5. Enforcement strategies in UK corporate governance: A roadmap and empirical assessment

The Law and Economics of Corporate Governance: Changing Perspectives

Volumn , Issue , 2010, Pages 213-258

  Armour, John ^a,b  

^a UNIVERSITY OF OXFORD   (United Kingdom)

^b ECGI ^*  (United States)

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[No Author keywords available]

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EID: 84881931063     PISSN: None     EISSN: None     Source Type: Book    
DOI: None     Document Type: Chapter

References (168)

1. R Pound, 'Law in Books and Law in Action', (1910) 44 American Law Review 12.
2. S Djankov, R La Porta, F Lopes-de-Silanes, and A Shleifer, 'The Law and Economics of Self-dealing', NBER Working Paper 11883 (2005) (henceforth 'Self-Dealing')
3. R La Porta, F Lopes-de-Silanes, and A Shleifer, 'What Works in Securities Laws?', (2006) 61 Journal of Finance 1 (henceforth 'What Works?').
4. JC Coffee, Jr, 'Law and the Market: The Impact of Enforcement', (2007) 156 University of Pennsylvania Law Review 229
5. HE Jackson and MJ Roe, 'Public and Private Enforcement of Securities Laws: Resource-based Evidence', (2009) 87 Journal of Financial Economics 207.
6. See R La Porta, F Lopez-de-Silanes, and A Shleifer, 'Corporate Ownership Around the World', (1999) 54 Journal of Finance 471, 492
7. M Becht and C Mayer, 'Introduction', in F Barca and M Becht (eds), The Control of Corporate Europe (Oxford: OUP, 2001), 19-30
8. M Faccio and LHP Lang, 'The Ultimate Ownership of Western European Corporations', (2002) 65 Journal of Financial Economics 365, 379-380
9. CG Holderness, 'The Myth of Diffuse Ownership in the United States', (2009) 212 Review of Financial Studies 1377.
10. See R Kraakman et al, The Anatomy of Corporate Law (Oxford: OUP, 2004), 21-2.
11. See PL Davies, Introduction to Company Law (Oxford: Clarendon Press, 2002), 215-17.
12. For details of private enforcement activity in the US, see RB Thompson and RS Thomas, 'The Public and Private Faces of Derivative Lawsuits', (2004) 57 Vanderbilt Law Review 1747
13. J Armour, B Black, BR Cheffins, and RC Nolan, 'Private Enforcement of Corporate Law: An Empirical Comparison of the United Kingdom and United States', (2009) 6 Journal of Empirical Legal Studies 701.
14. See, for example, JR Hay and A Shleifer, 'Private Enforcement of Public Laws: A Theory of Legal Reform', (1988) 88 American Economic Review 398.
15. P Fenn and C Veljanovski, 'A Positive Theory of Regulatory Enforcement', (1988) 98 Economic Journal 1055.
16. See, for example, RC Picker, 'Simple Games in a Complex World: A Generative Approach to the Adoption of Norms' (1997) 64 University of Chicago Law Review 929 1225, 1239-40, 1286
17. J McMillan and C Woodruff, 'Private Order Under Dysfunctional Public Order' (2000) 98 Michigan Law Review 2421, 2426-30.
18. BL Liebman and CJ Milhaupt, 'Reputational Sanctions in China's Securities Market', forthcoming (2008) 108 Columbia Law Review 929.
19. Moreover, where sanctions are imposed for matters implying a breach of trust - fraud, for example - the drop in stock price frequently exceeds the expected value of the sanction, implying that the firm's reputation has been harmed by the signal of its propensity for opportunism: see CR Alexander, 'On the Nature of the Reputational Penalty for Corporate Crime: Evidence', (1999) 42 Journal of Law & Economics 489
20. JM Karpoff, DS Lee, and GS Martin, 'The Cost to Firms of Cooking the Books', (2008) 43 Journal of Financial and Quantitative Analysis 581.
