15 October 2012
On 15 October 2012 the Financial Reporting Council published a discussion paper ‘Thinking about financial reporting disclosures in a broader context’. The FRC press release is here and the discussion paper is here.
From the FRC press release:
“The paper aims to improve the quality of financial reporting disclosures. The paper sets out a road map for a disclosure framework for financial reporting aimed at improving the quality of disclosure and their value to the users. In particular, the paper covers the reduction of clutter in financial reports by avoiding duplication in disclosures and using tests of materiality more rigorously.”
The consultation period on the paper closes on 31 January 2013.
See also: A single figure for directors’ pay? FRC Financial Reporting Lab report
Financial reporting for the smallest businesses: Government will consult on taking advantage of the new European regime
The FRC’s Financial Reporting Lab: A pragmatic approach to improving company reporting
Financial reporting: Regulator issues reminder of the fundamental importance of “true and fair”
“Cutting clutter” from annual reports: Financial Reporting Council recommendations
Posted in Companies Act 2006 and company law, Regulators, Reporting and accounts |
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15 October 2012
“!This note gives an introduction to the purpose of competition law, and a summary of the institutional arrangements in this country for enforcing it.” The note can be read here.
Posted in Companies Act 2006 and company law, UK government |
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8 October 2012
The Chancellor announced the outlines of a new type of employment contract today, the premise of which is that an employee will give up some employment rights in exchange for CGT-exempt shares in their employee.
The Treasury announcement is here and its main points are set out below. As to how these shares would interact with good leaver / bad leaver provisions, all the announcement says (at note 2) is that the forthcoming consultation on the new contract “will include the details of restrictions on forfeiture provisions to ensure that if an employee-owner leaves or is dismissed, the company is not able simply to take the shares back but is able to buy them back at a reasonable price”.
Treasury announcement:
read more »
Posted in Companies Act 2006 and company law, Consultations, Private equity, UK government |
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2 October 2012
The Financial Reporting Council issued on 28 September 2012 revised auditing standards which aim “to enhance communications to audit committees and auditor reporting”. From the FRC press release:
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Posted in Companies Act 2006 and company law, Corporate governance, Regulators, Reporting and accounts |
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1 October 2012
The Financial Reporting Council confirmed on 28 September 2012 that it is going ahead with changes to the UK Corporate Governance Code and the Stewardship Code. These changes were consulted on in April 2012, as we discussed here. The changes to both Codes are ”intended to increase accountability and engagement through the investment chain”. The FRC’s press release is here.
The new version of the Governance Code is here and the new version of the Stewardship Code is here. The updated Codes apply from 1 October 2012.
The FRC has also published an updated edition of its Guidance on Audit Committees to reflect the changes to the UK Corporate Governance Code, and will carry out further consultation on whether changes are needed to those parts of the UK Corporate Governance Code dealing with remuneration when the Government’s legislation on remuneration reporting and voting has been finalised. Any changes following this consultation will be effected in the next edition of the Code.
UK Corporate Governance Code
Here is the FRC’s summary of the changes to the Governance Code:
read more »
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Equity capital markets, Regulators, Reporting and accounts |
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1 October 2012
Xavier Rolet, Chief Executive of the London Stock Exchange, on why smaller growth companies “”not a mortgage, but equity funding”, and on the reforms needed to encourage equity investment in those companies:
“There…remain important structural reasons that are holding back private investors from funding our growth companies. Arguably the most significant is the tax treatment of equity: taxed at purchase, dividend and sale, in addition to the corporation tax paid on company profits, equities are treated aggressively while debt is often tax-deductible. Reducing tax on capital gains made from direct and indirect investment in smaller companies would also help boost liquidity by attracting more investors. And, a targeted abolition of stamp duty for Aim and PLUS-quoted shares would be a particularly low-cost and effective measure to promote growth.”
