Corporate Blawg UK

The Pursuit of Perfection

It's not the 1st January;
It's not Corporate Blawg's birthday; and
It's not resulting from a rap on the knuckles by the boss (or the wife). 

• Could it be his spreading tum? ("purposely to 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 [1967] 2 AC 134, and also (the slightly easier to remember) Bamford v Bamford [1970] 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 "cannot reasonably 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! 

To add insult to the injury and death of any meaningful use of section 176 (conflicts of interest), the Explanatory Notes to the Companies Act 2006 state at para 338:

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.

Jane Austen vs Frank Miller - the reasonable and the best

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 "for withdrawing 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, [2007] 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.

How to be a corporate fraudster

"Diddy dum-dum-dum.. another one bites the dust."

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?
• Deferring expenses
• 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. 

A new direction for Corporate Blawg

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. 

Timetable for Companies Act

becomes ...

Light floods the darkness, and colour clears the monochrome... to the bottom left corner.

28 February was the date that the government finally published the timetable for the implementation of the Companies Act.

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). 

Yeah.

The City in photos

Here is a photo Corporate Blawg took at Bank a couple of days ago.  It's like, art, ok:

Here is a slightly out of focus picture, which is a good argument for why Corporate Blawg should buy a tripod for his digital camera, and employ a short but enthusiastic assistant to carry it around for him: