Ouch! Corporate Blawg has returned from a great friend's stag weekend. I'll tell you why "ouch":
Corporate Blawg is covered in welts from being pummelled by paintballs; he has aching arms and whip lash from crashing into barriers whilst Go-Karting; and worst of all, his pride is damaged from missing all the targets on the firing range.
After his sh*te shooting, and poor pistoling, the rifle instructor publicly declared Corporate Blawg's effort back at the ranch, where the other instructors laughed in agreement that it was the worst anyone had ever done, even worse than a blind guy last year. Corporate Blawg is glad that he does not need to kill to eat, and passes three Tescos on his way to work each morning.
Corporate Blawg then spent £45 on bets at the dog races, winning a total of zero pounds over a period of 2 hours. In continuance of this appalling form, the stag party then hit the hotel bar, the Bank bar, the Pitcher and Piano and proceeded to study the form of other types of dogs.
Uninterested in building physical bonds with Brummies, Corporate Blawg led the warpath to Legs Eleven, where he emptied his wallet into the purses of dancing girls, who have now booked their summer holidays to Hawaii.
On confessing all, Corporate Blawg's wife was less than pleased by this behaviour. Fortunately, Corporate Blawg's wife is kind and understanding, much more beautiful than any stripper, and will recieve that Links of London bracelet she pointed out to Corporate Blawg last week.
The stag himself got off relatively lightly, only having to be dressed up as Kate Bush for 24 hours, and being a firing target for all of the afternoon. Needless to say, a great time was had by all. However, now the toxins are oozing from certain of Corporate Blawg's pores which are outside the usual jursidiction for their expurgation. Corporate Blawg is now suffering from a weekend of too many toxins in the city of toxicity.
The rather cool term relating to "toxic jurisdictions" is a term is not widely used to date, it will soon be, after this posting, probably. The term has evolved from Rule 30.3 of the City Code on Takeovers and Mergers. The Rule is part of the implementation of the European Takeovers Directive 2004/25/EC.
The rule states that information documents posted to shareholders and employee representatives must be posted to all shareholders and employee representatives no matter where they are. Yet posting such documents in certain jurisdictions may create further obligations under that jurisdictions' securities law. These jurisdication are known as toxic jurisdications. Consequently, it is not uncommon to see in such documents disclaimers and provisos stating that the document should not be served in U.S.A., Canada, Australia, Japan, China and now more often than not South Africa too.
Even though the rule is to be interpreted widely, the notes to the Rule 30.3 state a number of situations where it can be avoided, including:
In all other cases, the Panel may grant a dispensation where it would be proportionate in teh circumstances to do so having regard, notably, to the cost involved, any resulting delay to the transaction, the number of registered sharesholders in the relevant jursidcition, the number of shares involved and any other factors invoked by the offeror or the offeree company.
As in most other aspects of Mergers and Takeovers, the Panel is pretty much God. And if you come across the term "toxic jurisdiction" again it is unlikley to be a reference to Corporate Blawg oozing alcohol out of eyelids, but more likely a country with tight securities laws.
P.S. Both Tim Kevan and The Bar Council have obtained Corporate Blawg's respect in a coup de force that Corporate Blawg did not expect. Their action was simply to publish Corporate Blawg's comment here. Well done chaps.
Life is unfair, but that doesn't stop us being outraged when we are treated with unfairness. A response to unfairness may be to:
reject the source of unfairness,
take an artificial moral highground, or
physically remove the afronting situation.
Accordingly, it is Corporate Blawg's financial mediocrity that enables him to group "low life" with "high life" by their emphasis on irrelevant status symbols and displays of baboon-like competitive behaviour.
But not all monkeys are the same.
(Corporate Blawg is fascinated by monkeys. He knows he descended from apes, because he is hairy and prefers to get his point across by grunting rather than speaking in sentances.)
An uplifting article in the National Geographic of 17 September 2003 highlights how Sarah Brosnan undertook a study on brown capuchin monkeys (Cebus apella) to find they have a deep understanding of fairness. The experiment was like this: two monkeys were paired up. Pairs were placed next to each other and trained to give human researchers a small granite rock in order to receive a reward. The standard reward was a piece of cucumber, but sometimes grapes were given out to certain monkeys instead! Other monkeys who witnessed such unfair treatment (and failed to benefit from it):
refused future exchanges with human researchers, or
rejected cucumbers received for their work, or
sometimes even threw their cucumber rewards at the researchers.
