ICCLR Publication

My publication in the International Company and Commercial Law Review has now been published. See here for earlier references to it.

It can be found under the citation (2012) 23(2) ICCLR 5 and discusses the power of the court to order shareholder meetings after the recent decision of Wheeler v Ross [2011] EWHC 2572 (Ch)

Would you like chips with that? s172 goes with any other breach of duty.

Arden LJ held in the case of Fassihi [2004] EWCA Civ 1244 that is it possible that a failure to disclose misconduct will be a breach of s172. Thus, it is not the failure to disclose that is a breach itself, but the failure to disclose where it would be in the interest of the company to know that breaches s172.

The recent decision in GHLM Trading Ltd v Maroo [2012] EWHC 61 (Ch) adopts the approach taken by Arden LJ stating that it breaks new ground treating a fiduciary duty as prescriptive rather than merely proscriptive.

So, does this create a situation that no matter what duty you breach you will automatically breach s172 as well? For example, under s175 the duty is to avoid a conflict of interest regardless of whether you act in good faith, which is the test under s172.

Thus, if you breach s175 albeit in good faith, will that mean you are still in breach of s172 for a failure to disclose because subjectively no one acting in good faith will believe a conflict of interest is in the interests of the company?

It certainly "muddies" the waters. However, the test under s172 is good faith and is unlikely to be moving towards a more objective standard based on whether disclosure was in the interests of the company. The case of Maroo does clearly state that a company complaining of failure to disclose 'must... establish that the fiduciary subjectively concluded that disclosure was in the company's interests, or at least, that the director would have so concluded had he been acting in good faith'.

I would imagine a court would be hard pressed to find a situation where there is a conflict interest that a fiduciary would not conclude that disclosure would be in the interest of the company or would have done if he had been acting in good faith.

The other issue that would arise would be as to what constitutes disclosure. s175 requires clear unequivocal disclosure of all the relevant facts, whereas under s177 there is a duty to disclose an interest in a proposed transaction but that duty is met where the other directors are reasonably aware of the interest in the transaction. Thus can reasonable awareness of the conflict amount to sufficient disclosure under s172? 

Maroo does discuss the issue of to whom disclosure must be made. Mention is given to the subjective nature of s172 and that it should be made to the person/body that a director believes, acting in good faith, would be interested in knowing. However, since s172 is owed to the company it is likely disclosure should be made to it. Although, since this discussion revolves around disclosure in the interests of the company it would be perfectly plausible that it may be in the interests of the company that the fiduciary discloses to another individual i.e. a shareholder or creditor, may be even an "outsider" such as a lobbying group for the environment. For example, a failure to disclose information to a lobbyist that leads to them bringing litigation against the company, it may have been in the interests of the company for the director to disclose to the outsider.

It is certainly an interesting area of development...

Davos 2012: China and corporate governance

So Davos and the World Economic Forum meeting has begun.

I do not usually take too much note of these events but most of my reading in the papers and online have involved reading about China.

I was particularly interested in this BBC News piece.

It interestingly highlights people's perceptions of Chinese Business and corporate governance, or lack of.

It appears some view China as developing in business and still learning the ways (implicitly I assume they mean they are learning the ways of the west). Such a view on Chinese business is a bit short sighted in that it assumes the west has it all figured out despite certain recession in Europe and a 0% interest rate environment. Although, Bob Diamond CEO of Barclays predicts a 3% increase in GDP for America.

One commentator points out that China also has no 100-year corporate governance history. Although, neither does the UK. Arguably you could state corporate governance began in the UK around 1945 when the Cohen Report highlighted that there was no official body within a company responsible for supervision, although by 1972 non-executives were still rare and it was not until 1986 did non-executives truly become prominent on board appearing on 94% of boards. The eventually in 1991 there was the introduction of the Combined Code in the UK.

However, some commentators felt China is merely hoarding resources with an official behind every businessman. There is also the fear of them taking over many companies in the West. A fear I struggle to understand if you put that fear in to context with free market principles - although I must admit this is a very basic view of the situation. If China free up more of the resources then it will hopefully be beneficial for the western economy if Chinese firms emerge.

Whatever comes from Davos I do not expect it to be a defining moment for any economy. I do, however, expect to hear much more about China and there approaches to business as they move in to the west.

Academic Careers Seminar

As you may remember, a while ago I organised an academic careers seminar. The day proved very informative and was a success despite an early setback as previous users of the room had unplugged all the AV equipment.

The day successfully increased the transparency of job requirements. It helped develop understanding of the differences between research and teaching positions as well as discussions on the future direction of these positions at universities.

You can find a copy of the schedule here. The presentations from Nick Sharf on a "survival guide" and Rebecca Wyand's on "are research careers restricted to universities: widening horizons" can be found here and here respectively.

You can also find here research produced by the Economic and Social Research Council on employment figures for social science PhD graduates.  

Twitter account

In response to modern times I have set up a Twitter account. You can now follow me on Twitter @Gibbs_law. I hope to see you all there!

Blog posts will still appear here on a regular basis.

For an update on my work at the moment I have been working on preparing contract and company seminars for next semester as well as running my analysis on the 30 FTSE 100 companies and their multiple directorships.