To assist quoted companies comply with the mandatory greenhouse gas reporting requirements contained in The Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013. Here.
Accounting Directives: Proposed Directive adopted by European Parliament, now goes to Council for approval
Which is expected to be forthcoming without further comment. The Commission has published these FAQs on this proposed directive which will repeal and replace the Fourth and Seventh Company Law Directives:
Financial reporting obligations for limited liability companies (Accounting Directive) – frequently asked questions, published 12 June 2013.
New disclosure requirements for the extractive industry and loggers of primary forests in the Accounting (and Transparency) Directives (Country by Country Reporting) – frequently asked questions, published 12 June 2013.
The new strategic report in the annual report: draft Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013
Draft regulations amending the Companies Act 2006 to insert new sections providing for the preparation by companies of a strategic report have been published. The existing section 417 requirement to publish a directors’ review is abolished.
The requirement for a strategic report does not apply to companies eligible for the small companies regime for accounts.
The regulations are expected to come into force on 1 October 2013 and to apply in respect of financial years ending on or after 30 September 2013.
JKX Oil & Gas plc attempted disenfranchisement of shareholders for inadequate responses to s793 CA2006 notices
Following the attempted disenfranchisement, the dissident shareholders obtained an interim injunction from the High Court that their votes should be counted at the AGM, where they were attempting to remove the CEO.
JKX responded by counting the votes on each resolution twice, once with the disputed included and once without. The validity of the disenfranchisement will be the subject of a full trial in July 2013.
(The CEO was re-elected on both counting methods, although two special resolutions were lost.)
The London School of Economics for the European Commission has produced a 427 page study on “Directors’ Duties and Liabilities” across the EU for the European Commission.
“The European Commission has not, to date, considered directors’ liability issues in a comprehensive way. It is the purpose of this study to provide the relevant information in a comprehensive manner, in order to support to European Commission to consider its future policy in this area. To this end, the analysis spans from national laws and case law to corporate practice in respect of companies’directors duties in all 27 EU Member States and Croatia.
The overarching goal is to provide for a better understanding of certain important drivers of directors’ behaviour. This study shows the extent to which the content and extent of duties and the corresponding liabilities, as well as the understanding of the persons to whom they are owed, fluctuate over the life of a company, i.e. during the “normal” phase of operation, and in the so called “twilight zone”, i.e. shortly before insolvency. The study is mainly a stocktaking one. However, its comparative analysis also identifies similarities and differences between national regimes and identifies relevant cross-border implications.”
The Enterprise and Regulatory Reform Act 2013 received Royal Assent on 25 April 2013.
Part 6 of the Act contains the provisions which will give shareholders in quoted companies a binding vote over the pay of their directors, by amending Part 15 of the Companies Act 2006. It is expected that those amending provisions will come into effect on 1 October 2013, with the provisions applying to quoted companies with financial years beginning on or after that date.
A good short note from Manches on the recent Court of Appeal judgment in Dorchester Project Management Ltd v BNP Paribas Real Estate Advisory Property Management UK Ltd, where an NDA was litigated.
From Manches’ note:
“When entering into a confidentiality agreement (or NDA) with another business or organisation there may be times when, in order to meet your objectives, you want to allow the recipient to go on to disclose confidential information to third parties. In such cases it is critically important to have proper protection in place.
Businesses concerned about protecting opportunities where third parties may need to become involved should give proper consideration to whether ‘standard’ confidentiality agreements contain adequate provisions. If the intention is that a recipient of information needs to procure a back-to-back agreement on terms equivalent to those contained in the original confidentiality agreement, the original agreement should clearly say so.”
Dairy Crest has used £60 million of maturing cheese.
Kodak has sold two business to its UK scheme, enabling it to exit Chapter 11 in the US.
Reporting: European Commission proposed directive on disclosure of non-financial and diversity information
On 16 April 2013 the European Commission published a proposed directive on the disclosure of non-financial and diversity information by large companies and groups.
From the FAQs:
“This proposed Directive would amend the Accounting Directives (Fourth and Seventh Accounting Directives on Annual and Consolidated Accounts, 78/660/EEC and 83/349/EEC, respectively). The objective is to increase EU companies’ transparency and performance on environmental and social matters, and, therefore, to contribute effectively to long-term economic growth and employment.
Companies concerned will be required to disclose in their annual reports relevant and material information on policies, results and risks concerning environmental aspects, social and employee-related matters, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors.”
Following the Kay Review’s suggestion that the operation of fiduciary duties in the investment management industry should be reviewed, in March 2013 the Law Commission announced that its has started work on this project. The Commission expects to open a consultation in October 2013, with recommendations to Government being made by June 2014.
The Law Commission’s page on its review, containing its terms of reference, is here.
Where…is the dividing line between an unenforceable agreement to agree and a contract which binds the parties, despite leaving some issues for future agreement?