Big respect to the capuchin monkeys!
Even though this may not demonstrate altruism, it does represent recognition of the principle of fairness. There is clearly an evolutionary background to our outrage in our perception of unfairness.
Professor Ernst Fehr is the academic leader in the principles of fairness who (surprisingly has not yet written a book called "Fehr on Fairness") has written a host of interesting papers on how people react with their bargaining position in different situations:
"The self-interest model has been very successful in explaining individual behavior on competitive markets, but it is unambiguously refuted in many situations in which individuals interact strategically. The experimental evidence on, e.g., ultimatum games, dictator games, gift exchange games, and public good games, demonstrates unambiguously that many people are not only maximizing their own material payoffs, but that they are also concerned about social comparisons, fairness, and the desire to reciprocate." Theories of Fairness and Reciprocity – Evidence and Economic Applications", Ernst Fehr and Klaus Schmidt (February 2001).
So this is solid evidence that playing hard-ball in negotiations (with the wife) will rarely likely to achieve the best result.
In review of the least favourite things of Corporate Blawg, Corporate Blawg now considers that his situation is anything but unfair and he should be less critical. Even though Corporate Blawg was not born with a yacht and a WC1 post code, he does have a beautiful wife, a job he enjoys, and a dinner of toad-in-the-hole to be shared with some friends. Accordingly, he has maximised his payoff with regard to social comparisons, fairness, and the desire to reciprocate. And in this regard, even pink-pashminas and ski-tans have their rightful place in the world (on the other side of town).
Concluding this ramble, Corporate Blawg drags you towards Corporate Blueg, and a legal issue brought to him through a really good blog written by a commercial law PSL, which he now can't find on Google...
The Office of Fair Trading has published a 200 page consultation document in relation to their revised guidance for the Unfair Terms in Consumer Contracts Regulations 1999. The purpose of this tome is to ensure that the format and, broadly speaking, content of the guidance is "relevant, clear and comprehensive". The OFT state that they are not consulting on the law, but on how clearly they have presented their interpretation and enforcement of the Regulations.
The right side of Corporate Blueg is minded to reply to the OFT that their document is very neat and tidy, well done, gold star. The left side of Corporate Blueg is minded to point out that clear interpretation of the law is the law. Nevertheless, for want of leaving an online footprint, Corporate Blueg is shtum... but must note that this consultation procedure seems like rite of passage more than having any real value, and will probably not affect the finalised guidance that will be published in August later this year.
So enough Gov-bashing, what does the draft guidance say?
In standard terms to consumer contracts, the key is whether the terms are fair. The OFT's starting point in assessing the fairness of the term is to ask what would be the position for the consumer if it did not appear in the contract, so transparency is central top fairness. The Regulation 5(1) states that a standard term is unfair:
"if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer."
Apparently the principal of good faith embodies a general "principle of fair and open dealing". In assessing fairness the OFT notes how a term will be open to challenge if it is so wide that if it could be used to the consumers detriment. It may be considered unfair if it could have an unfair effect, even if it is not at present being used unfairly in practice and there is no current intention to use it unfairly. this does seem rather harsh, but the OFT are clearly trying to maximise their payoff.
An example on page 104 of the rather lengthy annex, is that a clause stating: "on completion of the work the client hereby agrees to pay the balance to the site foreman"… should be changed to…"on satisfactory completion of the work the client hereby agrees to pay the balance to the site foreman".
Well done OFT - inspired, and VFM (either Value For Money, or Very F**king Mediocre, take your pick).
Despite one or two oddities, the guidance does actually serve quite a useful tool for establishing what is a fair standard term in a consumer contract. Corporate Blawg would not be surprised to see precedents written using 100% terms from the guidance, even though the OFT's disclaimer removes any legal reliance on the terms in the guidance.
Whatever Corporate Blawg may have said about fairness above, he's not Scandinavian nor Dutch, so will never have a good reason to be fair. HA Ha ha.
