Friday, 23 January 2015

New Zealand: FMA Handbook - Corporate Governance in New Zealand, Principles and Guidelines

Following a consultation last year, the Financial Markets Authority has published a new edition of its handbook Corporate Governance in New Zealand - Principles and Guidelines: see here (pdf). The handbook was first published in 2004 by the Securities Commission (now replaced by the FMA) and is a reference guide to help directors and their advisers decide how best to apply the nine key corporate governance principles.

UK: JCPC considers claim for rectification of share register

The Judicial Committee of the Privy Council gave its opinion earlier this week in Nilon Limited v Royal Westminster Investments S.A. [2015] UKPC 2 (an appeal from the Court of Appeal of the British Virgin Islands). The case concerned a claim for an order for rectification of Nilon’s register of members under section 43(1)(a) of the BVI Business Companies Act 2004 (the equivalent of section 125 of the Companies Act 2006).

At issue was whether proceedings for rectification of the register were permitted only if the register was presently inaccurate or whether the proceedings could be used to determine if a party was in breach of contract by failing to procure a company to issue shares. It was the former (according to Lord Collins, delivering the opinion of the Board): proceedings could only be brought where the applicant had a right to registration by virtue of a valid transfer of legal title. It was not enough to have a prospective claim against the company, dependent on the conversion of an equitable right to a legal title by an order for specific performance of a contract. In reaching this view, Lord Collins held that the English decision Re Hoicrest Ltd [2000] 1 WLR 414 was wrong as a matter of principle (however sensible it may have been as a matter of case management).

Thursday, 22 January 2015

UK: The Corporation Tax (Northern Ireland) Bill 2014-15

The Corporation Tax (Northern Ireland) Bill 2014-15 was introduced in Parliament earlier this month and received its First reading: see here. A copy of the Bill, as introduced, is available here (pdf) and explanatory notes are available here (pdf). The purpose of the Bill is to give the Northern Ireland Assembly the power to set the main rate of corporation tax for certain trading profits (to be known as the 'Northern Ireland rate').

Wednesday, 21 January 2015

Europe: the gender diversity of listed company boards

The European Commission has published research regarding the proportion of board positions occupied by women in the largest EU listed companies: see here (pdf). The research found that, on average, 20.2% of board members were women.

Tuesday, 20 January 2015

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

In Financial Services Authority v Asset L I Inc (t/a Asset Land Investment Inc) [2013] EWHC 178 (Ch)[2013] WLR (D) 54 the trial judge held that certain sales of land were collective investment schemes as defined by section 235 of the Financial Services and Markets Act 2000. This finding was challenged before the Court of Appeal last year but rejected (see [2014] EWCA Civ 435). Several days ago the Supreme Court announced that it would hear an appeal from the Court of Appeal's decision: see here (pdf).

Monday, 19 January 2015

UK: Small Business, Enterprise and Employment Bill - Parts 7 and 8 - provisional implementation plan

The Department for Business, Innovation and Skills has published a provisional implementation plan for Part 7 ("Companies: transparency") and Part 8 ("Company Filing Requirements") of the Small Business, Enterprise and Employment Bill: see here (pdf). This explains, amongst other things, that the prohibition (with exceptions) on corporate directors will come into force in October 2015 and that companies will no longer be able to issue bearer shares two months after the Bill has received Royal assent. The Bill is currently before the House of Lords and its Committee stage will resume today.

UK: Restricting share capital reductions in takeovers

Last year, in the Autumn Statement, the Government announced that in order to protect the stamp duty tax base it would introduce legislation to prevent the use of 'cancellation' schemes of arrangement for company takeovers (such schemes enable stamp duty tax to be avoided). A draft of the proposed legislation - The Companies Act 2006 (Amendment of Part 17) Regulations 2015 - has now been published (see here, pdf) together with an information and impact note (herepdf).

UK: Transparency in UK bond markets

The Financial Conduct Authority has published a new paper in its occasional paper series, Transparency in the UK bond markets: see here (pdf). The FCA's paper finds a significant degree of diversity in the UK bond markets, with large differences between market participants, the ways in which they trade and the risks involved in trading different instruments.

Friday, 16 January 2015

UK: The PRA's recovery and resolution planning framework

The Prudential Regulation Authority has today published several documents (containing policy statements and rules) which together set out its recovery and resolution planning framework: see here. The statements and rules are relevant for holding companies, mixed financial holding companies, mixed activity financial holding companies, banks, building societies, and PRA-designated investment firms.

