Friday, 26 August 2016

UK: Can 'accounts' be 'accounts' if they are not reliable?

The First-tier Tribunal (Tax Chamber) decision Grint v HMRC [2016] UKFTT 537 (TC) has attracted much attention because of the identity of the taxpayer. The decision is noteworthy for other reasons, not least the discussion of what is meant by the term 'accounts'. The issue arose in a dispute concerning the effectiveness of a change in accounting date. The relevant legislation defined 'period of account' and 'accounting date', concepts that referred to 'accounts' but no definition of 'accounts' was provided: see section 217 of the Income Tax (Trading and Other Income) Act 2005 and section 989 of the Income Tax Act 2007.

The Tribunal held that 'accounts' for the purposes of section 217 referred to the company's general purpose trading accounts and did not include accounts drawn up solely for tax purposes. The Tribunal also rejected the argument advanced by HMRC that 'accounts' could not be regarded as such if they were wrong or unreliable. The Tribunal concluded, on the basis of expert evidence, that accounts (as understood by accountants): (a) must relate to an entity; (b) must be considered by, and intended by, the entity to be its accounts, by some kind of approval or adoption or otherwise; and (c) must represent (however accurately or otherwise) its past transactions over a set period of time.

Thursday, 25 August 2016

Ireland: The Companies (Accounting) Bill 2016

The Companies (Accounting) Bill 2016 was introduced in the Dáil Éireann earlier this month: see here. The main purpose of the Bill is to amend the Companies Act 2014 in order to implement the new EU Accounting Directive (2013/34/EU). A copy of the Bill is available here (pdf) and an explanatory memorandum is available here (pdf).

Wednesday, 24 August 2016

UK: Scotland: Review of the Scottish Code of Good Higher Education Governance

A review of the 2013 edition of the Scottish Code of Good Higher Education Governance is underway: see here. An important question for those conducting the review (and on which views are sought) will be to what extent, and how, the Code should be changed to reflect the passing of the Higher Education Governance (Scotland) Act 2016 earlier this year.

Tuesday, 23 August 2016

New Zealand: Court of Appeal upholds parent company's liability for debt of subsidiary company

The Court of Appeal gave judgment earlier this month in Steel & Tube Holdings Limited v Lewis Holdings Limited [2016] NZCA 366, on appeal from [2014] NZHC 3311. The case concerned a parent company that had placed one of its wholly-owned subsidiaries into liquidation. The liquidators of the subsidiary disclaimed a lease under section 269 ("Power to disclaim onerous property") of the Companies Act 1993. The lessor sought damages as well as an order that the parent company should be liable for those damages under section 271 ("Pooling of assets of related companies") of the 1993 Act.  Section 272 sets out the guidance the court is required to consider under section 271, including the extent to which the related company took part in the management of the company in liquidation and the extent to which the businesses of the companies were combined.

The trial judge held that it was just and equitable, as section 271 requires, for liability to be imposed on the parent company. The Court of Appeal upheld this decision.  Its judgment is important, not least because there are few authorities considering section 271. The first instance decision, which contains more analysis than the court of appeal judgment, remains a leading authority and its message remains clear: the separate legal personality of companies in groups will be respected where each company is conducted and governed as a separate entity.  To disregard the separate legal status of the companies will be to run the risk of liability being imposed under section 271 even where, as in the current case, the company's constitution permitted directors of the subsidiary to prefer the interests of the parent company (note also section 131(2) of the 1993 Act). Indeed, as the trial judge observed, provisions of this kind do not mean that the interests of both companies can be conflated or the subsidiary company's interests ignored.

Monday, 22 August 2016

Netherlands: consultation on Code principles, provisions and guidance for companies with a single tier board

Earlier this month, the Dutch Corporate Governance Code Monitoring Committee published for consultation the principles, best practice provisions and guidance it proposes to include in the revised edition of the Dutch Corporate Governance Code in respect of companies that choose to have a single tier board: see here (pdf). At this stage the Committee has decided not to publish a completely separate Code for companies with a single board. The option of having a single board was introduced several years ago.

