Monday, 28 July 2014

Europe: Commission evaluation of the Commercial Agents Directive

The European Commission has begun its first general evaluation of the Commercial Agents Directive (86/653/EEC): see here.  A public consultation has been launched, the purpose of which is to seek information about the operation and future of the Directive (in particular its significance for SMEs and cross-border activities).

Friday, 25 July 2014

UK: market for statutory audit services - CMA publishes draft Order

The Competition and Markets Authority has published for comment a draft of the Order that will implement the recommendations made by the Competition Commission (one of the bodies the CMA has replaced) in respect of the market for statutory audit services: see here (pdf). The Order covers audit tendering and audit committee responsibilities in this regard. An explanatory note accompanying the Order is available here (pdf). Further background information, including all of the Competition Commission's inquiry publications, can be found here.

Thursday, 24 July 2014

UK: EHRC inquiry into the appointment and recruitment of FTSE350 directors

The Equality and Human Rights Commission has begun an inquiry examining the recruitment and appointment practices of FTSE350 companies: see here. As part of the inquiry, guidance has been published on board appointments and equality law: see here (pdf).

UK: HM Treasury consults on transposition of the Bank Recovery and Resolution Directive

HM Treasury has begun a consultation in respect of the UK's implementation of European Directive 2014/59/EU on the establishment of a framework for the recovery and resolution of credit institutions and investment firms: see here. Further information about the Directive is available here.

UK: The Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014

The Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014 was made yesterday and comes into force on 1 January 2015: see here (pdf). The Order forms part of the statutory framework governing the ring-fencing of banking activities and defines which banks are ring-fenced bodies and the activities which can only be done by ring-fenced bodies. It also defines the circumstances in which accepting deposits can be undertaken by banks that are not ring-fenced. Further information is available in the explanatory memorandum prepared to accompany the Order: see here (pdf).

Wednesday, 23 July 2014

UK: FCA consultation on removing the requirement to publish interim management statements

The Financial Conduct Authority has published a consultation paper setting out the changes it will make to the Disclosure Rules and Transparency Rules (DTR) in order to remove the requirement for issuers to publish interim management statements: see here (pdf).

UK: FRC issues amendments to UK GAAP (FRS101 and FRS102)

The Financial Reporting Council has today published amendments to Financial Reporting Standard 101 and Financial Reporting Standard 102: see here.

Tuesday, 22 July 2014

India: SEBI International Advisory Board discusses corporate governance norms

The International Advisory Board (IAB) of the Securities and Exchange Board of India held its fourth meeting a few days ago: see here. Amongst the matters discussed were corporate governance norms in India. The IAB has suggested that there should be different governance standards for large and complex groups and it also called for more focused enforcement of corporate governance norms.

Monday, 21 July 2014

IFAC/CIPFA International Framework: Good Governance in the Public Sector

Earlier this month, IFAC and CIPFA launched their International Framework - Good Governance in the Public Sector: see here (pdf). The framework contains seven principles that can be used to review and update national governance codes for the public sector. A supplement has been published to accompany the framework and this provides further information and examples in respect of the seven principles: see here (pdf).

Friday, 18 July 2014

UK: Government consults on new employee shareholding vehicle

The Government has begun a consultation in which it seeks views on whether a new vehicle for employee shareholding is required: see here.

UK: Takeover Code - consultation on proposed amendments

The Code Committee of the Takeover Panel has published a consultation paper setting out proposed amendments to various provisions in the Takeover Code: see here (pdf). It is, for example, proposed that the deadline for a potential competing offeror to clarify its position should be a firm date set out in the Code and not, as present, a flexible date set by the Panel on a case by case basis.

Thursday, 17 July 2014

UK: FRC annual report identifies areas for improvement

The Financial Reporting Council published its annual report yesterday: see here (pdf). In his section of the report, the FRC's chief executive, Stephen Haddrill, identifies areas where further work is required, including understanding the causes of poor quality reporting by some smaller listed and AIM quoted companies. It is also noted that the FRC is discussing with the Department for Business, Innovation and Skills the extent to which faults in reporting and auditing can be made public where they do not amount to misconduct.

Wednesday, 16 July 2014

UK: Supreme Court judgment in FHR - bribes are held on trust (and subject to a proprietary claim)

The Supreme Court gave judgment earlier today in FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45: see here (pdf). A summary of the court's decision is available here (pdf). A panel of seven justices heard the appeal; the court's judgment was delivered by the President, Lord Neuberger. The court unanimously held that bribes (or secret commissions) received by an agent are held on trust for the principal.

