ICLG

The International Comparative Legal Guide to: Corporate Governance 2019

12th Edition

A practical cross-border insight into corporate governance

Published by Global Legal Group, with contributions from:

Arthur Cox Freehills LLP Stibbe Ashurst Hong Kong Houthoff SZA Schilling, Zutt & Anschütz BAHR Lenz & Staehelin Rechtsanwaltsgesellschaft mbH Barun Law LLC Luther S.A. Tian Yuan Bowmans LLP LLP Cektir Law Firm Mannheimer Swartling Advokatbyrå Uría Menéndez Cleary Gottlieb Steen & Hamilton LLP Miyetti Law Villey Girard Grolleaud Cravath, Swaine & Moore LLP Nielsen Nørager Law Firm LLP Wachtell, Lipton, Rosen & Katz Cyril Amarchand Mangaldas Nishimura & Asahi Walalangi & Partners (in association Davies Ward Phillips & Vineberg LLP Novotny Advogados with Nishimura & Asahi) Davis Polk & Wardwell LLP NUNZIANTE MAGRONE Elias Neocleous & Co. LLC Olivera Abogados / IEEM Business School Ferraiuoli LLC Payet, Rey, Cauvi, Pérez Abogados Glatzová & Co., s.r.o. LLP Hannes Snellman Attorneys Ltd Schoenherr The International Comparative Legal Guide to: Corporate Governance 2019

General Chapters: 1 Corporate Governance, Investor Stewardship and Engagement – Sabastian V. Niles, Wachtell, Lipton, Rosen & Katz 1 2 Directors’ Duties in the UK – The Rise of the Stakeholder? – Gareth Sykes, LLP 7 3 Human Capital Management: Issues, Developments and Principles – Sandra L. Flow & Contributing Editors Mary E. Alcock, Cleary Gottlieb Steen & Hamilton LLP 11 Sabastian V. Niles & 4 Dual-Class Share Structures in the United States – George F. Schoen & Keith Hallam, Adam O. Emmerich, Wachtell, Lipton, Rosen & Cravath, Swaine & Moore LLP 16 Katz 5 ESG in the US: Current State of Play and Key Considerations for Issuers – Joseph A. Hall & Publisher Betty M. Huber, Davis Polk & Wardwell LLP 23 Rory Smith 6 Governance and Business Ethics: Balancing Best Practice Against Potential Legal Risk – Sales Director Doug Bryden, Travers Smith LLP 32 Florjan Osmani 7 Corporate Governance for Subsidiaries and Within Groups – Martin Webster, Pinsent Masons LLP 36 Account Director Oliver Smith Country Question and Answer Chapters: Senior Editors Caroline Collingwood 8 Australia Herbert Smith Freehills: Quentin Digby & Philip Podzebenko 40 Rachel Williams 9 Austria Schoenherr: Christian Herbst & Florian Kusznier 47 Group Consulting Editor 10 Belgium Stibbe: Jan Peeters & Maarten Raes 53 Alan Falach 11 Brazil Novotny Advogados: Paulo Eduardo Penna 64

Published by 12 Canada Davies Ward Phillips & Vineberg LLP: Franziska Ruf & Olivier Désilets 73 Global Legal Group Ltd. 13 China Tian Yuan Law Firm: Raymond Shi (石磊) 79 59 Tanner Street SE1 3PL, UK 14 Cyprus Elias Neocleous & Co. LLC: Demetris Roti & Yiota Georgiou 87 Tel: +44 20 7367 0720 15 Czech Republic Glatzová & Co., s.r.o.: Jindřich Král & Andrea Vašková 94 Fax: +44 20 7407 5255 Email: [email protected] 16 Denmark Nielsen Nørager Law Firm LLP: Peter Lyck & Thomas Melchior Fischer 101 URL: www.glgroup.co.uk 17 Finland Hannes Snellman Attorneys Ltd: Klaus Ilmonen & Lauri Marjamäki 109 GLG Cover Design 18 France Villey Girard Grolleaud: Pascale Girard & Léopold Cahen 117 F&F Studio Design 19 Germany SZA Schilling, Zutt & Anschütz Rechtsanwaltsgesellschaft mbH: GLG Cover Image Source iStockphoto Dr. Christoph Nolden & Dr. Michaela Balke 124

