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Company and Commercial Digest

Court's Jurisdiction

The High Court recently held that it had jurisdiction to sanction a proposed scheme of arrangement in respect of a company whose principal place of business was not in England and Wales.

For advice on any aspect of commercial litigation we can help. Contact email on info@dfalaw.co.uk..

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Group Relief

High Court proceedings claiming that the provisions of UK tax legislation restricting group relief to companies resident or carrying on an economic activity in the UK were incompatible with Community law were stayed recently by the House of Lords in the case of companies which had made or could still make a claim for group relief, since in such cases the tax appeal commissioners had exclusive statutory jurisdiction.

For advice on tax legislation and how it affects your business contact email on info@dfalaw.co.uk..

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Offer to Settle

The Court of Appeal has held that an offer by a clearly solvent defendant to settle a money claim should usually be treated as having the same effect as a payment into court provided it satisfied certain conditions, was open for at least 21 days and was a genuine not a sham offer.

For advice on settling your claim contact us on info@dfalaw.co.uk..

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Securitisation Arrangements and the Right to Claim Possession

The Court of Appeal has decided that securitisation arrangements, widely adopted by mortgage lenders as an inexpensive method of fund raising, did not have the effect of preventing the mortgagee - as registered proprietor of the legal charge and who retained legal ownership of it - from exercising the right to claim possession of the mortgaged property.

For further information on securitisation arrangements contact our company and commercial team on info@dfalaw.co.uk..

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Loss Notification Option

The Court of Appeal has recently confirmed that the formal requirements for a loss notification option contained in the excess layers of an insurance policy had not been complied with. The notice relied on had been sent to the wrong addressee, had not been sent by or on behalf of the insured and did not purport to be a notice exercising the option.

For advice on all aspects of Corporate & Commercial Law and litigation email info@dfalaw.co.uk..

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Shortfall Following Repossession

The Court of Appeal has held that a mortgagees claim for a debt that had arisen by virtue of a shortfall following the repossession of a mortgaged property was time-barred and no reliance could be placed upon letters that had passed between the mortgagor and the mortgagee to establish an acknowledgment of the debt.

For advice on all aspects of company and commercial law contact us first on info@dfalaw.co.uk..

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Business Practice: Seeking Corporate Finance

The expression "Corporate Finance" generally refers to the mechanisms and processes by which businesses raise capital or enhance capital values for operations and growth.

Capital can be raised in a variety of ways, such as by the issue of shares or debentures, or the provision of loans or banking facilities. Capital values can also be enhanced or protected when businesses are merged or acquired or restructured. The mechanisms and processes can either be private or public in nature, depending on the objectives of the corporate finance exercise.

The mechanism or processes by which corporate finance is provided or the corporate finance transaction executed as well as the nature of the transaction contemplated will determine the level or type of due diligence required or available.

For further advice on corporate finance in general contact info@dfalaw.co.uk..

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Account of profits - Fraudulent misrepresentation

In a case which came before the Court of Appeal earlier this year the appellant appealed against a High Court decision that the respondents were entitled to an account of the profits from the sale of a hotel. In proceedings brought by the respondents the judge had held that there had been a fiduciary relationship between the appellant and the respondents in relation to the joint venture to buy the hotel and that the appellant had fraudulently misrepresented that his contribution would be made in cash, when in fact it had been made by setting off obligations he was owed by the vendor.

The Court of Appeal dismissed the appeal holding that the appellants profit was wholly unauthorised at the time it was made and had remained so. The appropriate remedy was that the appellant should disgorge all the profits, whether of a revenue or capital nature, that he made from inducing the respondents by his fraudulent representations to enter into the hotel venture subject to any allowances permitted by the court on the taking of the account.

For advice on fiduciary relationship matters and company finance in general contact info@dfalaw.co.uk..

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Disability Discrimination and Business

Businesses providing a service to the public have had to comply with Disability Discrimination Act amendments since 1 October 2004. The new rules require businesses to "make reasonable adjustments" to the physical features of their premises to overcome physical barriers to access, such as doors and stairs.