See also: A new route to the UK IPO market: Government plans to relax rules to attract high-growth companies to list on LondonA new route to the UK IPO market: Government plans to relax rules to attract high-growth companies to list on London
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Posted in Companies Act 2006 and company law, Equity capital markets, Tax |
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28 September 2012
Law firm McGuire Woods reports (unsourced) that the Director of the SFO has allayed some concerns about the impact of the Bribery Act 2010 on corporate hospitality, quoting Mr Green as saying:
“We are not interested in that sort of case. We are interested in hearing that a large company has mysteriously come second in bidding for a big contract. The sort of bribery we would be investigating would not be tickets to Wimbledon or bottles of champagne. We are not the “serious champagne office”.”
McGuire Woods article here.
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Posted in Companies Act 2006 and company law, Risk management |
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21 September 2012
Ofcom, in its decision issued yesterday on whether Sky is a fit and proper person to hold a broadcasting licence, gives a good example of how section 174 Companies Act can be breached by an omission or lack of action by a director. That section requires that a company director “must exercise reasonable care, skill and diligence”.
In assessing James Murdoch’s failure to take meaningful steps to investigate allegations of wrong-doing at the News of the World (i.e. phone hacking), Ofcom observes that:
“…a company director is required to exercise reasonable care, skill and diligence in the exercise of his functions. He may delegate, but has a duty to supervise appropriately. We consider James Murdoch’s conduct, including his failure to initiate action on his own account on a number of occasions, to be both difficult to comprehend and ill-judged. In respect of the matters set out above, in our view, James Murdoch’s conduct in relation to events at NGN repeatedly fell short of the exercise of responsibility to be expected of him as CEO and chairman.”
Ofcom clearly believes that Mr Murdoch’s behaviour and absence of challenge fell short of fulfilment of that duty.
Posted in Companies Act 2006 and company law, Directors |
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13 September 2012
The London Stock Exchange has produced a new guide to “Corporate Governance for Main Market and AIM Companies”, which can be read here. Written by a number of law firms and financial and other advisers, it is a comprehensive overview, if not particularly detailed discussion, of the subject and associated areas such as:
• Corporate governance in an EU context
• Requirements for non-UK companies listing in London
• Inside information
• The Bribery Act 2000
• Managing directors’ conflicts
• The independent adviser’s role
• Financial communications and investor strategies
• Protection for directors and their companies.
See also: Corporate governance
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Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets |
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22 August 2012
Asil Nadir has today been found guilty of 10 counts of theft. The SFO press release gives a comprehensive account of the Polly Peck background, the prosecution case and the 22 year investigation. Mr Nadir will be sentenced tomorrow.
UPDATE 23 August 2012: Mr Nadir has been jailed for 10 years – ITV News.
See also: SFO drops disastrous Tchenguiz investigation
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Posted in Companies Act 2006 and company law |
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20 August 2012
The GC100 group has issued a strongly supportive response to the Ministry of Justice’s consultation on Deferred Prosecution Agreements. The Corporate Crime and Corruption Committee of the City of London Law Society has responded here.
Follow us on Twitter @CoFinLaw
Posted in Companies Act 2006 and company law, Consultations, Lobby groups |
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14 August 2012
Draft regulations published by BIS last week are here, with an explanatory memorandum here. The equivalent LLP draft regulations are here. The current intention is that the regulations will come into force on 6 April 2013.
Herbert Smith’s summary of the regulations is here.
Posted in Companies Act 2006 and company law |
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14 August 2012
“A Transactional Genealogy of Scandal: from Michael Milken to Enron to Goldman Sachs”* (downloadable here) looks at how the “integration of SPEs into regulatory systems requires a ground-up rethinking of traditional legal models of the firm”.
From the abstract:
read more »
Posted in Companies Act 2006 and company law, Financial services and market conduct, Restructurings, Risk management |
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11 July 2012
The Dutch company ASML on 9 July 2012 announced a co-investment programme in which three of its biggest customers are being invited to part fund ASML’s R&D programme, and to take minority investments in its equity .