Corporate Blawg has returned from his hols in Norway. There, he used cross-country skis to cross at least 2 km of country to a sheltered spot overlooking a frozen Fjord. At this spectacular site he burnt some logs with his brother-in-law and further fed the fire with fallen frankfurters and melted marshmallows. Fortunately the snow kept the beer cool so all was not lost to their ashened faces.
Throughout this Scandinavian sally, it was of great amusement to Corporate Blawg that in Norwegian a "bash" means dropping the kids off at the pool. There will come a day when Corporate Blawg invites you to his Birthday Bash, where he will Bish-Bash-Bosh his drinks until he bashes into a door and slips over. Corporate Blawg had just as much fun last year, when choosing a cheesy crepe on a Parisian menu and eating his wife's crepe with extra chocolate sauce. For the avoidance of doubt, Corporate Blawg does not regard himself as childish.
A high-brow Norwegian day was spent in the Munch museum. Corporate Blawg has a particular interest in Edvard Munch having some years ago written a play in the german expressionist style (Ibsen-esque) about Munch, the father of expressionism. This play covers the 4 most important years of Munch's life (1898-1902), where he falls in love with Tulla Larson, then he wants to break up with her, but she wants to stay with him, so she stages her own suicide to surprise him at her death bed and to make him realise he loves her, but he ends up shooting through his index finger in his left hand. Much drama here. Anyway, to make this play even more unreadable everything Munch says in the play is a direct quote from one of his letters or recorded conversations (albeit removed from context). Anyone interested in attempting to read this work of painstaking genius should send Corporate Blawg an email and a promise to feed back nice compliments to warm Corporate Blawg's delicate ego.
Demonstrating an iota more of success in creativity, Corporate Blawg was happy to see BabyBarista in the Times Online. Since Corporate Blawg usually only reads the ever optimistic Independent, Corporate Blawg will now have to go against his principles and delve into the Times for his next fix of this hugely enjoyable blog.
Also, in this itty-bitty kind of a post, Corporate Blawg has become aware that Gary McKinnon has lost his appeal to stay in the U.K. His extradition to the U.S. for breaking into the U.S. mliitary computers will now be appealed in the House of Lords. Gary has always claimed that he was looking for U.F.O's. Corporate Blawg thinks this is a great story and, as long as Gary was not really trying to start World War 3 or anything dark like that, Gary has Corporate Blawg's full support. Corporate Blawg particularly likes the title of his support website: "Free Gary - or at least give him a fair trial in the U.K."
Followers of this blog will note that Corporate Blueg has been looking for comedy case names, but with no support, interest or encouragement from any other bloggers. Imagine the sheer glee and ribulous thrill when on his daily legal update Corporate Blawg discovered T Comedy (UK) Ltd v Easy Managed Transport Ltd  EWHC 611 (Comm). Here we have the ultimate in comedy case names. For anyone at all who is even vaguely interested, this case related to the Convention on the Contract for the International Carriage of Goods by Road.
For many, the thrill may somewhat subside at this point.
However, on reading the detail-from-dullwich case, Corporate Blawg discovered that a Turkish factory from which garments of clothes are made is called "Bates Istanbul Tekstil Sanayi Ticaret ve Pazarlama Limited Sirketi" What a great name! In his judgment, the judge wisely shortened it to "Bates".
Cadets in cyberspace, junior surfers and hatchling web-crawlers are all honking their horns in delight at being part of this blog's traffik. The reason for this gloria is the perpetuar googling for "cool terms" "cool phrases" and "bullet-dodging". Corporate Blawg is widdit, and able to carry his shiznit around here to spread out coolio on his blog of biznab. Accordingly, ol' cool terms is back, and its proud, and it's all about the pump and dump. Cowabunga dude.
Pumping and dumping is not about eating too many eggs before a work-out in the gym, nor is it a machoismatic mentality for dirty dating. Below, Corporate Blueg (colourblind people should refer to the lighter text - this is an equal opportunities blog) has divulged what pump and dump should mean in corporate speak, wherefrom the inspiration was discovered in a creaky corner of the FSA's gigantium website. Nevertheless, the probert encyclopedia shows us with true meaningful expression that:
Pump - Pump is slang for to break wind. Pump the stump - is slang for "to shake hands". Pumpers -Pumpers is slang for any anabolic steroid. Pumpin' - Pumpin' is slang for lively, energetic, thrilling. Pumpkin -is slang for "the moon", or "the sun".
