Friday, 19 January 2018

UK: The Office for Professional Body Anti-Money Laundering Supervision

The Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017 came into force yesterday. The Regulations give the Financial Conduct Authority a new role, in the form of the new Office for Professional Body Anti-Money Laundering Supervision: overseeing the anti-money laundering and counter terrorist financing supervision undertaken by 22 self-regulatory organisations. Further information can be found in the explanatory memorandum accompanying the Regulations: see here (pdf).

Wednesday, 17 January 2018

Singapore: MAS consults on revised corporate governance code

The Monetary Authority of Singapore has published a consultation paper seeking views on proposed changes to its Corporate Governance Code: see here. The new code is based on mandatory Principles supported by Provisions. The provisions are subject to 'comply or explain'. The proposed changes are designed, amongst other things, to strength board independence and diversity.

Tuesday, 16 January 2018

Denmark: updated Corporate Governance Recommendations

The Corporate Governance Committee has published a revised edition of its Corporate Governance Recommendations: see here (pdf, Danish). A copy of the new Recommendations, in English, has not yet been published.

Monday, 15 January 2018

Japan: FSA plans for a new supervisory approach

The Financial Services Agency - the regulator for banks, insurance companies and capital markets - is seeking views on plans to adopt a new supervisory approach. Further information about this new approach, in English, is available in the report published by the FSA setting out its proposals: see here (pdf, English). The FSA proposes moving away from its current approach - described as being too focused on form and the past - to one where judgment is exercised holistically, examines substance and is forward looking.

Friday, 12 January 2018

UK: CUC publishes draft Higher Education Remuneration Code

The Committee of University Chairs has published for comment a draft remuneration code: see here. It seems uncharitable to say that the Code appears to have been produced somewhat hastily. In places there are missing words and/or typographical errors and the general tenor appears somewhat defensive of the status quo.  The structure of the Code is not particularly helpful and what an institution needs to do in order to claim compliance with the Code is set low. This said, it is not clear if the explanatory notes accompanying the Code are part of the Code for compliance purposes (the notes are said to "support" the Code). These notes are more extensive than the Code itself and contain much of the detail covered in media reports (see here for example).

One aspect of the Code is striking given the changes that were made several years ago to the UK's Corporate Governance Code in respect of remuneration. The CUC's draft Code states that remuneration should be "sufficient to recruit, retain and motivate staff of appropriate calibre in the context of the market for that role, balanced with the need to demonstrate the achievement of value for money in the use of resources" (para. 21).  The first part of this quotation - with its emphasis on recruitment, retention and motivation - mirrors closely what was one of the Main Principles in the 2012 edition of the UK Corporate Governance Code (here, pdf). But in the 2014 edition of the Code (here, pdf) the references to recruitment, retention and motivation were removed and the Principle amended to stress that remuneration should be designed to promote the long-term success of the company. The FRC made this change because it wanted to make clear that remuneration policies should be designed to achieve long-term benefit for companies rather than short-term benefits for management (see here, pdf).

Thursday, 11 January 2018

UK: LSE proposes 'comply or explain' code requirement for AIM companies

Last month, the London Stock Exchange published a feedback statement (including consultation questions) in respect of the AIM rules discussion paper (herepdf) published earlier in the year: see here (pdf). It is the LSE's intention that AIM companies should be subject to a 'comply or explain' requirement in respect of a relevant corporate governance code (to be achieved through amendments to Rule 26 of the AIM rules). This would, subject to the outcome of the consultation, take effect from 30 June 2018. At present, Rule 26 does not require AIM companies to adopt a particular governance code (where no code has been adopted this should be stated and the company's governance arrangements disclosed).

Wednesday, 10 January 2018

UK: Scotland: the Takeover Code and enforcement by the court under the Companies Act 2006

Shortly before the end of last year, Lord Bannatayne, sitting in the Outer House of the Court of Session, delivered his opinion in The Panel on Takeovers and Mergers v King [2017] CSOH 156: see here (pdf). The opinion is an important one on the operation of section 955 ("Enforcement by the court") of the Companies Act 2006 and Rule 9 of the Takeover Code (the mandatory bid rule). Section 955 provides, on application by the Takeover Panel, that if the court is satisfied that a person has contravened a rule-based requirement or a disclosure requirement, the court "may make any order it thinks fit to secure compliance with the requirement". In respect of section 955, Lord Bannatayne stated (paras. [80] - [82]):
The intent of the provision clearly is to provide a means whereby the Panel can seek to have its decisions enforced. However, that does not mean that the court’s function is to act as no more than a rubberstamp ... The court I believe, in nearly all cases, if asked by the Panel to enforce its decision by granting an order will do so. However, there may be very rare cases where it may not do so. I do not believe that in holding that the court has discretion to refuse to pronounce an order, in what undoubtedly would be very exceptional circumstances, undermines the functioning of the Panel".

