CONSULEGIS Handbook - 2008 International Intellectual Property Law Basics

Table of contents




The premise of this book is that clients and advisers connected to Consulegis members will have an existing business or investments, and will wish to consider trade or investment expanding into other countries. Hence it would be helpful to have a collation of information as to the legal structures they may encounter or wish to utilise when trading with, investing in or commencing business operations in a new country. Individual member firms in Consulegis have written separate chapters of this book to outline in general terms the forms of legal structures one may encounter or use in their country. Such notes are general in nature and intended to give a broad understanding of the relevant issues, and do not replace the need for individual tailored advice to be given in relation to any specific business project.


The scope of this work does not include taxation detail, since taxes and tax laws change so frequently it would not be useful. Similarly Labour law, guidance on takeover mergers and acquisitions, whether of Companies or asset-based businesses are excluded, as is Anti-trust, Monopolies and Competition law. The primary focus is upon the vehicles available for business and investment.


When planning a new business or investment venture, the users of this book are recommended to involve their Consulegis advisers at an early stage in the planning process, both to help guide an appropriate choice of legal structure and to implement decisions to achieve the strategic objectives of the business. It is important to build the team (lawyers, accountants, bankers, patent attorneys and so forth) which will work with the business client and involve them early on in moulding the strategy for the business early on.


This introduction aims to point out the questions which may be relevant when considering the choice of jurisdiction.

Section 1- Issues surrounding choice of jurisdiction

In many cases clients who wish to start doing business in a new country or jurisdiction will select the country or jurisdiction because of a business need or the perception of a market that they wish to penetrate or trade with.   Apart from consideration of issues of tax efficiency (from the perspective of trading into the target area tax efficiently) the target area will to some extent be self selecting. It is quite simply where you wish to trade. In other cases, however, the choice of where to base a new enterprise may be a platform for several jurisdictions, for example, selecting one country within the European Union with the intention to then trade throughout the Union.


There are many forms of entity within different countries available to use as the vehicles for trade or investment as the following chapters of this book explore in some detail. However, the initial choice of jurisdiction itself will encompass many issues which will have a lasting impact upon the business. It is useful therefore to highlight some of the key questions to ask both in selecting a jurisdiction and comparing the different types of entity that one might use for the legal structure that is to be the vehicle for the underlying business. These include:


Jurisdiction comparison

1.             Incorporation

Apart from company registries and the formation of the business vehicle is the entity vetted as to the ultimate beneficial owner by an independent regulator (usually an arm of government) such as the Financial Services Authority in the UK?


Is a quick incorporation or formation of the entity possible and approximately how long does it take?


What are the formalities or restrictions on creating a particular business name and is there adequate trade mark protection available within the jurisdiction?


2.             Directors and Officers

What are the minimum numbers of directors and/or other officers?


Does there have to be a company secretary and what are his duties?


Are local directors required or can foreign nationals be directors and does this have any impact upon the tax situation locally?


Can meetings be held anywhere, including via electronic means or must they be held physically and in a particular location? Do directors and other officers of the company have potential liabilities to which they may be exposed (for example the Corporate Manslaughter and Homicide Act in the UK) and what insurance cover may be available in respect of directors’ and officers’ liabilities?


3.             Members meeting

Can Annual General Meetings, Extraordinary General Meetings or Partners’ Meetings be held anywhere and also by electronic means?


4.             Share capital

What are the requirements for authorised and issued share capital?


Is a foreign currency for share capital permitted?


Is there any minimum share capital?


Are there bearer shares or treasury shares or other shares required?


If it is a partnership, are limited forms of partnership available and what protection can be created in relation to capital or loans if that is the preferred method of funding the structure?


5.             Registered office

Is there a requirement for a registered office and what documents or registers have to be kept there? Are they open to public inspection or inspection of the members? Bear in mind that in the EU, following the decision of the European Court in Cadbury Schwepps, more than a nominal office may be needed to achieve specific tax effects and it may be necessary to have a real presence in the country in question if a particular tax treatment is desired. This is a matter for specialist advice.

