Source: http://corporatelawandgovernance.blogspot.com/2019/03/
Timestamp: 2019-05-25 20:22:19
Document Index: 679053727

Matched Legal Cases: ['arts 1', 'art 5', 'art 2', 'art 3', 'art 10', 'EWCA ', 'EWCA ', 'EWCA ', 'art 28']

Corporate Law and Governance: March 2019
UK: The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019
The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 were made earlier this week and, in accordance with regulation 1(2), come into force on exit day*: see here or here (pdf). The accompanying explanatory memorandum is available here (pdf) and this explains that the Regulations set out a new framework for the endorsement and adoption of IFRS after the UK's departure from the EU.
* - Exit day.
Exit day was originally set for tomorrow, 29 March, at 11.00pm: see section 20 ("Interpretation") (as enacted) of the European Union (Withdrawal) Act 2018. However, the European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019, made today, change this date to either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf). An explanatory memorandum has also been prepared for the Regulations: see here (pdf).
Labels: accounting, accounting standards, eu, eu societas, europe, European public limited liability company, financial reporting, frc, ifrs, societas europaea, uk, uk societas
UK: Independent review of the prudential supervision of the Co-Operative Bank plc
A little over a year ago, the Government directed the Prudential Regulation Authority to undertake a review of the supervision of the Co-operative Bank between 2008 and 2013: see here and here. Mark Zelmer, a former Deputy Superintendent of the Office of the Superintendent of Financial Institutions in Canada, was appointed to complete the review. The findings of that review, which makes recommendations for the Bank of England and the Prudential Regulation Authority designed to enhance the current supervisory regime, were published today by HM Treasury: see here (pdf). The Bank and PRA have resonded - see here (pdf) - as has the Financial Conduct Authority: see here.
Labels: bank of england, banks, co-operative, pra, prudential regulation, prudential regulation authority, uk
UK: The Uncertificated Securities (Amendment and EU Exit) Regulations 2019
The Uncertificated Securities (Amendment and EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). Further information about the purpose of the Regulations and the changes they will introduce is available in the explanatory memorandum: see here (pdf). Regulation 1 provides that Parts 1, 2, 3 and 4 come into force today (and are unconnected with the UK's withdrawal from the EU); Part 5 (connected with the UK's withdrawal from the EU) comes into force on exit day.*
* Exit day
The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019 were laid in draft form before Parliament on Monday and will be debated today in the House of Commons and House of Lords under the draft affirmative procedure: see, respectively, here and here. The purpose of these Regulations is to amend section 20 ("Interpretation") of the European Union (Withdrawal) Act 2018 in order to replace the exit day currently specified therein - 29 March 2019 at 11.00 p.m. - with either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf).
Labels: brexit, eu, europe, uk, uncertified securities
The International Organisation of Securities Commissions has published its work programme for 2019: see here (pdf). The following priority areas identified: (1) Crypto-assets; (2) Artificial Intelligence and Machine Learning; (3) Market Fragmentation; (4) Passive Investing and Index Providers; and (5) Retail Distribution and Digitalization.
Labels: artificial intelligence, crypto-assets, cryptocurrency, digital, fintech, iosco, machine learning, passive investment
UK: BEIS Committee report - 'Executive Rewards: paying for success'
The Business, Energy and Industrial Strategy Committee published its report 'Executive Rewards: paying for success' today: see here or here (pdf). The report is critical of the role played by institutional investors, remuneration committees and the Financial Reporting Council (FRC). The Committee calls for the simplifcation of pay, advocating a structure based on fixed salary plus deferred shares that would vest over a long period (and subject to provisions designed to prevent 'rewards for failure'). It also calls for remuneration committees to have at least one employee representative.
The Committee is strongly supportive of the creation of the new Audit, Reporting and Governance Authority (ARGA), to replace the FRC, and states that the ARGA should be "a more empowered, aggressive and proactive regulator that has the ability to take decisive action, where necessary, on executive pay and its reporting" (para. 11). Many of the Committee's recommendations are directed at the ARGA, particularly with regard to the revised Stewardship Code and its enforcement, as well as the expectations placed on asset owners. The Committee also recommends that the ARGA should become responsible for monitoring the impact of the new Wates Principles of Corporate Governance for Large Private Companies.