Tuesday, 9 January 2018

Sierra Leone: draft of national corporate governance code published

The Corporate Affairs Commission has published for consultation a draft corporate governance code: see here (pdf). The Code is intended to apply to companies, partnerships, state-owned enterprises, non-governmental organisations and trade unions. It will operate on the basis of 'comply or explain' or, where legislation requires it, 'comply or else'.

UK: Revised edition of the Takeover Code published

A revised edition of the City Code on Takeovers and Mergers (aka the Takeover Code) was published yesterday: see here (pdf). Further information about the revisions made is available here (pdf).

Tuesday, 12 December 2017

UK: Government publishes its anti-corruption strategy for 2017-2022

The Government has published its anti-corruption strategy for 2017-2022: see here (pdf). The strategy identifies priorities and proposed actions. It states, amongst other things, that in the current session of Parliament a draft Bill will be published for establishing a public register of beneficial ownership of overseas legal entities where they own or purchase property in the UK or participate in central government contracts (the creation of such a register was the subject of a consultation exercise that concluded earlier this year).

Monday, 11 December 2017

UK: FRC publishes revised ISA (UK) 250 Section A - Consideration of laws and regulations in an audit

The Financial Reporting Council has published a revised edition of one of its auditing standards: ISA (UK) 250 Section A - Consideration of laws and regulations in an audit of financial statements. The revised standard - effective for audits of financial statements for periods commencing on or after 15 December 2017 - is available here (pdf). It includes a new appendix providing updated guidance on the auditor's responsibilities in respect of money laundering, terrorist financing and proceeds of crime legislation.

Friday, 8 December 2017

Burma: English translation of the new Companies Law published

A copy of the new company law framework - the Companies Law - has now been published in English by the Directorate of Investment and Company Administration: see here (pdf).

Finalising the Basel III reforms

The Basel Committee oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), has endorsed the Committee's final Basel III reforms: see here. A high level summary of the Basel III reforms is available here (pdf). A video recording of the press conference at which GHOS approval was announced is available below and the accompanying press release is available here:

Thursday, 7 December 2017

Burma: new company law framework - Companies Bill becomes law

The Myanmar Times reports that the Companies Bill has become law following its receiving the signature of the President: see here. A copy of the Bill, as approved by the Pyidaungsu Hluttaw was published in English at the end of November by the Directorate of Investment and Company Administration: see here (pdf). It seems very likely that this version of the Bill has become the new Companies Act.

Update (8 December 2017) - a copy of the new Companies Law has been published: see here (pdf).

Wednesday, 6 December 2017

UK: Scotland: 2017 edition of the Scottish Code of Good Higher Education Governance

Rather belatedly, I note publication of the 2017 edition of the Scottish Code of Good Higher Education Governance: see here (pdf). Background information is available here.

It is interesting to note - given the publicity around vice chancellor pay in England and the remuneration setting process - that the Scottish Code requires the remuneration committee " seek the views of representatives of students and staff of the Institution, including representatives of recognised trade unions, in relation to the remuneration package of the Principal and the senior executive team". This goes beyond what is (currently) expected by the UK Higher Education Governance Code (here, pdf).

Spain: CNMV annual reports on corporate governance and directors' remuneration

The Comisión Nacional del Mercado de Valores (CNMV) has published the latest editions of its annual reports on corporate governance and directors' remuneration: see, respectively, here (pdf) and here (pdf). A summary, in English, is available here (pdf). Of particular interest, in respect of companies' compliance with the Good Governance Code (pdf), are those recommendations not widely followed: these include the recommendations on (a) live broadcasting of the shareholder meetings and (b) the formation of separate appointments and remuneration committees for the largest companies.