Thursday, 15 January 2015

UK: FRC publishes annual review of governance and stewardship

The Financial Reporting Council has published its annual review Developments in Corporate Governance and Stewardship: see here (pdf). The report provides: an assessment of corporate governance and stewardship in the UK; a report on the quality of compliance with, and reporting against, the UK Corporate Governance Code and UK Stewardship Code; findings in respect of the quality of engagement between companies and shareholders; an indication of the changes in governance behaviour or reporting that the FRC would like to see; and a summary of other developments, including changes to the regulatory framework within the UK and at European level (e.g., the European Commission's Recommendation on the quality of corporate governance reporting (2014/208/EU) and the proposed new Shareholder Rights Directive). .

A few points from the report follow. The FRC believes that the quality of corporate governance in the UK is high but it nevertheless identifies areas where improvements can be made. One such area is the quality of explanations provided as part of 'comply or explain', in particular where companies explain why, in departing from the Code, their chosen arrangements are appropriate.

The role of proxy advisors is discussed in the report because of the mixed reports that FRC has received about the quality of reporting, engagement and voting outcomes which result from the relationship between some proxy advisors and their clients. The FRC will be considering what role it can play in improving engagement and communication between the parties. The FRC will also be publishing a discussion document this year on succession planning and will also begin work to assess how effective boards are at establishing company culture and embedding appropriate behaviour.

With regard to the UK Stewardship Code, the FRC is concerned that too many signatories do not do what they have signed up to do. The standard of reporting by signatories is also variable. The first half of 2015 will see the FRC begin a project on how it can best promote a culture of stewardship; it will also increase its scrutiny of adherence to the Code.

Wednesday, 14 January 2015

Europe: Advocate General finds ECB OMT programme compatible with EU law

Advocate General Cruz Villal√≥n, in an opinion for the Court of Justice of the European Union in case C‑62/14, has advised that the European Central Bank's Outright Monetary Transaction programme is compatible, in principle, with EU law: see here. A summary of the opinion, which is not binding on the court, is available here (pdf).

Tuesday, 13 January 2015

UK: The Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015

The Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 were made a few days ago and come into force on 31 January: see here or here (pdf). This statutory instrument will consolidate several existing instruments relating to trading disclosures and company, limited liability partnership and business names. Further information is available in the accompanying explanatory memorandum: see here (pdf). An impact assessment has also been published: see here (pdf).

Monday, 12 January 2015

UK: BDO's review of board composition

Towards the end of last year, BDO published the results of its analysis of the board composition of over 1,700 quoted companies (including those within the FTSE100, FTSE250, FTSE Small Cap, Fledgling and AIM markets): see here (pdf).

The analysis considered the age, gender and tenure of executive and non-executive directors. Amongst the findings were these: age diversity is greatest on AIM, where directors’ ages ranged from the mid-20s to 94; in FTSE 100 companies, chairmen are most likely to be appointed from within their own boards.

Friday, 9 January 2015

UK: The Money Laundering (Amendment) Regulations 2015

The Money Laundering (Amendment) Regulations 2015 were laid before Parliament today and come into force on 6 February: see here or here (pdf). An explanatory memorandum is available here (pdf). The Regulations provide that the Chartered Institute of Legal Executives will become a supervisory authority for the purposes of the Money Laundering Regulations 2007. General information about the framework created by the Regulations is available here.

Thursday, 8 January 2015

UK: FCA uses new powers to fine sponsor

The Financial Conduct Authority has, for the first time, used new powers to fine a sponsor: see here. A copy of the FCA's final notice is available here (pdf). The fine was imposed under section 88A of the Financial Services and Markets Act 2000, inserted in the 2000 Act by section 18 of the Financial Services Act 2012.

Wednesday, 7 January 2015

UK: Bank of England Court of Directors - minutes during the crisis period

Following a request from the Treasury Committee, the Bank of England has released, in redacted form, minutes for the Court of Directors during the crisis period of June 2007 to May 2009: see here. The minutes - and what they reveal about the actions of the Bank - are widely discussed in the media: see, for example, here and here.

UK: Takeover Code - mandatory bids - new note for rule 9.1

The Takeover Panel has published a new note on Rule 9.1 (the mandatory offer) of the Takeover Code: see here (pdf). The new note provides that, in the case of a company to which the Takeovers Directive applies, Rule 9.1 does not apply in relation to any change in interests in shares or other transaction which is effected by the use of resolution tools, powers and mechanisms (within the meaning given in article 216 of the Bank Recovery and Resolution (No. 2) Order 2014).

Tuesday, 6 January 2015

UK: The Bank Recovery and Resolution Order 2014

The Bank Recovery and Resolution Order 2014 was made last month and came into force on 1 January: see here or here (pdf). The Order is one of several that implement Directive 2014/59/EU (establishing a framework for the recovery and resolution of credit institutions and investment firms). An explanatory memorandum is available here (pdf). A transposition note for the Directive is available here (pdf).