Printed by 20 Hong Kong Ashurst Hong Kong: Joshua Cole 131 Stephens & George 21 India Cyril Amarchand Mangaldas: Cyril Shroff & Amita Gupta Katragadda 136 Print Group July 2019 22 Indonesia Walalangi & Partners (in association with Nishimura & Asahi): Sinta Dwi Cestakarani & R. Wisnu Renansyah Jenie 144 Copyright © 2019 Global Legal Group Ltd. 23 Ireland Arthur Cox: Brian O’Gorman & Michael Coyle 150 All rights reserved 24 Italy NUNZIANTE MAGRONE: Fiorella F. Alvino & Fabio Liguori 157 No photocopying 25 Japan Nishimura & Asahi: Nobuya Matsunami & Kaoru Tatsumi 163 ISBN 978-1-912509-87-4 26 Korea Barun Law LLC: Thomas P. Pinansky & JooHyoung Jang 170 ISSN 1756-1035 27 Luxembourg Luther S.A.: Selim Souissi & Bob Scharfe 175 Strategic Partners 28 Netherlands Houthoff: Alexander J. Kaarls & Duco Poppema 182 29 Nigeria Miyetti Law: Dr. Jennifer Douglas-Abubakar & Omeiza Ibrahim 189 30 Norway BAHR: Svein Gerhard Simonnæs & Asle Aarbakke 197 31 Peru Payet, Rey, Cauvi, Pérez Abogados: José Antonio Payet Puccio & Joe Navarrete Pérez 202 32 Puerto Rico Ferraiuoli LLC: Fernando J. Rovira-Rullán & Andrés Ferriol-Alonso 208

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This product is from sustainably 34 Spain Uría Menéndez: Eduardo Geli & Ona Cañellas 222 managed forests and controlled sources 35 Sweden Mannheimer Swartling Advokatbyrå: Patrik Marcelius & Isabel Frick 231 PEFC/16-33-254 www.pefc.org 36 Switzerland Lenz & Staehelin: Patrick Schleiffer & Andreas von Planta 236

Continued Overleaf

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Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

WWW.ICLG.COM The International Comparative Legal Guide to: Corporate Governance 2019

Country Question and Answer Chapters:

37 Turkey Cektir Law Firm: Av. Berk Cektir & Av. Uğur Karacabey 244 38 Macfarlanes LLP: Robert Boyle & Tom Rose 251 39 Uruguay Olivera Abogados / IEEM Business School: Juan Martin Olivera 258 40 USA Wachtell, Lipton, Rosen & Katz: Sabastian V. Niles 264

EDITORIAL

Welcome to the twelfth edition of The International Comparative Legal Guide to: Corporate Governance. This guide provides corporate counsel and international practitioners with a comprehensive worldwide legal analysis of the laws and regulations of corporate governance. It is divided into two main sections: Seven general chapters. These are designed to provide an overview of key issues affecting corporate governance law, particularly from a multi- jurisdictional perspective. The guide is divided into country question and answer chapters. These provide a broad overview of common issues in corporate governance laws and regulations in 33 jurisdictions. All chapters are written by leading corporate governance lawyers and industry specialists, and we are extremely grateful for their excellent contributions. Special thanks are reserved for the contributing editors Sabastian V. Niles & Adam O. Emmerich of Wachtell, Lipton, Rosen & Katz for their invaluable assistance. The International Comparative Legal Guide series is also available online at www.iclg.com.

Alan Falach LL.M. Group Consulting Editor Global Legal Group [email protected] chapter 38 United Kingdom robert Boyle