6.             Local resident requirements

What are the requirements for locally registered agents, partners or directors and are they limited to administrative functions only? Is it essential to have a local national as a director or partner? What fees would they charge?


What are the ramifications if an eventual listing on the local stock exchange is desired?


7.             Accounting requirements

All jurisdictions will normally require the keeping of proper records of accounts, irrespective of the type of corporate or partnership structure chosen. However, enquiries should be made into the costs of complying with audit requirements, the frequency of preparing accounts and whether an audit is required if the business is not a public company or its articles do not require it. The flexibility within which accounting years may be changed, extended or shortened should also be considered and some jurisdictions have a minimum period within which accounts reports have to be submitted.


8.             Confidentiality

Most jurisdictions have anti-money laundering laws, which impact on confidentiality and this is a useful tool in considering issues of privacy. Are there requirements of the disclosure of the ultimate beneficial owners, whether individuals or corporate? What forms of documentation are required for compliance and is this linked to a minimum percentage of ownership? What information is open to inspection by the public, for instance the name and address of registered officers and agents are normally revealed by a search but would it extend to directors and officers and shareholders personal residential addresses? Is the charges register for any loans merely kept at the registered office and open for shareholders or is it available for public inspection? What are the disclosure requirements both in relation to any supervisory authority or local tax authorities?


9.             Annual requirements

In relation to annual returns to supervisory authorities, what are the requirements for annual returns and filing fees? What annual accounts are required and are they open to inspection by the public?


10.           Government and other fees

What fees are payable upon creation of the business entity and what are payable annually? Are there any share capital duties or stamp duty or other fees payable by reference to the amount of the capital of the company?


11.           Subsequent changes in domicile and structure

Is it possible to change the domicile from one country to that of another? What fees are payable and what are the problems if you wish to migrate a company or business entity at a later date? Is it possible to change the business structure and at what expense, for instance, from a partnership or a limited liability partnership into a corporation? What are the tax implications of a change in structure or domicile?


12.           Time zone

The relationship of the jurisdiction to the time zone of the founder should be considered and whether this poses any particular business issues.


13.           Listing issues

If, at a later stage, it is contemplated that the entity may seek a listing consideration should be given to prospectus requirements as to filing and approval, penalties for untrue statements, exemptions for professional or institutional investors and indeed prospect using requirements if an unlisted structure is sought to be financed by means of general subscription.


The presence or absence of a local stock exchange and the standing of the stock exchange should be considered as well as its relative tax efficiency. One should consider whether one can list merely its own securities and whether there are computer enabled registrars such as on the Crest system.


14.           Ancillary issues

The tax situation of the proposed entity and its jurisdiction needs to be considered, including a number of ancillary issues such as the presence or absence of double tax treaties and what they provide, relative to the founder’s domicile jurisdiction and the presence or absence of tax information exchange agreements. Ancillary services would also include the regime for trusts, the probity of and presence of adequate professional trustees and private trust companies. Banking of an international standard is a key issue as well as the inter-relationship between local banks and those of the founder’s jurisdiction.



This list of questions and issues is not exhaustive but are hopefully provides a useful preliminary step in considering and analysing the comparative suitability of jurisdictions and may serve as a useful checklist to users of this book.


Section 2 - Offshore Issues


Detailed tax advice on offshore solutions can only be helpful where specific jurisdictions are known; this needs to be tailored by your Consulegis adviser to target the territory for trade or investment. However, users of this book will often consider sheltering activities through the use of legal structures located in low tax areas or tax havens. Following the decision of the European Court of Justice in the Cadbury Schweppes case, the scope for group operations to be based within lower tax jurisdictions effectively is greatly broadened, provided there is a real presence in the territory ( such as a staffed office). Such structures were attacked by tax authorities based on “controlled foreign company” rules, but notwithstanding the court judgment great care is needed in structuring and maintaining such arrangements.