21. In relation to private parties, the distinction between formal and informal enforcement to some degree tracks the distinction drawn in the social norms literature between 'third party' and 'second party' enforcement: third parties being external to the interaction regulated by the conduct (courts and arbitrators), and second parties being themselves participants (visiting reputational sanctions): See RC Ellickson, Order Without Law: How Neighbours Settle Disputes (Cambridge, MA: Harvard University Press, 1991), 126-32.
22. AO Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States (Cambridge, MA: Harvard University Press, 1970).
23. See O Hart, Firms, Contracts, and Financial Structure (Oxford: Clarendon Press, 1995).
24. See EB Rock and ML Wachter, 'Islands of Conscious Power: Law, Norms and the Self-governing Corporation', (2001) 149 University of Pennsylvania Law Review 1619
25. J Armour and MJ Whincop, 'The Proprietary Foundations of Corporate Law', (2007) 27 Oxford Journal of Legal Studies 429.
26. See, for example, Gary Becker, 'Crime and Punishment: An Economic Approach', (1968) 76 Journal of Political Economy 169.
27. The figures for listed companies in Table 5.1 exclude 'cross-listings' - that is, UK-listed firms incorporated in other jurisdictions - and are therefore a subset of the population of public companies.
28. Cases which produce more than one judgment (for example, appellate decisions) are counted only once, and are recorded according to the date of the most recent judgment.
29. These databases aim to cover all decisions (both final and interim hearings) in which a written judgment has been delivered, or where an official transcript has been authorised by the judge. Coverage prior to 1996 includes only decisions selected for inclusion in law reports. From 1996 onwards, the databases include transcripts of unreported decisions. This transcript coverage becomes comprehensive as regards the Court of Appeal and High Court from 2001, when standardised numbering of transcripts was introduced.
30. Marshall's Valve Gear Co Ltd v Manning, Wardle & Co [1909] 1 Ch 267
31. Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, 221
32. Breckland Group Holdings Ltd v London & Suffolk Properties Ltd [1989] BCLC 100.
33. Foss v Harbottle (1843) 2 Hare 461, 67 ER 89
34. Mozley v Alston (1847) 1 Ph 790, 41 ER 833.
35. CA 2006 ss 260-64 (in force from 1 October 2007).
36. Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, 221; CPR, r. 19.9.
37. See Edwards v Halliwell [1950] 2 All ER 1064, 1066-7
38. Barrett v Duckett [1995] 1 BCLC 243, 248. The mere possibility of the matter being resolved by a general meeting - as opposed to its in fact having done so - sufficed to bar a derivative action. This was to encourage the minority shareholder to bring his or her grievance before the general meeting for resolution according to the wishes of the majority.
39. Russell v Wakefield Waterworks Co (1875) LR 20 Eq 474, 482.
40. Pavlides v Jensen [1956] Ch 565.
41. These have not been altered by the Companies Act 2006: see A Reisberg, Derivative Actions and Corporate Governance (Oxford: OUP, 2007), 166.
42. [1975] QB 373.
43. CPR r. 19.9
44. Companies Act 2006 ('CA 2006')s 994.
45. Companies Act 1980 s 75. It replaced a previous provision (Companies Act 1948 s 210) which had required a minority shareholder to show 'oppression' by the majority and had been interpreted very restrictively by the courts: see DD Prentice, 'The Theory of the Firm: Minority Shareholder Oppression: Sections 459-461 of the Companies Act 1985', (1988) 8 Oxford Journal of Legal Studies 55.
46. Re A Company [1986] BCLC 68.
47. Compare Re Elgindata Ltd [1991] BCLC 959, 993-4 (simple mismanagement does not constitute unfair prejudice) with Re Macro (Ipswich) Ltd [1994] 2 BCLC 354, 393-5, 404-7
48. Bhullar v Bhullar [2003] EWCA Civ 424, [2003] 2 BCLC 241 (misappropriation of corporate assets by respondent shareholder).