macfarlanes llp tom rose

1 Setting the Scene – Sources and (particularly premium-listed public companies) tend to follow a similar format. Overview The UKCG Code applies to companies with a premium listing of equity shares in the UK by virtue of the Listing Rules. The Listing 1.1 What are the main corporate entities to be discussed? Rules do not mandate compliance with the UKCG Code; rather, they require companies to state (in their annual report and accounts) UK public companies with a premium listing of equity shares traded whether they have applied the UKCG Code (which consists of on the Main Market of the London Stock Exchange. Other publicly- ‘principles’ of good governance together with more detailed traded companies, such as entities whose shares are admitted to ‘provisions’) and to explain and justify any areas of non- trading on AIM, are subject to similar (but typically less onerous) compliance. This is known as the ‘comply or explain’ regime, regulatory regimes. which is a common theme throughout the UK corporate governance regulatory framework. The current version of the UKCG Code was published in July 2018, and applies to accounting periods beginning 1.2 What are the main legislative, regulatory and other on or after 1 January 2019. The UK Stewardship Code, which also sources regulating corporate governance practices? operates on a ‘comply or explain’ basis, sets out good practice for institutional investors (principally asset owners, asset managers and The UK’s corporate governance landscape derives from (or is service providers) when engaging with UK listed companies. influenced by) a number of legislative, regulatory and other sources. A key feature of the UK corporate governance regulatory The key legislation is set out in the Companies Act 2006 framework is its constant evolution in the face of changing ‘cultural’ (the “Companies Act”), together with the Listing Rules and the expectations. For example, the FRC has recently announced plans Disclosure Guidance and Transparency Rules (the “DTRs”) made to review both how effectively the UKCG Code is being by the Financial Conduct Authority (the “FCA”). The main implemented by companies at the end of 2019, with a more detailed governance-focussed regulations are the UK Corporate Governance review in 2020 (when reporting under the revised code is fully Code (the “UKCG Code”) and the UK Stewardship Code for effective), as well as its intention to consult on a new UK institutional investors, each of which is currently issued and Stewardship Code. administered by the Financial Reporting Council (the “FRC”), although the FRC is soon to be replaced by a new regulator (see question 1.3 below). The City Code on Takeovers and Mergers 1.3 What are the current topical issues, developments, (the “Takeover Code”) will also be relevant if the company in trends and challenges in corporate governance? question is or may be the subject of a takeover or merger transaction. Finally, companies should also consider the application of The political and economic uncertainty surrounding Brexit means guidelines produced by investor protection groups, such as the that resilient corporate governance strategies may be more Investment Association. While such guidelines are technically non- important now than ever before for UK companies. Some of the binding, investors in UK companies increasingly expect them to be most important recent corporate governance developments, trends complied with, or for any areas of non-compliance to be publicly and challenges in the UK market include the following: explained. ■ Spotlight on boards: In recent years, there has been a greatly The Companies Act is the primary statutory rule-book for all UK increased public focus on board composition (including with companies. In the context of corporate governance, it includes respect to diversity and inclusion), accountability, transparency, succession planning, remuneration policies (among other things) provisions governing directors’ duties, (and practices), and on the role of the board in generating requirements for directors’ appointment, removal and remuneration, cultural change within an organisation. This has, in part, and various rules in respect of companies’ financial (and other) been facilitated by successive UK governments, which have disclosure obligations. The principal constitutional document of a publicly stated that one of their key priorities is the creation UK company is its articles of association. A company’s articles of equal opportunities for all, regardless of gender, ethnic govern the regulation of its internal affairs (including with respect to background or sexual orientation. Among other things, this various governance issues), subject to overriding statutory and has resulted in the publication of a series of independent common law requirements. Although UK companies have reports, which have set out of a number of diversity targets substantial discretion over the content of their articles, most for businesses. For example, a government-commissioned report published in 2015 by Lord Davies recommended that, iclg to: corporate governance 2019 www.iclg.com 251 © Published and reproduced with kind permission by Global Legal Group Ltd, London 252 United Kingdom . Whatarethecurrentperspectivesinthisjurisdiction 1.4 ■ a short-term focus on financial gain for a minoritya forfinancialgain short-termon focus a developments (see question 1.3 above) clearly show shareholderinvolvement in corporate governance. I promoconcernsthethroughtheseaddress to is Code th objectivesofthe of Oneeconomy. UK thewithin the Kay Review) identifying it as a major reason fo various reports published by parliamentary committe Short-termism has been seen as a key market risk fo ■ ■ ■ © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com macfarlanes llp Cybersecurity tkhle issues Stakeholder GDPR Audit integrity corporate governance policy. c their of part prominent a cybersecurity is thaensure important increasingly is it disruption, system extremelyvaried,rangingobtainingfrom private da issues. po While thethe motives of behind magnitude and theforms emphasising of further cybe Papers) with recent high-profile leaks (such as the Panama securitythewithinbreach of form some subject to A recent survey estimated that 92% of UK businesses cybersecurity is a major challenge to UK corporate Authority (“ARGA n Gov ReportingandtheAudit, named a beregulator, to that confirmed has government the Kingman, John importance ofpromotingsustainablevaluecreation