Tuesday, 5 December 2017

UK: FRC consultation on revised UK Corporate Governance Code

The Financial Reporting Council launched its consultation today on proposed changes to the UK Corporate Governance Code. A copy of the new Code is available here (pdf) and the consultation paper is available here (pdf). The proposed changes are designed to make the Code "shorter and sharper" and reflect what the FRC calls the "changing business environment". A summary of the proposed changes is available here (pdf). Accompanying the consultation paper is an updated edition of the Guidance on Board Effectiveness document, designed to support implementation of the Code's Principles: see here (pdf).

The consultation paper also seeks specific views on the UK Stewardship Code, in order to inform a review of this Code next year.

Monday, 4 December 2017

Australia: Royal Commission announced - misconduct in the banking, superannuation and financial services industry

The Government has announced the formation of a Royal Commission to examine alleged misconduct by banks and other financial services firms. Further information is available here and the draft terms of reference are available here (pdf).

France: AMF annual report on corporate governance and executive compensation

France's financial market regulator, the Autorité des Marchés Financiers (AMF), has published its 2017 report on corporate governance and executive compensation in large listed companies. A summary, in English, is available here (pdf).

OECD publishes updated edition of Guidelines on Insurer Governance

The OECD has published an updated edition of its Guidelines on Insurer Governance: see here (pdf). An overview of some of the changes made in the new edition is available here.

Friday, 24 November 2017

Canada: corporate governance reform - an update

Here is a further update on the Bill that will, when enacted, make changes to the governance framework by amending the Canada Business Corporations Act, the Canada Cooperatives Act, and the Canada Not-for-profit Corporations Act. The Bill completed second reading in the Senate yesterday and has now been referred to the Standing Senate Committee on Banking, Trade and Commerce: see here. The text of the Bill is available here and further information is available here. Among the changes proposed are those relating to the election of directors (including annual elections and votes for individual directors), the disclosure of information regarding board diversity and communications with shareholders.

Thursday, 23 November 2017

Pakistan: SECP approves the Listed Companies (Code of Corporate Governance) Regulations 2017

Following a consultation earlier this year, the Securities and Exchange Commission has approved the final version of the Listed Companies (Code of Corporate Governance) Regulations 2017: see here (pdf). Further background information is available here (pdf).

Wednesday, 22 November 2017

Canada: CSA consultation on director independence

The Canadian Securities Administrators have published for comment a consultation paper the purpose of which is to seek views on the approach taken in determining the independence of directors, including those sitting on the audit committee. The paper, CSA Consultation Paper 52-404 Approach to Director and Audit Committee Member Independence, is available here (pdf).

Tuesday, 21 November 2017

UK: Review Panel report - the FRC's enforcement sanctions

The Panel established to conduct a review of the Financial Reporting Council's enforcement sanctions has published its report and recommendations: see here (pdf). Making greater use of non-financial penalties is one of the recommendations that is made and, whilst the Panel concluded that it would not be appropriate to set a tariff for financial sanctions, it suggested that a fine exceeding £10 million could be appropriate where a major firm - one of the Big 4 - was found guilty of "seriously bad incompetence" in respect of the audit of a major public company where the errors were measured in nine figures (or more).

Monday, 20 November 2017

EU: Commission consultation on institutional investor and asset manager duties regarding sustainability

The European Commission has published a consultation paper on institutional investor and asset managers' duties regarding sustainability: see here (pdf). This is part of work being undertaken by the Commission to determine whether, and how, a clarification of such duties could contribute to (a) more efficient allocation of capital and (b) sustainable and inclusive growth. Further information is available here.

Friday, 17 November 2017

UK: updated edition of the voluntary code of conduct for executive search firms

An updated edition of the voluntary code of conduct for executive search firms was published earlier this week: see here (pdf). Thirty-nine firms are code signatories and each is committed to following the Code in respect of their board and senior executive search activities: see here. The Code was created following a recommendation from the Davies Review ("Women on Boards") in 2011.  One of the Code's provisions states that search firms should, when presenting their longlists, ensure that at least 30% of the candidates are women.

Thursday, 16 November 2017

New Zealand: FMA consults on updated (and refocused) Corporate Governance Handbook

The Financial Markets Authority has published for consultation an updated edition of its Corporate Governance Handbook: see here (pdf). The consultation follows the publication earlier this year by the NZX of an updated edition of its corporate governance code (herepdf). The FMA regards the NZX Code as providing the primary guidance on governance practices for NZX listed companies; the focus of the FMA Handbook has therefore moved away from listed companies and is intended instead to provide practical guidance for directors of non-listed companies including state owned enterprises and public sector entities.