49. See also Re Saul D Harrison & Sons plc [1994] BCC 475, 489-91, 499-500 (breach of directors' duties must be sufficiently serious as to be 'unfairly' prejudicial)
50. Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] UKPC 26, [2008] 1 BCLC 468, at [13] ('self-serving' negligence).
51. See Re Little Olympian Each-Ways Ltd (No 3) [1995] 1 BCLC 636
52. Profinance Trust SA v Gladstone [2001] EWCA Civ 1031, [2002] 1 BCLC 141 at [33]-[45], [59]-[61].
53. Re a Company (No 005136 of 1986) [1987] BCLC 82.
54. [2003] EWCA Civ 810, [2003] 2 BCLC 393 at [35].
55. See J Payne, 'Shareholders' Remedies Reassessed' (2004) 67 Modern Law Review 500.
56. The status of companies as 'listed' was determined manually, as the vast majority of UK 'public' companies are not listed. Cases involving public companies ('plcs') were first identified, and the transcripts and contemporary newspaper reports were cross-checked for evidence as to their status as listed or unlisted companies.
57. See generally, PL Davies, Gower and Davies' Principles of Modern Company Law, 7th edition (London: Sweet & Maxwell, 2003), 517-23.
58. See, for example, Re Blue Arrow plc [1987] BCLC 585, 590.
59. In contrast, Table 5.2 includes only those petitions that related to breach of directors' fiduciary duties.
60. Table 5.3 reported three additional cases in relation to listed companies during the period 1998-2006. These involved allegations either of informal understandings between all the shareholders, or of breaches of the articles.
61. See Law Commission, Shareholder Remedies, LCCP 142 (London: TSO, 1996), 235-38.
62. See Re Barings plc (No 6) [2001] 2 BCLC 159 at [4] (claim brought against Barings plc in 1996)
63. Axa Equity and Law Life Assurance Society plc v National Westminster Bank plc, (CA) 7 May 1998 (unreported) (claim brought against Coopers & Lybrand).
64. Under the principles articulated in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 and developed in Caparo Industries plc v Dickman [1990] 2 AC 605.
65. Derry v Peek (1889) 14 App Cas 337.
66. Liability for false or misleading statements or material omissions in respect of continuing disclosure was practically ruled out by requirements that the defendant must have known the identity of the claimant: see P Davies, Liability for Misstatements to the Market: A Discussion Paper (HM Treasury, London, 2007), 18-21.
67. A statutory cause of action for misstatements in relation to continuing disclosure was introduced in November 2006: see Financial Services and Markets Act 2000 ('FSMA 2000') s 90A (inserted by CA 2006). However this liability falls only on the issuer, and not on individuals - such as directors - involved in making the statement (FSMA 2000 s 90A(3)).
68. A survey by Ferran of LexisNexis revealed three cases: Al-Nakib Investments (Jersey) Ltd v Longcroft [1990] 1 WLR 1390
69. Possfund Custodian Trustee Ltd v Diamond [1996] 1 WLR 1351
70. Axa Equity and Law Life Assurance Society plc v National Westminster Bank plc, CA 7 May 1998 (unreported) (E Ferran, 'Cross-border Offers of Securities in the EU: The Standard Life Flotation' (2007) 4 ECFR 461, 476-77). An extension of this survey to Westlaw UK and Lawtel did not reveal any further cases.
71. See Insolvency Act 1986 s 212.
72. Insolvency Act 1986 ss 213-14. Fraudulent trading connotes that the directors were aware of the company's true financial position; wrongful trading that they negligently failed to be so aware.