regarding therisksofshort-termismand businesses. for consideration governance corporate key a h compliancebecome GDPR breach, a from turnover result would annual which worldwide of 4% whichever or is the higher), together euros with the reputat million o 20 severity potential the Given sanctions (a particularly serious breach could resu data. of processing throughoutthe EUon businesses regarding their han oblig wide-ranging imposing 2018, in introduced was increasingly beingseenasunacceptable. is level board at diversity of lack a perspective, governance not (currently) mandatory as a matter of law, from a corporate have one non-white director by 2021. While such targets are should board company’s 100 FTSE each that recommended Parker John Sir by review 2016 a and representation, female by 2020, all boards of FTSE 350 companies should have 33% over thelong-term? programmes for board members). insolvencyintroductionincludedtheof(which 2018 was the subject of various UK government bet proposals links top perceivedinsolvency,a and failuresgovernance corporate on focus increasing an been has facing significant financial difficulties. A relat we theybecamepublichealththatshortlybeforeit clean a given been had companies which Valerie) in (includ emergencyCarillioncollapsetheofand bail-out of scandals recent several following auditors, intention is that the AGRA will provide more robust workforce (explained at question 4.1 below). haveplaceinspecifica mechanism forengagement w report(seequestion 5.2below) andtheneedforco statement’ social which companies must environmental,now publish in thei governance including issues. New requirements include metrics, the ‘s financial publicfocusonreporting companies bymatters on o inc an shareholders), with combined withengagement insteadof not as,shareholderswell thanother(as engagementby UK boards and management with stakeho : The General Data Protection Regulation (“GDPRRegulationProtectionData General The : Atog b n mas nqe o h UK, the to unique means no by Although : : Following a recent independent review by Sir ”), will be created to replace the FRC. The Tee s goig mhss on emphasis growing a is There : r underperformance r many years, with a trend away from of sophisticated,of naddition, recent es (most notably, ed development tion of greaterof tion e Stewardshipe ional damage lt in a fine of and Paradise governance. r attacks are , continued, scrutiny of mpaniesto re, in fact,in re, ection 172 Patisserie ta to totalto ta r strategic ompany’s past year,past in August had been dlingand ic which ic therthan boards t training iththeir ernance n the ing il of bill reased tential ations the f ween UK lders and ew as ”) , any subsequent feedback will have on its corporate annualreportnextoutlistatementitspublish ina thecompanyby following theconsultation. Thecom publish an update on the shareholder views received to take to consult with shareholders and, within si requires that the company must publicly explain the votes have been cast against a shareholder resoluti managementcompany.theof Wheremore thanof20% indications of shareholders’ general sentiment rega boards.shareholderresultsThea of voteofteare press significant bring to used be canshareholding failureto engage with shareholders’ concerns, rela together registers with the adverse publicity companies’ generated by an ‘a given many a ofeffective poweraugmentingvotingthe of nature passively-held proposed by the board rarely fail in their entirety majorityvotesofbeing75%favour)orcast in mean (e matters these of approval the for thresholds The and theapprovalofrelatedpartytransactions. rights pre-emption statutory of disapplication the shares, new issue to authority of grant the transactions, major into entry years), three every approved and reviewed be must (which policy directors’remuneration the of authorisation the re- members, annual board all the of them), election to amendments (or association of articles new of adoption the include matters Such exert gives board. the to on pressure which leverage shareholders) approval, large (particularly, shareholder shareholders require matters corporate Various meetings. shareholder at votes their of exercise) of threat company’s board of directors or, ultimately, through the exercise (or influence on the company’s operations through interactions with the their exert typically company public UK a of shareholders Active format to(and be consistentwith)thenewUKCG Code. new The similar a follow to another.expected is published, when Code, Stewardship one investee to by complementary applied being (as as Code companies) UKCG the and shareholders) by on report and policies voting activities. The FRC views the Stewardship Code (as applied voting their disclose shareholders, other with collectively act to willing be companies, investee monitor will The basis. revised) sets out a series of general expectations explain’as to how investors or ‘comply a Stewardship Code (which, as noted above, is in the process of being on apply signatories such on imposed obligations the and voluntary, is adherence such it, to the of governance Code does impose obligations on institutional investors who sign the up to relation in company (although see question 2.4 below). While the Stewardship shareholders other to or Generally, shareholders have no legal responsibility to the company . Whatrightsandpowersdoshareholders haveinthe 2.1 . Whatresponsibilities,ifany, doshareholdershaveas 2.2 term, sustainable value-creation. travel is clearly away from short-termism and towar corporateUKgovernance thechangeslandscape: in t interestsof non-shareholder stakeholders is sympto profit-drivenshareholders.particular,In inc the Shareholders 2 corporate entity/entitiesinwhichtheyareinvested? entity/entities inwhichtheyareinvested? strategic direction,operationormanagementofthe regards tothecorporategovernanceof iclg to: corporate governance 2019 United Kingdom . However, given the x months of the vote, reasing focus on thereasingfocuson on, the UKCG Code rding the board and ning the effectthethatning tivelylow levels of actual or perceived n viewedpublicnas actions it proposes ds the aim of long- maticof the wider strategy. and actions taken thatresolutions ctive’holding), r t ba on bear to ure panymustalso he directionheof te a simple a ither shareholder (thereby © Published and reproduced with kind permission byGlobal Legal Group Ltd,London n nls cmay s lgl esn dsic fo its from distinct person, legal rights and obligations have a ‘members’) as known (also shareholders is The shareholders. company English An be dealtwithatthemeeting. shareholders a statement relating to a resolution other or other business to include to AGM, an matters in before the business to be dealt with at an AGM, resolution or to circulate to a put to company the require may number) in 100 least at being or shares voting the of more or 5% (holding shareholders addition, In meeting. such at proposed be resolution particular a that require may and timeframe, prescribed a within meeting general a call directors the that request may company the of shares voting the of more or 5% of Holders (for AGM the of time the example, toapproveamajorcorporatetransaction). at foreseen not were which matters particular for required is approval where year the throughout called be Additional may meetings) general as simply AGM). (known meetings or shareholder meeting, general annual (the year a once least at meeting shareholder a convene must companies public UK Whatkindsofshareholdermeetingsarecommonly 2.3 macfarlanes llp iclg to: corporate governance 2019 Do shareholdersoweanydutiestothecorporate 2.4 ‘comply or explain’ basis) to shareholders who voluntarily commit voluntarily who shareholders to explain’basis) or ‘comply As noted in question 2.2 above, the Stewardship Code applies (on a amounts example, due on a subscription (for for contributedshares). yet not have but company amountsagreedhavetheylimitedany)theto(ifto ‘sham’). th In the (rendering normal course, purposes however, illegitimateshareholde for being shareholder is company the of personality legal separate limitedTheexceptionsprinciplethiss toarisein (and, therefore, liability) of the company from tha concept of the ‘corporate veil’, which segregates t law English company. the of omissions or acts the h becannot companyGenerally, UK a shareholdersof by a director). Such actions are, in practice, ver a torespect example,with(forcompany the to done r companyin the benefit of, the for and of,behalf ‘derivativeaand claim’, whichbroughtbemaya by been conducted in a manner that is unfairly prejudi the Companies Act that seeks to establish the compa prej‘unfair an includerights itsenforce to claim circumstances where an aggrieved minority sharehold shareholder by owed company, duties and to one another, the are typically fairly members,l of majority rule’ and will not interfere with comp decisions made (i the of princi ownersrecognisesgenerallythe lawEnglish because the are shareholders the Because themselves. members the between and members its contract and company the statutory between a constitute Act, Companies the under which, association) of articles (principally,its documents constitutional its The relationship between a company and its members is founded on held andwhatrightsdoshareholdershaveasregards invested? to suchmeetings? respect tothecorporateentitiesinwhichtheyare or lawsregulatingtheconductofshareholderswith entity/entities? Are thereanystewardshipprinciples liable foractsoromissionsofthecorporate corporate entity/entitiesandcanshareholdersbe entity/entities ortoothershareholdersinthe vis-à-vis the company, as well as one another. y rare. t of its shareholders. imited. The limited n good faith) by the he legal personality ituationswherethe udice’underclaim cial to its interests, espect of a wrong a ofespect rs’ liability will be contributethe to ny’s affairs have ple of ‘majorityof ple shareholder on breach of duty ofbreach er may bring a recognises therecognises cmay a company e eld liable forliable eld bsd y a by abused n unpaid any n, and any, t the to s and/or to remedy abuses by directors of their fiduc actions which would constitute a breach of the comp may also (at common law) take action against the co defanegligencetrust,duty,or ofbreach of breach ‘derivative’ claim (on behalf of the company) again example,asnoted inquestion the2.4 above, sharehola by taken be steps certain compel to or duties, sharehol circumstances, limited (normallysubjectcourt toapproval) takeaction to certain in However, and itsmembers,butnotbetweenthecompanydirectors. company The the between contract company. a constitute the association against to of articles owed action duties of their of rights breach direct for directors have not do shareholders such, 3.6 As question shareholders. to than rather (see company, the to duties owed are below) directors shareholders, its from entity legal separate a is company the that principle the with Consistent listed entities,and theirintentionsorwishesforthe company. in stakes acquiring for motivations their disclose voluntarily also may shareholders below,certain discussed As locations). business and employees management, its (including target the to relation in publicly to disclose its intentions with regard to a number of matters Takeoverthe (under required Code) is bidder a situation, merger or Such disclosures are not generally required. However, in a takeover in applied be be may can regulator certain sectors,suchasfinancialservicesbusinesses. which a shareholding from of approval without the size acquired the towards on counted Limits a holdings of threshold). rights party’ voting ‘concert the (with in company interest 30% a acquires a shareholder if triggered be may bid mandatory a Code, Takeover the under addition, In dealings. subsequent any and position their disclose must more or 1% of holders all that such company) the for made been has offer an where or or contemplation in takeover is transaction the merger a when if (typically, period’ (broadly) ‘offer an apply enters company Code Takeover the disclosure Additional under requirements above). outlined thresholds their the meet disclose not Act) does it Companies if (even so do to requested company,if the the to shareholding (under must shareholders notification. All the of receipt following day trading the of end the by market the notify to announcement an make then must company 3% (for a UK issuer), or any percentage point above that level. The the if below falls or company exceeds hold they which rights the voting of percentage notify must shareholder a DTRs, the Under . Canshareholdersseekenforcement actionagainst 2.5 . Arethereanydisclosuresrequiredwithrespecttothe 2.7 Arethereanylimitationson,ordisclosuresrequired, 2.6 ofit aaeet oiis n te fetv mntrn of monitoring effective the investee companies. and activities, policies voting management of disclosure conflict public the including principles, stewardship key certain with compliance and making decision