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APB guidance on new auditors’ reports See CLM ¶667, ¶1158, ¶1177, ¶1409, ¶1625, ¶1634, ¶4340 The Auditing Practices Board (APB) has issued a Bulletin entitled “Miscellaneous Reports by Auditors Required by the United Kingdom Companies Act 2006”. As its title suggests, the purpose of the Bulletin is to provide guidance and examples on the reports and statements required to be made by auditors under the new Companies Act. Reports and statements covered by the Bulletin include: » report on distribution by reference to relevant accounts; » report on the use of initial accounts in distributions; » statement by an auditor on ceasing to hold office; » statement with respect to net assets when a private company re-registers as a public company; » report when a private company wishes to redeem or purchase its own shares out of capital; » valuation report when a public company wishes to allot shares for non-cash consideration; and » report when non-cash assets are transferred to a public company by certain shareholders. A copy of the Bulletin can be found on the Financial Reporting Council’s website: http://www.frc.org.uk/apb/publications/pub1758.html. BERR consultation on shareholder rights See CLM ¶3626, ¶3730+, ¶3743, ¶3749, ¶3840, ¶3846 BERR has published a consultation document in relation to the implementation of the EU Shareholder Rights Directive (EC Directive 2007/36). Although primarily aimed at listed companies, the consultation document also proposes changes to bring the new Companies Act into line with the Directive, which will apply to both listed and non-listed companies. The proposals affecting all companies include: » adding a new provision which will enable general meetings to be held via “electronic means”, which would include telephone, video and web-conferencing; » making amendments to enable corporate representatives appointed by the same corporate shareholder to vote in different ways from one another in respect of different blocks of shares, to mirror the corporate shareholder’s own right to do so; » reducing the default threshold of shareholders able to require directors to call general meetings from 10% to 5%; » adding a new section which will allow votes taken on a poll to be cast in advance; and » making amendments to the rules regarding proxies, including clarifying how a proxy appointed by more than one shareholder can follow different voting instructions on a show of hands and adding a new section which will oblige proxies to act in accordance with the instructions of their appointing shareholders (this duty is currently derived from case law). In relation to proxy voting, the draft regulations propose to give a proxy appointed by more than one shareholder who all instruct him to vote in the same way one vote on a show of hands for or against the resolution, as applicable. However, if he is instructed to vote in different ways, he will have one vote for and one against. It is arguable that the proposed amendments, as they currently stand, have not sufficiently clarified the voting rules and that it may still be necessary to demand a poll to properly reflect the spread of votes (e.g. if one proxy is appointed by four shareholders, and three instruct him to vote for the resolution and one wants him to vote against, he can only cast two votes (one for and one against), giving the “against” vote undue weight). The Government proposes to implement the Directive (including the above proposals) by means of the draft Companies (Shareholders’ Rights) Regulations 2008/9, and is inviting comments on the above proposals by 30 January 2009, when the consultation period ends. The Directive must be implemented by 3 August 2009. The consultation document is available on BERR’s website: http://www.berr.gov.uk/files/file48662.pdf. New guidance on company secretary’s role See CLM ¶4142+ The Institute of Chartered Secretaries and Administrators (ICSA) has published a new guidance note which summarises the company secretary’s main corporate governance responsibilities. These responsibilities include: » duties derived from the Combined Code on Corporate Governance, including those relating to board composition and procedures, directors’ remuneration, auditing, relationships with shareholders and corporate disclosures; » obligations in relation to statutory and regulatory compliance; and » the need to ensure that the board is aware of current guidelines issued by institutional investors (such as the Guidelines on Responsible Investment Disclosure issued by the Association of British Insurers). Although some of the guidance is targeted at company secretaries of listed companies (such as those responsibilities derived from the Combined Code), it still provides useful clarifications to company secretaries with regards to their role in promoting good corporate governance, irrespective of whether their