Therefore, since Corporate Blawk is kooler than the Klingonz, Corporate Blawg will try to become evener groovier by using more slang, as he cruises town under the pumpkin whilst pumpin' pumpin' tunes up to the petrol pump to pump the stump with local hoods in pumps... from his rather large middle-class saloon.
Corporate Blueg would like to ignore Corporate Blawg or Blawk, and explain that the graphic term "pump and dump" is a phrase for market manipulation where the price of security is artifically inflated through an exaggerated or fraudulent promotion. Immediately following the rise in the price of the stock, the persons responsible for the promotion dump their shares.
This is also known as "stock dump" or "hype and dump manipulation" but "pump and dump" wins for being the most pithy, the most seedy and the most easy to remember.
It's an issue that sooo relevant. According to the Inquirer:
"The first "pump and dump" spam campaign has hit Europe this week, designed to manipulate the share price of a company listed on the German stock exchange,"
And in the middle of last month it was reported that three Indonesian hackers pumped online brokerage accounts to boost their profits - which was the "first case involving people arrested overseas in connection with an online brokerage intrusion scheme carried out in the US."
Basically, it's here and it's fear, it's mad and it's bad, it's illegal and a beagle, it's pumping and dumping and it's market manipulation which is a form of market abuse (and therefore can be penalised by the FSA with an unlimited fine, public humiliation and imprisonment) - so don't do it.
Corporate Blawg is a little disappointed that no one was able to provide any comedy case-names following from his last post. This is clearly a matter of the river runeth dry, or else that in the ever-changing blogosphere Corporate Blawg is the only comedy / genius.
Corporate Blawg is now off to Norway now for the Easter break. "No way", I hear you Northerners exclaim. Yes way, and Norway!
Could it be his spreading tum? ("purposelyto increase gravitas, because businessmen have big bellies" - Corporate Blawg's verbose excuse)
Could it be a new age dawning, due to his next birthday having a zero on the end?
Could it be magic?
For an inexplicable reason, Corporate Blawg is thinking that it's time for self-improvement. The blawg has been reinvented, now the mind behind the blawg needs a bit of personal development.
To get the body fixed before the spirit, Corporate Blawg visited the dental hygenist to remove the calcites from his teeth. After 60 minutes of the most enjoyably painful experience he has ever had, Corporate Blawg now has a twice-daily 15 minute routine to ensure his teeth are brushed, flossed, rinsed, gargled and his tongue well and truly scraped to be fungus free. Corporate Blawg's mouth is now so hygenic that he could lick crockery clean enough for babies to eat off!
Since Corporate Blawg clearly needs to improve in a number of other ways, such as exercise (beyond walking to the bus stop), eating habits (not splashing soup on tie), social advancement (remembering names of people he meets) and personal development (buying new PS2 games and increasing his 2000 a.d. collection), Corporate Blawg has turned to management training to fine tune his life to be healthier, more efficient and more spiritually rewarding.
Through a complex adaption of Six Sigma (not to be confused with Sigma 6), Corporate Blawg intends to systematically remove defects in his lifestyle to achieve perfection. Firstly, he DEFINES, then he will MEASURE, then ANALYZE, IMPROVE and finally CONTROL. Tackling the first step, Corporate Blawg found that he was having troubling "defining". Accordingly, Corporate Blawg must first project manage this Six Sigma to success, by using PMBOK, PERT, waterfall development, critical chain and CMMI. It may also be necessary to first use SWOT, BHAG, TRO and SMART to establish his strategic direction. Corporate Blawg may take a few years to reach the end of the "defining" stage, because understanding management jargon is like knitting with fog.
However, when he is ready to fully engage with his pathway to perfection, he will be sure to let you know how smug he has become.
The end result of this process will be that Corporate Blawg will have removed all decision-making to ensure that time is used in the most efficient burger-flipping way, and that Corporate Blawg becomes an automaton to health and happiness.
