-development' of board committees - a view from Martin Taylor

Martin Taylor, an external member of the Financial Policy Committee, delivered a speech yesterday at the Oliver Wyman Institute annual conference: see here (pdf). He used part of his speech to reflect on the governance of banks and, in particular, the role of board committees. He raised some serious concerns about the effectiveness of the board and wider governance framework. To quote directly:

I sense that one of the solutions we have developed to address the thorny problems of corporate governance has turned into a large, looming, silent problem itself. I refer to the over-development of board committees, and – as a consequence – the reduced space for boards as a whole to operate in. (This observation, by the way, goes well beyond the banking sector, though the phenomenon may be most acute there). Now committees are self-evidently a good thing...

These days, of course, boards have committees to cover not only audit but also remuneration, risk, nominations, social responsibility, and in some cases capital allocation and many other matters. The committees are subordinate to the main board – powers are delegated to them. They make the board more efficient in the sense that they allow it to take on a greater workload – indeed it’s hard to imagine how a board today might function without a slew of committees, never mind what the governance rules require. But I believe this efficiency has been bought at a high price in reduced board cohesion. It has got harder – perhaps because some organisations are ungovernably large – for boards to see any sort of big picture. Unable to encompass the blurred outlines of a sometimes ugly reality, individuals take refuge in trivial detail.

Two powerful effects seem to be in play – entirely understandable, quite subtle, and in the end perverse. First, a director who is not on the remuneration committee or the audit committee thanks her lucky stars and removes these crucial topics from her personal list of concerns. Second, the committees themselves take on a fundamentally technical aspect, where the members, drawing heavily on consulting advice and inter-firm comparisons, tend to behave more as experts, and less as broadly responsible directors. In the end the committees usurp the power of the board – after all, they perform three quarters of the board’s role – but they do not really behave like boards.

Thursday, 20 November 2014

Canada: contracts and the 'organising principle of good faith'

The Supreme Court gave judgment several days ago in Bhasin v Hrynew, 2014 SCC 71, one of the most important contract law cases of recent years and one that will be of interest internationally. Cromwell J delivered the judgment of the court and held that: [1] there was a general organising principle of good faith underlying many facets of contract law; and [2] it was appropriate to recognise a new common law duty, a manifestation of the general organising principle and applying to all contracts: a duty of honest performance, requiring the parties to be honest with each other in relation to the performance of their contractual obligations.

This new duty, Cromwell J stressed, was a simple requirement not to lie or mislead the other party about one's contractual performance. It did not impose a duty of loyalty or of disclosure, nor did it require one party to forego the advantages flowing from the contract.

Wednesday, 19 November 2014

OECD Principles of Corporate Governance - revised edition published for public comment

The OECD has published for public comment a revised edition of its Principles of Corporate Governance: see here (pdf). Further information, including how to respond to the consultation, is available here.

Pakistan: a legal framework for LLPs - SECP publishes concept paper

The Securities and Exchange Commission has published a concept paper setting out a proposed framework for the introduction of limited liability partnerships: see here (pdf).

Tuesday, 18 November 2014

UK: Extending the Senior Managers and Certification Regime to UK branches of foreign banks

HM Treasury is seeking views on a draft Order the purpose of which is to extend the Senior Managers and Certification Regimes, the framework for which is set out in Part 4 of the Financial Services (Banking Reform) Act 2013, to UK branches of foreign banks: see here. Further information about the new regimes is available here.

Monday, 17 November 2014

UK: Takeover Code - miscellaneous changes and a new edition for January 1, 2015

The Code Committee of the Takeover Panel has published a response statement in respect of its consultation earlier this year on miscellaneous changes to the Takeover Code: see here (pdf). A new edition of the Code will come into force on January 1, 2015, reflecting the amendments contained in Instrument 2014/2: see here (pdf). Most of the amendments proposed in the consultation paper are being introduced.

Friday, 14 November 2014

UK: ICAEW proposes a 'framework code' for corporate governance

The ICAEW has published the fifth and final paper in its thought leadership series on corporate governance: see here (pdf). In the paper, the ICAEW sets out the case for what it calls a 'framework code': a set of fundamental principles the purpose of which is to promote a good culture of corporate governance across society and within companies. According to the ICAEW, a framework code:
"... would apply to everyone in corporate governance [and] would typically include directors, shareholders, auditors, and remuneration and recruitment consultants. Where specific codes already exist, they should be tested against the framework code. A framework code would also cover all intermediaries in the investment chain, such as proxy agents, as well as other types of finance providers such as bondholders and lenders, the media, professional bodies, NGOs, governments and regulators in so far as their actions affect corporate governance at individual companies or more widely..".