73. Author's analysis of LexisNexis, Westlaw and Lawtel transcripts.
74. Bairstow v Queens Moat Houses plc [2000]1 BCLC 549, [2001] EWCA Civ 712, [2001] 2 BCLC 531.
75. FSMA 2000 Part VI, esp. ss 72, 77, 89, 91.
76. FSMA 2000 Part VIII, esp. ss 123, 129.
77. See FSMA 2000 ss 401-02 (criminal prosecution powers, particularly in relation to insider dealing under the Criminal Justice Act 1993 Part V), 91, 123 (civil penalties for breaches of Listing Rules or market abuse), 66 (civil penalties against authorised persons). See also ss 380-84 (ancillary powers to seek injunctions and/or restitution orders).
78. FSMA 2000 ss 56, 63.
79. FSMA 2000 ss 77, 87K-87L, 89L.
80. FSMA 2000 ss 66, 87M, 89, 89K.
81. See FSA, The Enforcement Guide (London: FSA, 2007), 23-36.
82. Criminal Justice Act 1993 Part V. See esp. s 61(1).
83. FSMA 2000 s 397.
84. See DTI, Companies in 2002-3 (2003), 22. The Serious Fraud Office ('SFO') also has power to investigate and prosecute insider dealing where this involves serious or complex fraud: see Criminal Justice Act 1987 s 1(3).
85. FSMA ss 118, 123.
86. See H McVea, 'Fashioning a System of Civil Penalties for Insider Dealing: Sections 61 and 62 of the Financial Services Act 1986', [1996] JBL 344, 349-50.
87. M Filby, 'The Enforcement of Insider Dealing under Financial Services and Markets Act 2000', (2003) 24 Company Lawyer 334.
88. N Moneiro, Q Zaman, and S Leitterstorf, 'Updated Measures of Market Cleanliness', FSA Occasional Paper No 25 (2007).
89. However it is of course possible that they simply reflect good 'guesswork' by sophisticated investors.
90. This was set up in response to a number of corporate failures and scandals involving poor accounting and financial reporting during the 1980s. In particular, statutory recognition was granted to accounting standards produced by the FRC's Accounting Standard Board, and power was devolved to the FRRP to enforce breaches of these standards in respect of financial statements by companies.
91. This includes all public companies and large private companies. Responsibility for oversight of accounting requirements in relation to small private companies was left to the DTI (now BERR): see Memorandum of Understanding between the FRRP and the FSA, 6 April 2005, para 3.
92. See Financial Reporting Council, The State of Financial Reporting: A Review (London: FRC, 1991), 24-5, 49-50.
93. Companies Act 1989 s 12, inserting ss 245-245C into Companies Act 1985. Equivalent provisions now appear as CA 2006 ss 456-7. The FRRP was authorised to exercise these powers by the Companies (Defective Accounts) (Authorised Person) Order 1991, SI 1991/13.
94. See, for example, Financial Reporting Council, Annual Review 2002 (London: FRC, 2003), 58-9
95. Financial Reporting Council, Annual Review 2003 (London: FRC, 2004), 55-7.
96. The scope of the FRRP's investigatory role was also increased to include compliance with accounting requirements imposed by the Listing Rules as well as the general Companies Legislation. Companies (Audit, Investigations and Community Enterprise) Act 2004 s 14 (requiring prescribed body to 'keep under review' periodic accounts and reports that are produced by issuers required to comply with accounting requirements imposed by the Listing Rules); Supervision of Accounts and Reports (Prescribed Body) Order 2005, SI 2005/715 (naming FRRP as prescribed body).
97. See, for example, Financial Reporting Review Panel, Activity Report 2006-7 (London: FRRP, 2008), 4-6.
98. See generally, K Cearns and E Ferran, 'Non-enforcement Led Public Oversight of Financial and Corporate Governance Disclosures and of Auditors', ECGI Law Working Paper No 101/2008, 20-27.
99. See, for example, T Tridimis, 'Self-regulation and Investor Protection in the United Kingdom: The Takeover Panel and the Market for Corporate Control', (1991) 10 CJQ 24
100. TP Lee, 'Takeover Regulation in the UK', in K Hopt and E Wymeersch (eds), European Takeovers: Law and Practice (London: Butterworths, 1992), 133.