Friday, 19 August 2016

Australia: ASIC report finds improvement in market cleanliness

The Australian Securities and Investments Commission has published a report titled Review of Equity Market Cleanliness: see here (pdf). The report found an improvement in market cleanliness for the ten year period ending 31 November 2015. The report draws upon two measures of market cleanliness: one new and developed by ASIC; and another more established measure used by the predecessor of the UK's Financial Conduct Authority. ASIC has published a podcast in which the report is discussed: see below (or here if the audio player is not displayed).

Thursday, 18 August 2016

Pakistan: Limited Liability Partnership Bill introduced in the National Assembly

The Limited Liability Partnership Bill 2016 was introduced in the National Assembly earlier this month: see here. A copy of the Bill is available here (pdf). The Bill will, once enacted, provide for the incorporation, regulation and winding-up of limited liability partnerships in Pakistan. The LLP is not currently available in Pakistan.

Wednesday, 17 August 2016

UK: HMRC consultation - strengthening tax avoidance sanctions and deterrents

Her Majesty's Revenue and Customs published a discussion document today titled Strengthening Tax Avoidance Sanctions and Deterrents: see here (pdf). The document has attracted much media attention, in particular the penalties proposed for those involved in advising on aggressive tax avoidance schemes: see here or here. What is arguably more interesting is the potential reach of the proposed liability regime, which would operate in respect of defeated tax avoidance arrangements: it would encompass 'enablers', described as including "anyone in the supply chain who benefits from an end user implementing tax avoidance arrangements and without whom the arrangements as designed could not be implemented" (para. 2.7).

Whilst company formation agents and those providing the infrastructure through which the avoidance takes place (e.g., nominee services; company director services) are obvious examples of enablers, the discussion document states (in case study 2.1) that companies would also fall within the new penalty regime where they have been used to enable the defeated tax avoidance arrangements.

Tuesday, 16 August 2016

UK: gender pay gap reporting - bringing section 78 into force

The Equality Act 2010 (Commencement No.11) Order 2016 was made earlier this month and published yesterday on the legislation.gov.uk website: see here. The Order brings into force, on the 22nd of August, section 78 of the Equality Act 2010. Section 78 provides the power to make, through regulations, the framework for gender pay gap reporting.

Monday, 15 August 2016

UK: public company holds electronic annual general meeting

A couple of months ago, on June 15th to be precise, something rather unusual happened: a UK public company, Jimmy Choo plc, held its annual general meeting electronically. The company's articles of association were amended in 2015 to make this possible. Further information about the AGM is available in the press release from Equiniti: see here. The AGM results are available here.

Friday, 12 August 2016

Indonesia: OECD report - tackling backdoor listings

The OECD has published a report titled Improving Corporate Governance in Indonesia - Policy Options and Regulatory Strategies for Tackling Backdoor Listings: see here. The report identifies four regulatory strategies, for the attention of policymakers in Indonesia, to help improve listing and corporate governance standards.

Thursday, 11 August 2016

South Africa: introducing the twin peaks financial regulatory framework - an update

The National Treasury has provided an update on the introduction of the twin peaks financial regulatory framework: see here (pdf). Legislation - the Financial Sector Regulation Bill (herepdf) - is already before Parliament (its progress can be followed here). Revisions are proposed and are shown in an annotated copy of the Bill available here (pdf). An impact study has also been published: see here (pdf). Regulations concerning the over-the-counter derivatives market have also been published: see here. Further background information is available here.

Wednesday, 10 August 2016

FSB peer review - implementation of the G20/OECD Corporate Governance Principles

The Financial Stability Board has begun a peer review concerning the implementation by FSB member jurisdictions of the G20/OECD Principles of Corporate Governance: see here. Views are being sought on the scope of the review and should be sent to fsb@fsb.org by 9 September.

Tuesday, 9 August 2016

Ireland: the removal of a liquidator by the court

The Court of Appeal (Finlay Geoghegan, Irvine and Hogan JJ) gave judgment at the end of last month in Revenue Commissioners v Fitzpatrick [2016] IECA 228 (on appeal from [2015] IEHC 477). The judgment, which draws heavily upon English authorities, is now the leading Irish authority on the court's power to remove a liquidator from office (under section 277 of the Companies Act 1963 or section 638 of the Companies Act 2014). Irvine J noted, in particular (at para. [61]):

I fully accept that the removal of a liquidator is a serious matter for any court and the relief should not to be granted lightly. In particular, I would endorse the sentiments expressed by Neuberger J. in AMP Music Box Enterprises Ltd [2003] 1 BCLC 319 that the Court should not remove a liquidator merely because it can be shown that in one or possibly more than one respect his conduct has fallen short of the ideal"

Monday, 8 August 2016

UK: High Pay Centre report on FTSE100 CEO pay

The High Pay Centre today published its annual survey of FTSE100 CEO pay: see here (pdf). Average (mean) pay is reported at £5.480 million (up from £4.964 million the year before). The increase in median CEO pay was smaller: up from £3.873 million to £3.973 million.

Friday, 5 August 2016

UK: DBEIS publishes FRC Direction in respect of audit regulatory tasks

A copy of the Direction issued to the Financial Reporting Council in June, in respect of the delegation of audit regulatory tasks under regulation 3 the Statutory Auditors and Third Country Auditors Regulations 2016, was published today by the Department for Business, Energy and Industrial Strategy today: see here (pdf).

Thursday, 4 August 2016

UK: defining the characteristics of mutual deferred shares

HM Treasury has published a consultation paper seeking views on the characteristics of mutual deferred shares, for the purpose of Regulations to be created under section 1 of the Mutuals’ Deferred Shares Act 2015: see here (pdf).

Wednesday, 3 August 2016

UK: Scotland: corporate groups and implied terms

Lord Malcolm, sitting in the Court of Session (Outer House), delivered his opinion in Fisher v Applied Drilling Technology International Ltd [2016] CSOH 108 last month. At issue was whether the company, ADTI, was in breach of an implied term in Mr Fisher's contract of employment concerning the making of enhanced redundancy payments. It was said that such a term arose through custom and practice within a group of companies. The company sought to have the action dismissed on the grounds that the pleadings did not set out a relevant and sufficiently specific case. Lord Malcolm refused to dismiss the action.

Of interest, albeit at this early stage in the case, is the fact that Lord Malcolm refused to uphold the submission that Mr Fisher was bound to fail in his claim that senior executives of the parent company, acting on behalf of other companies in the group, had given undertakings in respect of the enhanced payments.

Tuesday, 2 August 2016

UK: PRA consults on system risk buffer policy statement

The Prudential Regulation Authority has published a consultation paper in which it sets out a proposed statement of policy in respect of the approach to be taken in the implementation of the systemic risk buffer: see here (pdf). The paper relates specifically to ring-fenced bodies and certain large building societies.

Monday, 1 August 2016

UK: Takeover Panel publishes annual report for 2015/16

The Takeover Panel has recently published its annual report for 2015/16: see here (pdf). The report notes that M&A activities in the period were similar to those seen in the preceding year. The report also contains information about Panel activities during the year, including work that is not made public.  It is noted, for example, that the Panel Executive issued two letters of private censure and 26 educational/warning letters. The Executive also granted 59 'whitewash' dispensations from the obligation to make a mandatory offer under Rule 9 of the Takeover Code following an issue of new shares.

Friday, 29 July 2016

UK: new code of practice for defined contribution pension schemes

A new code of practice for defined contribution pension schemes, published by the Pensions Regulator and setting out the standards that pension trustees should meet to comply with legislation, came into force yesterday: see here (pdf). The code applies to all schemes offering money purchase benefits and has sections dealing with the trustee board, scheme management skills, investment governance and value for members.

Thursday, 28 July 2016

UK: FRC publishes revised edition of the UK Audit Firm Governance Code

A revised edition of the UK Audit Firm Governance Code was published today by the Financial Reporting Council: see here (pdf). Further information about the changes and additions made to the Code (including a very useful table summarising the differences) is available in the accompanying feedback statement: see here (pdf). One change proved particularly controversial on consultation: the requirement to have at least three non-executive directors. The revised Code suggests that there should be three such directors but recognises that two may be appropriate for some firms (provision C.1.1).