In the past small businesses i.e. those with less than 15 employees, were exempt from certain parts of the legislation but from October 2004 they have been required to make similar reasonable adjustments to provide for employees with a disability, e.g. by providing specialist equipment.

New discrimination rules in the workplace also give disabled employees protection against "less favourable treatment on the grounds of disability".

Is your business fully compliant? To find out more about how the legislation affects your companys interests contact info@dfalaw.co.uk..

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Red Tape Round-Up

Forum of Private Business (FPB) research has consistently shown that small businesses struggle with a bureaucratic burden that adds more than 10 hours a week on top of actually running their businesses and since 2004 this has increased further, making running a small business even more complex, costly and time-consuming than ever before.

Aside from the new rules governing dispute resolution in the workplace, small businesses have had to contend with the introduction of increased levels for the minimum wage and a revaluation of their business rates. Some of the most recent legislative changes include:

  • the introduction of the offence of making unsolicited phone calls to businesses that have registered with the Telephone Preference Service (from 25 June 2004) - previously the service was only available to consumers;
  • new rules on the disposal of waste materials when electrical products reach the end of their lives;
    collection, recovery and recycling targets set by the Waste
  • Electrical and Electronic Equipment Directive for minimising the impact of hazardous waste on the environment (most of which activities producers will be expected to finance);
  • restrictions on the use of various hazardous substances in new electrical and electronic equipment under the ROHD Directive which bans the sale in the EU of new products containing more than the agreed level of prescribed substances from 1 July 2006;
  • compliance with the new Disability Discrimination Act amendments from 1 October 2004 which bring small businesses in line with other larger enterprises.

Dont get tangled up in red tape. Its a constant challenge staying up to date and were fully aware of the demands on your time which is why were here to help. Contact info@dfalaw.co.uk. for assistance.

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The Advantages of IP Protection

Taking steps to protect future assets should be a natural process for any business and actually seen as an investment. Protecting intellectual property (IP) safeguards the growth of a business as well as protecting it from theft. IP protection can help businesses of all sizes raise finance, improve company performance, build brand awareness and improve customer loyalty. However, despite these clear benefits, only 26% of UK businesses, either recognise or know how to take full advantage of this growing area of opportunity.

Intellectual property falls into three broad categories:

  • Patents protect inventions by giving the owner of the patent the right to stop anyone from making or using the invention without the owners permission.
  • Trade marks are signs which are used to distinguish the goods or services of one business from those of another. (Most trade marks are words or logos or combinations of the two, but other forms e.g. three-dimensional shapes, combinations of colours and even sounds, may be used as trade marks.)
  • Design protection is often the reason that a particular product is chosen or desired. Protection for design work can be important in preventing competitors from using the same or a very similar design.

For further information on how IP protection can help your business and the types of protection available in general, contact info@dfalaw.co.uk. for assistance.

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Contractual Commitment Confirmed

The Court of Appeal has decided that the mere fact that two parties proposed in a letter that their agreement should be contained in a formal contract to be drawn and signed in the future, did not preclude the court from concluding that they had already informally contractually committed themselves on exactly the same terms.

A cautionary tale... To ensure that your company is not caught unawares by signing such correspondence, contact us on info@dfalaw.co.uk..

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Business Practice: Financial Due Diligence

This involves financial investigations with the help of a firm of accountants or an investment bank to verify whether all books of accounts and other financial records are up to date and have been accurately maintained. It also seeks to search out the current trading position and prospects of the business, which are not evident from the historical or filed accounts. The fact that the books are audited provides some comfort but usually this information will be significantly out of date.

Businesses are dynamic and every day something may change that will affect the overall financial position of the company prior to conclusion of the transaction. For example, on a lending transaction, a lender will frequently require extensive drawdown conditions under which very up-to-date information is provided on the companys affairs prior to drawdown, for example up-to-date debtors and creditors lists, cash balances and reassurance that no material changes or events have taken place.

Whether buying or selling, making sure your due diligence exercise is structured properly. We can help. Contact info@dfalaw.co.uk. for advice.