The following is a reminder of do’s and don’ts that should be observed to ensure continuing non-residency of offshore companies (compared with the tax centre one is concerned with) once formed:

  • DO ensure that the directors and board members are non residents.


  • DO ensure that all board meetings are held offshore.


  • DO ensure that the board makes decisions and DO NOT merely “rubber stamp” decisions made onshore.


  • DO document all board meetings to ensure proper recordings of discussions including, if appropriate, decisions on dividend payments. Where meetings are held over the telephone this fact should be properly documented.


  • DO ensure that if assistance of the onshore companies or any of its onshore shareholders is required, it is done so by way of “request for assistance” or “do you have a preference in the way this is structured”. The onshore companies and shareholders must be seen only to be giving a preference and not a direct instruction. In time this should become an habitual letter/ email writing style.


  • DO ensure that the signatories on the offshore bank accounts (which should be local accounts, offshore) are not main board directors and that the signatories have the appropriate powers to authorise payments without approval from the onshore companies or shareholders. Onshore persons should preferably not have signature powers, or otherwise only very limited ones (tightly regulated via mandates and agency agreements).


  • DO ensure that offshore directors are fully aware of what the entity has been established to do, why the entity own the necessary assets and that they are able to perform the services required of them. An annual inspection of onshore-based fixed assets by offshore directors is a good idea.


  • DO ensure that, where major decisions have to be made, where appropriate, independent professional advice is sought by the offshore directors and not via the onshore companies or shareholders.


  • DO ensure that all advice be addressed to the offshore directors and sent to them direct. All bills for such advice must be addressed to the relevant entity and not the onshore companies or shareholders.


  • DO ensure that the directors/managers have the power to run the operations including, where appropriate, a power to invest surplus cash wherever they think fit. All goods and services should be contracted for locally (i.e. offshore).


  • DO ensure that if any of the entity’s assets serve as collateral for borrowings of connected companies, this is accepted and documented by the directors and a proper guarantee charge is levied on the borrower.


  • DO ensure that all the day-to-day management decisions are taken locally (i.e. offshore) and are properly documented to show that the company is being managed from its country of incorporation and certainly not onshore.


  • DO ensure that the books and records are kept locally and that the accounts are also produced locally (i.e. offshore).


  • DO ensure that the Annual General Meeting is held locally in the offshore country.


  • DO ensure that all tax returns are prepared and filed locally (i.e. offshore).


  • Do ensure all insurance policies and claims are administered locally (i.e. offshore).


  • DO NOT send faxes letters or emails on offshore company letterhead from the onshore companies.


The above summary is not exhaustive and is only intended to give the reader an indication of the tests the relevant Tax authorities will consider when determining whether a company is managed or controlled in the onshore jurisdiction.



Section 3 - Transnational Structures (EU)

European Economic Interest Grouping


EEIGs were established by European Union (EU) Regulations, namely Council Regulation (EEC) No 2137/85. They are designed to help businesses establish and maintain links with firms in other Member States of the European Union. For businesses, and smaller firms in particular, other development options - mergers, take-overs, joint ventures - may be too expensive and complicated. The EEIG provides an alternative way to establish links in other Member States without losing individual identity and independence. The EU Regulations require and permit Member States to make certain provisions under national law in respect of EEIGs. As a result, there are some differences in the laws of Member States in areas such as legal capacity, the managers and auditing requirements.




  1. What is an EEIG?

The EEIG is a form of association between companies or other legal bodies, firms or individuals from different EU countries who need to operate together across national frontiers. It carries out particular tasks for its member-owners and is quite separate from its owners' businesses. Its aim is to facilitate or develop the economic activities of its members.


An EEIG may be set up in any one of the Member States, and operate in any part of the EU. It can also enter into arrangements with organisations outside the EU, although these organisations cannot themselves become members of an EEIG.