Monday, 5 January 2015

Australia: Productivity Commission inquiry - barriers to setting up, transferring and closing a business - issues paper published

The Productivity Commission - as part of its public inquiry into the barriers to setting up, transferring and closing a business (and identifying options for reducing barriers where appropriate) - has published an issues paper: see here (pdf) or here (docx). As would be expected, the paper asks questions concerning the operation of the corporate and personal insolvency regimes.

Friday, 2 January 2015

Pakistan: SECP feedback statement on the proposed framework for limited liability partnerships

The Securities and Exchange Commission has published a feedback statement for the comments received in respect of its recent consultation on a proposed framework for the introduction of limited liability partnerships: see here (pdf).

Malaysia: annual report disclosures and the 2012 corporate governance code

Bursa Malaysia has published the results of its review of corporate governance disclosures in annual reports by 300 issuers listed on the Main and ACE markets: see here (pdf). The report is the first to be published by Bursa Malaysia in respect of disclosure following the introduction of the Malaysian Code of Corporate Governance 2012. An overview of the report's findings is available here.

Japan: draft corporate governance code - copy in English published

A copy, in English, of the draft corporate governance code published last month by the Council of Experts is now available: see here (pdf). Comments are invited: see here.

Wednesday, 24 December 2014

Season's greetings and best wishes for the new year

Season's greetings to all blog visitors and those receiving the daily e-mail updates. I hope that you have found the contents useful and interesting over the past year. The first blog post for 2015 will appear on January 2.

With best wishes for 2015, Robert.

Jersey: the unfair prejudice remedy and the influence of English authorities

The Royal Court (Samedi division) gave judgment a couple of days ago in Kilbey v Grafters Ltd [2014] JRC 225. The case concerned a shareholder's claim for relief under Jersey's unfair prejudice remedy (Article 141 of the Companies (Jersey) Law 1991). The court held that, were it not for the reasonable offer the shareholder had received for his shares, unfair prejudice would have been established and the court's jurisdiction to make an order invoked.

The decision contains a wide ranging discussion of various examples of unfairly prejudicial conduct and also provides an excellent illustration of the influence that English authorities (under the equivalent UK provision: section 994 of the Companies Act 2006) have in the development of this particular aspect of Jersey company law.

UK: Takeover Panel response statement and instrument - post offer undertakings and intention statements

The Takeover Panel yesterday published Response Statement 2014/2 Post offer undertakings and intention statements, following its consultation earlier this year: see here (pdf). The response statement is accompanied by Instrument 2014/4, which will make amendments to the Takeover Code, to implement new rules concerning post offer undertakings and post offer intention statements: see here (pdf). The revised version of the Code will take effect from 12 January 2015.

Tuesday, 23 December 2014

Ireland: Companies Act 2014 becomes law

The Companies Bill 2012 was signed by the President today and, as the Companies Act 2014, became law: see here. A copy of the Bill, as it stood before signing by the President, is available here (volume 1, pdf) and here (volume 2, pdf).

The Act is expected to come into force during the middle of next year; secondary legislation will follow in the new year. It is the largest piece of legislation to be enacted by the Oireachtas and contains Ireland's new company law framework. It consolidates the existing 17 Companies Acts, which date from 1963 to 2013.

A short overview of the Act, focusing in particular on the reforms it will introduce for private companies, is available here. There is also further information on the Companies Registration Office website: see here.

UK: Supreme Court declines to hear London Metal exchange consultation appeal

The Supreme Court has announced that it has refused United Company Rusal's application to appeal the Court of Appeal decision in United Company Rusal Plc, R (on the Application of) v The London Metal Exchange [2014] EWCA Civ 1271 (a case on the procedural fairness of a consultation process carried out by London Metal Exchange).

UK: FCA publishes new DTRs for extractive and forest industries

The Financial Conduct Authority has published the new Disclosures Rules and Transparency Rules concerning payments to governments by issuers involved in the extractive or logging of primary forest industries: see here (pdf). The new rules apply to financial years beginning on or after 1 January 2015. A detailed policy statement will be published early in the new year.

Romania: Bucharest Stock Exchange consults on new corporate governance code

The Bucharest Stock Exchange has published for consultation a new edition of its corporate governance code. Further information, in English, is available here (pdf).

Monday, 22 December 2014

UK: FCA consultation paper - bringing additional benchmarks into the regulatory and supervisory regime

The Financial Conduct Authority has published a consultation paper titled Bringing additional benchmarks into the regulatory and supervisory regime: see here (pdf). The paper seeks views on how the FCA's current approach to benchmark supervision could be applied beyond LIBOR, and in particular to the seven additional benchmarks the FCA will regulate from April 2015. The paper notes, for example, that whilst the MAR 8.3 requirements and guidance work well for the LIBOR administrator, modifications are needed to accommodate differences in other benchmarks.

