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NEWS ROUND-UP |
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ICSA guidance on proxies and corporate representatives at shareholder meetings See CLM ¶3727+, ¶3743+ The Institute of Chartered Secretaries and Administrators (ICSA) has published new guidance on proxies and corporate representatives at shareholders meetings (ICSA guidance note number 080122). The new note takes into account the changes made in this area by the October 2007 implementation phase of the new Companies Act and advises companies on how to deal with some of the issues that may arise as a result. These changes allow corporate shareholders to appoint more than one corporate representative if they wish, as well as more than one proxy. This is useful where a corporate shareholder holds shares on behalf of others, as it can appoint a proxy or representative for each beneficial shareholder so the votes can be cast in the interests of each beneficiary. The distinction between proxies and corporate representatives is blurred further by the fact that proxies now have the same rights to attend, speak and vote on a show of hands as well as on a poll. The main practical differences between the two are that: » notice of a proxy’s appointment must be given to the company in advance of the meeting, but there is no equivalent deadline for corporate representatives; and » a fresh proxy appointment needs to be made for each meeting even if the same person is appointed each time, whereas a corporate representative only has to be appointed once. The new Act may cause problems for corporate shareholders that appoint more than one corporate representative. Each of those representatives is entitled to exercise the shareholder’s powers. However, if they exercise a power in different ways, they are treated as not exercising it at all. This will lead to problems where corporate representatives need to vote differently on behalf of different beneficial shareholders at a meeting. It would be possible to argue that a representative voting on behalf of one beneficial shareholder is exercising a different power from one voting on behalf of another beneficial shareholder, or that corporate representatives should be allowed to exercise their rights in different ways like individual shareholders (s 152 CA 2006). However, until the point is resolved through case law or legislation, the position is uncertain. ICSA recommends that corporate shareholders appoint: » one corporate representative to attend, speak and vote at meetings (who can be instructed to cast his vote in different ways if necessary); or » if there is a need for several representatives, appoint as many proxies as necessary. Where it is not possible to appoint proxies (e.g. where the appointment has to be made at the last minute), ICSA suggests a method of using multiple corporate representatives instead. This entails a lead representative casting the votes on behalf of the others as instructed. The guidance note also provides useful advice on proxies and corporate representatives generally, such as their appointment and how to manage multiple proxies/representatives attending a meeting. It also flags up issues that companies may wish to address in their articles. “ICSA Guidance on Proxies & Corporate Representatives at General Meetings” is freely available from ICSA’s website: http://www.icsa.org.uk/. Impact of the Budget on companies See CLM ¶555, ¶5338, ¶5344, ¶5345, ¶5346+, ¶5431 The Chancellor delivered the 2008 Budget Report on 12 March. Of particular interest to companies are: » changes to corporation tax; » the introduction of the new CGT regime; and » HMRC powers and penalties. Commentary on and analysis of the Budget can be found in Budget 2008 Newsletter. New guidance on the City Code from the Takeover Panel See CLM ¶6776, ¶6778, ¶6780+, ¶6807, ¶6816+, ¶6882 The Takeover Panel has released two practice statements giving guidance on its interpretation of the City Code (Practice Statement 20 of 2008 and Practice Statement 21 of 2008). Practice Statement 20 concerns offers for a target company and the need for secrecy, possible offer announcements and pre-announcement responsibilities (r 2 City Code). The statement reiterates the need for absolute secrecy to avoid creating a false market in the shares as well as to enable offer negotiations to be conducted in private. If there has been a breach of secrecy, the Panel must be told about the measures which have been put in place to remedy the breach and to prevent recurrences. The Panel must be consulted if there is any rumour or speculation about there being a potential offer for the target company. An increase of 5% in the price of the shares in one day, for example, would indicate that the offeror should consult the Panel. The Panel will decide whether an announcement is needed, or not. Usually, an announcement will not be needed if the rumours are false. Financial advisers have particular responsibility for ensuring compliance with this rule, including in being pro-active and contacting the Panel first, rather than waiting to be contacted. Practice statement 21 deals with the need for independent advice on an offer (r 3 City Code). There are circumstances where an adviser to the target will not be regarded by the Panel as being sufficiently independent to meet this requirement, often because of a current or past link to the offeror. The Panel is now prepared to be more flexible in regarding advisers as being independent, as parties to an offer will often use several advisers in one transaction, or may use different advisers in successive transactions. The Panel is now more likely to conclude that an adviser is independent, especially if the adviser has only acted occasionally for the offeror in the past. The new Practice Statements are freely available from the Takeover Panel’s website: http://www.thetakeoverpanel.org.uk/new/. Secondary insolvency legislation reform postponed again See CLM ¶3042, ¶7364 The anticipated implementation date for the new Insolvency Rules and related secondary legislation has been postponed further to October 2009. This reflects the scale of the task that the Insolvency Rules Committee (IRC) faces. Drafts of the new Rules and other legislation have been produced, but the IRC has a lot of work to do on the draft given the extent of the restructuring and substantive changes that will be made. The IRC anticipates completing this stage in late 2008. Another reason for delaying the implementation is that, like the revised company law forms under the new Companies Act, time is needed to adapt Companies House’s systems to the new insolvency forms that will have to be filed under the new legislation. The proposed structure for the Insolvency Rules was outlined in CLM 2007 Newsletter Issue 5. Drafts of the new Rules and other secondary legislation are not yet publicly available. The Insolvency Service has stated that these will be published well in advance of the new implementation date. The Insolvency Service’s consultation on the changes to IA 1986 and CDDA 1986 closed in December (see CLM 2007 Newsletter Issue 7). The Service is currently considering the responses and deciding which proposals will be pursued later in the year. Any changes to the primary legislation will be implemented at the same time as the new secondary legislation. Insolvency Service report on the impact of the Enterprise Act on corporate insolvencies See CLM ¶8691, ¶9238 The Insolvency Service has published an evaluation report looking at the effects in practice of the corporate insolvency provisions of the Enterprise Act 2002. The report includes detailed analysis of statistics comparing various aspects of pre- and post-Enterprise Act insolvencies (principally administrations and administrative receiverships). The report draws out the positive effects of the Act: » the increased use of the administration procedure as opposed to administrative receivership, in particular by small and medium-sized companies; » the popularity of the out-of-court method of entering administration, compared to the court procedure (see CLM ¶8710+); and » more positive outcomes of administration in terms of the length of time administrations take (due to the time limit on the administrator’s appointment, see CLM ¶8999+), increased returns to secured and preferential creditors and some reductions in the cost of the procedure. It also highlights some of the less desirable consequences of the Act, such as the apparent use of administration as a substitution for liquidation. In addition, unsecured creditors have not yet seen the benefits of the procedure in terms of distribution. This may largely be due to the fact that administrators do not have to ring-fence assets subject to pre-2003 floating charges for the benefit of unsecured creditors (see CLM ¶7994+). The report recommends continued analysis of the effect of the Enterprise Act over time, especially since the impact of ring-fencing is yet to be felt. It also suggests reviewing the CVL procedure to see why administration is becoming a popular alternative and whether any changes should be made to it. “Enterprise Act 2002 – Corporate insolvency provisions: Evaluation report” is freely available from the Insolvency Service’s website: http://www.insolvency.gov.uk/. |