Labels: arga, beis committee, board of directors, directors remuneration, disclosure, executive pay, frc, institutional shareholders, pay ratio, remuneration, remuneration committee, say on pay, uk
UK: Commons approve the draft International Accounting Standards and European Public Limited-liability Company (Amendment etc) (EU Exit) Regulations 2019
It was, perhaps, easy to miss. Hansard reports that yesterday, at the end of the day, the House of Commons approved the draft International Accounting Standards and European Public Limited-liability Company (Amendment etc) (EU Exit) Regulations 2019: see here. Further information about the Regulations, which set out the framework for the adoption of International Financial Reporting Standards after the UK leaves the European Union, is available in the accompanying explanatory memorandum: see here (pdf). When made, the Regulations will be published here.
Labels: accounting standards, financial reporting, frc, iasb, ifrs, international accounting standards, uk
The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). Regulation 1 provides that it, and Part 2, come into force today; the remaining regulations come into force on exit day*. Further information is available in the accompanying explanatory memorandum and impact assessment: see, respectively, here (pdf) and here (pdf).
The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019 were laid in draft form before Parliament yesterday and will be debated in the House of Commons and House of Lords under the draft affirmative procedure. The purpose of these Regulations is to amend section 20 ("Interpretation") of the European Union (Withdrawal) Act 2018 in order to replace the exit day specified therein - 29 March 2019 at 11.00 p.m. - with either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf).
Labels: central securities depositories, clearing house, eu, europe, financial regulation, investment exchange, uk
UK: The Securitisation (Amendment) (EU Exit) Regulations 2019
The Securitisation (Amendment) (EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). Regulation 1 provides that the Regulations come into force on exit day*, with the exception of Part 3 which comes into force immediately after Part 10 of the Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019. Further information about the Regulations is available in the accompanying explanatory memorandum: see here (pdf). An impact assessment has also been published: see here (pdf).
Labels: brexit, credit rating agency, eu, europe, financial regulation, securitisation, uk
UK: The Mortgage Credit (Amendment) (EU Exit) Regulations 2019
The Mortgage Credit (Amendment) (EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). In accordance with regulation 1, they come into force on exit day*. Further information about the Regulations is available in the accompanying explanatory memorandum: see here (pdf).
UK: The Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019
The Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). They come into force on exit day* and are accompanied by an explanatory memorandum and an impact assessment: see, respectively, here (pdf) and here (pdf). The Regulations contain the framework for benchmarks that will apply on exit day should the UK leave the European Union without an implementation period. Further information has also been published by the Financial Conduct Authority, in particular concerning the UK Benchmarks Register: see here.
Labels: benchmark, benchmarks, brexit, eu, europe, libor, uk
Section 1140 of the Companies Act 2006 provides, broadly put, that a document may be served on a company director by leaving it at, or sending it by post to, the director's registered address. Decisions concerning this provision are sparse; this said, the operation of section 1140 was one of several matters considered by the High Court in a judgment handed down today - Arcelormittal USA LLC v Essar Steel Ltd [2019] EWHC 724 (Comm) - in the context of a challenge made to the grant of search orders.
The trial judge, Mr Justice Jacobs, rejected the argument that it was impermissible for search orders to be served under section 1140, finding that the section was (a) "wide in scope"; (b) expressly permitted the service of "a document"; and (c) applied whatever the purpose of the document in question (para. [130]). He also accepted as correct the view "...that there was 'no requirement under the statute that the director be resident or otherwise present in the jurisdiction in order to be served here'." (para. [132]). This latter point was, in fact, confirmed in an earlier decision of the High Court not cited by Jacobs J: Key Homes Bradford Ltd & Ors v Patel [2014] EWHC B1 (Ch).