Wednesday, 15 November 2017

Zambia: the Companies Bill 2017

A new framework for companies in Zambia - the Companies Bill 2017 - was introduced in the National Assembly earlier this year. The Bill - a copy of which is available here (pdf) - is nearing the end of its parliamentary journey (its progress can be followed here).

Tuesday, 14 November 2017

Hong Kong: HKEX consults on amendments to the HK Corporate Governance Code

HKEX has published a consultation paper setting out proposed changes to the Hong Kong Corporate Governance Code: see here (pdf). The proposed changes address a variety of issues including concerns with 'over-boarding' by NEDs, board diversity and NEDs' attendance at general meetings and the factors affecting NEDs' independence.

Monday, 13 November 2017

UK: Tax strategy reporting among the top 50 FTSE100 companies

Schedule 19 of Finance Act 2016 contains the framework requiring large businesses to publish a tax strategy report. The extent to which the largest 50 companies (by market capitalisation) in the FTSE100 have published such a report (and, where they have, the nature of its content) is the subject of a report published by Fair Tax: see here (pdf). The report's headline is: "Slow to emerge, poorly executed, but some examples of excellence". According to the report, 66% of companies had failed to publish online a compliant Tax Strategy at the study's cut off date (30 June 2017).

UK: Grant Thornton's 2017 corporate governance review

Rather belatedly I note the publication of the 2017 edition of Grant Thornton's Corporate Governance Review: see here (pdf). Based on an analysis of FTSE350 company annual reports, it is noted that 66% of companies claim full compliance with the UK Corporate Governance Code. Other highlights are noted here.

Friday, 3 November 2017

Ireland: 'Measures to Enhance Ireland's Corporate, Economic and Regulatory Framework ('Ireland combatting white collar crime')

The Department for Business, Enterprise and Innovation, working with other Government Departments, has published a report titled Measures to Enhance Ireland's Corporate, Economic and Regulatory Framework (subtitled Ireland combatting 'white collar crime'): see here (pdf). The report contains wide-ranging proposals, divided into the following areas: (a) organisational and procedural reforms; (b) corporate governance; (c) enhancing the powers of the authorities to identify and combat economic and regulatory offences in the financial sector; and (d) countering Money Laundering and Corruption. Under (a), the Office of the Director of Corporate Enforcement will become an independent agency responsible for company law enforcement (the ODCE has welcomed this proposal: see here, pdf).

Thursday, 2 November 2017

EU: TFEU articles 49 and 54 and the transfer of a company's registered office

The Court of Justice of the European Union gave judgment at the end of last month in Polbud v Wykonawstwo sp. z o.o.  (Case C‑106/16). A summary of the decision is available here (pdf). To quote directly from the judgment:
Articles 49 and 54 [of the Treaty on the Functioning of the European Union, on the right of establishment] must be interpreted as precluding legislation of a Member State which provides that the transfer of the registered office of a company incorporated under the law of one Member State to the territory of another Member State, for the purposes of its conversion into a company incorporated under the law of the latter Member State, in accordance with the conditions imposed by the legislation of that Member State, is subject to the liquidation of the first company".

Wednesday, 1 November 2017

South Africa: unfair prejudice claims and beneficial shareholders

The Supreme Court of Appeal gave judgment last week in Smyth v Investec Bank Ltd (674/2016) [2017] ZASCA 147. A summary is available here (pdf). At issue was whether those owning shares beneficially through a nominee were able to seek relief under section 252 of the Companies Act 61 of 1973 (the unfair prejudice remedy).

Referring to section 103 (who are members of a company) of the Act, and authorities from other jurisdictions, the court unanimously held that the beneficial shareholders were unable to bring a claim under section 252: relief was available only to those whose names appeared in the register of members. The court also rejected the argument that the beneficial shareholders could, on the grounds that they had a direct and substantial interest in the section 252 proceedings, be joined as co-applicants.  Petse JA, delivering the judgment of the court, stated (para. [55]):
It was a simple matter for the appellants, if they wished to avail themselves of the remedy provided for in s 252 of the Act in their own names, to terminate the nomination of their respective nominees so as to procure the entry of their names in the register of ... members. Instead, they obdurately elected ‘to saddle what has proven to be an unruly horse’ by seeking to invoke the s 252 remedy in their own names as beneficial owners. They were ill-advised in doing so. As I see it, for as long as the nominees’ names remained in the register of members, the beneficial owners lacked a legal interest in the subject-matter of the litigation". 