Thursday, 13 November 2014

UK: FRC consults on revised interim financial reporting guidance

The Financial Reporting Council has published an exposure draft - FRED56, Draft FRS104 Interim Financial Reporting - the purpose of which is to revise the FRC's existing guidance on interim financial reporting to ensure consistency with the new UK and Irish GAAP (FRS102): see here (pdf).

Wednesday, 12 November 2014

New Zealand: FMA consults on revised handbook on corporate governance principles and guidelines

The Financial Markets Authority has published for consultation a revised edition of its handbook Corporate Governance in New Zealand - Principles and Guidelines: see here (pdf). Information on how to provide feedback is available here. The handbook was first published in 2004 by the Securities Commission and is a reference guide to help directors and their advisers decide how best to apply the nine key corporate governance principles.

Note: on 1 May 2011 the Securities Commission was replaced by the FMA (see the Financial Markets Authority Act 2011).

Tuesday, 11 November 2014

UK/Bermuda: JCPC judgments - insolvency law - jurisdiction issues and assisting a foreign liquidation

Two of the judgments given yesterday by the Judicial Committee of the Privy Council (in concurrent appeals from the Court of Appeal of Bermuda) concerned insolvency law: PricewaterhouseCoopers v Saad Investments Company Ltd (Bermuda) [2014] UKPC 35 and Singularis Holdings Ltd v PricewaterhouseCoopers (Bermuda) [2014] UKPC 36. A summary for each decision is available: see, respectively, here (pdf) and here (pdf).

In the first case, the committee considered, amongst other things, issues of jurisdiction in respect of the winding-up of a company incorporated in the Cayman Islands. In the latter case, the court considered the power of the Bermudan court at common law to assist a foreign liquidation.

IFSB publishes two new exposure drafts

Two new exposure drafts have been published by the Islamic Financial Services Board for public comment: [1] ED17, Standard on Core Principles for Islamic Finance Regulation (Banking Segment) [see: English (pdf) | Arabic (pdf) ] and [2] ED of GN6, Guidance Note on Quantitative Measures for Liquidity Risk Management in Institutions Offering Islamic Financial Services [see: English (pdf) | Arabic (pdf) ].

Monday, 10 November 2014

UK: Small Business, Enterprise and Employment Bill - an update

The Small Business, Enterprise and Employment Bill 2014-15 completed Committee stage in the House of Commons last week: see here. A copy of the Bill, as it left Committee for the Report stage next week, is available here (pdf).

The Bill contains, amongst other things, changes to company filing requirements; the framework for the new register of significant control; the requirement for all company directors to be natural persons (although the Bill provides that the Secretary of State may, through regulations, provide that a person who is not a natural person may be appointed a director); and provisions to apply the general duties of directors in the Companies Act 2006 to shadow directors.

Australia: insolvency law reform - draft Bill published for consultation

Proposals to reform the law of personal and corporate insolvency have been published by the Treasury and are contained in a draft of the Insolvency Law Reform Bill 2014: see here (pdf). Accompanying the Bill is explanatory material (herepdf) and a proposal paper in respect of insolvency practice rules (herepdf). Further information about taking part in the consultation is available here.

Note (11 November 2014): the original link for the proposal paper was wrong but has now been corrected. Apologies.

UK: DTR change and FCA policy statement - removing the requirement to publish interim management statements

The Disclosure Rules and Transparency Rules (DTR) have been amended to remove, from 7 November 2014, the requirement for interim management statements to be published by issuers of shares admitted to trading on a regulated market where the UK acts as home Member State and the DTRs apply.

Further information is available in the policy statement, Removing the Transparency Directive’s requirement to publish interim management statements, that was published last Friday by the Financial Conduct Authority: see here (pdf). The change to the DTR was made by the Disclosure and Transparency Rules (Interim Management Statements) (Amendment) Instrument 2014, a copy of which will be available here soon.

Friday, 7 November 2014

UK: England and Wales: service of claim on an overseas company

Judgment was delivered yesterday in Teekay Tankers Ltd v STX Offshore & Shipping Co [2014] EWHC 3612 (Comm). The case involved a challenge by STX (an overseas company) regarding the jurisdiction of the English court to hear a claim for damages brought against it by Teekay. One of the arguments made, but rejected by the trial judge, was that the service of the Claim Form, which had been effected on STX's registered UK establishment, was ineffective.