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Foreign Currency and the Enforcement of Judgments

A recent Court of Appeal decision raised an interesting issue relating to the enforcement of judgments expressed in foreign currency (in this case dollars).The Court decided that there was no rule or statute to prevent a charging order being expressed in a foreign currency, where this was the currency in which the parties had chosen to deal. Where it later became clear that currency fluctuations disadvantaged the judgment creditor, the court was entitled in the exercise of its discretion to refuse to amend the judgment debt.

For all your commercial litigation needs contact info@dfalaw.co.uk..

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Sale of Repossessed Property by Mortgagee

In a recent case before the Court of Appeal the appellant (R) alleged that the Building Society had sold his repossessed property to a connected company and had failed to take all reasonable steps to comply with its duty to obtain the best price reasonably obtainable. The Court of Appeal found that the trial judge had erred by finding that R had failed to satisfy the burden of proof because it was the duty of the building society to explain the true nature of the transaction to the court.

Contemplating the sale of an asset to a connected company? Contact info@dfalaw.co.uk. for specialist advice.

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Requirement of Notification to a Re-insurer

The Court of Appeal have held that re-insurers could not rely on a "claims control clause" in two re-insurance contracts, which required the re-insured to notify, within a specified time limit, "knowledge of any losses which may give rise to a claim" under the policy, because the clause did not sufficiently clearly exempt them from liability.

On the construction of the wording of the clause, the re-insured had no knowledge of any "actual loss". In dismissing the appeal Lord Justice Longmore said:

"The moral of this case is that "knowledge" is (or can be) an elusive concept because in any given case a party to a contract may have difficulty in showing what another party "knows". It would, therefore, be better if "knowledge" were not used as the trigger for any requirement of notification to a liability insurer or re-insurer."

As this case demonstrates the wording of legal clauses is all important. Our company commercial team has extensive experience of drafting a wide range of commercial documentation. Contact info@dfalaw.co.uk. for further details on how we can help spare you the costs involved in such litigation.

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Trigger for Interim Relief

The Court of Appeal has held that the courts jurisdiction to make an interim order had to be activated by the commencement of substantive proceedings or an undertaking to commence such proceedings. Without either of these, the courts jurisdiction to grant any form of interim relief in support of the relevant cause of action under English law did not exist.

Is your company facing litigation? We can help. Just contact info@dfalaw.co.uk. for further details.

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Fraudulent Insurance Claims

The Court of Appeal has held that the scope of the common law rule relating to fraudulent insurance claims was to forfeit the whole of the claim to which the fraud related. The effect of this was that the consideration for any interim payments made by the insurer prior to the fraud in respect of genuine loss on that claim failed, and those payments were recoverable by the insurer from the insured.

Concerned about fraud and its affect on your business? Contact info@dfalaw.co.uk. for advice.

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Business Practice: Fundamental Issues of Corporate Finance

In each corporate finance situation invariably the same fundamental issues are being addressed. What is the investment return available or the level of finance affordable by the business, and what risks are there which would result in the expected return not being achieved or the financing not being repaid? The due diligence process will define the return or pricing of the investment or financing, the amount of the investment or financing to be made available and the structure of investment or financing.

Invariably too, the due diligence process is forcing an alignment of interests, of risk and reward, as well as expectation. There are competing interests. What a business or company may perceive as a fair return for an investment may differ substantially from what the investor or financier may require.

There is also the issue of evaluating external factors, which will affect the return and reward, factors that are either systematic, such as interest rates, inflation and political events that are common to the business and industry as whole, or events that are specific to the business or industry itself and which can be compared to similar businesses.

Find out more about the fundamental issues involved and their impact on your business. Contact info@dfalaw.co.uk. for information as to how we can help.

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Business Practice: Levels of Due Diligence

The level or type of due diligence can vary. For example, the level of due diligence required for a secured borrowing facility will be significantly less than that required for an equity investment. The lender will simply be looking to ensure that:

  • his loan will be repaid together with interest over the term and that there is sufficient net cash flow cover to ensure repayment; and
  • the value of the security is sufficient to cover the loan to value given.

