2022 saw various developments in company law. We concentrate here on four of them:
- The overhaul of the corporate enforcement structure with the introduction of the Corporate Enforcement Authority
- The introduction of a new statutory fiduciary duty for directors – the first such duty codified since the Companies Act 2014 was commenced, and
- The extension, perhaps for the last time, of some of the temporary measures introduced as a response to the Covid-19 epidemic
- The adoption of the Corporate Sustainability Reporting Directive (CSDR) at a European Level
The first two developments are significant and are likely to have lasting effect. The establishment of the Corporate Enforcement Authority demonstrates a commitment to fighting so-called white collar crime, an area of interest and legislation at EU level.
The codification – and extension – of the common law duty on directors to have regard to the interests of their companies’ creditors in the event or likelihood of experiencing financial difficulty is a noteworthy development in corporate governance. This highlights how important it is for directors to understand their companies’ financial position and what steps they need to take should the worst happen.
Some of those COVID measures, such as the ability of companies to hold general meetings entirely by electronic means without the need for a physical venue, have proved very popular. If this provision is not renewed prior to the current expiry date of 31 December 2022, will see a return to the traditional in-person general meeting – with the attendant cost to the company and members alike.
The Corporate Enforcement Authority - Tackling Economic Crime and Corruption
The Companies (Corporate Enforcement Authority) Act 2021 came into force in July 2022. Among other things, such as procedural and corrective amendments to the Companies Act 2022, this Act replaced the old Office of the Director of Corporate Enforcement with the Corporate Enforcement Authority.
This was in response to the Hamilton report, and its recommendations concerning the establishment an independent advisory council, a multi-annual strategy to increased funding, all to combat economic crime and corruption. The Corporate Enforcement Authority will have greater autonomy, resources and support than its predecessor.
Read the full article: The Corporate Enforcement Authority - Tackling Economic Crime and Corruption
New Statutory Fiduciary Duties of Directors of Insolvent Companies
The European Union (Preventive Restructuring) Regulations 2022 were signed on 27 July 2022 to give effect to an EU directive (Directive (EU) 2019/1023). Among other things, these Regulations put onto a statutory footing the common law duty on directors to have regard to the interests of their company’s creditors where the directors become aware of their company’s authority.
In addition, where a director believes, or has reasonable cause to believe, that his or her company is or is likely to be unable to pay its debts, he or she mist also have regard to the need to take steps to avoid insolvency and to avoid deliberately or grossly negligent conduct that threatens the viability of the business of the company.
Read the full article: New Statutory Fiduciary Duties of Directors of Insolvent Companies
Interim Period for Holding Virtual General Meetings Extended
In response to the restrictions on movement and assembly introduced to combat the Covid-19 pandemic, temporary measures were introduced into the Companies Act 2014 to enable companies more easily to execute documents under seal and to hold general meetings entirely via electronic communications such as Zoom or Teams platforms. These have proved helpful and, in the case of the latter, very popular. Companies with a large and diffuse membership have reported increased member engagement due to the convenience of being able to join and participate in a meeting from the comfort of their own home.
In April 2022, the expiry date for these measures was extended to 31 December 2022 and, while the provisions relating to sealing will lapse at the end of the year, those relating to general meetings have been extended again until 31 December 2023.
Read the full article: Interim Period for Holding Virtual General Meetings Extended
Ready or Not? Here comes the Corporate Sustainability Reporting Directive
The Corporate Sustainability Reporting Directive (CSRD) is expected to be published in the Official Journal of the EU on the 15th of December and it will enter into force 20 days after publication. It must be integrated into national law within 18 months. It will drastically change the sustainability reporting landscape in the EU. Organisations of all shapes and sizes need to take immediate action to prepare for its impact.
Read the full article: Progress on the Corporate Sustainability Reporting Directive
This area of law remains dynamic with a recent European Court of Justice ruling appearing to limit the access to personal information of beneficial owners of companies currently stored on the Central Register of Beneficial Ownership of Companies and Industrial & Provident Societies and possibly for other corporate registers too.
The popular measures allowing for general meetings to be held by virtual means remain in place for at least another year. Finally, the reporting standards, required to be reported on under the CSDR, are almost finalised at European level and companies within scope of the CSDR need to start preparing for their reporting obligations. In addition, companies intending to voluntarily report in accordance with the reporting standards need to start taking action now too.
For more information and expert guidance on all related matters, contact a member of our Corporate Governance & Compliance team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.