Registry round-up

Principles of Corporate Governance

Last month saw judgement being given in Stobart Group Ltd v Tinkler (2019) EWHC 258 (Comm). The trial judge is quoted as stating that the litigation concerned 'some elementary principles of corporate governance' in respect of a company incorporated in Guernsey and listed on the London Stock Exchange.

While the facts of the case are numerous they included:

• the removal from office of a director (Mr Tinkler) by the board the day after his election at the company's annual general meeting
• Mr Tinkler's private discussions with shareholders

This case is of particular note due to the discussion regarding directors' duties in the context of board dissent, including what is expected of each director in light of the proper functioning of the board.

One of the other findings held that Mr Tinkler had breached his fiduciary duties under Guernsey law due to the private discussions he held with shareholders where he criticised the board's management and advocated for the removal of a fellow director. The finding was reached following an analysis of the law in which the 'collegial function' of the board was stressed. It was also clear that the director's duty to exercise independent judgment 'is one that operates upon each director in the context of him operating as a member of the board…it exists in order to support the board's management of the company in an efficient and competent manner'.

While Guernsey company law was applied there was a heavy reliance placed on English authorities, as it was recognised that duties owed by the directors under Guernsey law were 'fundamentally the same' as those under English common law before the introduction of the Companies Act 2006.

The judgements can be found here and here.

Next Gen Company Directors

In the context of an increasing number of first time and 'next-gen' (under 50) company directors, Spencer Stuart and Diligent have published a document that identifies core elements of an effective onboarding program and suggests key onboarding related responsibilities, tips for the Company Secretary and other members of management, board leadership, and seasoned directors.

Company Secretaries are encouraged to:

• explain their role to new directors who may be unfamiliar with when and how to use them as a resource
• provide context to new directors on board/director personalities, preferred communications methods and other important historical and interpersonal information
• be cognisant of new directors' special skill sets that may call for additional tailoring during the onboarding process

The publication can be found here.

Investor Engagement: Board Oversight

Deloitte has published its 2019 Directors' Alert. In an article on page 13 entitled 'Investor engagement and activist shareholder strategies', it suggests action steps for boards to enhance their investor engagement oversight and reduce the company's potential for becoming an activist target or, at a minimum, being poorly positioned to respond if targeted.

Deloitte's article includes questions for directors to consider, that will facilitate their knowledge and understanding of the company's potential vulnerabilities and inform potential additions or changes to the board's oversight agenda going forward.

The document can be found here.

Australian Corporate Governance

The Australian Securities Exchange's (ASX) council on corporate governance has published the fourth edition of its Corporate Governance Principles and Recommendations (found here).

The principles have been drafted to operate on the basis of 'if not, why not', so essentially 'comply or explain'. The fourth edition sees the introduction of seven new recommendations which include:

• Listed entities should articulate and disclose their values.
• Listed entities should ensure that all substantive resolutions at a meeting of security holders are decided by a poll rather than by a show of hands.

There has been a strengthening of principles and associated recommendations related to the culture and values of the company, including changes which clearly state that organisations have a responsibility to instil a culture of acting lawfully, ethically and responsibly. Other changes include expanding the recommendations on diversity and making it clear that measurable objectives should be set by the board. If the organisation is in the S&P/ASX 300, then the objective must not be less than 30% of its directors being a different gender.

This edition of the principles will take effect for an entity's first full financial year commencing on or after 1 January 2020. But the council encourages listed entities to adopt the fourth edition earlier.