their in investors institutional assist to is aim Its terms. its by abide to management body? are invested? shareholders inthecorporateentity/entities? the corporateentity/entitiesand/ormembersof respect tothecorporateentity/entitiesinwhichthey intentions, plansorproposalsofshareholderswith in relationtotheinterestssecuritiesheldby United Kingdom www.iclg.com iary powers. enforce directors’ st the directors for ult. Shareholders ult. mpany to prohibit any’s constitution dercould bring a opn. For company. es can ders 253 United Kingdom 254 United Kingdom © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com board. management team should report to (and be held accountable by) the management executive the executive director). The a invariably is (who CEO the by led team, by undertaken usually is the operations for responsible ultimately is company’sthe company,of the running of day-to-day management directors of board the While Whomanagesthecorporateentity/entitiesandhow? 3.1 the mandatory bid obligation referred to in questio Takeoverthe under rules particular of gi application also can action shareholder collective another), merg (suchthat persons may bedeemed tobe‘acting or inc takeover a in is company a when prohibited, stakeholde longer-term interests other (as discussed of in question interests1.3 the in is transaction take UK achieving a inbetter bid price, rather than on (for f e their activists normally, because, least of not controversial, role biddin prevalent a into increasingly enter to willing is acquirer would-be short-termprofit,partia rewardedwith be may and arguepublicly betterfora price practice(a known takeover situations. company targetActivists who adopt a this stra into buying by example, (for roles business for listed companies, activists can also o day-to-dain role activismaplaying additionto In is that commission ofanoffence underMAR. statement any as the in result may otherwise), misleading been having as regarded subsequently or media social through (whether company a about pronouncements public making when information misleading or false regarding a company. Activist of shareholders must therefore take care dissemination the prohibits (commonly referred to as the Market 596/2014 Abuse Regulation, or “MAR”) specifically No. (EU) Regulation UK, the in regulated particular, applicable in the UK. In While shareholder activism is not specifically caution. with used activists must ensure that they comply be with the market abuse regime must media social cause, their to shareholders other rally to seek to activists for tool useful a While media. social of use the to extended has companies UK activists’some of nature public with increasingly engagements The above) can be important weapons in an activist’s ar ( statement a of circulation the requisition and/or resolution a sha propose meeting, minority) general a requisition significant (including significant of election of the ag company’s remuneration sometimes, committee ch and, policies or reports remuneration threatenin(or againstvoting investors with focus, c and/or management board positions. Executive arrangements,remuneratio governance strategy, business f lobbying public and meetings shareholder of ahead v of inste statements public including or ones), traditional (alongside approaches publicity-based more hav activists however, years, recent In investors. through private lobbying of listed companies’ board undertakenwasbehindclosed UKdoo theactivism in Tradition entities. corporate go UK of accountability the in role pivotal a plays activism Shareholder Whatistheroleofshareholder activisminthis 2.8 macfarlanes llp ManagementBodyand 3 jurisdiction andisshareholderactivismregulated? xample) whether the tegy often choose to above). Whilst not ften play important as ‘bumpitrage’),as n 2.6 above. y governanceand y g to vote against)vote to g moury. e qeto 2.3 question see ally, shareholderally, cs il e on be will ocus s by institutional cularly if a rival a cularlyif aotd other adopted e Code, including Code, oncert’with one gop o for or groups r tn intentions oting air. The power n is often a key e ie o the to rise ve t h AGM the at or changes to changes or enne and vernance rs, essentiallyrs, wr The war. g eodr to reholders is te re- the ainst s hrs in shares) ’s r situation er omposition d f the of ad vr is overs voluntary. are resignations director most practice in although directors, other the of largemajority a or all by requested is director relevant the of resignation the where occur usually will This directors. remove to that The constitution of the company may also give the board the power recognising also whilst above), ultimately appointmentsshouldbe madeonthebasisofmerit. 1.3 question (see board the to appointments approving when considered be diversity ethnic and gender that recommends also Code UKCG The cases. some in planning succession appropriate facilitate to order in extended be to need may this that recognises but years, nine than longer for The post in remain not should chair committee. the that recommends Code nomination UKCG the by shareholders and board the to recommended and approved sought, typically are directors New retire to required and standforre-electionbytheshareholders. directors, be other the usually alongside AGM, next will the before but immediately board, the of members other by basis) interim an the (on appointed be at may Directors shareholders AGM. the by re-election for themselves presenting that each director must retire immediately prior to each AGM before ‘ordinary requires company) the of articles the often, (and, Code UKCG The an through shareholders’ a meeting. at voting and present shareholders by cast removed or votes of majority simple a by passed resolution a being resolution’, appointed are Directors ■ follows: the board. the The committees recommended by the UKCG Code inform are as may committees opinions of the board, these any final approval should ultimately rest with Whilst directors. executive non- of exclusively or primarily consist which committees board to delegated be matters certain that recommends Code UKCG The ‘overboarding’). certain of as directors to known regulated companies,suchasinthefinancialsector. apply overboarding practice on rules (a Additional directorships many too accept not should consequently and duties, their of discharge larger of ensure that they are able to dedicate case sufficient time and efforts to the must director the Each latter). the of majority a (in requiring companies, and