Wednesday, 27 July 2016

UK: Supreme Court decision on agency, constructive trusts and insolvency

The Supreme Court gave judgment earlier today in Bailey v Angove's PTY Ltd [2016] UKSC 47, on appeal from [2015] EWCA Civ 215. The court's opinion was delivered by Lord Sumption, with whom the other four justices agreed. A summary of the opinion is available here (pdf).

There were two issues before the court: when will the law regard the authority of an agent as irrevocable; and, does liability to account as a constructive trustee arise where money is received at a time when the recipient knows that imminent insolvency will prevent the performance of the corresponding obligation? With regard to the latter question, Lord Sumption held that no trust arose and declined to follow the authorities suggesting otherwise including Neste Oy v Lloyd’s Bank Plc [1983] 2 Lloyds Rep 658 and In re Japan Leasing Europe Plc [1999] BPIR 911. Lord Sumption stated (at paras. [26] and [28]):

It is inherent in the statutory scheme of distribution in an insolvency that apparently arbitrary results may follow from the adventitious timing of the commencement of the liquidation, especially in the case of deferred obligations. In principle, an advance payment to a company made before the commencement of the liquidation for an obligation performable afterwards will form part of the company’s estate, notwithstanding that its supervening insolvency means that the obligation will not be performed, at any rate in specie. The payer must prove in the liquidation for damages for the breach of contract. Likewise, a contractor providing goods or services on credit will have to prove in the liquidation for the price if the other party becomes insolvent before paying. The rule is the same for money received for his principal’s account by an agent who becomes insolvent before accounting for it, unless (contrary to the unchallenged finding of the judge in this case) the relations between the parties were such as to make the agent an express trustee of money in his hands. The money will form part of the agent’s insolvent estate, and the principal must prove in the liquidation. In the nature of things, these consequences involve a detriment for the payer, attributable to the timing of the company’s insolvency; and a windfall for the general creditors, since the estate available for distribution will be increased by the payment without being reduced by the cost of performance.

Bingham J’s point of departure in Neste Oy was that the recipient of money may be liable to account for it as a constructive trustee if he cannot in good conscience assert his own beneficial interest in the money as against some other person of whose rights he is aware. As a general proposition this is plainly right. But it is not a sufficient statement of the test, because it begs the question what good conscience requires. Property rights are fixed and ascertainable rights. Whether they exist in a given case depends on settled principles, even in equity. Good conscience therefore involves more than a judgment of the relative moral merits of the parties. For that reason it seems to me, with respect, that Bingham J’s observation in Neste Oy that any reasonable and honest director would have returned the sixth payment upon its receipt begs the essential question whether he should have returned it. It cannot be a sufficient answer to that question to say that it would be “contrary to any ordinary notion of fairness” for the general creditors to benefit by the payment. Reasoning of this kind might be relevant to the existence of a remedial constructive trust, but not an institutional one. The observation of the editors of Bowstead and Reynolds and of Nicholas Warren QC in Japan Leasing that a proprietary claim should be recognised whenever the claim is “sufficiently strong and differentiable from other claims” to warrant giving it priority over other claims in an insolvency, seems to me to be open to the same objection."

A video recording of Lord Sumption, delivering the court's opinion, is available below (and also here should the embedded video not work):

Pakistan: company law reform - publication of Companies Bill 2016 (final draft) and concept paper on several new provisions

The Securities and Exchange Commission of Pakistan (SECP) has published a final draft of the Companies Bill 2016: see here (pdf). The provisions in red are new and remain under review. Further information about these new provisions, which include those relating to the creation of a register of beneficial ownership and a duty on company officers to prevent the commission of fraud or money laundering, is available in a concept paper published alongside the Bill: see here (pdf). For earlier drafts, see (all pdf): third | second | first.

Tuesday, 26 July 2016

UK: Executive Remuneration Working Group publishes final report and recommendations

The Executive Remuneration Working Group, formed last year by the Investment Association to "bring forward proposals for a radical simplification of executive pay", published its final report and recommendations today: see here (pdf). Ten recommendations are made - none of which explicitly refers to simplification - under the following headings: increasing flexibility; strengthening remuneration committees and their accountability; improving shareholder engagement; increasing transparency on target setting and the use of discretion; and addressing the level of executive pay.  Other recommendations are also made in the report including, for example, that remuneration committee chairs should have at least one year's experience on the remuneration committee before becoming the chair of the committee.

