Corporate Law Update

• A contract was novated by conduct, even though the counterparty did not give formal written consent
• The FTSE 350 Women Leaders Review publishes its second annual review on female leadership representation
• The QCA celebrates the 10^th anniversary of its Corporate Governance Code
• The FRC invites participation in a new review of business model reporting

Contract was novated by conduct, despite lack of written consent

The Court of Appeal has held that a contract between five parties was effectively novated, then novated again, even though the documentation did not refer to all the parties and prior consent had not been given.

Musst Holdings Ltd v Astra Asset Management UK Ltd [2023] EWCA Civ 128 concerned a contract for the introduction of clients to an asset management business.

The contract was originally made between three parties: an introducer and two asset management companies within a group regulated by the Financial Conduct Authority (FCA) (Octave). However, all parties understood that the longer-term plan was for investments in underlying assets to be managed by a new group which was then currently awaiting approval by the FCA (Astra).

In due course, Octave took steps to transfer its business to Astra. A dispute arose over whether, as part of this, the contract with the introducer was novated from Octave to Astra. No written novation agreement was signed, and the parties did not at all times match those on the introduction agreement.

In particular, the introduction agreement required the introducer to give its prior written consent to the transfer of any rights or obligations under the introduction agreement. This had not happened.

Nevertheless, the court found that the contract had been novated from Octave to Astra by conduct. It said that all parties had been aware from the outset that the common intention was for Astra to carry on the asset management services once it had received FCA approval, and that all of the parties had acted on that basis.

Although the introducer had not given its prior written consent, it had effectively waived that requirement by conduct. It made no commercial sense to find that a novation had not occurred.

The judgment shows the value in documenting any transfer of contracts carefully to avoid disputes. You can read more about the case in our separate in-depth piece.

FTSE Women Leaders publishes second annual gender balance review

The FTSE Women Leaders Review has published its second report on women’s representation on company boards, looking at progress against targets during 2022.

The Leaders Review was created in October 2021 to continue the work of its forerunner, the Hampton-Alexander Review, which had previously set a voluntary target of 33% female representation on FTSE 350 boards by the end of 2020.

The Leaders Review published its first report in February 2022, in which it assessed progress against the targets set by the Hampton-Alexander Review but also made recommendations for setting more strident targets for forthcoming years. These included:

• increasing the voluntary target for FTSE 350 boards and leadership teams from 33% to 40% by the end of 2025;
• encouraging FTSE 350 companies to have at least one woman as chair or senior independent director (SID) and/or one women as CEO or finance director by 2025; and
• extending the targets beyond publicly traded companies to the top 50 private companies in the UK (measured by sales).

The 2022 report notes the following.

• 5% of UK FTSE 100 and 40.1% of FTSE 250 board positions are now occupied by women (up from 39.1% and 36.8% at the beginning of 2022). The figure for the FTSE 350 overall is 40.2% (up from 37.6%).
• 319 FTSE 350 boards met or exceeded the previous 33% target in 2022 (up from 278 in 2021). Encouragingly, 57 FTSE 100 boards and 137 FTSE 250 boards met the new, increased target of 40% during 2022.
• The number of female FTSE 350 chairs has also risen to 55 (up from 38 in 2021), and the number of female senior independent directors (SIDs) has risen to 130 (up from 115 in 2021).
• Finally, the number of female FTSE 350 CEOs has risen to 55 (up from 48 in 2021).

QCA celebrates 10^th anniversary of Corporate Governance Code

The Quoted Companies Alliance (QCA) has celebrated the 10^th anniversary of its Corporate Governance Code by publishing a small summary of the history and purpose of the Code.

The Code is designed to act as a framework for good corporate governance for small and mid-sized UK quoted companies. It serves as the corporate governance framework of choice for most AIM companies but is also suitable for smaller listed companies and AQSE Growth Companies.

The summary sets out how the Code has developed over time, how AIM companies perceive the Code, how the Code has benefitted companies and investors, and the evolution of reporting against the Code’s ten principles.

FRC invites participation in business model reporting review

The Financial Reporting Council (FRC) has announced a new project looking at the evolution of business model reporting, including how it is described, how the business model is used as a driver for other disclosures across the annual report and accounts, and how it can provide the most useful information for stakeholders.

It is asking for companies, investors and other parties that are interested in participating to let it know. Details can be found in the FRC’s announcement.