101. R v Panel on Take-overs and Mergers, Ex parte Datafin plc [1987] QB 815.
102. CA 2006 Part 28.
103. Takeover Code, A2.
104. For example, in relation to speculation surrounding potential interest by CVC Partners and others in J Sainsbury & Co plc, the supermarket, the Panel on 6 March 2007 gave CVC until 13th April 2007 to 'put up or shut up': that is, either to declare a firm offer for the company, or to decline to bid for a further year: see Takeover Panel, 'Sainsbury (J) plc', Panel Statement 2007/8
105. E Rigby and L Saigol, 'Pressure on CVC to Make Sainsbury Bid', Financial Times, 5 April 2007.
106. See Takeover Panel, 'British Telecommunications plc offer for Plusnet plc', Panel Statement 2007/6, 2, 5-6
107. D Jordon, 'BT Reviews Rothschild's Fees as Takeover Panel Criticises Bank', The Times, 13 February 2007.
108. See now CA 2006 ss 946, 954.
109. See Takeover Panel, Annual Report 1988-89 (London: Takeover Panel, 1989), 8. The breaches concerned failure to disclose purchases of shares in Distillers by a party acting in concert with Guinness.
110. For example, the Panel's statement in relation to two Scottish financiers involved in numerous Code breaches in relation to an attempted takeover of Dundee Football Club plc in 1991, read as follows in the Panel's view neither Mr Drummond nor Mr Prentice nor any company which is in practice, directly or indirectly, controlled by either or both of them is likely to comply with the standards of conduct for the time being expected in the United Kingdom concerning the practices of those involved in takeovers and mergers. Therefore persons or firms authorised to conduct investment business are prohibited from acting for Mr Drummond or Mr Prentice or companies which are controlled by either or both of them in connection with transactions regulated by the City Code': Takeover Panel, 'Mr Andrew P Drummond and Mr Robert D Prentice: Re Dundee Football Club plc', Panel Statement 1992/9, 15.
111. See FSA Handbook, MAR 4.3.
112. To be sure, a calculating 'one shot' player, who determines that they will cynically breach the Code and has no interest in returning to the stock market, will not be deterred by such threats. However, most bidders in control transactions are repeat players.
113. CA 2006 s 955.
114. Prior to 1970, the DTI was known as the Board of Trade.
115. See DTI, Companies in 2005/6 (London: TSO, 2006), 7.
116. Companies Act 1985 s 447. These powers were extended in 2004 to permit the inspectors to require the disclosure of information as well as documents: see generally, DTI, Companies (Audit, Investigations and Community Enterprise) Act 2004: A Guide to the New Investigations Provisions Introduced by the Act (London: DTI, 2005)
117. S Sheikh, 'Company Investigations: Powers for the 21st Century', (2002) 13 ICCLR 228. Part XIV of the 1985 Act has not been repealed by the CA 2006.
118. The largest category of referrals comes from the general public (60-80%) and the most frequent reason for referral is an allegation of fraud: see, for example, DTI, Companies in 2004/5 (London: DTI, 2005), 9-10.
119. Companies Act 1985 s 432.
120. See, for example, Companies House, 'Tackling Corporate Abuse: Companies Investigation Branch (CIB) at Work', Register No 67, February 2007, 12-13.
121. See, for example, DTI, Companies in 2003/4 (London: DTI, 2004), 17 (Table 2). Recently published reports include those on Queens' Moat Houses plc (530 pp), Mirror Group Newspapers plc (762 pp) and Transtec plc (452 pp). http://www.insolvency.gov.uk/cib/inspectorsreports.htm.
122. Insolvency Act 1986 s 218(3); see also ss 132-3.
123. Insolvency Act 1986 s 124A. See generally V Finch, 'Public Interest Liquidation: PIL or Placebo?' (2002) 5 Insolvency Lawyer 157.
