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Friday 9 December 2016

MH Corporate

E-signatures in Commercial Contracts

Introduction

The days when parties to a transaction would have to be physically at the same meeting to sign transaction documents are diminishing. It is now common practice for the lawyers involved to arrange a signing via email. Transactions typically see signatories signing a hard copy document in wet ink, and they then scan and send the document by email. However, as technology evolves, the use of e-signatures has become increasingly common. This article sets out the present position on the scope for use and acceptance of electronic signatures in commercial transactions in the UK.

Restrictive Covenants – will they make the cut?

In the recent case of Rush Hair Ltd v Gibson-Forbes & Anor [2016] EWHC 2589 (QB), the High Court considered the enforceability of two restrictive covenants contained within a share purchase agreement (SPA).

The Facts

In March 2015, the claimant, a hairdressing company called Rush Hair Limited (Rush), entered into a share purchase agreement (SPA) with the first defendant Hayley Gibson-Forbes (H), to purchase the share capital of two companies owned by H: Hair (Windsor) Limited and Hair (Maidenhead) Limited (Companies). Rush agreed to pay £25,000 on completion of the SPA, and a further £15,000 (Deferred Consideration) six months after completion provided that H did not breach any of the provisions of the agreement.

 

Friday 20 November 2015

MH Corporate

Indemnities and interpretation: a case of cats and dogs

The recent Court of Appeal decision Wood v Sureterm Direct Ltd & Capita Insurance Services Ltd [2015] EWCA Civ 839 considered how to interpret an indemnity clause in a sale and purchase agreement, overturning the High Court decision. The Court examined its role in interpreting a contract between parties where the language was capable of having more than one meaning, finding that it is not for the courts to improve a party’s bad bargain where it would undermine the importance of the natural language used.

The Good, the Bad and the Faithful

The case of Portsmouth City Council v Ensign Highways Ltd [2015] EWHC 1969 (TCC) considered whether a duty to act in good faith could be implied into the Council’s dealings with its service provider (Ensign).

Illegality considered – the case of Jetivia SA and another v Bilta (UK) Ltd

In the recent case Jetivia SA and another v Bilta (UK) Ltd [2015] UKSC 23 (“Jetivia v Bilta”) the Supreme Court considered the application of the illegality defence.

Through its liquidators, an insolvent English company, Bilta (UK) Limited (“Bilta”), brought claims against its directors for unlawful means conspiracy involving them breaching their fiduciary duties and against a Swiss company, Jetivia SA (“Jetivia”) and its sole French director for dishonestly assisting them. Jetivia and its directors applied to strike out Bilta’s claim on the basis of the “illegality defence”, the principle that the courts will not assist a claimant whose claim is only possible due to the claimant’s own illegal action.

Corporate Update: Recovery of avoided loss and collateral benefits

The case of Swynson Limited v Lowick Rose LLP [2015] EWCA Civ 629 on appeal to the Court of Appeal concerned an amount of damages recoverable by a lender from a negligent firm of accountants which failed to perform a proper exercise of due diligence on the borrower to whom monies were lent on reliance on that negligent advice. The loan was repaid by using money lent to the borrower by the owner of the lending company. At first instance the High Court held that repayment was a collateral matter which did not go to reduce the damages recoverable by the lender from the negligent accountants. The appeal concerned, amongst other matters, whether damages due for that negligence could be reduced by “avoided loss”. The avoided loss came about through the repayment to the borrower of the two initial loans through the issue of a third refinancing loan from the borrower’s owner undertaken principally for tax reasons.

Tuesday 9 June 2015

MH Corporate

End of the corporate director… or not

Currently in the UK, companies are permitted to appoint directors who are corporate entities rather than individuals/natural persons. However, under the Companies Act 2006 all companies must have at least one director who is a natural person at all times.

Only just over one per cent. of UK companies use corporate directors. There are several reasons why it may be attractive or beneficial for companies to appoint corporate directors, such as administrative flexibility and efficiency. A corporate director could remain constant without the need to effect frequent appointments and resignations of individual directors. A parent company may also wish to directly control how its subsidiaries are run and may do so by it, or another group company, being appointed as a director of the subsidiaries.

How the courts will calculate business interruption losses

The case of Sugar Hut Group & Others v A J Insurance [2014] EWHC 3775 (Comm) considered the measure of business interruption losses to which the claimants were entitled following a serious fire at a well-known nightclub – the Sugar Hut Club in Brentwood, Essex (the “Club”). The case highlights the importance of full disclosure before inception of an insurance policy and gives an indication of how the courts will calculate business interruption losses and in particular the proper assessment of the overall loss of turnover.

The Facts

Following a fire on 13 September 2009, the Club was effectively unusable for a period of some 49 weeks until it eventually reopened on 25 August 2010. Very shortly after the Club reopened, it started to feature in a well-known TV show – The Only Way is Essex which significantly increased its national profile.  The Court referred to this as the ‘TOWIE’ effect.

Amendments to the Share Buyback regime: encouraging employee ownership

The Department for Business, Innovation & Skills has published new regulations amending the share buyback process under the Companies Act 2006, in an attempt to clarify the previous amendments of 2013. With these latest changes having come into force with effect from 6 April 2015, we take a look at the regime’s evolution over recent years and the likely effects of the changes.

