There were two issues before the court: when will the law regard the authority of an agent as irrevocable; and, does liability to account as a constructive trustee arise where money is received at a time when the recipient knows that imminent insolvency will prevent the performance of the corresponding obligation? With regard to the latter question, Lord Sumption held that no trust arose and declined to follow the authorities suggesting otherwise including Neste Oy v Lloyd’s Bank Plc  2 Lloyds Rep 658 and In re Japan Leasing Europe Plc  BPIR 911. Lord Sumption stated (at paras.  and ):
It is inherent in the statutory scheme of distribution in an insolvency that apparently arbitrary results may follow from the adventitious timing of the commencement of the liquidation, especially in the case of deferred obligations. In principle, an advance payment to a company made before the commencement of the liquidation for an obligation performable afterwards will form part of the company’s estate, notwithstanding that its supervening insolvency means that the obligation will not be performed, at any rate in specie. The payer must prove in the liquidation for damages for the breach of contract. Likewise, a contractor providing goods or services on credit will have to prove in the liquidation for the price if the other party becomes insolvent before paying. The rule is the same for money received for his principal’s account by an agent who becomes insolvent before accounting for it, unless (contrary to the unchallenged finding of the judge in this case) the relations between the parties were such as to make the agent an express trustee of money in his hands. The money will form part of the agent’s insolvent estate, and the principal must prove in the liquidation. In the nature of things, these consequences involve a detriment for the payer, attributable to the timing of the company’s insolvency; and a windfall for the general creditors, since the estate available for distribution will be increased by the payment without being reduced by the cost of performance.
Bingham J’s point of departure in Neste Oy was that the recipient of money may be liable to account for it as a constructive trustee if he cannot in good conscience assert his own beneficial interest in the money as against some other person of whose rights he is aware. As a general proposition this is plainly right. But it is not a sufficient statement of the test, because it begs the question what good conscience requires. Property rights are fixed and ascertainable rights. Whether they exist in a given case depends on settled principles, even in equity. Good conscience therefore involves more than a judgment of the relative moral merits of the parties. For that reason it seems to me, with respect, that Bingham J’s observation in Neste Oy that any reasonable and honest director would have returned the sixth payment upon its receipt begs the essential question whether he should have returned it. It cannot be a sufficient answer to that question to say that it would be “contrary to any ordinary notion of fairness” for the general creditors to benefit by the payment. Reasoning of this kind might be relevant to the existence of a remedial constructive trust, but not an institutional one. The observation of the editors of Bowstead and Reynolds and of Nicholas Warren QC in Japan Leasing that a proprietary claim should be recognised whenever the claim is “sufficiently strong and differentiable from other claims” to warrant giving it priority over other claims in an insolvency, seems to me to be open to the same objection.”
A video recording of Lord Sumption, delivering the court's opinion, is available below (and also here should the embedded video not work):
The Securities and Exchange Commission of Pakistan (SECP) has published a final draft of the Companies Bill 2016: see here (pdf). The provisions in red are new and remain under review. Further information about these new provisions, which include those relating to the creation of a register of beneficial ownership and a duty on company officers to prevent the commission of fraud or money laundering, is available in a concept paper published alongside the Bill: see here (pdf). For earlier drafts, see (all pdf): third | second | first.
The Executive Remuneration Working Group, formed last year by the Investment Association to “bring forward proposals for a radical simplification of executive pay”, published its final report and recommendations today: see here (pdf). Ten recommendations are made – none of which explicitly refers to simplification – under the following headings: increasing flexibility; strengthening remuneration committees and their accountability; improving shareholder engagement; increasing transparency on target setting and the use of discretion; and addressing the level of executive pay. Other recommendations are also made in the report including, for example, that remuneration committee chairs should have at least one year's experience on the remuneration committee before becoming the chair of the committee.
A meeting of the Italian Corporate Governance Committee was held earlier this month: see here or here (pdf). The Committee considered the results of the first monitoring exercise of compliance with the Assogestioni Stewardship Code as well as the updated Corporate Governance Code, and decided that the latter did not require updating in 2016/17. Several topics were, however, identified for investigation: SMEs’ corporate governance; enhancing the board of directors’ role; the procedures for the appointment of directors; and relations with shareholders.
A copy of the Stewardship Code monitoring report, in Italian, is available here (pdf). A copy of the Governance Code monitoring report, in English, is available here (pdf).
The true position is that, save in exceptional circumstances, a validation order should only be made in relation to dispositions occurring after presentation of winding up petition if there is some special circumstance which shows that the disposition in question will be (in a prospective application case) or has been (in a retrospective application case) for the benefit of the general body of unsecured creditors, such that it is appropriate to disapply the usual pari passu principle.”