executive directors of non-executive mix the (independent) including board, the of composition exceptional the regarding specifications various contains also Code UKCG The in than other same individual. that, provides circumstances, the roles of chair and CEO should not be held by Code the UKCG the the and appointment, on independent is who and chair non-executive a by board the of led be should board the example, For business. the of management leadership the between responsibilities The UKCG Code emphasises that there should be a clear division of . Howaremembersofthemanagementbodyappointed 3.2 ■ ■ t s lo omn o ohr omtes o e salse where established be necessary, forexampleariskcommittee. to committees other for common also is It nmnto cmite wih s epnil for responsible is which committee, nomination a a remuneration committee, which is responsible for setting for responsible is which committee, remuneration a an audit committee, responsible for establishing formal and formal establishing for responsible committee, audit an and removed? appointments to the board and senior offices of the company; executives, aswellthewiderworkforce;and senior and directors for policy remuneration company’s the eotn ad ik aaeet rnils ad for and principles, the auditorsofcompany. management risk establishing and maintaining an appropriate relationship with and corporate of reporting application the for arrangements transparent iclg to: corporate governance 2019 United Kingdom © Published and reproduced with kind permission byGlobal Legal Group Ltd,London eid drn wih ietr ad DR ae prohib dealing in the company’s are securities. PDMRs and directors which during periods regulatedunder, CompaniesMAR).voluntarily may i (as information’ ‘inside of possession in are they prior to the publication of the annual report or announcem an appropriate during ‘closed periods’, an which include the period o make i dealing from prohibited are to PDMRs) (and Directors company the enable immediatelynotifycompanythechangesany thof to They,together withpersonsclosely associated with (“PDMRs Directors and other ‘persons discharging managerial remuneration the by undertaken typically committee, subject(asabove)totheapprovalofshareholders. is remuneration The determination of directors’ (including non-executive directors’) year, service asrequiredbytheUKCGCode. director’s a where one to limited be invariably will practice, it duration, fixed a has In agreement years. two than longer entering into a service agreement with a director with a fixed term of from company a prohibits also It Act policy. remuneration company’s Companies The the of scope the outside are which resolution). directors to payments prohibits ordinary an by approved be a prepare company’s must (which years the three every shareholders to policy remuneration submit must must and shareholders), directors of vote advisory the an Act, to subject is (which year financial each for report remuneration Companies the Under Whatarethemainlegislative,regulatoryandother 3.3 macfarlanes llp iclg to: corporate governance 2019 to is Act Companies the under director each of duty principal The Whataretheprincipalgenerallegal dutiesand 3.6 matters aretypicallyundertakenby theboard. material of respect in approvals (see final although above), 3.1 question board the of committees to including functions, its delegate to board the permit typically also will association of articles The at meetings short noticewhereunexpectedmattersarise. attend to individual expected be by also will attendance board The and directors. held were which meetings board of number the regarding information contain will company the of board meetings (and board committee meetings). 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United Kingdom www.iclg.com 255 United Kingdom 256 United Kingdom © Published and reproduced with kind permission byGlobal Legal Group Ltd,London www.iclg.com of form the in disclosure periodic for responsible is board The Whoisresponsiblefordisclosureandtransparency? 5.1 information intheannualreport(seequestion5.2below). these outlining report considerations. Companies are also CSR required to include certain CSR annual an produce to companies for practice common become has it such, above). 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The remuneration report must provide sufficient information to related contain is this how demonstrate also must It implemented. is this must report how and policy inclusion and company’sdiversity annual the surrounding company’s listed A website andcross-referredtointhedirectors’ report. with the annual report, or in a document published on the company’s company’s annual report), or in a separate report published together the within (contained report directors’ the of section separate a in certain requirements must include a corporate governance statement meet that companies listed DTRs, the and Code UKCG the Under must bepublishedonitswebsite. disclosures These not). has it Code’swhy explain (or requirements UKCG the with those complied as has it how describe report, annual also, its in than must company (other and, Code UKCG the to The subject is it that disclose above, described resolutions business). shareholder ordinary constituting of approval the company’s the of and board the to way changes as to such matters include and report annual by made addition typically are these In question, in situations. events the of time the at announcements public make to obligations governance-related corporate of Listed companies must make public announcements in a wide range ea rqieet hv be mt n wehr h disclosures the whether and contain anymaterialmisstatements. met been have requirements legal separate relevant the whether disclosures, any such of adequacy report the confirming own and their produce to statements and statement governance financial corporate audited produced the are which alongside reports the review to required are Auditors . Whatcorporategovernance-related disclosuresare 5.2 in afailuretomakenecessarydisclosure. concerned’‘knowingly is who director individual an against taken be may action enforcement this, for responsible is board entire the Although required. where market, the to announcements relevant of publication the as well as reports, half-year and reports annual . Whatistheroleofauditandauditorsinsuch 5.3 be publishedonwebsites? disclosures? required andaretheresomedisclosuresthatshould iclg to: corporate governance 2019 United Kingdom macfarlanes llp United Kingdom