Tuesday, 31 October 2017

UK: Judicial Committee of the Privy Council on piercing the corporate veil and 'one man' companies

Yesterday the Judicial Committee of the Privy Council delivered its judgment in Persad v Singh (Trinidad and Tobago) [2017] UKPC 32. At first instance, and upheld by the Court of Appeal in Trinidad and Tobago, the trial judge found that a director and shareholder of a company (CHTL) was liable for a lease granted to the company.

The Board took a very different view, with Lord Neuberger stating that "the facts of this case [do] not begin to justify piercing the veil of incorporation" (para. [16]) and proceeding to observe (para. [20]):
The fact that CHTL was a “one man company” is also irrelevant: see Salomon v A Salomon and Co Ltd [1897] AC 22, which famously established the difference between a company and its shareholders. That case also exposes the fallacy of the notion that the court can pierce the veil where the purpose of an individual interposing a company into a transaction was to enable the individual who owned or controlled the company to avoid personal liability. One of the reasons that an individual, either on their own or together with others, will take advantage of limited liability is to avoid personal liability if things go wrong, as Lord Herschell said [in Salomon] at pp 43 to 44. If such a factor justified piercing the veil of incorporation, it would make something of a mockery of limited liability both in principle and in practice."

An end to the hiatus...

I apologise for the hiatus. I have been unwell and, having caught up (to the extent possible) with work related matters, can give the blog the attention it deserves. This term is proving very busy, not least because I have designed and am now teaching a new interdisciplinary undergraduate module - Fraud, Bribery and Corruption* - alongside my corporate governance and taxation teaching.
* - please get in touch if you would like to know more.

Friday, 13 October 2017

Australia: Treasury consultation paper on illegal phoenix activity

The Treasury has published a consultation paper in which it seeks views on law reform proposals designed to deter and disrupt illegal phoenix activity: see here (pdf). A specific offence of "illegal phoenixing" is not proposed. Instead, a series of proposals is made including, for example, an amendment to the Corporations Act 2001 to specifically prohibit the transfer of property from Company A to Company B where the main purpose of the transfer was to prevent, hinder or delay the process of that property becoming available for distribution amongst Company A's creditors.

Hong Kong: HKEX analysis of issuers' corporate governance disclosures

HKEX has published its analysis of listed companies' corporate governance disclosures in respect of the HKEX Corporate Governance Code: see here (pdf). The analysis looked at the annual reports of 1,428 issuers with a financial year end of 31 December 2016, representing 72% of the issuers listed on this date. 34% of these issuers reported compliance with all of the Code's provisions.

It is interesting to note those provisions of the Code that have the lowest compliance rates. One such provision is A.2.1 on the separation of the roles of chief executive and chairman: 63% of issuers report that they comply with this provision. HKEX's analysis reports that the most common reason given for non-compliance with A.2.1 is the view that one person occupying these two positions "can provide strong and consistent leadership and can enable more effective planning and better executive of long-term strategies".

UK: Parker review report - the ethnic diversity of company boards

The Parker Review final report into the ethnic diversity of UK boards has been published and makes recommendations to increase the ethnic diversity of boards: see here (pdf). A target is set of all FTSE100 boards having at least one director of colour by 2021, and all FTSE250 boards by 2024. The report notes that of the total population of FTSE100 directors, only 2% are UK citizen directors of colour and 51 of the FTSE100 companies do not have any directors of colour.

Friday, 6 October 2017

India: SEBI governance committee publishes report and recommendations

The committee formed by the Securities and Exchange Board of India to provide advice on a range of governance matters - with a view to enhancing the standard of governance amongst listed companies - has published its report and recommendations: see here. The recommendations are wide-ranging. An increase in the minimum number of directors a listed company must have is proposed as well as an increase in the proportion of independent directors.  An increase in the minimum frequency of board and committee meetings is also proposed.  The Committee also recommends that a Stewardship Code should be introduced.