The Financial Reporting Council, in a statement published today, described the Group's report as "thoughtful" and said that it would consider the recommendations concerning the skills and experience of the remuneration committee. The FRC also took the opportunity - perhaps mindful of its position as an advocate for the role of codes and best practice in shaping behaviour, given that further legislation in this area would appear imminent - to say that it welcomed the Government's current focus on improving corporate conduct, pointing in this respect to its recent report on corporate culture and the role of boards.

Italy: Governance Committee meets - no update to the Code but areas for investigation identified

A meeting of the Italian Corporate Governance Committee was held earlier this month: see here or here (pdf). The Committee considered the results of the first monitoring exercise of compliance with the Assogestioni Stewardship Code as well as the updated Corporate Governance Code, and decided that the latter did not require updating in 2016/17. Several topics were, however, identified for investigation: SMEs’ corporate governance; enhancing the board of directors’ role; the procedures for the appointment of directors; and relations with shareholders.

Note:

A copy of the Stewardship Code monitoring report, in Italian, is available here (pdf). A copy of the Governance Code monitoring report, in English, is available here (pdf).

Monday, 25 July 2016

UK: England and Wales: dispositions of company property after the commencement of winding-up

The Court of Appeal gave judgment several days ago in Express Electrical Distributors Ltd v Beavis [2016] EWCA Civ 765, [2016] WLR(D) 407, an important decision on the operation of section 127 of the Insolvency Act 1986. Section 127 renders void, except where court permission has been granted, any disposition of company property made after the commencement of the winding-up. With regard to the circumstances in which such permission should be granted, Lord Justice Sales (delivering the only reasoned opinion; Patten LJ and the Chancellor agreeing) stated (para. [56]):
The true position is that, save in exceptional circumstances, a validation order should only be made in relation to dispositions occurring after presentation of winding up petition if there is some special circumstance which shows that the disposition in question will be (in a prospective application case) or has been (in a retrospective application case) for the benefit of the general body of unsecured creditors, such that it is appropriate to disapply the usual pari passu principle."

Friday, 22 July 2016

USA: updated CalSTRS Corporate Governance Principles

An updated edition of the CalSTRS Corporate Governance Principles was approved last week: see here. An important change has been made to A1 (Board composition) and the skills of the board: risk management, including climate risk management and cyber risk management, is now included. A copy of the new Principles is available here (pdf).

Thursday, 21 July 2016

USA: 'Commonsense corporate governance principles' published

A group comprising of well known company directors, investment managers and institutional investors (including the head of the Canada Pension Plan Investment Board), has published a series of corporate governance principles - described as 'commonsense' - for public companies: see here (pdf). The principles cover the following matters: board composition and internal governance; board responsibilities; shareholder rights; public reporting; board leadership; management succession planning; compensation of management; asset managers' role in corporate governance. Further background information is available here.

Wednesday, 20 July 2016

UK: FRC report - corporate culture and the role of boards

The Financial Reporting Council has today published a report titled Corporate culture and the role of boards: see here (pdf). The report contains the FRC's observations on the importance of culture, following discussions with company chairmen, chief executives, professional organisations and other stakeholders. It is designed to assist boards and to share best practice; several key observations are made: recognise the value of culture; demonstrate leadership; be open and accountable; embed and integrate; assess, measure and engage; align values and incentives; and exercise stewardship.

Tuesday, 19 July 2016

UK: Amending the Takeover Code - four instruments published

Four Instruments have been published in order to make the following changes to the UK Takeover Code: the introduction of new terms of reference for the Hearings Committee and for the Code Committee; and the introduction of new procedures for amending the Code and new rules of procedure for the Hearings Committee. The introduction to the Code is also amended as a result of these changes. The Instruments - numbers 2016/1 to 2016/4 - are available here.

Monday, 18 July 2016

Luxembourg: company law reform - update

Legislation to bring about the reform of Luxembourg's corporate law framework, including the introduction of a new corporate form - the société par action simplifiée - has received its first vote of approval in the Chambre des Députés: see here (pdf). Further background information, in English, is available in a news alert published by Deloitte Luxembourg: see here (pdf). Much more detailed information about the new framework, including all Parliamentary documents, is available here.