ASML may issue up to 25% of its equity to those customers in return for cash. The proceeds of that cash issuance will be returned to ASML shareholders (excluding the investing partners) via a “synthetic buy-back”.
read more »
Posted in Companies Act 2006 and company law, Equity capital markets |
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3 July 2012
Last week we highlighted the 27 page analysis of specific “problems and anomalies” contained in the Companies Act 2006 that was compiled by the Company Law Committee of the City of London Law Society and the Law Society Company Law Committee.
The British Venture Capital Association has prepared a futher gloss on that analysis and submitted it to the Government’s “Red Tape Challenge” on company law. The BVCA submission can be read here.
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Posted in Companies Act 2006 and company law, Lobby groups |
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28 June 2012
The Department of Business, Innovation and Skills today published the draft regulations that will implement the Government’s plans to reform the pay of quoted company directors. The regulations are contained in this consultation document. The accompanying BIS press releases are here and here.
read more »
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Directors, Equity capital markets, Reporting and accounts, UK government |
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27 June 2012
Here is a detailed, 27 page analysis of specific “problems and anomalies” contained in the Companies Act 2006, compiled by the Company Law Committee of the City of London Law Society and the Law Society Company Law Committee. (It also has, as an appendix, a letter discussing the issues raised by Farstad v Enviroco.)
read more »
Posted in Companies Act 2006 and company law |
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26 June 2012
As we reported here last week, the Secretary of State withdrew his action to have the former directors of Farepak Food & Gifts Limited (Farepak), and its parent company European Home Retail Group PLC, disqualified as directors.
The former directors had been widely blamed in the media and by action groups for the collapse of Farepak, a company that ran a Christmas savings club and whose collapse in 2006 led to over 100,000 customers losing almost all of their deposits.
The judge presiding over the disqualification action, Mr Justice Peter Smith, made a statement following the withdrawal of the disqualification action last week. In that statement he made clear that blame had been wrongly attached to the directors:
read more »
Posted in Companies Act 2006 and company law, Directors |
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26 June 2012
Here are the meeting minutes of the Company Law Committee of The City of London Law Society for January 2012 and April 2012.
Posted in Companies Act 2006 and company law, Lawyers, Lobby groups |
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25 June 2012
Defra announced on 20 June 2012 that it intends to require quoted companies* to report their greenhouse gas emissions in the directors’ report of their annual report, and will consult on the contents of secondary legislation to implement that policy. The announcement follows a prior consultation to decide how to proceed with the requirements of section 85 of the Climate Change Act 2008.
*See section 385 Companies Act 2006
UPDATE 25 July 2012: The Defra consultation has now been published and is here.
Posted in Companies Act 2006 and company law, Consultations, Reporting and accounts, UK government |
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21 June 2012
Following yesterday’s announcement by the Government on how it will legislate to give shareholders of quoted companies greater control over directors’ pay – which we covered in this post - the Financial Reporting Council has today published a report on “A single figure for directors’ remuneration”. Accompanying press release here.
The aim of the report, which comes out of work done by the FRC’s Financial Reporting Lab, is to suggest a methodology by which quoted companies can publish a single figure for the pay of each of their directors. The report will support the Government’s intention, in its proposed pay reforms, to require quoted companies to publish that single figure in the pay “implementation report” that a company will need to publish in its annual report.
The FRC’s report runs to 15 pages and contains multiple tables, suggest disclosure approaches and appendices – suggesting that the production of a single figure that is meaningful (and comparable across other companies) is, as might be expected, not going to be straightforward. Cold towels all round.
