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This week’s edition of Corporate highlights includes news of an independent review of the FRC, an update on the timing of the upcoming corporate governance reforms, the IMF’s findings on the use of tax havens by empty corporate shells and some news analysis on the Corporate Manslaughter and Corporate Homicide Act 2007.
The House of Commons Library has published a briefing paper, Corporate Governance Reform. The briefing paper provides an overview of the corporate governance framework in the UK, including the history of the UK Corporate Governance Code (UKCG Code) and the interaction of the UKCG Code with directors’ duties under the Companies Act 2006. The paper also provides an overview of the corporate governance reforms announced by the government in August 2017 and provides an update on timescales.
The reforms announced by the government in August 2017 included secondary legislation that would require quoted companies and large public and private companies to make additional corporate governance disclosures and the government initially intended to bring these legislative reforms into effect by June 2018 to apply to financial years beginning on or after that date. Draft secondary legislation was planned to be laid before Parliament before March 2018, but this has been delayed. The government has therefore indicated that it is now more likely that the reforms will apply to financial years beginning on or after 1 January 2019, to coincide with the implementation of the revised UKCG Code.
For further details on the government’s reforms, see Practice Note: 2017/2018 Corporate governance reforms. For further details on the FRC’s consultation on a revised UKCG Code, see News Analysis: FRC consultation on revised Corporate Governance Code.
For further information, see news, LNB News 06/06/2018 77.
The government has launched an independent review of the Financial Reporting Council (FRC) led by Sir John Kingman. The review has called for evidence from stakeholders as to whether the FRC and its current regulatory framework are as effective as they need to be now and are fit for the future. Responses to the call for evidence should be received by 6 August 2018.
The independent review is being conducted with two objectives:
Evidence, including specific examples, is sought on topics including the FRC’s:
For further information, see LNB News 06/06/2018 49.
Research conducted by the International Monetary Fund (IMF) has found that £12trn is invested globally in empty corporate shells located in tax havens. The study discovered that almost 40% of all foreign investment positions globally are situated in companies without activity. The IMF has observed how important this is, particularly as in many countries there are major policy initiatives aiming to curb the harmful use of tax havens. The IMF’s report, Piercing the Veil, states that in light of increased digitalization and mobility of assets, the international tax challenge will increase in the coming years.
The eight major countries that are well-known tax havens are the Netherlands, Luxembourg, Hong Kong SAR, the British Virgin Islands, Bermuda, the Cayman Islands, Ireland and Singapore, which hold more than 85% of global investments in special purpose entities. The characteristics of these entities include legal registration subject to national law, ultimate ownership by foreigners, few or no employees, little or no production in the host economy, little or no physical presence, mostly foreign assets and liabilities, and group financing or holding activities as their core business. The IMF has found that this type of financial tax engineering is a worldwide phenomenon that cuts across advanced and emerging market economies.
The IMF suggests that more data is needed to fully pierce the veil of offshore financial secrecy. It believes more countries should regularly report detailed financial data, divided up by instrument, domestic sector, counterpart sector, country, currency and maturity. The IMF also suggests traditional macroeconomic statistics, which are based on the concept of a national economy as the only relevant boundary, should be paired with data on global interconnection that looks across borders to uncover the ultimate holders of financial wealth.
For further information, see LNB News 04/06/2018 56.
Corporate Crime analysis: In the third of a three-part series produced on the tenth anniversary of the Corporate Manslaughter and Corporate Homicide Act 2007 (CMCHA 2007), Richard Crockford, partner, at Kennedys offers his opinion on the value of a statutory offence of corporate manslaughter.
The analysis covers Crockford’s views on:
Crockford also gives his predictions for the future of the law on corporate manslaughter.
For further information, see News Analysis: Corporate Manslaughter and Corporate Homicide Act 2007—ten-year review (part three).
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