Ooooh it's pretty exciting... tomorrow, on the 20 January 2007, section 463, Part 22 and ss 1143-1148 of the Companies Act 2006 come into force, but also the Transparency Directive as a whole!
I know. Corporate Blawg's knees are also knocking with exhileration.
This excitement is explosive, and everyone in Corproate Blawg's office is buzzing with anticipation of amending Articles of Association to enable companies to post information and documents on their websites (provided all the shareholders have individually agreed to such process).
Not only that but also, I'm shaking like jelly, yes also a public company has a right to investigate who as an interest in its shares. Isn't that amazing???? This is in sections 791-810, 811(1)-(3), 813 and 815-828 of the Companies Act 2006 (the new one). This is all in Part 22 of the new one and expands on section 212 of the old one (1985). WOW!
And there's more - the new section 463 of the Companies Act 2006 (liability for making false or misleading statements in reports) will mean that directors are liable to the company for the information contained in the directors report (including business review), remuneration report and summary financial information compiled from those reports! Corporate Blawg can hardly con-con-contain himself, in fact he is beside himself with Awe (whoever Awe is).
Corporate Blawg is so excited the only thing that can prevent him from bouncing off the walls before midnight, when he is likely to leap over the moon, is to play with his wee (his wii).
When he calms down, if he can ever calm down, Corporate Blawg will consider these new provisions in greater detail. Yikes.
I can't pretend to be hugely excited but I am curious: is the right to investigate an Enrony thing? What's the policy issue?
Posted by: Geeklawyer | 19 January 2007 at 06:35 PM
The liability for false statements in reports has come from Enrony and Worldy Com. Directors are now gonna think twice (or maybe three times) before lying in official reports. The more criminal sanctions from different angles, the more directors will get excited about being honest and accurate.
The right of a public company to investigate who is interested in the shares has always been around. It's to allow companies to find out if there are any off-market transfers or further securitiy granted over the shares. The expansion is only really so that "section 212 notices" (to the shareholder on the books) can be submitted in electronic form. It's about as exciting as a damp flannel.
Thanks for the comment though.
Posted by: Corporate Blawg | 19 January 2007 at 08:33 PM
Yes, but aren't they only liable for making reckless statements. Its a pretty high standard really isn't it??
Posted by: Mark | 16 February 2007 at 11:10 PM
The liability of directors under subsection (3) of s.463 is for (1) an untrue or misleading statement is made deliberately (2) or recklessly, or (3) an omission amounts to dishonest concealment of a material fact.
As mentioned in my post of 19 October on "The Power of None", the importance of the document,the size of the company, and the impact of the reckless statement will have some baring as to whether the director should be personally liable for his statement.
However, taking s.463 on face value, the "recklessness" standard will apply to untrue statements made deliberately by a director who did not know that (or care if) the statement was untrue. This will boil down to whether the director exercised the appropriate standard of skill and care when obtaining the information that he would set out in the report. If that information turns out to be untrue, then the facts will be vital in assessing whether the director acted recklessly... Did the director know that the auditors were cowboys? Did the director know that some of the facts that the auditors relied on were untrue or incomplete?
Fundamentally, the court will construe the level of recklessness according the the director's misfeasance, and the presence of the clause in the companies act should help focus directors minds on what they are reporting.
Posted by: Corporate Blawg | 19 February 2007 at 11:51 AM
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