So how do director's of company's profit from their activities? Well, besides under a service contract, or through dividend distributions, Corporate Blueg notes that directors should not exercise their powers to obtain a personal profit. And like Corporate Blawg on his pathway to perfection, personal achievement should be measured by other people's respect rather than by personal profit.
It is a common law fiduciary duty that directors do not make a personal profit, under Regal (Hastings) Limited v Gulliver  2 AC 134, and also (the slightly easier to remember)Bamford v Bamford Ch 202.
This fiduciary duty has been subsumed into the Companies Act 2006 in sections 175 (Duty to avoid conflicts of interest), but is mainly in section 176 (Duty not to accept benefits from third parties). An interesting defence to accepting benefits from third parties is set out in section 176(4):
This duty is not infringed if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.
Going back a section, section 175(1) states:
A director must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.
Accordingly, section 176 is actually redundant, unless we want to argue the semantics of whether "cannotreasonably be regarded as likely to give rise to" means the same as the horrible tautology: "possible may"? So taxi for semantics... get your coat semantics!
Conflicts of interest may also arise whenever a director makes a profit in the course of being a director, in the matter of his directorship, without the knowledge and consent of his company.
If you're very determined to argue that benefits are not the same as profits, Corporate Blawg welcomes your lyrical waxing.
So, on that friendly note, and the fond memory of Bamford v Thumper(ok - Bamford v Bamford), Corporate Blueg is keen discover more comedy case-names? Corporate Blueg can find smut without any problem, thanks to Westlaw and a male mind, (e.g. The Willy v Trento (1920) 2 Li L Rep 598 relates to a steamship called willy and not to a surprise in a cubicle).
Let's ask some bar-stewards to demonstrate their knowledge of comedy case-names: Geeklawyer? Charon QC? Pupilblog? See if you can beat The Willy?
Corporate Blawg is now off to spend an efficient 2.25 minutes making a cup of tea.
Last week Corporate Blawg's wife subjected him to 2 hours of Becoming Jane, a movie about Jane Austen's wilted daisy of real-life romance. To date, Corporate Blawg has avoided discussing this blip in his cultural development, for fear of a permanent invitation to the Dull Men's Club. In Corporate Blawg's highly sophisticated view of the cinematic experience, costume dramas should involve swords rather than guns, and the only silly dances should be around bonfires prior to slaughtering the enemy.
So yesterday Coporate Blawg took his wife to see 300, Frank Miller's version of the Battle of Thermopylae, where 300 Spartans resisted a massive army of Persians. Corporate Blawg's wife seemed to find as much objection in severed heads flying in slo-mo (and deformed men with blades grafted onto their fore-arms), as Corporate Blawg had found a week earlier - with Jane's Austen's pathetic attempt at meeting a man and settling down. After feeling subjected to 300, Corporate Blawg's wife suggested he was emotionally stunted, so he pointed out that so was Jane Austen "forwithdrawing from the world to write six of the greatest novels in the English language".
This simple diffusion of a potential explosive situation stemmed from Corporate Blawg's life-long commitment to use best endeavours to preserve and maintain the happiness of his wife. Even though "best endeavours" were not in his traditional vows, Corporate Blawg considers that they should have been and should be for all lawyers who marry. Accordingly, Corporate Blawg has suggested marriage vows for future marrying corporate lawyers:
"Do you [ ] take [ ] to be your partner for life – to enjoy a legal and equitable benefit, in trust in perpetuity, and contracted to domicile in the holy estate of matrimony? Will you always use your best endeavours to comfort her? Will you act in every way possible (other than crime) to maintain her honor? In personal injury and having reached all milestones and service levels, for consideration, and for taxation, in completion and in down-tools, to procure compliance with all safety regulations, and to bestow on [her/ him/ it] your reasoning and greatest consideration, forsaking all others to whom it may be profitable, and to keep yourself exclusively with [her/ him/ it] as long as you both shall live, [optional - and then beyond too if possible under any religion which has such jurisdiction*]?
*provided no additional or onerous terms and conditions are imputed upon this agreement."
