Transactions of Russian joint stock companies and limited liability companies require the consent of the general meeting or the board of directors if they qualify as material or interested party transactions. As the non-observance of the relevant requirements may be grounds for contesting these types of transaction, they should be observed not only by shareholders and members of the corporate bodies of the respective companies, but also by persons that wish to enter into such transactions with these companies.
The EY Centre for Board Matters has identified investors' top priorities for companies in 2018, based on its annual investor outreach involving interviews with institutional investors. According to EY, the top investor priorities include board composition, with a particular focus on enhanced diversity; board-level expertise that is more aligned with business goals; and enhanced attention to talent and human capital management.
The Commercial Division of the Supreme Court has clarified how an assignment of business receivables, known as a 'Dailly assignment', operates. Through this decision, the Supreme Court has reinforced the effectiveness of the Dailly assignment mechanism by giving full effect to the assigned debtor's actual knowledge of the assignment and by giving no effect to contractual provisions that restrict assignment.
The corporate functioning rules for joint stock companies have been repeatedly altered by Romanian legislation, especially in relation to the governing structures of companies, such as shareholders' assemblies and management bodies. However, some situations create problems in practice or generate inconsistencies within jurisprudence. One such example is the use of secret voting in general shareholders' meetings.
At the request of the Department for Business, Energy and Industrial Strategy, the Investment Association has launched a public register of Financial Times Stock Exchange All-Share companies, showing occasions where these companies have experienced substantial shareholder dissent. The purpose of the register is to identify companies which receive a high vote against or withdraw a resolution and to understand the process used by those companies to identify and address their shareholders' concerns.
The Federal Trade Commission (FTC) has issued its annual inflation-adjusted thresholds for determining whether an acquisition of voting securities requires prior notification under the Hart-Scott-Rodino Act. If any person or entity will hold voting shares that exceed the set amount as a result of an acquisition, all parties must submit a filing and observe a mandatory waiting period before acquiring the shares. The FTC also revised the potential maximum penalty for violations of the act.
The concept of a 'golden share' was devised to maintain control of newly privatised companies as they adjust to the free market environment or to prevent takeover by overseas shareholders of private companies operating in fields of national interest. Cypriot company law is silent on the rights enshrined in golden shares. However, case law provides that golden shares represent a separate class of shares, which enable holders to exercise veto rights by having weighted voting rights on specific matters.
The new tax act is expected to trigger a spike in the levels of stock buybacks. Since one of the most prolific proponents of shareholder proposals recently submitted a proposal to eliminate the impact of stock buybacks in determining executive compensation, it seems likely that this type of proposal may resurface more frequently, especially if, in light of the recent tax law change, the level of stock repurchases resumes a sustained upward climb.
A press release by the Institute of Directors suggesting that in 2016 Carillion relaxed the clawback conditions that applied to bonuses has raised questions over remuneration governance. The change seems to have removed 'corporate failure' as a clawback or malus event, substituting conditions so that pay could be clawed back only in the event of a misstatement of financial results or gross misconduct of an individual.
A recent High Court decision has provided a useful reminder of the care that must be taken when administrators enter into pre-contract negotiations and the risk of inadvertently entering into a binding contract before terms are finalised. It also deals with the risks of disposing of assets, even those that are difficult to value, without due process.
Creditors and investors assess the level of a company's net assets when deciding whether to grant a loan to or invest in that company. Further, the Companies Law requires companies to maintain a certain level of net assets. However, an increasing number of companies on the Romanian market are struggling with low net assets to total asset ratios. Luckily, such companies can redress their situation through a share capital increase, which is a straightforward procedure.
A Dutch private limited company can make distributions of profits to its shareholders if the company's capital exceeds the aggregate of the reserves that must be maintained pursuant to the law and the company's articles of association. If a company cannot pay its due and payable debts after a distribution, the members of the board of directors can be held liable to for any resulting shortfall and the company's bankruptcy trustee can claim and recover the amount wrongfully paid from each shareholder.
A recent Court of Appeal ruling provided guidance on directors' powers after considering whether a fresh issuance of shares by directors which altered the balance of voting power between the shareholders was done for a proper purpose. The court held that directors should not issue shares in a manner that could affect the balance of power between groups of shareholders or create new majorities, irrespective of whether the old or new majority have a proprietary interest in the fund.
The National Association of Corporate Directors has released the results of its 2017-2018 Public Company Governance Survey of over 1,000 directors and executives. The survey looked at directors' outlooks for 2018 on key business trends and critical board priorities, the board's role in overseeing an organisation's culture, the state of board risk oversight – especially cybersecurity risk – and the growing challenge of hedge fund activist investors.
While some economists have predicted a bleak outlook for the UK economy in 2018, with Brexit negotiations likely to affect the prospects of any improvement, others are less pessimistic and expect that the fall in the pound following the EU referendum will lead to stronger export growth. The government is advised to broker a deal with the European Union on key issues as soon as possible in order to minimise damage to the economy and avoid handing the advantage to overseas competitors.
The Ministry of Manpower recently issued Regulation 18/2017, which introduces an online-only procedure for mandatory manpower reporting. The regulation specifies when companies must submit an online report and requires them to do so via the ministry website. It also regulates the usage and management of data from manpower reports.
The Code of Commercial Companies provides that the supervisory board of a limited liability company cannot give binding instructions regarding the management of the company's affairs to its managers. As there is no similar explicit provision prohibiting a shareholders' meeting from issuing such instructions, the question arises as to whether this was an intentional omission by the legislature and whether managers of limited liability companies must follow instructions given by shareholders.
The Higher Administrative Court recently requested that the Constitutional Court repeal Section 39(2) of the Trade Act, as it infringes fundamental rights guaranteed by the Constitution. Austrian legal practitioners are already eagerly awaiting this judgment, which is expected to be issued during 2018.
The Financial Reporting Council (FRC) has more than tripled the size of its enforcement team over the past five years in response to public criticism over its failure to prosecute auditors for giving clean audits to financial institutions in the months before they were engulfed by the financial crisis. The increased headcount and specialist nature of the team now in place should enable the FRC to move more quickly in instigating and resolving investigations.
The Securities and Exchange Commission Division of Corporation Finance recently revised some of the guidance in its Financial Reporting Manual relating to the adoption of new accounting standards. One revision relates to the adoption of a new accounting standard in the context of a significant acquisition and the second relates to transition period accommodations for emerging growth companies. This new guidance could take on particular significance in the context of the new revenue recognition standard.