Labels: companies act 2006, england and wales, service of documents, uk
Labels: bribery, foreign bribery, oecd, oecd anti-bribery convention
The Court of Appeal gave judgment earlier this week in Christianuyi Ltd & Ors v Revenue And Customs [2019] EWCA Civ 474. The decision is an important one - now the leading authority - on the definition of managed service companies (MSCs) and MSC providers within the tax anti-avoidance framework, following decisions of the Upper and First-tier Tribunals (see, respectively: [2018] UKUT 10 (TCC) and [2016] UKFTT 272 (TC)).
Specifically, the court considered the definition of MSC provider within section 61B of the Income Tax (Earnings and Pensions) Act 2003 and rejected the argument that, in order for a company to be a MSC provider, it was necessary for that company - in addition to being in the business of promoting or facilitating the use of companies through which individuals provide their services to clients - also to promote or facilitate the services provided by those companies.
Update (25 March 2019) - a summary of the case has been published by the ICLR: see here.
Labels: corporation tax, dividends, hmrc, income tax, managed service companies, tax avoidance, uk
The Guidelines set out nine principles, each supported by a short description and what are called 'core elements'. For example, the first principle - that "[b]usinesses should conduct and govern themselves with integrity, and in a manner that is ethical, transparent, and accountable" - has nine core elements, the first of which is: "The governance structure should develop and put in place structures, policies and procedures that promote this Principle, prevent its contravention and effect prompt and fair action against any transgressions".
Labels: india, national guidelines on responsible business conduct
Labels: benchmark, benchmarks, canada, esma, eu, europe, financial regulation
Earlier this week the Supreme Court published its permision to appeal decisions for February: see here (pdf). Among the cases for which an appeal has been granted is Lehtimäki v The Children's Investment Fund Foundation (UK) & Ors [2018] EWCA Civ 1605, [2018] 3 WLR 1470, [2018] WLR(D) 423.
The decision considered important aspects of the governance of charities, in the context of a one charity - CIFF - that was a company limited by guarantee. The court held that CIFF's members owed a duty corresponding with that owed by members of charitable incorporated organisations under section 220 of the Charities Act 2011: to exercise their powers in the way that they decide, in good faith, would be most likely to further the purposes of the organisation. The court also held that its inherent jurisdiction in relation to charities did not permit it to order a member of CIFF to exercise his powers in a particular way where there was no breach of duty. As the court put it: "Important though its role in relation to charities is, the Court is not entitled, absent a breach of duty, to substitute its view for that of the fiduciary" (para. [62]).
The court therefore concluded that the Chancellor, Sir Geoffrey Vos, had been wrong, at first instance ([2017] EWHC 1379 (Ch)), to order one of CIFF's members to vote to approve a resolution under section 217 of the Companies Act 2006 in the absence of clear evidence of breach of fiduciary duty by that member.
Labels: charitable incorporated organisation, charities, charities act 2011, companies act 2006, fiduciary, supreme court, uk
Australia: directors' duties, distributions and creditor interests
Last week I noted an English decision in which the directors' failure to adopt a dividend policy was regarded as a breach of duty: see here. Today I note an Australian decision - Termite Resources NL (in liq) v Meadows, in the matter of Termite Resources NL (in liq) (No 2) [2019] FCA 354 - also from last week, but one in which the trial judge (White J.) held that directors had acted in breach of duty in adopting, and failing to review and revise, a distribution policy.
The decision contains a useful review of directors' duties and is noteworthy because of the discussion it contains of the circumstances in which directors are required to consider the interests of creditors. Regarding the latter, the trial judge rejected a narrow interpretation and stated (paras. [209], [708]):
...I do not accept the submission ... to the effect that the directors or officers of a company are required to consider the specific interests of creditors only when their actions are likely, on a balance of probabilities, to lead to the insolvency of the company. That was so, the defendants submitted, because it is only at that point that their decisions are effectively managing assets which belong to the creditors and not to the shareholders. I agree ... that that is one circumstance in which directors and officers of a company will be obliged to consider the interests of the company’s creditors, but the authorities .... indicate that it is not the only circumstance...
.... the authorities ... indicate that test is broader than 'nearing insolvency' or 'doubtful solvency'. They indicate that the duty of directors to consider the interests of creditors is enlivened when there is a 'real and not remote risk of insolvency' and when the objective circumstances require consideration of the interest of creditors".