  1. What can an EEIG do?

An EEIG's activities must relate to the economic activity of its members but must be ancillary to them. The concept of 'economic activity' can be interpreted very widely. For example, universities and research institutes may participate in an EEIG. The creation of an EEIG between people in the professions (for example, solicitors) is also permitted. However, professional people will need to consider whether or not participation in an EEIG would be contrary to the rules of their profession. The Grouping may not itself practise a profession - as this would replace the activities of the members - but it may provide services for its members which relate to their profession (for example, consultation on legal matters).


Apart from this, and the restrictions set out under 3, the EEIG can do whatever its members wish. For example, companies in the UK, Spain and France might form an EEIG to carry out scientific research in an area of common concern; or firms in Portugal and Scotland might use an EEIG to create a joint marketing operation for a new range of products; or lawyers in England, Denmark and Germany could join together to pool information.


  1. What can't an EEIG do?
  • be formed with the object of making a profit, although it may do so as a consequence of its normal operations;
  • exercise management control over its members’ own activities or those of any other undertaking;
  • hold shares in any of its members;
  • take investment from the public;
  • be a member of another EEIG;
  • employ more than 500 people;
  • be used to make loans to a company director or any person connected with him or her where that would be restricted or controlled by national law;
  • be used for the transfer of any property between a company and a director, or any person connected with him or her, except to the extent allowed by national law.
  1. What are the advantages of an EEIG?

An EEIG enjoys several advantages including 'legal capacity' - the right to enter into contracts and to sue (or be sued) - and tax transparency. Further, members have flexibility regarding the method of financing the Grouping. For example, when smaller firms or non-profit making organisations are involved, their contribution may be in the services and skills they can provide. There is no capital requirement for an EEIG. Members may vary their funding methods, rights and obligations by contract so that the Grouping can develop. And, since an EEIG may not hold shares in its members, nor exercise any management control over them, it works for the members, not vice versa.

  1. What are the disadvantages?

The price to pay for the lack of a capital requirement is unlimited joint and several liability of the members. This means that not only is there no limit to the financial liability of any of the members for the activities of the EEIG, but also that each member can individually be held liable for those activities. If no provision were made for this responsibility, third parties might not have the confidence to sign contracts with the EEIG. In addition, whilst an EEIG may, for example, be funded from members' funds, by raising share capital from its members, or by bank loans, it cannot seek funds from the public or buy a share in another EEIG.

  1. How is an EEIG structured?

An EEIG is set up in much the same way as a company. It must be formed by at least two members from different EC States, and a manager or managers must be appointed to operate the EEIG on a day-to-day basis.

  1. Who may be a member of an EEIG?

The Regulations aim to make membership of an EEIG open to as many people and organisations as possible within the Union. The main requirement is that each member should have been engaged in an economic activity in the EU before becoming a member of the EEIG.

  1. Is there a nationality requirement?

An EEIG must have at least two members with their central administrations or principal activities based in different EC States.

To be eligible for membership, companies, firms and other legal bodies must:

  • have been formed according to the law of one of the Member States and have their registered or statutory office (if applicable) within the EU; and
  • have their central administration (that is, their place of central management and control) within the EU.

Individuals may become members if they carry on any industrial, commercial, craft or agricultural activity or provide professional or other services in the EU.

Organisations from non-EU countries may not become members.

  1. What is the role of the members?

The members decide how the EEIG will be run. Normally this will be set out in the formation contract of the EEIG, but there is no requirement that this must be so. There is no requirement for regular meetings or for decisions of the members to be taken only at meetings: all communication may be by fax, telephone or video-conferencing if the members so desire.


Each member has at least one vote. The contract of formation can give more than one vote to certain members (for example, if one member has subscribed a greater share of the capital or expertise), provided that no one member holds a majority of the votes.


