Is the Prospectus Directive working?

The European Securities Market Expert Group (prettily named: ESME) has published a report on whether the Prospectus Directive has achieved what it set out to do.  This was to achieve market efficiency in detailing the publishing of prospectuses when securities are offered to the public or admitted to trading.  ESME is a body of practitioners that advise the EC on EU securities directives.  The report details ambiguities and deficiencies in the wording of the Directive (e.g., definition of transferable securities, liability for prospectuses, advertisements and marketing materials) and notes the average length of a prospectus has increased since the Directive came into effect.  It is safe to assume there will be some amending legislation in due course.

Banking bits of CA 06: 1 October 2007

Next Monday, some of the drier parts of Companies Act 2006 come into force.  Things that you might notice change from 1 October are:

• References to signed written resolutions will go.   From Monday, shareholders will “signify their agreement to” written resolutions.  You should notice these changes coming through in the conditions precedent of loan agreements.
• If you see any extraordinary resolutions being made in new documentation, it will be a mistake.  They disappear for ever on 1 October 2007 unless you spot them referred to in existing contracts or memorandum & articles.
• Memorandum & articles will generally disappear as a phrase, to be replaced by “the constitution“.  This is to encompass the wider definition of constituting documents under the Act, including resolutions and agreements required to be filed at Companies House and resolutions (shareholders, board, written) or other decisions come to in accordance with the constitution.
• Board minutes might have lengthier wording on how the directors have considered the various statutory duties imposed on them.  Opinions differ as to how much should be said about this in board minutes, so there will be some variation.
• Special resolutions will only require 75% of the total voting rights of eligible members (s 283(2) CA 06).  But it would be a brave bank that relied on a mere 75% majority for a resolution obtained for Rolled Steel (commercial benefit) purposes.  Or in financial assistance cases.

There is a misconception on auditors and written resolutions that from 1 October, mistakenly some people think you don’t have to send written resolutions to the auditors.  In fact, under the transitional provisions, you do have to.  The requirements of s 390(2) have been repeated in the provisions to apply to resolutions used before 6 April 2008.  On that date, s 502 CA 2006 comes into force, under which auditors are “entitled to receive all communications relating to a written resolution as must be supplied to a member”.

Insolvency reform

The Insolvency Service has issued a consultation paper setting out its proposals to modernise and streamline the law governing insolvency procedure.   The broad aims are to bring insolvency law up to date with our current ability to communicate electronically, to move some decision-making process to insolvency practitioners and to remove some unnecessary burdens from insolvency practitioners.  Replies to the consultation must be with the Insolvency Service by 10 December 2007.

Home credit competition

On 4 October 2007, the Home Credit Market Investigation Order 2007 will come into force. It contains provisions relating to the sharing of data on customers’ payment records, publication of prices, provision of information in client statements and rebates for early repayment of loans. It puts into place the remedies the Competition Commission identified as needed in their final report on the home credit market.

EU integration of retail markets

We can expect more law to come out of Europe over the next few years integrating the European retail financial markets. A press release on the 19 September by the European Commission shows that at a hearing on Retail Financial Services, the European Banking Federation repeated its conviction there are benefits to be gained from integration of the European retail financial markets.

Corporate hospitality & Companies Act 2006

 

On 1 October 2007, some (not all) of the provisions of Companies Act 2006 relating to directors’ duties come into effect.  This is a good time to raise a question about the effect of the duty on directors not to accept benefits from third parties (s 176 CA 06), although that duty does not come into effect until October 2008. 

Will the duty affect the ability of directors of banks to accept to accept corporate hospitality?  A director must not accept a benefit from a third party conferred by reason of his being a director or his doing or not doing anything as a director.  A third party means anyone who is not the company, or acting on behalf of or associated with the company, such as a law firm or customer.

The position is far from clear-cut but perhaps directors need not fear the end of their free golfing days just yet.  Just a little care needs to be taken when the invitations come in.  The duty is not infringed if the acceptance of the benefit cannot reasonably be regarded as giving rise to a conflict of interest. 

Consultation on pensions clearance guidance

The Pensions Regulator has begun a consultation process to revise the clearance guidance first published in 2005.  The guidance is for (amongst others) finance lawyers advising on transactions involving defined benefit pension schemes that might be affected by the Pensions Act 2004.  The draft guidance gives an indication of how the Regulator will use its powers in such cases as M&As.  The consultation document can be seen here.

Chapter 15 rejected for hedge funds

There has been a surprise decision in the US, reported here, involving Bear Stearns’ hedge funds.  The court refused an application by the Cayman-based distressed hedge funds who were seeking to reorganise for Chapter 15 protection.  It is estimated that about 80% of the total number of hedge funds in the world are registered in the Cayman Islands.  Unless the case is appealed, which is possible, it means that such hedge funds must file for either Chapter 11 or Chapter 7 in the US to gain protection from American creditors. 

German law LMA document soon

The LMA have announced that the German law investment-grade facility agreement has now been finalised, after many months of expectation. We can expect its formal launch soon.

Corporate insolvency law

For a review of the important insolvency cases in the last twelve months, try to get hold of an excellent article in Sweet & Maxwell’s Company Law Newsletter this month (August 2007) by Prof. David Milman of the University of Lancaster.  David draws together themes, puts the case-law in context and suggests how things might move forward next year.