Robert Boyle Tom Rose Macfarlanes LLP Macfarlanes LLP 20 Cursitor Street 20 Cursitor Street London EC4A 1LT London EC4A 1LT United Kingdom United Kingdom

Tel: +44 20 7831 9222 Tel: +44 20 7831 9222 Email: [email protected] Email: [email protected] URL: www.macfarlanes.com URL: www.macfarlanes.com

Robert has been a partner in Macfarlanes’ corporate and M&A team Tom became a partner in Macfarlanes corporate and M&A team in since 2001. He is active in all fields of corporate law, advising on a 2019. He advises clients on a wide range of corporate matters,

broad range of corporate transactions, particularly for quoted clients. including public and private M&A, equity capital markets and private United Kingdom In addition to transactional work, Robert advises a number of listed equity transactions, with particular experience in international cross- issuers in respect of their ongoing corporate advisory work, which border work. Tom’s practice covers a variety of sectors and requires a detailed understanding of the UK regulatory regime. geographies, often involving transactions across multiple jurisdictions. He is a member of the International Bar Association. Over the last few years, Robert has also been heavily involved in advising clients on governance, controls and risk management issues and in respect of investigations. Robert is a member of the City of London Law Society Company Law Sub-Committee and of the Securities Sub-Committee of the International Bar Association.

Macfarlanes is a distinctive, London-based law firm, focused on our clients and on delivering excellence in the international legal market. The firm has made a deliberate choice to remain smaller than many of its peers, believing that clients benefit from close-knit teams who work together on a regular basis. The firm has decided against growth at the expense of quality, or size at the expense of efficiency and agility. So, whilst the firm is large enough to advise on the most complex legal matters, it is also small enough to ensure the provision of consistently high-quality advice to its clients.

iclg to: corporate governance 2019 www.iclg.com 257 © Published and reproduced with kind permission by Global Legal Group Ltd, London Current titles in the ICLG series include:

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