company is publicly traded or not. The guidance note is available on ICSA’s website: http://www.icsa.org.uk/knowledge/guidance/081020. New guidance on directors’ accounting duties See CLM ¶4185+ The Institute of Chartered Accountants in England and Wales (ICAEW) has issued new guidance on the financial and accounting duties and responsibilities of directors (TR 06/08). The guidance sets out what is considered to be good practice, rather than what may be acceptable as the legal minimum. It is concerned with companies in the UK subject to the provisions of the new Companies Act and has been prepared on the basis of the complete implementation of it (with the exception of the model articles). The guidance is divided into 3 parts: » Part 1 deals with directors in general, for instance, who is a director and the powers and duties associated with directorship; » Part 2 deals with the financial reporting and accounting responsibilities of directors, including for example, the requirement to prepare true and fair accounts and retain records, and the laying/delivery of accounts; and » Part 3 deals with other financial responsibilities of directors, such as the requirement to file annual returns, compliance with the City Code on Takeovers and Mergers (where the company is involved in a takeover/merger), and responsibilities in relation to fraudulent trading. Note that the accounts provisions of the new Act came into force on 6 April this year, applying to financial years starting on or after that date. Most of the new Act is now in force, but some provisions will not be implemented until 1 October 2009 (see Company Law Memo for details). Proposal to grant equivalence to GAAPs of certain third countries See CLM ¶4212, 4226, 4229 The EU has long had the objective of achieving a single market in financial services and unifying the regulation of financial markets throughout the Community. Part of this objective includes the global convergence in accounting standards to reflect international practice and promote the efficiency of capital markets (see CLM 2008 Newsletter Issue 1). Since 1 January 2005 all EU listed companies have been required to prepare their consolidated accounts in conformity with the International Financial Reporting Standards (IFRS) of the EU. Non-EU financial entities are able to use their own Generally Accepted Accounting Principles (GAAPs) until 2011, provided that its country’s standards are moving towards the IFRS ones. EC Regulation 1569/2007 sets out the basis on which non-EU GAAPs will be considered equivalent to IFRS. This affects listed companies and their obligations under the Transparency Directive and the Disclosure Directive (see CLM 2008 Newsletter Issue 1). Under this regulation the European Securities Commission has proposed to determine that the GAAPs of US, Japan, China, Canada, South Korea and India are found to be equivalent to IFRS. These will be reviewed for China, Canada, South Korea and India by 2011 (at the latest). In the UK, non-listed companies are able to choose whether to adopt international accounting standards or continue to prepare their accounts in accordance with UK GAAP. OFT publishes summary of responses to merger control consultation See CLM ¶5510+ In March this year the Office of Fair Trading (OFT) revised and updated its guidance on merger control (see CLM 2008 Newsletter Issue 3 for further details). The revised guidance covers various issues, such as the issue of when an acquiring company is considered to have the ability to materially influence the target, and the use of the statutory pre-notification merger notice procedure. The OFT has now published a summary of responses to the consultation on the draft guidance. In summary, the majority of respondents welcomed the OFT’s guidance, although they also raised a number of issues on the revised draft, including: » the need for clearer guidelines on the circumstances in which the acquiring company would have material influence over the target (and therefore would be subject to the OFT’s merger control procedures); » the need for clarification on when it would be appropriate to use the voluntary pre-notification merger notice procedure (which is intended to be a fast-track procedure for transactions that do not raise any anti-competitive concerns); and » concern that the threshold at which the OFT would seek initial undertakings from potential acquiring companies where the merger is likely to raise competition concerns is too low. The OFT is currently finalising its guidance in the light of these issues. For instance, it intends to clearly explain the key principles as to when “material influence” is likely to be found. The OFT aims to publish the finalised guidance by the end of 2008. A copy of the OFT’s summary of responses can be found on the following website: http://www.oft.gov.uk/shared_oft/business_leaflets/enterprise_act/oft1021.pdf. European