124. More frequent still are prosecutions of companies for regulatory offences such as late filing of accounts.
125. CA 2006 s 387.
126. CA 2006 s 993.
127. Insolvency Act 1986 ss 206-11.
128. Company Directors Disqualification Act 1986 ss 11, 13.
129. See, for example, CA 2006 ss 183 (failure to disclose interest in self-dealing transaction); 228, 237 (failure to keep copies of directors' service contracts or indemnity arrangements available for inspection); 248 (failure to keep minutes of directors' meetings); 291-3 (failure to circulate resolutions).
130. Law Commission, Company Directors: Regulating Conflicts of Interest and Formulating a Statement of Duties, LCCP 153 (London: TSO, 1998), 223 (noting that during period 1991-6, DTI records show only one prosecution for criminal offences resulting from breaches of directors' duties).
131. S Deakin and A Hughes, Directors' Duties: Empirical Findings. Report to the Law Commissions (1999), section 5.3.5, available at http://www.lawcom.gov.uk/docs/153study.pdf.
132. See generally, A Walters and M Davis-White, Directors' Disqualification and Bankruptcy Restrictions (London: Sweet & Maxwell, 2005).
133. Company Directors Disqualification Act 1986 s 1A (inserted by Insolvency Act 2000).
134. For example, several former directors of Barings plc were disqualified in 1998 for having failed to implement a system of control adequate to restrain the activities of Nick Leeson, whose 'rogue trades' brought down the bank: see Re Barings plc (No 5) [1999] 1 BCLC 433; [2000] 1 BCLC 523.
135. See M Carapeto and L Stuflesser, 'The Information Content of Administration and Administrative Receivership Filings in the UK', working paper, Cass Business School (2006), 20 (approximately ten UK-listed firms entering receivership or administration each year during period 1996-2003).
136. These figures may over-estimate the contribution of the FRRP, some of whose investigations concern unlisted firms, and under-estimate the contribution of the FSA in relation to the Listing Rules, where the relevant population of firms does not include AIM-listed companies.
137. See FRC, The Combined Code on Corporate Governance (London: FRC, 2006) ('Combined Code 2006'), available at: http://www.frc.org.uk/documents/pagemanager/frc/Combined%20Code%20June%202006.pdf.
138. The Listing Rules require that listed companies incorporated in the UK state in their Annual Reports (i) how the principles of the Code have been applied (LR 9.6.8(5)), and (ii) a statement as to whether the provisions of the Code have been complied with or not, and if not, the reasons for non-compliance (LR 9.6.8(6)).
139. See Weil, Gotshal & Manges, Comparative Study of Corporate Governance Codes Relevant to the European Union and its Member States: Final Report & Annexes I-III (Brussels: European Commission, 2002), 71
140. Financial Services Authority, Annual Report 2004-5, 140 (2005)
141. Financial Services Authority, Annual Report, 2005-6, 141 (2006) (annual breakdowns of enforcement activity).
142. SR Arcot and VG Bruno, 'In Letter but not in Spirit: An Analysis of Corporate Governance in the UK', working paper, London School of Economics (2006), 56 (Table 7).
143. See N Vafeas and E Theodorou, 'The Relationship between Board Structure and Firm Performance in the UK', (1998) 30 British Accounting Review 383, 395-9
144. C Weir, D Laing, and PJ McKnight, 'Internal and External Governance Mechanisms: Their Impact on the Performance of Large UK Public Companies', (2002) 29 Journal of Business Finance and Accounting 579, 594-603
145. C Padgett and A Shabbir, 'The UK Code of Corporate Governance: Link between Compliance and Firm Performance', working paper, University of Reading ICMA Centre Finance Discussion Paper No DP2005-17 (2005), 18-25
146. SR Arcot and VG Bruno, 'One Size Does Not Fit All, After All: Evidence from Corporate Governance', working paper, London School of Economics (2007), 18 (no link between stated compliance with provisions of Code and operating performance for samples of UK-listed firms, respectively in 1994, 1994-6, 2000-03, and 1998-2004).