Friday, 15 July 2016

UK: FRC report - developments in audit 2015/16

The Financial Reporting Council, as the competent authority for audit within the EU statutory audit framework, has published a report titled Developments in Audit: An Overview 2015/16. A copy of the full report is available here (pdf) and an overview is available here (pdf). The central message appears to be: confidence in audit has grown but there is more to be done in improving good practice in firms and in terms of market competition. A separate report has also been published and explains the results of research exploring stakeholder confidence in the audit: see here (pdf).

Thursday, 14 July 2016

UK: Law Commission report - consumer prepayments on retailer insolvency

The Law Commission for England and Wales today published its report and recommendations on the law concerning consumer prepayments on retailer insolvency: see here (pdf). The report contains the following five key recommendations (and sets out a number of options for more fundamental reform, should the Government wish to adopt them):
  • Regulating Christmas and similar savings schemes, which the Commission believes pose a particular risk to vulnerable consumers.
  • Introducing a general power for Government to require prepayment protection in sectors which pose a particular risk to consumers.
  • Giving consumers more information about obtaining a refund through their debit or credit card issuer.
  • Making a limited change to the insolvency hierarchy, to give a preference to the most vulnerable category of prepaying consumers (their claims would rank below preferential claims from employees and above those of floating charge holders).
  • Making changes to the rules on when consumers acquire ownership of goods.

Further information about the Commission's project is available here.

Wednesday, 13 July 2016

Burma: New Companies Law - post-consultation draft published

A post-consultation draft of Burma's new Companies Law has been published by the Directorate of Investment and Company Administration: see here (English, pdf).

The duties of directors will, for the first time, be set out in legislation: see sections 164 to 172. Section 166 contains the duty to act in good faith in the company's best interest and it is noteworthy that it provides guidance on how this duty operates where the director of a wholly-owned subsidiary acts in the interests of the subsidiary's parent company. An oppression remedy is provided by section 192 and section 196 provides for the bringing of derivative claims. Information about the current company law framework is available here.

Tuesday, 12 July 2016

UK: England and Wales: the interests of creditors and reductions of capital supported by a solvency statement

Judgment was given yesterday by Mrs Justice Rose in BTI 2014 LLC v Sequana S.A. & Ors [2016] EWHC 1686 (Ch). The judgment contains much interesting and important discussion, including that concerning reductions of capital supported by a solvency statement as well as the circumstances in which directors are required at common law to consider or act in the interests of the creditors

Regarding the solvency statement, one of the issues before the court was the nature of the opinion the directors are required to form under section 643 of the Companies Act 2006. Mrs Justice Rose stated (at para. [327]):
... the opinion that the directors must form is not whether, if calamity were to strike on some or all fronts, the company might be unable to pay its debts nor is it whether the court would have jurisdiction to wind up the company under section 123 of the Insolvency Act on a petition issued on the day the solvency statement was signed. The test is not a technical one but a straightforward one applying the words of the section. The directors must look at the situation of the company at the date of the statement and, taking into account contingent or prospective liabilities, form an opinion as to whether the company is able to pay its debts".

With regard to the circumstances in which directors are required at common law to consider or act in the interests of the creditors, Mrs Justice Rose stated (paras. [477] - [488]).
Having reviewed the authorities I do not accept that they establish that whenever a company is 'at risk' of becoming insolvent at some indefinite point in the future, then the creditors' interests duty arises unless that risk can be described as 'remote'. That is not what the cases say and there is no case where, on the facts, the company could not also be accurately described in much more pessimistic terms, as actually insolvent or 'on the verge of insolvency', 'precarious', 'in a parlous financial state' etc. The essence of the test is that the directors ought in their conduct of the company's business to be anticipating the insolvency of the company because when that occurs, the creditors have a greater claim to the assets of the company than the shareholders".