In reaching this view, the trial judge considered Regulation 7 of the Overseas Companies Regulations 2009 (No. 1801), which sets out what information must be provided in respect of an overseas company's registered establishment, including the "... name and service address of every person resident in the United Kingdom authorised to accept service of documents on behalf of the company in respect of the establishment...". The judge held that the words "in respect of the establishment" referred to the person and not to the documents: in other words, the company was required to register the details of each person who, in respect of the establishment, was authorised to accept service of documents on behalf of the company.

Thursday, 6 November 2014

UK: CMA to undertake retail banking market investigation

The Competition and Markets Authority has confirmed, following a provisional decision in July this year, that it will undertake an in-depth market investigation into the personal current account and SME retail banking sectors: see here.

Wednesday, 5 November 2014

UK: women on boards - progress following the 2012 corporate governance code

The School of Management at Cranfield University has published Women on Boards - Progress following the 2012 Corporate Governance Code: see here (pdf). The report notes that since the publication of the Davies Report in March 2011, the percentage of directorships held by women on FTSE100 boards has increased by 82% to 22.8%, and the percentage held on FTSE250 boards has increased by 124% to 17.5%. The report notes that if the appointment of women to FTSE100 board positions continues at the current rate, Lord Davies' target of 25% of board positions being held by women will be met in 2015. The target is unlikely to be met in respect of FTSE250 boards unless there is an increase in the proportion of new appointments being taken up by women.

Gibraltar: new company law framework comes into force

The new company law framework for Gibraltar - one of the British overseas territories - came into force on 1 November. The framework is contained in the Companies Act 2014, a copy of which is available here (pdf). This copy does not show the amendments made by the Companies (Amendment) Act 2014 (herepdf) which correct various typographical errors and omissions. In addition to the company law framework, the 2014 Act also contains provisions concerning liquidation.

Subsidiary legislation has been made under the 2014 Act and includes the following: the Companies (Certification of documents) Rules 2014 (here, pdf), the Companies (Forms) Regulations 2014 (here, pdf) and the Companies (Model Memoranda and Articles) Regulations 2014 (here, pdf).

Tuesday, 4 November 2014

Europe: Single Supervisory Mechanism comes into force today

The Single Supervisory Mechanism, part of the Banking Union, came into force today. The European Central Bank is now responsible for supervision of banks within the Eurozone, working with authorities in the participating countries, although it will only directly supervise the largest institutions. Further information is available on the new supervision website created by the ECB: see here. A guide to banking supervision is available here (pdf).

Monday, 3 November 2014

UK: England and Wales: company directors - no implied duty to deliver up documents on termination

Judgment was given last Friday in Eurasian Natural Resources Corporation Ltd v Judge [2014] EWHC 3556 (QB). The case concerned an application by Sir Paul Judge, a former director of ENRC, for summary judgment of, and/or strike out, of several claims made against him by ENRC in which various breaches of duty were alleged. Sir Paul's application was rejected by the trial judge (Mrs Justice Swift) in respect of all the claims except for one: the claim based on a purported term (whether implied in contract, or as part of his fiduciary duties) requiring the delivery up within a reasonable time (or on demand) of all hard copy documents belonging to ENRC and any other documents, whether hard copy or in electronic format, containing confidential information and which had been provided for the purposes of performing his duties as director. In rejecting the existence of this duty, Mrs Justice Swift observed (para. [73]):
I can see no grounds for finding that [Sir Paul] was subject to an implied term requiring delivery up of the confidential documents after termination of his appointment. Had it been the "obvious but unexpressed intention of the parties", one would have expected it to be incorporated into [Sir Paul's] contract, as was done in Brandeaux. Moreover, I have been shown no legal authority, Code of Practice, Guidance or other evidence that would suggest that such a requirement is the norm for directorships. I can well understand that there would be difficulties in complying with such a duty, especially for those individuals who take on multiple directorships. The difficulty is particularly acute where, as here, company documents are sent to a number of email addresses, some personal to the director and others maintained by other private and publicly listed companies with which the director is associated. It is difficult to see how 'business efficacy" would be achieved by an implied term to deliver up. It would potentially involve a considerable amount of work for those subject to it - to very little purpose."