The members are free to decide the voting procedures to be set down in the contract of formation except for certain decisions fundamentally affecting the existence and operation of the EEIG, for which unanimous decisions are required. The decisions requiring unanimity are:

  • alteration of the objects of the grouping;
  • alteration of the number of votes allotted to each member;
  • extension to the duration of the grouping;
  • alteration to members' contributions to the grouping's financing;
  • alteration to members' obligations, unless otherwise provided by the formation contract;
  • alteration to the formation contract not covered above, unless otherwise provided by the contract itself; and
  • transfer of the official address of an EEIG to another Member State.
  1. What is the role of the managers?

The members appoint managers who run the EEIG and make normal daily decisions. At least one manager must be appointed. EEIGs registered in the UK may appoint legal persons (for example, a company incorporated under the Companies Act) as managers, provided that an individual is then registered as the manager's representative.


The members determine the limits of the manager or managers' powers. The actions of the managers are binding on the EEIG and the members are jointly liable for those actions. The only limitation that can be applied to the managers by the members in this respect is that of the 'double signature'. This means that the EEIG is only bound by the joint action of two or more managers. If this control device is used it will be effective only if its existence is published in the appropriate Gazette.

  1. Does an EEIG have legal personality?

An EEIG registered in the UK is accorded legal personality as a 'body corporate' from the date shown on its certificate of registration. The position varies slightly in other European Union Member States.

  1. What competition rules apply to EEIGs?

EEIGs are not exempt from EU or domestic competition laws. They are subject to control under Articles 85 and 86 of the Treaty of Rome and to national competition legislation in the same way as any other undertaking.

  1. How is an EEIG funded?

The members of the EEIG are not required to subscribe any capital. The grouping can be financed by capital invested by the members or by loans or donations from them or others. The contribution of some members may be in the form of the services and skills that they can provide. EEIGs may not seek investment from the public.

  1. What taxation rules apply to EEIGs?

Taxation operates under a system of fiscal transparency; that is to say, any profits, losses or gains are shared between the members according to their shares. These are then taxed in the hands of the members according to the relevant national law in the normal way.

  1. How do they work?

For the purposes of taxation, a grouping is regarded as acting as the agent of its members: its activities are those of its members acting jointly, and each member is regarded as having a share of the property, rights, liabilities and profits of the EEIG. The portion of profits, losses or gains going to each member is determined by the formation contract where this is stated. If the contract says nothing the members are apportioned equal shares. The shares of property, rights and liabilities are determined in the same way.


Returns, accounts and information are given by the EEIG acting through its managers. The members of the grouping are jointly and severally liable for any acts or omissions relating to the taxation provisions.


The concept of tax transparency does not extend to other taxes such as VAT and stamp duty. An EEIG will have to register for VAT purposes if it makes taxable supplies in excess of the registration limits, in the same way as any other person.

  1. What are the accounting requirements?

The EEIG is not subject to any accounting or auditing requirements, and therefore does not have to file an annual returns with company registries, but does have to file tax returns.

  1. Is there an obligation to register in other Member States if the EEIG also has activities there?

If a UK-registered EEIG opens an establishment in another Member State that establishment must be registered in that State.


The same applies in reverse: if a grouping opens an establishment in the UK but has its official address in another Member State it must register in that part of the UK where the establishment is situated.

  1. Can the official address be transferred from one Member State to another?

Yes. The official address may be transferred within the Union.

  1. What name can I give the grouping?

EEIGs must include either 'European Economic Interest Grouping' or 'EEIG' in their name.

  1. What information does the formation contract have to provide?

The contract of formation must, as a minimum, contain the following information about the EEIG:

  • its full name;
  • its official address;
  • the objects for which the grouping was formed;
  • the names, business names and legal form of each member;
  • the permanent address or registered office of each member;
  • the number and place of registration (if any) of each member;
  • the duration of the EEIG, except where this is indefinite.

The European Company: Societas Europaea (SE)

  1. What is an SE?

The SE is a European Public Limited – Liability Company. An SE may be created on registration in any one of the Member States of the European Economic Area (EEA). Member States are required to treat an SE as if it is a public limited company formed in accordance with the law of the Member State in which it has its registered office. National laws of Member States that apply to public limited companies also apply, in many respects, to SEs. The SE was originally established by Council Regulation (EC) No 2001/ 2157 on the Statute for a European Company (“the Regulation”) and Council Directive 2001/86/EC (“the Directive”).