A good note from Macfarlanes discussing this question in the light of the Court of Appeal’s decision in MRI Trading AG v Erdenet Mining Corp LLC  EWCA Civ 156.
From the Macfarlanes note:
“The Court of Appeal held that the critical question was whether the parties intended that the contract would be binding in the event that agreement on the outstanding points was not achieved. There was a distinction between situations:
- where the parties must be taken to have intended that the matter should be left to their future agreement on the basis that either was to remain free to agree or disagree about that matter as his own perceived interest dictates – in which case there would be no bargain to enforce; and
- where the true intention of the parties was that the matter to be agreed in the future was capable of being determined, in the absence of future agreement, by some objective criteria of fairness or reasonableness.
The contract in this case fell into the second category and was, therefore, enforceable.”
The Mental Health (Discrimination) Act 2013 is here; the relevant provision is section 3. A short note from Manches explaining the changes, which are effective from 28 April 2013, to the model articles of association (for private and public companies and for companies limited by guarantee) is here.
Extract from Manches note:
A short summary by Pinsent Masons (at page 14) of Belfairs Management Limited v Sutherland & Anor  EWCA Civ 185, where the Court of Appeal held that a warranty in an SPA should be interpreted on a “commercially sensible” basis, rather than on the natural language of the provision. Lovells note here.
Here, following Yam Seng Pte Limited v International Trade Corporation Limited.
Here. The changes take effect on 6 April 2013.
On 11 March 2013 the Department of Business, Innovation and Skills published a second draft of the regulations which will implement the Government’s changes to the corporate governance framework for executive remuneration. As we discussed in this post of June 2012, the big change is to give shareholders in quoted companies a binding vote over executive remuneration.
On 22 March 2013 BIS published a useful set of FAQs on these new regulations. Section C of those FAQs attempts to explain the implementation of the timing of the new regime.
The Financial Reporting Council’s “Financial Reporting Lab” published on 5 March 2013 the results of its second project on reporting remuneration, “this time exploring the views of investors and companies on two new aspects of the draft reporting regulations on remuneration:
- scenario charts demonstrating how directors’ pay varies with performance, and
- a chart comparing CEO pay based on the single figure for remuneration, with company performance, measured using Total Shareholder Return”.
As part of the Government’s “Red Tape Challenge”, the Department of Business, Innovation and Skills on 27 February 2013 launched a consultation on simplifying the company and business names rules. The consultation document is here; the consultation closes on 22 May 2013.
On 27 February 2013 the Department of Business, Innovation and Skills published a consultation document on “Simpler financial reporting for micro-entities: the UK’s proposal to implement the ‘Micros Directive’ consultation“.
The consultation follows the EU’s adoption in February 2012 of a “Directive on the annual accounts of certain types of companies as regards micro-entities - on which, see this post.
From the executive summary of the BIS consultation:
“A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest which conflicts, or possibly may conflict, with the interests of the company.”
J Sainsbury plc Annual Report 2012, page 40:
“The Board…considered a potential conflict for Justin King, whose son, Jordan King, is one of the country’s top young racing drivers. His recent success is attracting interest from potential sponsors. Current sponsors include high net-worth individuals and companies with established interests in motor sport. Some of the sponsors are also suppliers to Sainsbury’s. Jordan King arranges his sponsorships through his company, 42 Racing Ltd. The Board has satisfied itself that Justin King has no direct involvement in the trading relationship between Sainsbury’s and any supplier who may have an interest in 42 Racing Ltd. It is satisfied that the governance of all supplier relationships is robust and that there is therefore no conflict of interest regarding these arrangements.”
H/T The Times 27 February 2013: Sainsbury boss Justin King’s son is given a racing start by store’s suppliers
Share buy-back rules for private companies to be reformed by secondary legislation some time in 2013
As we discussed here in October 2012, one of the recommendations of the Nuttall Review of Employee Ownership, (published in July 2012) was that the Companies Act 2006 rules on share buy-backs should be simplified, in order to make it easier for private companies to buy back shares from departing employees and to re-distribute them to new joiners or other employees.
The Government launched a consultation on that recommendation in October 2012, and published its response to that consultation on 15 February 2013. In its response, the Government confirms that it will liberalise the rules on share buy-backs. From the consultation response:
“The Government intends to amend the Companies Act 2006 by secondary legislation to implement the proposals outlined below. These measures will come into force during 2013.
In relation to authorising share buy backs these amendments will:
- Allow off-market share buy backs to be authorised by ordinary resolution; and
- Allow for the prior approval of multiple off-market share buy backs for the purposes of or pursuant to an employee share scheme to be authorised by a single ordinary resolution.