UK: insolvency and the payment of rent - Supreme Court declines to hear appeal

The Supreme Court has announced that it has declined to hear an appeal from the Court of Appeal's decision in Pillar Denton Ltd v Jervis [2014] EWCA Civ 180: see here. A summary of the Court of Appeal decision, provided by the ICLR, is available here; the headnote of this summary reads:
In the context of insolvency, where rent was payable in advance the office holder should make payments at the rate of the rent for the duration of any period during which he retained possession of the demised property for the benefit of the winding up or administration. The rent would be treated as accruing from day to day. Those payments were payable as expenses of the winding up or administration. The duration of the period was a question of fact and was not determined merely by reference to which rent days occurred before, during or after that period."

Friday, 31 October 2014

UK: FPC review of the leverage ratio

The Financial Policy Committee published the results of its review of the leverage ratio today: see here (pdf). In its document, the FPC sets out the power it would like HM Treasury to grant it: the power to direct the Prudential Regulation Authority to set leverage ratio requirements and buffers for PRA-regulated banks, building societies and investment firms, including: a minimum leverage ratio requirement; a supplementary leverage ratio buffer that will apply to G-SIBs and other major domestic UK banks and building societies, including ring-fenced banks; and a countercyclical leverage ratio buffer.

The document explains the FPC's intentions in respect of this new power of direction. For example, the minimum leverage ratio requirement would be set at 3%.

Publication of the review was accompanied by an exchange of letters between the Governor of the Bank of England and the Chancellor of the Exchequer: see here (pdf) and here (pdf).

UK: HM Treasury consultation on the FPC's power of direction - mortgage lending and LTV and DTI limits

A consultation paper was published today by HM Treasury setting out the intention (with supporting draft legislation) for the Financial Policy Committee to be given the power to direct the Prudential Regulation Authority and Financial Conduct Authority to restrict institutions' mortgage lending with reference to loan-to-value and debt-to-income limits: see here (pdf). This would apply to owner occupied mortgages; the extent to which such limits should apply to buy-to-let mortgages will be the subject of a separate consultation next year.

Thursday, 30 October 2014

Europe: Commission study - the promotion of employee ownership and participation

The European Commission has published a study containing an overview of the development of employee financial participation, including employee share ownership, in the European Union: see here (pdf). The study also identifies and analyses various options for removing the obstacles to transnational participation and ownership. An executive summary, and further supporting documents, are available here.

Wednesday, 29 October 2014

UK: BIS discussion paper on the register of significant control

The Small Business, Enterprise and Employment Bill is currently before Parliament and will, amongst other things, introduce a new central register of those with significant control over UK companies (the so-called PSC register). The Secretary of State will be required to prepare and publish guidance about the meaning of "significant influence or control" and in this regard the Department for Business, Innovation and Skills has published a discussion paper seeking views on the structure, format and content of this guidance and asks whether an external working group would be an appropriate way to develop it: see here (pdf).

FATF Guidance on transparency and beneficial ownership

The Financial Action Task Force has published Guidance on Transparency and Beneficial Ownership: see here (pdf). The Guidance is intended to assist countries in the design and implementation of measures that will deter and prevent the misuse of companies and other corporate vehicles for money laundering, terrorist financing and other illicit purposes.

Europe: Financial Reporting - ESMA publishes European common enforcement priorities

The European Securities and Markets Authority has published a public statement containing the priorities for it and national authorities in respect of listed companies' financial statements. These priorities - described as European common enforcement priorities - include the presentation of consolidated financial statements and the recognition and measurement of deferred tax assets.

A copy of the public statement is available here (pdf). The accompanying press release is available here (pdf). ESMA has also published Guidelines on the enforcement of financial information: see here (pdf).

Tuesday, 28 October 2014

UK: Kay Review implementation - a progress report

The Department for Business, Innovation and Skills yesterday published a progress report concerning implementation of the recommendations made in the Kay Review of UK Equity Markets and Long–Term Decision Making: see here (pdf). The report also contains the Government's response to the recommendations recently made by the Law Commission in its report Fiduciary Duties of Investment Intermediaries.

Two additional documents accompany the progress report. The first, a BIS research paper, considers the metrics and models used to assess company and investment performance: see here (pdf). The second document contains notes of a BIS roundtable on the practical and legal issues related to limiting the rights of short-term shareholders during takeover bids: see here (pdf).