It might work. Rev. Corporate Blawg will be available to hold any services between 1pm and 2pm on weekdays or between 2am and 3am on Sunday mornings.
And on this very concept of best endeavours Corporate Blueg has been gezumped by Ken Adams who has a rather professional site and blog called Adam's Drafting. Ken, who is presenting a course on drafting in London on 17 April this year, as discussed Rhodia International Holdings Ltd. v. Huntsman International LLC,  EWHC 292 (Comm). In this case the judge found, in obiter dictum (cough cough), that all reasonable endeavours could equate with best endeavours.
Ken is correct for stating that this view was weak beer or even a soft-drink (the origin of the term "codswallop"). Corporate Blawg would suggest that the judge's view is a load of old tripe, but for different reasons to Ken. Ken argues a semantic view that "best" must be by all accounts better than "reasonable" no matter how extensive that reasonableness may be. True enough, but much more importantly in Corporate Blawg's view is the distinction based on the financial impact on the part who must carry out those endeavours. In Corporate Blawg's dark and hazy understanding of the law:
"Reasonable endeavours"means endeavouring to the extent that it will not have any material financial impact on the endeavouring party.
"All reasonable endeavours" means endeavouring to the extent that any material financial impact will not exceed the benefit of the agreement for the endeavouring party.
"Best endeavours" means endeavouring to the entire consideration of the agreement for the endeavouring party, provided such endeavouring does not cause insolvency.
Perhaps these are artificial distinctions, created by Corporate Blawg to help him understand a vague concept - but they work, and any Court of Appeal judge in the U.K. would be wise to bear in mind these distinctions as stated by Corporate Blawg here in this post.
Where Corporate Blawg always uses best endeavours to please his wife in all ways, Corporate Blawg's wife understands that sometimes he would prefer to write his blog than watch Jane Austen season on a Sunday night.
In our fabricated meta-world of old-money millionaires and the socially-diseased homeless, Corporate Blawg bounces along blissfully avoiding both blithe arrogance and true suffering. His is a middle-class liberal's quest for middle-aged success (self-justified on quasi-conscientious strands of moral obsequiousness). Unfortunately the terms of this success are restricted to the options of either:
(a) socially recognised accomplishment (i.e. a knighthood) or (b) f**k-loads of cash.
Since Corporate Blawg must obtain f**k-loads of cash in order to be knighted these days, Corporate Blawg goal is cash alone.
Nevertheless, it has come to pass that recently Corporate Blawg has become nostalgic for his youthful dreams, contemplative of what success should really mean and, more importantly, what it once meant. So in these lessor-minor of his mature days, Corporate Blawg considers how he once believed he would reach the stars. Unfortunately in the majority of cases the answer to these early ambitions falls mainly to failure and his having not:
1. published his book of sh*te teenage poetry, namely "the soundbite generation" (great title - sh*te poems) 2. slept with a supermodel before marriage 3. earned a cool mill before he is 30 4. found a workable solution to end world poverty
Despite these personal-tragedies, life goes on. And in retrospect, No.1 has saved Corporate Blawg grown-up embarrassment, and for No.2, Corporate Blawg's wife is fitter and cooler than polystyrene supermodels who don't eat battered cheeseburgers. No.3 may be rectified by selling this blog within the next 6 months for £2.3 million, and he's still working on No.4. So these failures aren't really failures at all, and most importantly none of them are the result of tripping on Corporate Blawg's moral tailcoat or messing up for want of self-application.
Having resolved that these failures are not failures at all but, in some small ways, successes, Corporate Blawg shall provide a more traditional analysis: for some success may be judged as good family life, good job and/or good money; for others success is having moral convictions, knowledge and intellect, and/or control or empathy of emotions. Too easily the internal successes are ignored or disregarded, yet without them it is hard to see how the more visible successes can be achieved but for good luck alone.
It is delightfully true that many failures are to be regarded as successes - there are good failures and there are bad failures. Good failures may come from bad luck or lack of experience, whereas bad failures are moral errors resulting in deep-rooted unhappiness or prison. When failure seems likely, how does one steer between a sympathetic smile from the boss and being a jailmate's mate? The answers are in the virtues of all Jane Austen heros:
Honesty, plain and simple.