Commission proposal on mergers and divisions See CLM ¶5520+, ¶6536+ The European Commission has put forward a proposal for a directive aimed at reducing the administrative burdens on European public limited companies in relation to mergers and divisions. The proposal is an initiative of the Commission’s simplification programme, and allows companies to publish draft terms of the merger/division on their own website (rather than having to publish them in the national gazette or register (Companies House in the UK) and enables them to send information to shareholders electronically when the shareholders agree. The purpose of this is to provide easier and cheaper access to information. In addition, the proposal removes the requirement for companies to table an independent expert’s report at the general meeting to consider the merger or division, and also eliminates the need to hold a shareholders’ meeting where the merger/division in question is between a parent company and its subsidiaries (both of these elements are already in place in the UK under the new Companies Act). The proposal will be implemented by amending various current EC Directives. Details of the proposal can be found at: http://ec.europa.eu/internal_market/company/docs/simplification/20080925commprop_en.pdf. In addition, the Commission has also launched a public consultation on how well the EC Merger Regulation works in relation to the jurisdictional provisions and referral mechanisms in particular (EC Regulation 139/2004). The consultation closes on 1 December 2008. ICSA guidance on corporate manslaughter See CLM ¶7181+ ICSA has published guidance on the Corporate Manslaughter and Homicide Act 2007, which came into force on 6 April 2008 (see CLM 2007 Newsletter Issue 1 and Issue 6 for further coverage of the Act). The guidance explains the new offence of corporate manslaughter and sets out a number of suggested steps which organisations can take to minimise the risk of prosecution for corporate manslaughter, which include: » complying with the Health and Safety at Work etc Act 1974; » ensuring that compulsory health and safety guidelines are in place and that employees understand and adhere to them; » offering health and safety training; and » engaging health and safety experts to ensure a safe work environment. The guidance is available on ICSA’s website: http://www.icsa.org.uk/assets/files/pdfs/guidance/081003.pdf. Nominees’ and supervisors’ qualification requirements CLM ¶7423 The Insolvency Service has issued proposals to enable non-insolvency practitioners to act as nominees and supervisors of CVAs and IVAs (“Authorised persons – section 389A Insolvency Act 1986”, September 2008). The legislation currently enables persons other than insolvency practitioners to take on these roles by setting out an exception to the criminal offence for acting without being qualified to do so, as long as the person (s 389A IA 1986): » is a member of a body recognised by the secretary of state for the purposes of authorising nominees and supervisors to act; » has the correct security in place; and » is not disqualified from acting (because he is an undischarged bankrupt, he is subject to a disqualification order or he lacks the mental capacity to act). However, at the moment, the secretary of state has not yet recognised any professional bodies for this purpose, meaning that only qualified insolvency practitioners can act as nominees and supervisors. The Insolvency Service proposes to amend the legislation to make it clear that a person can be authorised to deal with just CVAs and/or IVAs (without having to be qualified to deal with other types of insolvency procedure as well). It also proposes to put a scheme in place for the authorisation of nominees and supervisors through membership of recognised professional bodies, in much the same way as insolvency practitioners are authorised to act now. There are no plans to act on the power in the legislation for the secretary of state to authorise individuals to act directly. Regulations will deal with nominees’ and supervisors’ security (or bond), mirroring the provisions for insolvency practitioners’ bonds (see CLM ¶7425). The regulations will also set out the record-keeping obligations of authorised persons. The consultation is open until 12 December 2008; it can be found on the Insolvency Service’s website: http://www.insolvency.gov.uk/. The timetable for implementation of these changes is currently unclear, as the Insolvency Service has recently announced that it proposes to introduce the legislative amendments into a suitable Bill going through parliament when one becomes available. As there is no such Bill at present, the consultation is likely to be reissued because the current consultation document will be out of date by the time the changes can be considered by parliament. |
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NEWS ROUND-UP |