Monday, 11 July 2016

UK: new prime minister outlines governance reforms

Not so long ago today, and not that far away from where I sit typing this post, the Rt Hon Theresa May MP - now the only remaining contender for leadership of the Conservative Party and, as such, the UK's next prime minister - delivered a speech: see here. The speech set out her priorities for office, which included governance reforms, and was delivered before it was confirmed that she would become prime minister on Wednesday this week.  Here is an extract highlighting her proposals on board membership and executive pay:
I want to see changes in the way that big business is governed. The people who run big businesses are supposed to be accountable to outsiders, to non-executive directors, who are supposed to ask the difficult questions, think about the long-term and defend the interests of shareholders. In practice, they are drawn from the same, narrow social and professional circles as the executive team and – as we have seen time and time again – the scrutiny they provide is just not good enough. So if I’m Prime Minister, we’re going to change that system – and we’re going to have not just consumers represented on company boards, but employees as well .... I want to make shareholder votes on corporate pay not just advisory but binding. I want to see more transparency, including the full disclosure of bonus targets and the publication of “pay multiple” data: that is, the ratio between the CEO’s pay and the average company worker’s pay. And I want to simplify the way bonuses are paid so that the bosses’ incentives are better aligned with the long-term interests of the company and its shareholders.

More detailed proposals will follow over the coming months. With regard to shareholder votes on pay, the UK framework currently requires a mandatory vote on policy - held at least once every three years, or when changes to policy are proposed - in addition to an annual advisory vote. It would seem that Mrs May proposes to make the annual advisory vote binding. Would this render redundant the binding vote on policy?  With regard to simplifying bonuses (the call for which has been made repeatedly over the past few years), how will this be achieved?

With regard to the board proposals, much depends on what Mrs May means by "represented on company boards", but the general tenor of her comments suggests that she wants to see dramatic changes through legislation rather than relying on encouraging best practice guidance in the UK Corporate Governance Code, which is the responsibility of the Financial Reporting Council. In this respect it is interesting to note that last month the chairman of the FRC, Sir Win Bischoff, and several of his European counterparts met (describing themselves the 'five chairmen group') and published a statement in which they defended the role and value of governance codes and recommended "a cautious approach in making further legislative proposals on corporate governance issues": see here (pdf).

Friday, 8 July 2016

UK: FCA post-implementation review of crowdfunding rules

The Financial Conduct Authority has published a 'call for input' in respect of a recently launched post-implementation review of its crowdfunding rules: see here (pdf).

Thursday, 7 July 2016

UK: Female FTSE board report 2016 published

The 2016 edition of Cranfield's Female FTSE report has been published: see here (pdf) and also here (short update, pdf). The report notes that 26% of FTSE100 board positions are occupied by women, more than in March 2015 but similar to the proportion in October 2015. Women hold 31.4% of FTSE100 non-executive positions and 9.7% of executive positions. Across FTSE 100 boards, the proportion of new appointments going to women between September 2015 and March 2016 was 24.7%, the lowest proportion since September 2011. If this trend continues, the new target of 33% women on FTSE350 boards by 2020 is unlikely to be met. A review of ways to improve the proportion of women occupying executive directorships on FTSE350 boards is underway and its findings are expected at the end of the year: see here and here.

Wednesday, 6 July 2016

UK: Supreme Court holds director had no civil liability for failure to obtain adequate insurance

The Supreme Court delivered its opinion today in Campbell v Gordon (Scotland) [2016] UKSC 38. The case concerned a company that failed to have in place appropriate insurance under section 1(1) of the Employer's Liability (Compulsory Insurance) Act 1969. A claim for damages was made against the company's sole director (the company had gone into liquidation in 2009) by an employee injured at work in respect of an injury not covered by the company's insurance policy. In certain cases, under section 5 of the 1969 Act, a director or officer of a company will be criminally liable for the company's failure to obtain insurance.

The Lord Ordinary - sitting in the Court of Session (Outer House) - found the director personally liable to pay damages: see [2013] CSOH 181. On appeal the Court of Session (Inner House) by a 2:1 majority held that civil liability was not imposed: see [2015] CSIH 11.

Opinion was also divided in the Supreme Court: by a majority of 3:2 the justices held that the director was not subject to civil liability. A summary is available here (pdf). A summary was also delivered this morning in person by Lord Carnwath: see the video recording below.