See also: FRC to consult on directors’ pay in support of the Government’s reform plans
Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets, Regulators |
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21 June 2012
Following yesterday’s announcement by the Government on how it will legislate to give shareholders of quoted companies greater control over directors’ pay - which we covered in this post - the Financial Reporting Council has announced that it will consult on remuneration-related changes to the UK Corporate Governance Code once the Government’s legislation is in place:
“The FRC will consult on two proposals that the Government has asked it to consider: to extend the Code’s existing provisions on claw-back arrangements, and to limit the practice of executive directors sitting on the remuneration committees of other companies. It will also seek views on whether companies should engage with shareholders and report to the market in the event that they fail to obtain at least a substantial majority in support of a resolution on remuneration.”
See also: A single figure for directors’ pay? FRC Financial Reporting Lab report
Changes to the UK Corporate Governance Code, Stewardship Code and Auditing Standards: FRC starts consultation
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Directors, Equity capital markets, Regulators |
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21 June 2012
The Government yesterday published its finalised plans for giving shareholders in quoted companies* control over directors’ remuneration. The Department of Business, Innovation and Skills press release is here and its “Statement of government policy” is here.
BIS describes its proposed reforms as “the most comprehensive reforms of the framework for directors’ remuneration in a decade”. The reforms will be effected through the Enterprise and Regulatory Reform Bill. What BIS describes as “simplified” regulations setting out how companies must report directors’ pay will be published and consulted on. The government’s plan is that all these reforms will be enacted by October 2013.
Pay reforms: Government intentions
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Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets, UK government |
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21 June 2012
The Insolvency Service yesterday withdrew its action against former directors of Farepak Food & Gifts Limited (Farepak) and its parent company European Home Retail Group PLC.
The application for disqualification orders against the directors was in progress at the High Court. It was withdrawn following the judge’s questioning of whether the action should continue in the light of, amongst other matters, the reported actions of HBOS in refusing to place Farepak customers’ money into a separate trust account prior to Farepak’s collapse. If HBOS did refuse to do that, it would have meant that more cash was available to meet creditors’ claims. HBOS was a major creditor.
The Daily Telegraph’s report of the ending of the disqualification action is here and the Mail’s is here.
UPDATE 6 July 2012: Lloyds Banking Group to make £8 million ex-gratia payment to former Farepak customers
See also: Farepak: what the judge said
Business Secretary Vince Cable has referred HBOS, now part of Lloyds Banking Group, to the FSA after his prosecution of the Farepak directors collapsed last week. In a statement Mr Cable also said he would also be contacting HBOS to establish how they would respond to calls for the bank to pay more into the Farepak creditors’ compensation fund – Daily Telegraph
Disqualification action against former Farepak directors to start on 24 May
Farepak liquidation: Advisers’ fees exceed total creditor payout
Insolvency Service applies for disqualification order against former President of the CBI
Posted in Companies Act 2006 and company law, Directors |
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19 June 2012
Transparency International UK has published a 32 page guide to “Anti-bribery due diligence for transactions”, which can be downloaded here.
The guidance ”aims to help those operating in this area by providing a practical guide that draws on the expertise of leading practitioners in multinational companies, the legal profession, accounting firms and professional advisors” and contains:
read more »
Posted in Companies Act 2006 and company law, Lobby groups |
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13 June 2012
On 2 May 2012 it was announced that London-listed Kewill plc had accepted a takeover offer from Kinetic Bidco Limited, a newco vehicle owned by Francisco Fund Partners. The takeover was to be effected by scheme of arrangement, and the Scheme Court Meeting and the General Meeting were held on 25 May 2012, with the Kinetic takeover being approved by Kewill shareholders at those meetings.
The Scheme Court Hearing was duly scheduled for 13 June 2012 (today), which would have completed the scheme of arrangement and the takeover by Kinetic.
However,
read more »
Posted in Companies Act 2006 and company law, Equity capital markets, Private equity, Takeovers |
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12 June 2012
The Companies Act 2006 introduced a new procedure by which a private company limited by shares can reduce its share capital by means of a solvency statement made by the directors. The procedure is set out in sections 642 to 644 of the 2006 Act.