FSB recommendations for reform of benchmark rates in foreign exchange markets

The Financial Stability Board has published a consultation paper in which it sets out recommendations for the reform of benchmark rates in foreign exchange markets: see here (pdf).

Tuesday, 15 July 2014

UK: FCA proposals for a price cap on high cost short term credit

The Financial Conduct Authority has published a consultation paper in which it sets out its proposals for introducing a cap on the cost of so-called 'pay day' loans. The paper, titled Proposals for a price cap on high‐cost short‐term credit, is available here (pdf).

Monday, 14 July 2014

UK: High Pay Centre report published - 'How to make top pay fairer'

The High Pay Centre has today published a report titled How to make top pay fairer: see here (pdf). The report identifies eight wide-ranging measures which, it is argued, could be adopted in order to deliver fairer, more proportionate pay for those at the top. These include employee representation on boards and introducing a maximum pay ratio.

Friday, 11 July 2014

UK: Supreme Court judgment in FHR due next week

The Supreme Court will give judgment next week in FHR European Ventures LLP v Cedar Capital Partners LLC: see here. The principal issue before the court, to quote from its case summary, was this: does an agent who receives a secret commission hold the sum paid on constructive trust for his principal(s) giving rise to proprietary rights?

The appeal hearing took place last month before a panel of seven justices: Lord Neuberger, Lord Mance, Lord Sumption, Lord Carnwath, Lord Toulson, Lord Hodge and Lord Collins.

UK: ICSA report - "The company secretary: building trust through governance"

ICSA has published a report titled The Company Secretary - building trust through governance: see here. The report, which draws on research led by Professors Andrew and Nada Kakabadse, notes that many of those interviewed - including chairmen - recognise the important and unique function performed by the company secretary. Many company secretaries, however, said that their role was largely taken for granted and often improperly utilised. The report identifies and explains how high performing company secretaries are able to contribute to good governance through helping to build trust.

Thursday, 10 July 2014

UK: England and Wales: de facto directorships and substantial property transactions

The Court of Appeal gave judgment earlier today in Smithton Ltd v Naggar [2014] EWCA Civ 939. At first instance the trial judge held that an individual was not a de facto director or shadow director and that certain transactions were not substantial property transactions for the purposes of section 190 of the Companies Act 2006: see [2013] EWHC 1961 (Ch). The Court of Appeal held that there was no basis for setting aside these findings. Arden LJ (with whom Elias and Tomlinson LJJ agreed) delivered the leading judgment and, with regard to section 190, observed that it:
"... requires an arrangement (which can be a non-contractual arrangement) under which a director or connected person acquires "or is to acquire" an interest in shares. There is no basis for interpreting the words 'is to acquire' as 'may acquire'. The fact that conditional arrangements are permitted does not require this interpretation since even a conditional arrangement must still satisfy the words quoted even if it is conditional" (para. [110]). 

UK: The Financial Services (Banking Reform) Act 2013 (Commencement No. 5) Order 2014

The Financial Services (Banking Reform) Act 2013 (Commencement No. 5) Order 2014 was made yesterday: see here (pdf). The Order brings into force certain provisions in the Financial Services (Banking Reform) Act 2013 in order to enable the Prudential Regulation Authority and the Financial Conduct Authority to make and consult on rules governing the conduct of persons working in the financial services sector as provided by Part 4 of the 2013 Act.

Wednesday, 9 July 2014

UK: FCA Market Watch newsletter published

The Financial Conduct Authority has published the latest edition of its Market Watch newsletter: see here (pdf). Two matters are discussed in the newsletter: the price spike in HSBC shares earlier this year and manipulation in fixed income markets. The issues raised for firms generally are identified.

Tuesday, 8 July 2014

UK: PRA/FCA review of the requirements for firms entering into or expanding in the banking sector - board composition

The Prudential Regulation Authority and Financial Conduct Authority have published a document titled A review of requirements for firms entering into or expanding in the banking sector - one year on: see here (pdf). The document provides some further guidance about the regulators' expectations of board composition, non-executive directors and whether shareholders can serve as independent non-executive directors. It is stated, at paragraph 58, that "... there is no ‘one size fits all’ and overall composition will be assessed proportionately as part of the application process on a case-by-case basis".