147. For example, the model of the independent director may be less helpful for high-growth firms; non-executive directors with a significant interest in the company may be better motivated to assist executives in strategy and in networking.
148. See MA Lasfer, 'On the Monitoring Role of the Board of Directors: The Case of the Adoption of Cadbury Recommendations in the UK' (2004) 9 Advances in Financial Economics 287, 310-14 (adoption of Code's board structure recommendations negatively associated with operating performance for firms in high-growth sectors, but positively associated for firms in mature industries with free cash flow, for which monitoring by independent directors may be beneficial).
149. CA 2006 s 168.
150. In the US, where there is no mandatory provision granting shareholders the right to remove directors, it may take two to three years to wrest control from a staggered board following a takeover: see LA Bebchuk, JC Coates IV, and G Subramanian, 'The Powerful Antitakeover Force of Staggered Boards: Further Findings and a Reply to Symposium Participants', (2002) 55 Stanford Law Review 885.
151. CA 2006 ss 303-05. Moreover, shareholders holding more than 5% of the voting rights in public companies may require resolutions to be put onto the agenda for the AGM, and circulated to shareholders in advance, also at the company's expense (CA 2006 ss 338-9).
152. B Buchanan and T Yang, 'A Comparative Analysis of Shareholder Activism in the US and UK: Evidence from Shareholder Proposals', paper prepared for Oxford/Yale conference on UK-US corporate governance (2007), 44-5.
153. See, for example, 'Error Deprives Schroders of FTSE 100 Place', Financial Times, 15 March 2007 ('Unusually for a UK company, Schroders has voting and non-voting shares.').
154. See 'Views on Non-Voting Shares', The Times, 23 August 1957, 12
155. GP Stapledon, Institutional Shareholders and Corporate Governance (Oxford: Oxford University Press, 1996), 58-9
156. J Franks, C Mayer, and S Rossi, 'Spending Less Time with the Family: The Decline of Family Ownership in the UK', in RK Morck (ed), A History of Corporate Governance around the World (Chicago: University of Chicago Press, 2005), 581, 582-3
157. W Underhill (ed), Weinberg and Blank on Takeovers and Mergers (London: Sweet & Maxwell, 5th edition, 1989 & Supp. 2006), § 4-7077.
158. As in Bushell v Faith [1970] AC 1099.
159. City Code, GP 7 and Rule 21. See also J Armour and DA Skeel, Jr, 'Who Writes the Rules for Hostile Takeovers, and Why? The Peculiar Divergence of US and UK Takeover Regulation', (2007) 95 Georgetown Law Journal 1727, 1734-8.
160. Bids are only counted as 'hostile' if the target management remains opposed until the bid is resolved.
161. CA 2006 ss 190, 197.
162. LR 10, 11.
163. CA 2006 ss 549-51, 560-77.
164. LR 9.3.11-12. Moreover, shares may not be issued at a discount of more than 10% of their current market price unless as a 'rights issue' or specifically approved by shareholders: LR 9.5.10.
165. CA 2006 ss 570-71, LR 9.3.12(1).
166. For the latest version, see Pre-emption Group, Disapplying Pre-emption Rights: A Statement of Principles (London: FRC, 2006), available at http://www.preemptiongroup.org.uk/documents/pdf/DisapplyingPre-EmptionRightsStatementofPrinciples.pdf.
167. See, for example, PL Davies, 'Institutional Investors in the United Kingdom', in DD Prentice and PRJ Holland (eds), Contemporary Issues in Corporate Governance (Oxford: OUP, 1991), 69.
168. R Crespi-Cladera and L Renneboog, 'Corporate Monitoring by Shareholder Coalitions in the UK', ECGI Finance Working Paper 12/2003 (2003), 6.