Some of the authorities cited by White J. were considered recently at appellate level in England: see BTI 2014 LLC v Sequana S.A. & Ors [2019] EWCA Civ 112, [2019] WLR(D) 68. The Court of Appeal unanimously rejected the view that the creditor interests duty (to adopt its description) should apply in English law where there was a "real risk" of insolvency; the court nevertheless accepted that the duty could be triggered where a company's circumstances fell short of actual insolvency.
Labels: australia, creditor, de facto director, director, directors' duties, distribution, dividends, insolvency, winding-up
The judgment contains clear acceptance of the concept of the 'relational' contract, the trial judge (Mr Justice Fraser) rejecting the view - expressed by Professor Hugh Collins in S. Degeling et. al. (eds), Contract in Commercial Law (Lawbook Co, Thomson Reuters, 2016) - that use of the label was a passing fad by the courts. Moreover, Fraser J. held that where a contract between commercial parties was relational in nature, it became subject to an implied term of good faith. To quote the trial judge (at para. [711]):
...I consider that there is a specie of contracts, which are most usefully termed “relational contracts”, in which there is implied an obligation of good faith (which is also termed “fair dealing” in some of the cases). This means that the parties must refrain from conduct which in the relevant context would be regarded as commercially unacceptable by reasonable and honest people. An implied duty of good faith does not mean solely that the parties must be honest".
The trial judge made clear that he was not stating that there was a general duty of good faith in all commercial contracts. As for which contracts would be regarded as relational, he identified the following "specific characteristics that are expected to be present" (para. [725]; direct quotation of the judge's list):
Labels: contract, england and wales, good faith, relational contract, uk
The Order is being made, the explanatory note accompanying it explains, in response to the UK's withdrawal from the EU and changes in responsibility for company registration on the Isle of Man. Article 2 of the Order extends Chapter 1 ("The Takeover Panel") of Part 28 ("Takeovers etc") of the Companies Act 2006 to the Isle of Man subject to the modification contained in the Schedule. Article 3 revokes the Companies Act 2006 (Extension of Takeover Panel Provisions) (Isle of Man) Order 2008 and the Companies Act 2006 (Extension of Takeover Panel Provisions) (Isle of Man) Order 2009.
Labels: isle of man, takeover, takeover panel, uk
EU: EBA publishes revised guidelines on outsourcing arrangements
The European Banking Authority has published revised guidelines on outsourcing arrangements, which have a heavy focus on governance: see here (pdf). The guidelines enter into force on 30 September 2019 and operate alongside the EBA's guidelines on internal governance.
Posted by Robert Goddard at 14:59 0 comments
Labels: eu, europe, european banking authority, internal governance, outsourcing
UK: The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019
The Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 were made yesterday and come into force on exit day: see here or here (pdf). The accompanying explanatory memorandum - available here (pdf) - explains the purpose of the Regulations as follows (paras. 2.1 to 2.3):
...to address deficiencies in retained EU law in relation to the prudential regulation of the insurance sector arising from the withdrawal of the United Kingdom (UK) from the European Union (EU), ensuring the legislation continues to operate effectively once the UK leaves the EU.
The Solvency II Directive (Directive 2009/138/EC) and Delegated Regulation EU No. 2015/35 implemented a harmonised prudential framework for insurance and reinsurance firms in the EU. It is designed to provide a high level of protection for policy holders by requiring firms to provide a market-consistent valuation of their assets and liabilities, understand the risks they are exposed to, and to hold capital that is sufficient to absorb shocks. Solvency II was transposed into UK law by the Solvency II Regulations 2015 (No. 575) and through the Prudential Regulation Authority (PRA) Rulebook.
Current UK Solvency II legislation is drafted on the basis that the UK is a member of the EU, and treats countries in the EEA differently to other third countries. Once the UK has left the EU, this will no longer be appropriate. To ensure that Solvency II regulation continues to operate effectively once the UK is outside of the EU, certain deficiency fixes to the legislation are necessary".
Labels: eiopa, eu, europe, insurance, prudential regulation, prudential regulation authority, solvency ii, uk