Monday, 7 July 2014

UK: CIPD calls for new board diversity targets

In its Manifesto for Work, published today, the CIPD has called on the Government to set new boardroom diversity targets: see here (pdf). The CIPD advocates a 2020 target of 40% for female non-executives and 20% female executive directors amongst FTSE100 companies. It also calls for greater information to be provided by companies in respect of how people are managed, led and developed.

Friday, 4 July 2014

Isle of Man: should a centralised register of company beneficial ownership and control be introduced?

The Cabinet Office has published a consultation paper in which it asks, amongst other things, whether a centralised registry would improve the transparency of company ownership and control in the Isle of Man: see here (pdf). The paper notes that the Isle of Man Government has not, so far, taken a view on this question.

Canada: board gender diversity disclosure rules published for consultation

The securities regulators in Saskatchewan, Manitoba, Qu├ębec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Northwest Territories and Nunavut (the participating jurisdictions) yesterday published for public comment amendments that would require all TSX-listed issuers (and other non-venture issuers reporting in the participating jurisdictions and Ontario) to provide information in respect of the representation of women on their boards and in certain executive officer positions: see here.

Europe: Court of Auditors special report on banking supervision framework

The European Court of Auditors has published its special report European banking supervision taking shape — EBA and its changing context: see here (pdf). The report recommends, amongst other things, further clarification through legislation of the roles and responsibilities of the European Central Bank, European Banking Authority and national supervisors.

Thursday, 3 July 2014

Australia: are directors' duties public in nature?

The Supreme Court of Western Australia (Court of Appeal) gave judgment towards the end of last month in Ailakis v Olivero (No 2) [2014] WASCA 127. The judgment is noteworthy because of the arguments made about the nature of directors' duties and the view taken by the court in this regard. Chief Justice Martin (with whom Buss JA and Murphy JA agreed) stated (para. [103]):
"It is clear that the duties of a director have a number of sources, including common law, equity and statute. However, the fact that the scope of a director's duties, and the standards which must be met in the discharge of those duties, are embodied in a statute and can be enforced by the exercise of the remedies conferred by a statute does not of itself mean that the duties have a public character, analogous, for example, to the duty to attend court in answer to a subpoena ... or the duty to care for a dependent child ... The duties of a director are owed to the company and are enforceable by the company. Although the rule in Foss v Harbottle [1843] EngR 478; (1843) 2 Hare 461; (1843) 67 ER 189 has to some extent been ameliorated by the development of the shareholder's derivative action, including the current statutory form of that action, it remains the case that the remedy enforces the rights of the company as against those who owe duties to the company, such as its directors. The appellants' assertion that the duties which a director owes to the company in which he or she holds office are duties of a public character cannot be accepted."

UK: Deregulation Bill - First reading in the House of Lords

The Deregulation Bill, introduced in the House of Commons in the previous session of Parliament, has now received its First reading in the House of Lords: see here. Second reading is scheduled for July 7. A copy of the Bill, as introduced in the Lords, is available here or here (pdf). Clauses 18, 19 and 20, together with Schedules 5 and 6, contain provisions concerning company and insolvency law. Further information is available in the explanatory notes produced to accompany the Bill's introduction in the Lords: see here or here (pdf).

Wednesday, 2 July 2014

UK: England and Wales: Law Commission report - the fiduciary duties of investment intermediaries

The Law Commission for England and Wales yesterday published its report Fiduciary Duties of Investment Intermediaries: see here (pdf). An executive summary is available here (pdf). The report is the product of work undertaken following a recommendation in the Kay Review of UK equity markets and long-term decision making.

The Commission concludes that the law of fiduciary duties should not be reformed by statute. It recommends that it is for the Government to decide if investors should have greater rights to sue intermediaries (and a possible option, based on section 138D of the Financial Services and Markets Act 2000, is highlighted).

The Law Commission also advises that there is no impediment to trustees taking account of environmental, social or governance factors where these are, or may be, financially material. It advises that when trustees invest in equities over the long-term they should consider, in discussion with their advisers and investment managers, how to assess risks (including risks to a company's long-term sustainability).

The Commission accepts that trustees need more guidance but it does not advocate codification of the law; instead, it hopes that its report - and accompanying guidance for trustees in respects of their duties when setting an investment strategy: see here (pdf) - will prove useful.