The ICAEW has published useful short guidance on how to comply with some of these statutory requirements. That guidance appears to be no longer available for public access online, but this short note from Mayer Brown captures its main points.
The Company Law Committee of the Law Society published a memorandum in October 2008 on practical steps that directors can take before making a solvency statement, which can be read here.
See also: ICAEW legal and regulatory technical releases
Posted in Companies Act 2006 and company law, Directors |
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24 May 2012
The Enterprise and Regulatory Reform Bill was published yesterday and contained within it at section 57 is confirmation that the Bill will start the process of giving shareholders of quoted companies a binding vote on directors’ remuneration.
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Directors, UK government |
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18 May 2012
Back in February 2011 we covered the decision of the Insolvency Service to apply to the High Court, on behalf of the Secretary of State for Business, Innovation and Skills, for disqualification orders to be made against nine individuals in relation to their conduct as directors of European Home Retail Group PLC and/or Farepak Food & Gifts Limited (Farepak).
The trial has now been scheduled to start on 24 May.
read more »
Posted in Companies Act 2006 and company law, Directors |
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16 May 2012
The Financial Times reports today that Michel Barnier, the European Commissioner for the Internal Market and Services, will propose that shareholders should get a binding vote on directors’ pay in quoted companies when he makes his final recommendations on corporate governance in listed companies in autumn 2012.
For the UK, the suggestion simply replicates the Government’s own proposals for a binding vote confirmed in the May 2012 Queen’s Speech.
In his interview with the FT, Mr Barnier also suggests that:
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets, Europe, Financial services and market conduct, Regulators |
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14 May 2012
An attack on your fellow shareholder is likely to result – amongst other things – in an order under section 994 to have your shares bought out. Re Home & Office Fire Extinguishers Ltd has put the point beyond doubt. (H/T Hewetts Solicitors.)
Posted in Companies Act 2006 and company law |
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9 May 2012
The two Bills in today’s Queen’s Speech that are of most interest from a company and financial law perspective are the:
The Enterprise and Regulatory Reform Bill
This will:
- Enshrine the “green” purpose of the Green Investment Bank, providing powers for it to operate including funding and ensuring its operational independence from Government.
- Create a single Competition and Markets Authority by combining the Competition Commission and the competition functions of the Office of Fair Trading.
- “Strengthen the framework” for directors’ pay, specifically by repealing section 439(5) of the Companies Act 2006 making it possible for directors’ remuneration to be contingent on the outcome of the shareholder vote on the remuneration report. The expectation is that the Government’s March 2012 suggestion that a binding vote on quoted company directors’ pay would require a supermajority to pass will not go ahead, with the vote instead being an ordinary resolution requiring a simple majority to pass.
- Simplify the regulatory system and give “confidence to business that they will not be held back by outdated and unnecessary legislation”…no details of how that will be achieved.
Banking Reform Bill
This will:
- Give the Treasury powers to make provision for ring-fencing by requiring that essential banking services are only provided in a ring-fenced bank, and defining services that a ring-fenced bank may not provide.
- Require the Prudential Regulatory Authority to ensure that a ring-fenced bank in a group is, as far as possible, independent of other entities in the group.
- Provide that depositors are treated as preferred creditors, paid before unsecured creditors on insolvency, and so reduce the exposure of the Financial Services Compensation Scheme and the taxpayer in insolvency.
Government Briefing Notes on the Bills here.
Posted in Companies Act 2006 and company law, UK government |
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6 May 2012
Caffyns plc, a family-controlled company (page 57 of 2010 Annual Report) with three classes of security on the UKLA Official List and a Premium Listing on the London Stock Exchange, is facing a derivative claim and an unfair prejudice action from a shareholder action group.
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Equity capital markets |
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3 May 2012
The advisory vote on the remuneration report at today’s AGM was lost by the insurer. It seems that institutional shareholders are to some extent pre-empting the results of the Government’s consultation on giving investors binding votes on executive pay.