By 25 June 2010, only 595 SEs had been registered, including 23 in the UK. Following a review in 2010 on the application of the SE Regulation, the European Commission is considering possible amendments to the SE Regulation, with a view to making proposals in 2012, if appropriate.

  1. How is an SE structured?

There are several ways of forming an SE: by merger, as a holding company or as a subsidiary. An SE can also be formed by a Public Limited Company (“PLC”) transforming into an SE.

Once registered, an SE has legal personality. It must have a registered office and its head office must be in the same Member State. Some Member States may require the registered office and the head office to be at the same address, not just in the same Member State. (The UK does not).

An SE must have share capital and shareholders whose liability is limited in a similar manner to that of a PLC. As with a PLC, an SE may denominate its share capital in any currency it chooses provided, that at least £50,000 is denominated in Sterling or €57,100 is denominated in Euros.

Regardless of the currency in which it is expressed, an SE is required to have a minimum amount of subscribed share capital equivalent to at least EUR €120,000. The relevant conversion rate is that for the last day of the month preceding the formation of the SE.

  1. Does an SE need a minimum amount of share capital to be paid up before it can commence business and borrow

As with a PLC, an SE may only allot shares which are paid up to at least ¼ of their nominal value and the whole of any premium (except as part of an employees’ share scheme). It does not need to obtain a certificate to commence business and borrow.

  1. Can the share capital of an SE be changed?

In general, Articles 5 and 9(c)(ii) of the Regulation apply the same rules to the maintenance of share capital, allotment, restructuring, etc. as those that apply to PLCs.

  1. How is an SE managed?

There are two different systems for the structure of managing and controlling SEs. The SE’s statutes may, therefore, require either a one-tier or two-tier system of administration.

  • in a one-tier system, management is undertaken by an ‘administrative organ’;
  • in a two-tier system, management is undertaken by a ‘management organ’ and a separate ‘supervisory organ’ supervises the work of the management organ.

The Directive also makes provisions for employees to be involved in the management of an SE.

  1. Formation by Merger

Two or more public limited companies or existing SEs may merge to form an SE provided at least two of them are governed by the laws of different Member States. The merger may be conducted by acquisition (with the acquiring company becoming an SE) or by the formation of a new company (with the merging companies ceasing to exist).


Before the merger can take effect, draft terms for the merger must be drawn up by the merging companies and presented to general meetings of their shareholders for approval.


Section 4 - EU Companies - A Glossary of Names

The following list provides an overview of terminology of different legal entitles in European countries

Public and private limited companies in each Member State

Member State Public Limited Liability Companies Private Limited Liability Companies
Austria Aktiengessellschaft (AG) Gesellschaft mit beschränkter Haftung (GmbH)
Belgium Société anonyme (S.A) / Naamloze vennootschap (N.V) Société privée à responsabilité limitée (S.P.R.L) / Besloten vennootschap met beperkte aansprakelijkheid  (B.V.B.A)
Bulgaria Aktsionerno drujestvo/Акционерно дружество (AD/АД) Drujestvo s ogranichena otgovornost/Дружество с Ограничена Отговорност (OOD/ООД)
Cyprus Public Limited Company (PLC) Private Limited Company (Ltd)
Czech Republic Akciová společnost (a.s., akc. spol.) Společnost s ručením omezeným (s.r.o., spol. s r.o.)
Denmark Aktieselskaber (A/S) Anpartselskaber (ApS)
Estonia Aktsiaselts Osaühing
Finland Publikt aktiebolag (Abp) / Julkinen osakeyhtiö (Oyj) aktiebolag (Ab) / osakeyhtiö (Oy)
France Société anonyme (SA) Société à responsabilité limitée (SARL)
Germany Aktiengessellschaft (AG) Gesellschaft mit beschränkter Haftung (GmbH)
Greece εταιρια περιοριομενης ενώυμη εταιρια ευζύνης
Hungary Nyilvánosan működő részvénytársaság (nyrt.) / Zártkörűen működő részvénytársaság (zrt.) Korlátolt felelősségű társaság (kft.) / (kht.) Közhasznú társaság
Ireland Public companies limited