Monday, 27 October 2014

UK: FRC discussion paper on succession planning due next spring

An article on the website, titled "Succession planning faces tighter climate", reports that the Financial Reporting Council will next spring publish a discussion document on succession planning, the purpose of which is to strengthen guidelines to ensure that companies have a clear and consistent policy: see here.

Friday, 24 October 2014

UK: Share loss relief and the meaning of "issue"

The First-tier Tribunal (Tax) gave judgment a few days ago in Thomas v Revenue & Customs [2014] UKFTT 980 (TC). It was required to consider, amongst other things, whether shares had been "issued" in the context of a claim for share loss relief under the Income Tax Act 2007. Section 131 of the 2007 Act sets out the conditions and one of these is that the shares have been subscribed for by the individual. Section 135(2) states that an individual subscribes for shares in a company if they are "issued to the individual by the company in consideration of money or money's worth".

The Tribunal held that in the current context of "... very prescriptive statutory provisions ... it seems to us that if parliament had intended the word 'issue' for the purposes of share loss relief to mean something other than its normal company law meaning, it would have done so by means of an explicit definition" (para. [167]). The Tribunal therefore held, with reference to National Westminster Bank plc v Inland Revenue Commissioners [1995] 1 AC 119, that shares were only issued when the entire process of application, allotment and registration had been completed.

Thursday, 23 October 2014

UK: Bank of England publishes resolution framework

The Bank of England has published its framework for resolving failing banks, building societies and certain types of investment firm: see here (pdf). The first part of the document explains the aims of resolution and describes the key feature of the UK's resolution regime. The second part explains how the Bank expects to carry out the resolution of a failing firm in practice, using the powers available to it as the UK resolution authority.

Wednesday, 22 October 2014

UK: The UK, the Crown Dependencies and the English courts

The Supreme Court gave judgment today in R (on the application of Barclay and another) v Secretary of State for Justice and the Lord Chancellor and others [2014] UKSC 54: see here or here (pdf). This is an interesting and important decision which explores the relationship between the United Kingdom, and the English courts (including the UK Supreme Court), with the Crown Dependencies (and, in particular, the legislative process of the island of Sark, part of the Crown Dependency of the Bailiwick of Guernsey). A summary of the decision is available here (pdf) and in the following recording:

Tuesday, 21 October 2014

UK: IMA Principles of Remuneration - updated edition published

The Investment Management Association, which has responsibility for remuneration guidance previously issued by the Association of British Insurers, has published the 2014 edition of its Principles of Remuneration: see here (pdf). The Principles set out members’ views on the role of shareholders and directors in relation to remuneration and the manner in which remuneration should be determined and structured. The 2014 edition of the Principles contains a new statement concerning allowances forming part of fixed pay: in general, the IMA's members believe that the use of allowances as part of fixed pay goes against the spirit of simplicity, clarity and pay for performance.

Monday, 20 October 2014

Germany: amended corporate governance code - copy in English available

A copy, in English, of the amended corporate governance code published earlier this year by the Government Commission on the German Corporate Governance Code is now available: see here or here (pdf). A copy of the Code, with the amendments highlighted, is available here (pdf).

Norway: NUES outlines changes to be made to the Norwegian Corporate Governance Code

Earlier this year the Norwegian Corporate Governance Board (NUES) published the changes it proposes to make to the Norwegian Corporate Governance Code: see here (pdf). The revised Code should be published soon.

Friday, 17 October 2014

UK: The CEO of the PRA comments on bonuses and governance

Andrew Bailey, a Deputy Governor of the Bank of England and the Chief Executive Officer of the Prudential Regulation Authority, delivered a speech yesterday in which he referred to several areas of current controversy: bonus policy (in the light of the EBA's recent report on the payment of allowances and their use to circumvent the bonus cap) and individual accountability (against the background of the PRA consultation on the new senior managers regime).

With regard to bonuses, and incentives more generally, Mr Bailey observed "... the bonus cap is the wrong policy, the debate around it is misguided, and the best thing I can say about allowances is that they are a response to a bad policy". With regard to governance, and the new regime, he stated: "... is it really unreasonable to expect the most senior figures to assume responsibility? Not in my view, and in my experience not in the view of those who take on these roles".

FSB key attributes of effective resolution regimes for financial institutions

The Financial Stability Board has published an updated edition of its guidance The Key Attributes of Effective Resolution Regimes for Financial Institutions: see here (pdf). These attributes represent what the FSB believes to be the core elements of an effective resolution regime.