Manifest, the proxy voting agency, reports that “only 12 other FTSE 100 companies have had more than 40% dissent on their remuneration report since records began” and that Aviva becomes only the fourth FTSE100 company to lose the advisory vote.
The chief executive of Trinity Mirror, Sly Bailey, has seen the writing on the wall and quit a week ahead of her AGM. Ms. Bailey managed to extract £12.7 million from the company whilst overseeing a 90% fall in the share price during her tenure.
UPDATE 8 May 2012: Following the shareholder vote against the remuneration report, the Chief Executive of Aviva has now resigned with immediate effect even though he personally was re-elected by 95% of those voting at the AGM on 4 May.
He gets a year’s salary “subject to mitigation” and £300,000 “in full and final settlement of all claims that he might have to bonus under his contract”, and pension, and vesting of shares from the 2009 bonus plan – but nothing from the deferred elements of the 2010 or 2011 bonus plans. Approximately £1.7 million, all taken together.
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Directors, Equity capital markets, Reporting and accounts |
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1 May 2012
The DCMS Select Committee has today published its report into phone hacking at News International. The Committee’s report finds that Rupert Murdoch exhibited “wilful blindness” (at paragraph 229) to what was going on in his companies, and lays the same charge also at James Murdoch:
“In failing to investigate properly, and by ignoring evidence of widespread wrongdoing, News International and its parent News Corporation exhibited wilful blindness, for which the companies’ directors—including Rupert Murdoch and James Murdoch—should ultimately be prepared to take responsibility…”. (Paragraph 275 of the report.)
It appears that Rupert and James Murdoch were both statutory directors of News International Limited (as it then was) during the phone hacking period.
The finding of “wilful blindness” by the DCMS Committee is not a judicial finding. If that finding was repeated by the court, it would suggest that these directors of News International had breached their duties as directors of the company, as set out in section 174 Companies Act 2006 (“a director of a company must exercise reasonable skill, care and diligence”) and also presumably section 172 (the duty to promote the success of the company).
Given that News International is a subsidiary of News Corporation, there is little prospect of a shareholder derivative action (under Part 11 of the Companies Act 2006) to confirm that the court would equate “wilful blindness” with breach of the section 174 duty to exercise reasonable skill, care and diligence.
Posted in Companies Act 2006 and company law, Directors |
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30 April 2012
The Court of Appeal last week confirmed the High Court’s first instance decision that a side letter between a Mr Barbudev, founder of a Bulgarian cable TV company, and a Warburg Pincus acquisition vehicle – by which Mr Barbudev would be given the right to invest in up to 10% of the acquisition vehicle following its purchase of his company – was no more than an “agreement to agree” and so not legally enforceable.
read more »
Posted in Companies Act 2006 and company law, Private equity |
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30 April 2012
In Golden Ocean Group v Salgaocar Mining Industries the Court of Appeal has confirmed that a guarantee can be constituted by an exchange of e-mails.
See this useful note by Fenwick Elliott (at pages 8 and 9), which also discusses more generally how contracts can be formed by e-mail – and that as, in this case, the sender’s Christian name at the end of an e-mail will be all that is required for a signature.
Posted in Companies Act 2006 and company law |
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29 April 2012
Last week the Court of Appeal confirmed the High Court’s finding last year that, in some circumstances, a parent company could be found to owe a duty of care to an employee of a subsidiary.
The judgment sets out a four stage test for when the law may impose on a parent company responsibility for the health and safety of its subsidiary’s employees.
read more »
Posted in Companies Act 2006 and company law, Risk management |
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27 April 2012
“The SFO has not yet prosecuted an individual or company under the Bribery Act” – see here. The Bribery Act came into force on 1 July 2011.
For more on the Bribery Act 2010, see here.
Posted in Companies Act 2006 and company law, Risk management, UK government |
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