by shares, public

companies limited by guarantee having a share capital

Private companies limited by shares, private companies limited by guarantee having a share capital
Italy Società per Azioni (S.p.A) Società a responsabilità limitata (S.r.l)
Latvia - Sabiedrība ar ierobežotu atbildību (SIA)
Lithuania Uždaroji akcinė bendrovė Akcinė bendrovė
Luxembourg Société anonyme (SA) Société à responsabilité limitée (Sàrl)
Malta Partnership anonyme (Ltd) -
Netherlands Naamloze vennootschap (N.V) Besloten vennootschap met beperkte aansprakelijkheid (B.V)
Poland Spółka akcyjna (SA) Spółka z ograniczoną odpowiedzialnością (Sp. z.o.o.)
Portugal Sociedada anónima

De responsabilidade limitada (S.A)

Sociedada por quotas de      responsabilidade limitada
Romania Societate pe Acţiuni (SA) Societate cu răspundere limitată (SRL)
Slovakia Akciová spoločnosť (A.S) Spoločnosť s ručením obmedzeným (S.R.O)
Slovenia Delniška družba (D.D) Družba z omejeno odgovornostjo (D.O.O)
Spain Sociedad anónima (SA) Sociedad de responsabilidad limitada (S.L)
Sweden Publikt aktiebolag (AB) Aktiebolag (AB)
United Kingdom Public companies

limited by shares,

public companies

limited by

guarantee having a share capital (PLC)

Private companies limited by shares, private companies limited by guarantee having a share capital (Ltd)

Section 5  - Recent International Developments

ICGN guidelines on corporate risk oversight

ICGN published its Corporate Risk guidelines (short version only available online) which aim to help investors assess how well a portfolio company’s board is effectively overseeing risk management. The guidelines are intended to be used by institutional investors who own stakes in corporations in all jurisdictions.

OECD: recommendations for corporate governance in light of financial crisis

In 2009, the OECD launched a plan to address corporate governance weaknesses related to the financial crisis. It aims to develop a set of recommendations for improvements in priority areas, such as board practices, implementation of risk-management, governance of the remuneration process and the exercise of shareholder rights. The recommendations will also address how the implementation of their principles of corporate governance may be improved.

In 2010 the OECD then published a report upon corporate governance and the financial crisis, setting out conclusions and emerging good practices relating to corporate governance and the financial crisis. The report states that the OECD Principles on Corporate Governance provide a good basis to address the concerns raised in the OECD's earlier reports and that its priority should be to support the implementation of agreed international and national corporate governance standards, including the Principles.


US developments

Following the Enron and WorldCom scandals, the Sarbanes–Oxley Act was introduced and with changes to the rules of the National Association of Securities Dealers and New York Stock Exchange. These changes include CEO and CFO certification of financial statements, certification of annual and quarterly reports filed with the SEC (including sign off on not misleading/internal controls), the requirement for a wholly independent audit committee and hefty penalties for those involved in wrong–doing (including the reimbursement of benefits), rapid and current disclosure requirement, increased regulation of accountancy firms, and rules to address conflicts of interest in connection with analysts' recommendation of equities.

Following the global financial crisis, the US has introduced the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) which puts in place wide-ranging reforms of the US financial regulatory system, affecting most if not all aspects of the financial industry. The Dodd-Frank Act includes reforms in the areas of executive compensation in US public companies generally, corporate governance, and private equity. Many of the provisions of the Dodd-Frank Act may affect non-US companies who have banking or other financial operations in the US and may also impact non-US companies such as UK companies listed on a US securities exchange or that have sold securities to the US public in the past.

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