In relation to financing share buy backs these amendments will:
- Allow private limited companies to pay for its own shares in instalments (where the buy back is for the purposes of or pursuant to an employees’ share scheme);
- Allow for private limited companies to finance buy backs (for the purposes of or pursuant to an employee share scheme) out of capital subject to the signing of a solvency statement by the board of directors and shareholder approval by special resolution; and
- Allow private limited companies to the buy back shares using small amounts of cash (an amount not exceeding the lower of £15,000 or the cash equivalent of 5% of share capital in any financial year) that does not have to be identified as distributable reserves.
In relation to treasury shares these amendments will:
Allow for all companies limited by shares to hold their own shares in treasury and to deal with such shares as treasury shares.”
- The notice period for displaying buy-back resolutions will be retained.
- The Government’s intention is not to impose time limits for completing buy-back payments by instalments.
- On the new cash route, this articles will have to permit this (if the articles do not, then a special resolution will be required).
Following HP’s allegations of “serious accounting improprieties, misrepresentation and disclosure failures” at its recently-acquired Autonomy business (which, together with Autonomy’s founder’s rebuttal, we reported on here), the Financial Reporting Council today launched an investigation:
“into the published financial reporting of Autonomy for the period between 1 January 2009 and 30 June 2011″.
The FRC’s press release is here. Autonony was traded on the London Stock Exchange throughout the period under investigation.
Former chairman of JJB Sports plc charged with making misleading statements contrary to s397 FSMA 2000
David Jones is also a former chairman of Next plc:
From an SFO press release today:
“Today, two men appeared before Leeds Magistrates’ Court in response to a summons in connection with forgery and misleading statements made to the market by JJB Sports Plc in 2009.
Sir David Charles Jones (70) of Ilkley, West Yorkshire was the Executive Chairman of JJB Sports Plc between January 2009 and January 2010. He is charged with:
• Two offences of making a misleading statement, contrary to s397(1)(b) of the Financial Services and Markets Act 2000;
• One offence of using a false instrument, contrary to s3 of the Forgery and Counterfeiting Act 1981.
Stuart Mark Jones (38) of Bingley, West Yorkshire is the son of Sir David Jones and was employed as Head of Marketing at JJB Sports plc in February 2009. He is charged with:
• One offence of aiding and abetting Sir David Jones’s use of a false instrument, contrary to s3 of the Forgery and Counterfeiting Act 1981.
Both defendants were released on unconditional bail. Proceedings are to be transferred to a Crown Court for 19 April 2013.”
From Wey Education plc’s announcement on 29 January 2013:
“On 17 January 2013, the Company sent Dr Atkins a copy of a report which set out, inter alia, allegations (i) that Dr Atkins had breached her fiduciary duties and her conduct was not commensurate with her duties and responsibilities as Chief Executive Officer of the Company; (ii) Dr Atkins had accepted a position as a Director of a Wey client company, without disclosing such to the Wey Board, or seeking permission for such; (iii) that Dr Atkins had incorporated various companies, having names similar to that of the Company and its principal subsidiary, Zail Enterprises Limited, where Dr Atkins was named as the sole shareholder and Director, again without disclosing such to the Wey Board; and (iv) that Dr Atkins had supplied incomplete or inaccurate information to the Company’s ISDX Advisor as to her Directorships and shareholdings.”
VTB Capital v Nutritek International: Supreme Court confirms that corporate veil cannot be pierced to allow contractual claims against non-contracting parties
In a judgment give today, the Supreme Court has confirmed the Court of Appeal decision that the corporate veil cannot be lifted to allow a contractual claim against a non-contracting party.
The Supreme Court’s decision in VTB Capital v Nutritek is here, with press summary here. The leading judgment (Lord Neuberger) on the corporate veil point starts at paragraph 118. From the press summary:
On 29 January 2013 BIS published the Government’s response to its consultation on “Private actions in competition law”. The consultation was launched in April 2012, as we discussed in this post at the time.
They’ve certainly made it enjoyably public:
The GC100 has responded to the final report of the Kay Review of UK Equity Markets and Long-Term Decision Making.
Part 25 of the Companies Act 2006, Company charges, will be amended on 6 April 2013. The latest draft of the amending Regulations is here. Companies House have produced an explanation of the intent and effect of the proposed amendments, which is here. Excerpt:
“The aims of the new provisions are to:
- streamline procedures and reduce costs for those putting information on the public record, in particular by enabling electronic filing
- reduce uncertainty as to what charges must be registered
- replace two current schemes which depend on the company’s place of registration with a single scheme for all UK-registered companies
- improve the quality of information about security given by companies
- improve access to the instruments creating companies’ charges
The primary purpose of the draft regulations is to give effect to the Department’s policy of providing for a single scheme for registration, satisfaction or alteration of company charges irrespective of the place of incorporation of the company (as in current Part 25 of the Act). The changes will also be applied, with minor modifications, to limited liability partnerships by a separate statutory instrument.”
As stated above, the changes also apply to LLPs.