Admitting error and trying to make amends.
Sincerity and good intentions
Some degree of self-sacrifice when the sh*t hits the fan
[Ahem, welcome to the CORPORATE BLUEG. This is the section of the post that focusses on Corporate Law. Due to the different colour, this section may be easily avoided by non-corporate readers. For corporate folks - this is what it's all about, for non-corporates - you're not missing much.]
Good corporate failures are when the decks are cleared and the fittest survive. Bad corporate failure is where the cards are thrown in the air and the disruptive individual gets kicked out for cheating.
The recent corporate failure of Livedoor as been described as the "Japanese Enron". The founder, Takafumi Horie has been found guilty of fraud. He has been held responsible for falsely reporting a pre-tax profit in his company, Livedoor, of 5bn yen (£22 million) whereas in fact in the year ending September 2004 there were losses of 310m yen (£1.2 million). These numbers don't seem very much by corporate standards, but when the fraud was discovered there was temporary shut-down of the Tokyo stock exchange. Now Horie faces a couple of 2.5 years imprisonment.
How could he do it? Not the fraud, because that's just the sign of a cowardly man backed into a corner, but how did he manipulate the accounts? Corporate Blawg recently attended a great training session held by Robert Mowbray on Advanced Accounts. Public companies want to increase their profits in the company to please their shareholders, whereas private companies want to reduce profits to reduce corporation tax payable. Robert highlighted the following key areas where accounts may be manipulated:
Shifting estimates technique
Recognising income at different times, i.e. when is the income really earned - when the cash is handed over or when the delivery is made?
Capitalising expenses - means including it on the balance sheet and not as a loss.
Adjusting provisions for current assets or current liabilities
Adjusting time periods and rates of depreciation
Amortisation of goodwill and intangibles
Assessing substance over form
Off-balance sheet transactions, such as loan transfers, sale and leaseback
There is clearly a risk in adopting these policies, and any accountant or director who attempts to twist the true and fair view of the accounts is riding high for a crashing corporate failure. Where fraud is involved it will be difficult to turn such failure to success. Many commentators suggest that Takafumi Horie would have avoided a jail sentance had he admitted wrongdoing and apologised - but let us hope that whilst in prison Mr Hori can make success from some sort of self-realisation, or moral reckoning, that will enlighten and improve his internal life in some small way.
And so, it is clear that success is a measure of how failure is avoided or reinterpreted as success. The most simple way to reinterpret failure as success is to admit the failure to make the world bend accordingly - deny a failure and be damned.
Corporate Blawg has returned safely from a two-day conference at the Hilton Hotel, which for three centuries was lost in a leafy industrial estate north of Glasgow. One thing that Corporate Blawg learned on this valuable course was a quote by Lyndon B Johnson:
Making a speech on economics is a lot like pissing down your leg - It seems hot to you, but it never does to anyone else.
This quote, heard in a session on "Networking With Confidence" (which was, disappointingly, not about using the internet), set Corporate Blawg down a helter skelter of unravelling his blogging identity. Having splashed into the mudpool of deconstruction, and fought against the bubbling daemon of despair, Corporate Blawg emerged victorious with the sword of realisation. With this sword he found he should stop reading Golden Age fantasy comic books, and that his blog has occasion to be quite dull.
Reeling with excitement (transferred to his readers by a rainbow) Corporate Blawg decided that his blog should follow the way of other blogs and be largely devoid of Corporate Law. So like Madonna, Corporate Blawg will change his style, his spots and his pointy bra. This is not to say that Corporate Blawg will never talk of the Corporate loveliness again, merely that there is a new moon and a shift in the tide.
These new waters of identity, lead Corporate bBawg to assess a number of shapes and sizes to bring him safetly to the golden sands of soliloquy. Corporate Blawg does not want to become embroiled in the intricacies of his office, or his colleagues or his clients, and will therefore definitely avoid becoming any of the following stereotypes:
1. The law student blog
Hi there, in my lecture today we were taught about something really outrageous. It was like, well bad. I described my feelings to this fit summer student girl but she said I should talk to her about it when I become a partner at A&O. What a funny name for a firm. I wonder if anyone has thought... there's S&M, A&O... Hilarious. Ah, well, enough for now. Jeeves wants to go to the pub, gotta go...