Tuesday, 1 July 2014

UK: Upper Tribunal considers meaning of "director"

The meaning of the term "director", as found in section 28(5)(a) of the Goods Vehicles (Licensing of Operators) Act 1995, has recently been considered by the Upper Tribunal in Bradley & Anor (Transport : Traffic Commissioner cases) [2014] UKUT 253 (AAC). The Tribunal rejected the argument that "director" in this context was limited to an individual lawfully appointed as such and appearing on the Register at Companies House. It also held, after considering the meaning of de jure, de facto and shadow directorships, that "... what really matters is whether the evidence shows that the person concerned probably played a part in the corporate governing structure of the company in question. If the answer is that they did, that, in our view, is what matters for the purpose of engaging s. 28(5)(a) of the 1995 Act" (para. [27]).

Singapore: MAS consults on framework for systemically important banks

The Monetary Authority of Singapore has published for consultation its proposed framework for systemically important banks: see here (pdf).

Monday, 30 June 2014

Malaysia: Launch of the Malaysian Code for Institutional Investors

The Securities Commission and Minority Shareholder Watchdog Group have launched the Malaysian Code for Institutional Investors: see here (pdf). The Code was developed by Malaysia's largest institutional investors and contains principles designed to promote effective stewardship.

UK: Law Commission publishes trade and industry statute law repeal proposals

The Law Commission, as part of its statute law repeals work, has proposed the repeal of legislation within the field of trade and industry, including the Companies Act 1947: see here (pdf).

Friday, 27 June 2014

UK: PRA consults on implementing the FPC recommendation on loan to income ratios in mortgage lending

The Prudential Regulation Authority published a consultation paper yesterday setting out how it proposes to respond to the recommendation made by the Financial Policy Committee that mortgage lenders limit the number of mortgage loans made at or greater than 4.5 times LTI to no more than 15% of their overall number of mortgage loans: see here (pdf).

UK: Glencore announces appointment of female non-executive director

Glencore yesterday announced the appointment of a new non-executive director - Patrice Merrin - and in doing so brought to an end its position as the last FTSE100 company without female representation on its board: see here.

Thursday, 26 June 2014

UK: Small Business, Enterprise and Employment Bill 2014-15 introduced in Parliament

The Small Business, Enterprise and Employment Bill 2014-15 was introduced in Parliament yesterday and received its First reading: see here. Second reading is scheduled to begin today. A copy of the Bill, as introduced, is available here or here (pdf). Explanatory notes are available here or here (pdf). Further materials, including impact assessments, have been published by the Department for Business, Innovation and Skills: see here.

The Bill contains a wide range of provisions, including those for the establishment of a register of those with significant control over companies. It will also introduce a new general rule that company directors must be natural persons (at present, under section 155 of the Companies Act 2006, companies can act as a director of a company where that company has at least one director that is a natural person). This general rule can, however, be subject to exceptions determined by the Secretary of State.

Ireland: Company Law Review Group publishes 2013 annual report

The Company Law Review Group has published its annual report for 2013: see here (pdf). This provides an update on the work of the Group over the past few years as well as a useful overview of the Companies (Miscellaneous Provisions) Act 2013.

Wednesday, 25 June 2014

Hong Kong: reforming the regulatory regime governing listed entity auditors

The Financial Services and Treasury Bureau has launched a consultation on proposals to reform the regulatory regime for listed entity auditors, the purpose of which is to introduce greater independence and to bring the regime into line with international standards and practices. For further information see the consultation paper (English, pdf) and FAQs (Chinese, pdf).

Tuesday, 24 June 2014

Japan: TSX to develop new corporate governance code

The Japanese Government has formally announced plans to introduce a new corporate governance code, as part of a Japan Revitalisation Strategy: see here (pdf). The Code will be developed by the Tokyo Stock Exchange and will operate on the basis of comply or explain (the Exchange already has its own governance principles for listed companies: see here). It is expected to take effect next year. New disclosure obligations will also be introduced for listed companies, from March 2015, in respect of the number of women occupying executive positions.

Isle of Man: Limited Liability Companies (Amendment) Bill 2013 receives Royal Assent

The Limited Liability Companies (Amendment) Bill 2013 received Royal Assent on 17 June: see here (pdf, at line 4332). A copy of the Act is not yet available but a copy of the Bill as introduced is available here (pdf) and explanatory notes are available here (pdf). The new Act will make it possible to form single member limited liability companies on the Isle of Man.

Note also: a copy of the Foreign Companies Act 2014, which became law earlier this year, has been published on the Isle of Man legislation website: see here (pdf).