A highly liquid publicly traded stock will have a higher loan to value than an illiquid stock and certain types of real estate, such as development or commercial properties, will have lower loan to values than residential properties. On the other hand, an equity investor, such as a venture capitalist, will be concerned to ensure that the profitability and positioning of the company over the given investment time horizon will be sufficient:

  • to yield the required internal rate of return on the investment; and
  • for that return to be crystallised by an exit event, such as initial public offering of floatation, or a trade sale.

The focus will therefore be more on the ability of the management to deliver the returns based on the forecasts or projections for the business.

Due Diligence neednt be a dilemma. Just contact info@dfalaw.co.uk. for straightforward advice and assistance.

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The Impact of Red Tape on Small Business

The Forum of Private Business (FPB) has produced a report which looks at the impact of red tape on small businesses. There has long been concern about how the regulatory burden on businesses in general disproportionately affects the smaller firm to a greater degree than larger enterprises. The results from the survey (drawn from a sample of 915 firms) indicate that:

  • in recent years red tape has increased as a business concern among businesses and across the board many firms found that this impacts upon the development of their business;
  • health and safety issues and taxation are two common areas of concern;
  • 7 out of 10 firms consider that the flow of information about red tape from government is not effective and accountants were identified as a key source of support.

Penalties for failure to comply with business regulations can be punitive and ignorance is no defence. We can help keep you up to date with the latest legislative changes leaving you time to run your business. For further information on how we can help contact info@dfalaw.co.uk..

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Business Practice: Anti-Money Laundering Due Diligence

Money laundering checks are an essential prerequisite and integral part of the due diligence exercise for any corporate finance transaction in light of the now very extensive, stringent and punitive money laundering regulations that have been adopted by most countries. The scope of the regulations can be very wide. In the UK, for example, they now cover any crime. This means that in looking at a business or transaction as a whole it will need to be borne in mind that questionable accounting practices or possible tax evasion discovered as part of the due diligence exercise, which are or could be criminal offences, may then lead to independent money laundering disclosure obligations for the due diligence team.

The first steps in any corporate finance transaction would be undertaking appropriate due diligence on the business owners or management, or ensuring that the proposed funds to be invested or lent to the business as part of the corporate finance transaction are clean. The exercise would then extend to evaluating the proper sources of funds coming into and out of a businesss operations. Where businesses have significant cash revenues, or operate on otherwise a cash based system, this could give rise to a significant number of problems and potential disclosures.

Are you up to speed with your anti-money laundering obligations? Contact info@dfalaw.co.uk. for guidance.

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Dividends and Directors

In a recent case before the High Court it was held that where dividends were paid to directors of a company in contravention of s 263(1) of the Companies Act 1985, the directors were required to know or have reasonable grounds to believe not just the facts which gave rise to the contravention, but the legal result of that contravention for repayment liability to arise under s 277(1) of the Act.

Concerned about your position as a director? Contact info@dfalaw.co.uk. for advice and information.

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Insolvency Proceedings

The Court of Appeal recently held that with regards to an application to serve an insolvency petition on a debtor living outside the jurisdiction, the place where he had his centre of main interests was to be determined, when the court was required to decide whether to open insolvency proceedings.

For advice and assistance with insolvency contact info@dfalaw.co.uk..

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Voting Agreement and Issue of Shares

The High Court recently held that where a voting agreement had given a shareholder an absolute discretion in the manner in which it chose to raise funds, on a new issue of shares the shareholder had a right to choose investors including itself and others and a right to waive pre-emption rights in the companys articles. The voting agreement imposed no fiduciary duties on the shareholder in relation to the selection of investors and the subsequent issue of shares.

For advice and assistance on shares and voting agreements contact info@dfalaw.co.uk..

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Distraint

In a case before the High Court the process of distraint against a companys goods by the Revenue for recovering unpaid tax was not an "execution" within the meaning of s 183 of the Insolvency Act 1986 and thus did not operate to make the distrained goods available as assets for distribution to the companys creditors on a subsequent liquidation.

For advice on this and company and commercial matters in general contact info@dfalaw.co.uk..

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