2. The overly creative soliticor blog
The moon crept up behing the double glazing as the air conditioning stopped throughout the building, leaving nothing but deathly silence, and overworked lawyers gasping that they had missed the last bus home. With the first tap of a computer key other fingers lurched into action and the gentle hum of flesh on plastic on metal began to resurge from the corners of the open plan office...
3. The barrister's blog
When my pupilmaster, 007, a ginger fellow by all misfortune, stood before Barrymore QC in Chambers today he was cut to the quick by the QC's sly remark. The remark was that 007's wig was like roadkill on an ancient woodland road. Why an ancient woodland road, we laughed heartily, us pupils in his eye. Because, the judge remarked, it is one of the few remaining habitats of Sciurus Vulgaris, the red squirrel, and as you can see by our dear fellow's head, he is red in the head which is made of wood. It has been three days since Barrymore QC made this jest and we have only just stopped laughing...
4. The marketting blog
What do clients really want from their lawyers? Me I expect. I am one of the best anonymous corporate lawyers in the U.K., with a little help from my boss, Corporate Counsel and a trainee who finds out the answers for me. How did I get this good? Because I care about clients. I care about taking them out for lunch, being totally honest with them, and working out how we can help each other to advance both of our positions in our own companies. Then we talk about other stuff, and never about pissing on ourselves...
If you ever catch me, dear reader, indulging in any of the above or any other blogging stereotype for that matter, please let me know, and I will promptly have a lobotomy or electric shock therapy. In the meantime, Corporate Blawg is excited about what will happen hereon, and prays that Google will go with him.
All the fiddly bits are being implemented first. This will allow any problems with the tricky stuff to be ironed out before the basics wade in on 1 October 2008.
Some randomly selected key points are:
1 October 2007
s.993 - the offence of fraudulent trading will come into force on 1 October
6 April 2008
s.270 - a private company will no longer be required to have a secretary
1 October 2008
s.155 - at least one of the company's directors be a real person as opposed to a body corporate.
s.64 - the first codification for a board resolution is that a board resolution is required for a change of name of the company
s.171 -177 - duties of directors are codified.
s.182 - where a director has a personal interest in a company's transaction he must also state the nature and extent of the interest .
s.197 - loans to directors must be approved by members' resolution.
And in full...
1 October 2007:
Part 9 (Exercise of members' rights); Part 10 (A company's directors), other than provisions relating to directors' conflict of interest duties, directors' residential addresses and underage and natural directors; Part 11 (Derivative claims and proceedings by members); Part 13 (Resolutions and meetings), and, related to this, sections 485-488 of Part 16 (Audit); Part 14 (Control of political donations and expenditure); Section 417 of Part 15 (Contents of directors' report: business review); Part 29 (Fraudulent trading); Part 30 (Protection of members against unfair prejudice); Part 32 (Company investigations: amendments).
6 April 2008:
Part 12 (Company secretaries); Part 15 (Accounts and reports), other than section 417; Part 16 (Audit), other than sections 485-488; Part 19 (Debentures); Part 20 (Private and public companies); Part 21 (Certification and transfer of securities); Part 23 (Distributions); Part 26 (Arrangements and reconstructions); Part 27 (Mergers and divisions of public companies); Part 42 (Statutory auditors).
1 October 2008:
Part 1 (General introductory provisions); Part 2 (Company formation); Part 3 (A company's constitution); Part 4 (A company's capacity and related matters); Part 5 (A company's name); Part 6 (A company's registered office); Part 7 (Re-registration as a means of altering a company's status); Part 8 (A company's members); Part 10 (A company's directors) - provisions relating to directors' conflict of interest duties, directors' residential addresses and underage and natural directors Part 17 (A company's share capital); Part 18 (Acquisition by limited company of its own shares); Part 24 (A company's annual return); Part 25 (Company charges); Part 31 (Dissolution and restoration to the register); Part 33 (UK companies not formed under the Companies Acts); Part 34 (Overseas companies); Part 35 (The registrar of companies); Part 41 (Business names).