Thursday 4 December 2014

Mini-bonds – an alternative funding solution

What are mini-bonds?

A ‘bond’ is a debt instrument under which an investor lends money to a borrower, usually a corporate entity. Bonds are issued by the borrower on specified terms which are contained in a ‘bond instrument’.

Traditional bonds are issued by companies to both private and institutional investors and are traded on a stock market. Such bonds are commonly known as ‘corporate bonds’ or ‘retail bonds’ (although unlisted bonds are also sometimes referred to as retail bonds) and are issued by a variety of companies, including well known brands such as Tesco, National Grid and GlaxoSmithKline.

There is no legal definition of a ‘mini-bond’. However, the term is generally used to describe bonds which are offered mainly to private individuals and which are not listed or traded on any stock market. Typically, mini-bonds are not redeemable prior to maturity and are non-transferable, so the investor is tied in for the term of the bond.

Mini-bonds, as opposed to corporate bonds, tend to be issued by much smaller companies. Mr and Mrs Smith, Hotel Chocolat, Ladbrokes and the University of Cambridge are examples of some more well-known companies and organisations which have issued mini-bonds to raise money.

Mini-bonds, like crowd-funding, have become an attractive method of raising capital for smaller companies as a result of the difficulties in securing bank finance over the last seven or eight years. As Capita Asset Services, a leading administrator of mini-bonds, says “Mini-bonds offer a number of other potential benefits to companies including brand building, increased company profile and customer loyalty.”The market has seen mini-bonds issued across a wide range of sectors including commercial real estate, confectionary, leisure and gambling, retail, food and beverage and education.

One of the main attractions of mini-bonds is the better interest rates they offer compared with the high street banks. Typically, mini-bonds will have a coupon of anywhere between five and 10 per cent., whereas current deposit rates offered by banks may be as low as one to two per cent.

If you would like to discuss how we can help you with your mini-bond and financial promotion, please contact us and we would be delighted to advise and support you:

Pure FS Support Limited
Katherine Norris
E: katherine@purefssupport.co.uk
T: 07977 274 628

Marriott Harrison LLP
Ben Devons
E: ben.devons@marriottharrison.co.uk
T: 020 7209 2000

Hugh Gardner
E: hugh.gardner@marriottharrison.co.uk
T: 020 7209 2000

Capita Asset Services
Ian Shaw
E: ian.shaw@capita.co.uk
T: 020 7954 9705

This article has been jointly written by Pure FS Support and Marriott Harrison LLP with contributions from Capita Asset Services. It has been written for information purposes only.

Friday 24 October 2014

MH Corporate

Court of Appeal Decision on De Facto and Shadow Directors

The recent Court of Appeal decision in Smithton Ltd (formerly Hobart Capital Markets Ltd) v Naggar and others [2014] EWCA Civ 939 is a reminder about the points of general practical importance for identifying de facto and shadow directors.

The definitions of de facto director and shadow director have been determined by statute and case law. Without ever having been formally appointed as a director, a person may become a de facto director if they have performed the functions of a director, or become a shadow director if they are able to persuade the directors of a company to act in a certain way. The question which arose in this case, and which often arises in practice given the substantial duties (and potential liabilities) imposed on a company director, is whether a director of the holding company of a group of companies has become a director of its subsidiaries.

The Importance of Being Clear

In the recent case of Heritage Oil and Gas Ltd & Anor v Tullow Uganda Ltd [2014] EWCA Civ 1048, the Court of Appeal reinforced the importance of using clear language when drafting a provision that is intended to operate as a condition precedent.

The appellant, Heritage, argued that Tullow could not bring a claim under an indemnity because, amongst other things, it had failed to comply with the notice provisions requiring it to give Heritage 20 business days’ notice of any tax claim.

Why It’s Not Always Good To Get A Promotion

We are often asked by companies wishing to raise money how they may do so lawfully. They may have entered into an agreement with a third party which agrees to procure finance for them. This is a heavily regulated area, with significant consequences for breaching the law. It is commonly referred to as the Financial Promotion Regime. Below, I summarise some of the key points which arise out of the regime and their consequences in an equity fund raising scenario. I do not address here any potentially overlapping issues arising from the Markets in Financial Instruments Directive.

The Bearer of Bad News?

The Small Business, Enterprise and Employment Bill (the “Bill”) had its second reading in the House of Commons on 16 July 2014, and shall soon be timetabled to continue its march towards royal assent.

The rationale underpinning the Bill is the frequently resurrected (although seemingly never-ending) goal of cutting bureaucracy to stimulate enterprise, or, as it is more windily described in Research Paper 14/39, “[to] reduce regulatory burdens and facilitate the inception, financing and growth of business”.

The Bill’s scope includes addressing the transparency of company ownership, which has led to proposals for the abolition of the type of security known as ‘bearer shares’. As it is not easy to identify the owner of a bearer share, their existence has long been demonised as a dark corner of the UK’s otherwise bright and open regime of company ownership.

 

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