UK: BIS and FRC consult on auditor regulation

The Department for Business, Innovation and Skills has published a discussion document seeking views on a range of reforms the purpose of which is to enhance confidence and strengthen the audit regime, in the context of new European law (Directive 2014/56/EU and Regulation (EU) No 537/2014): see here (pdf). The discussion document is accompanied by a consultation paper from the Financial Reporting Council: see here (pdf).

Friday, 19 December 2014

Europe: ESMA report - high frequency trading in EU equity markets

The European Securities and Markets Authority has published its first Economic Report, titled High-frequency trading activity in EU equity markets: see here (pdf). According to the report, HFT activity levels vary widely between trading venues and are linked to market capitalisation (HFT activity increasing with the market capitalisation of stocks). HFT activity ranges from 24% to 43% of equity value traded.

UK: FRC draft annual plan, budget and proposed levies

The Financial Reporting Council has published its draft plan, budget and proposed levies for 2015/16: see here (pdf). The report notes, amongst other things, "... some encouraging signs of more engagement on a wider range of issues between the larger listed companies and their shareholders; but this is not the case across the listed sector or the signatories to the Stewardship Code as a whole". Contributing to the development of an updated Audit Firm Governance Code is one of the (many) tasks for the year ahead.

Thursday, 18 December 2014

UK: The Financial Services Act 2012 (Commencement No. 6) Order 2014

The Financial Services Act 2012 (Commencement No. 6) Order 2014 was made yesterday by the Treasury: see here or here (pdf). The Order brings into force, on 1 January 2015, subsections (1), (2), (5) and (6) of section 96, and sections 98 and 99 of the Financial Services Act 2012.

UK: Treasury review of enforcement decision making at the financial regulators

The Treasury today published its final report Review of enforcement decision-making at the financial services regulators: see here (pdf). An overview of the report's recommendations is available here. One of the recommendations is that the Financial Conduct Authority and Prudential Regulation Authority should publish more information about their criteria for beginning investigations and their approaches to referring cases from supervision to enforcement, including how they co-operate with each other.

India: Companies (Amendment) Bill 2014 passed in the Lok Sabha

The Companies (Amendment) Bill 2014 was passed yesterday in the Lok Sabha: see here (pdf). A copy of the Bill, as introduced, is available here (pdf). The Bill makes various amendments to the Companies Act 2013, some designed to address omissions and others under the banner of "ease of doing business". In the latter category are changes to the approval requirements for certain related party transactions and the removal of the requirement for companies to have a minimum amount of paid-up share capital.

Japan: draft corporate governance code published

Earlier this year the Japanese Government announced plans to introduce a new corporate governance code, as part of its Japan Revitalisation Strategy: see here (pdf). The Council of Experts formed to develop the new code published a draft code yesterday: see here (in Japanese). A copy of the draft code, in English, will be available here soon.

Wednesday, 17 December 2014

Europe: Mortgage Credit Directive - EBA consults on draft guidelines

The European Banking Authority is consulting on two sets of draft guidelines under the Mortgage Credit Directive (Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property). The first set relate to creditworthiness assessments: see here. The second set concerns to the treatment of mortgage borrowers in arrears: see here.

Tuesday, 16 December 2014

UK: Non-executive directors and conflicts of interest

The Upper Tribunal (Tax and Chancery Chamber) gave judgment yesterday in Burns v Financial Conduct Authority [2014] UKUT 0509 (TCC): see here (pdf). The Tribunal held that Mrs Burns was not fit and proper to hold a non-executive director position. She had, the Tribunal held, "turned a blind eye" to various ethical issues concerning conflicts of interest.

In its decision, the Tribunal commented on the role of the non-executive director (at para. [121]): "It is a sensitive function. Non-execs often have wide-ranging business interests. A non-exec position requires rigorous adherence to the proper standards concerning avoidance of conflicts and the making of disclosures".

Hong Kong: Unfair prejudice - Court of Final Appeal declines to decide merits of case

Last year the Court of Appeal of the High Court gave judgment in Luck Continent Ltd v Cheng Chee Tock Theodor (CACV 107/2012), a case concerning a listed company and the unfair prejudice remedy (now found in Part 14 of the Companies Ordinance, Cap 622). An appeal was made to the Court of Final Appeal and this was heard several days ago: see here. The Panel included, as a non-permanent judge, Lord Hoffmann, a former Law Lord from the United Kingdom well known for his contribution to the development of the English unfair prejudice remedy (see, e.g., O'Neill v Phillips [1999] 1 WLR 1092).

The hearing did not, however, provide the court with the opportunity to consider the unfair prejudice remedy in the very unusual circumstances of the case. This was because the appeal was academic and the court declined to exercise its discretion to consider the merits of the case. The opinion of the court was delivered by Mr Justice Ribeiro PJ. He observed that difficult and interesting questions were raised by the appeal but that it was not one of those "rare and exceptional" cases where, although academic, the court should decide its merits.