Forsters’ Private Wealth lawyers featured in Legal Week’s Private Client Global Elite Directory 2022
31 January 2022
News
Ten lawyers in Forsters’ Private Wealth team have been featured in Legal Week’s 2022 Private Client Global Elite directory.
Launched in 2017, the esteemed Global Elite Directory lists the world’s most respected lawyers advising High Net Worth clients, as nominated by peers within the private wealth industry. Each year the list is narrowed down to just 250 industry experts from over 6,000 nominations.
After two years of unprecedented challenges faced by real estate and the planning industry, industry predictions for 2022 have perhaps been more eagerly anticipated than ever, and whilst kickstarting the year with a U-turn on reforms may not have been all that surprising, it’s unclear what is yet to come. In the meantime, Associate, Ella Jones, recaps on a year of planning and some of the key changes and cases that have shaped the industry:
Winter 2021
Heritage Protection Issues
In January 2021, the Government announced new legal precautions for historic monuments.
There will now be a requirement for full planning permission to remove all historic statues, plaques, and other monuments. In addition to this new requirement, where the Council is prepared to grant planning for such removal, the Communities Secretary will be notified and will make the final decision. It is said that planning permission will be granted in the ‘most exceptional circumstances’ only.
These safeguards come after protestors toppled a statue of 17th Century slave trader, Edward Colston, into a harbour in Bristol in 2020.
If you are looking to remove, renovate or replace historic figurine then advice should be sought early, to understand if these new measures are applicable to you.
Community Infrastructure Levy Planning Appeal
In an appeal decision also in January, the Planning Inspectorate provided some helpful guidance on the service of a CIL liability notice and what can be considered “as soon as practical” under Reg 65(1). In this instance, the relevant Collecting Authority served said notice 10 months after planning permission was granted. The Inspector confirmed that 10 months did not meet the test under Reg 65(1), thus allowing the appeal.
If you receive a liability notice, it is always advisable to check the date it was served, and the length of time elapsed since planning was granted. By doing so, you may just save yourself some money.
Summer 2021
Introduction of First Homes
In June, a new government initiative was introduced to assist first time buyers get a foot onto the property ladder. The initiative offers first time buyers discounts of a minimum of 30%, (up to 50% if implemented by the Council), on new build properties.
First Homes will be considered as an affordable housing tenure and will contribute to meeting the Council’s policy compliant amount of affordable housing. They will be secured through a Section 106 agreement in a similar way to current affordable housing requirements. However, First Homes will not need to be transferred to a Registered Provider, as is the case for other affordable tenures. Instead, developers will be able to sell the units directly to buyers.
In December 2021 the government released their model s.106 which provided clarity as to how the new tenure will operate.
There is a transition period before First Homes is formally introduced. If you would like to know if the requirement to provide First Homes is applicable to your development, please get in touch.
Updated to the National Planning Policy Framework
The National Planning Policy Framework (NPPF) sets out the governments planning policies and how they should be applied in England.
Following a Government consultation earlier in 2021, an updated NPPF was published in July. This is the latest update to the NPPF, that was originally published in 2012, and follows changes in July 2018 and February 2019.
This latest version has greater emphasis on design, quality, and sustainability. Some of the main changes include:
A promotion of “well-designed, beautiful and safe places” (paragraph 8b) and all local planning authorities “should prepare design guides or codes consistent with the principles set out in the National Design Guide and National Model Design Code, and which reflect local character and design preferences”. A new test has also been introduced which will allow refusal of development where it is not well designed.
When plan-making, there is a presumption in favour of sustainable development (paragraph 11a).
Limits on the use of Article 4 Directions to restrict permitted development rights. In particular, those directions which prevent the conversion of non-residential property to homes.
To maximise the chances of a successful planning application, these changes will need to be at the forefront of the design and planning stages of development. The above is only a summary of the key changes; for a more detailed overview, or further guidance, contact Ella Jones.
Autumn 2021
Stonewater (2) Limited v Wealden District Council [2021] EWHC 2750 (Admin)
In October, The High Court considered how Social Housing relief can be claimed against a liability to pay Community Infrastructure Levy (CIL), in the context of 100% affordable housing schemes, and when the Section 106 Agreement only secures a policy compliant level of affordable housing.
It was decided by the Court that Wealden District Council were correct to reject Stonewater’s application for Social Housing relief on the following grounds:
the Section 106 Agreement secured the delivery of exactly 59 affordable housing units;
the description of development in the decision notice specifically referred to the fact that the development consisted of 35% affordable housing;
for the Council to have granted Social Housing relief, Stonewater needed to prove that the additional units would have been ‘qualifying dwellings’. In the absence of the additional units being secured through the Section 106 agreement, or any further evidence to support their position, they were not able to do so.
It should be stressed that the Court was clear in determining that a Section 106 Agreement is not a pre-requisite to Social Housing CIL relief, but in these circumstances, it held weight to assist the Court in deciding if the units would be used as affordable housing.
Going forward, planning applicants should ensure that affordable housing requirements allow for flexibility. This can be achieved in a number of ways: avoid specifying the level of affordable housing in the description of development and ensuring that a Section 106 agreement refers to a minimum level of affordable housing rather than a fixed amount.
If you would like further information on any of these updates or require planning assistance, please get in touch with our Planning team who will be happy to help.
Forsters have advised RELX (UK) Limited on the renewal of the lease of their corporate headquarters at 1-3, The Strand.
Part of the FTSE 100 RELX Group plc, RELX (UK) is a global provider of information-based analytics and decision tools for professional and business customers. The renewal secures RELX’s occupation until 2025.
Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised RELX and was assisted by Owen Spencer and Alex Harrison.
London Calling? Government Proposes Overseas Companies Re-Domicile to the U.K.
27 January 2022
News
Elizabeth Small, Partner in our Tax team, looks at the U.K. government’s proposed scheme for international companies to re-domicile to the U.K., and assesses the processes and potential tax implications for businesses that contemplate doing so.
Reproduced with permission from Copyright [2022] The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com. The original article can be located here.
There is no doubt that “U.K. PLC” is open for business post-Brexit and Covid-19. Access to a skilled and technical workforce and world-leading capital markets, coupled with a transparent and robust corporate law and governance framework, have long been draws for international groups to establish “U.K. Headquarters Co.”
There is also a key tax incentive as, unlike some other notable headquarters jurisdictions, the U.K. does not impose withholding tax (WHT) on dividend payments, meaning that no complex structuring has to be inserted between the U.K. Headquarters Co and its shareholders.
Why is the U.K. Government Proposing a Re-Domiciliation Scheme?
A perceived bar to entry has been the need for an overseas company’s shareholders to, for example, establish a new U.K. headquarters company, transfer the shares of the existing company to the newco by way of a share-for-share exchange, and then potentially have to transfer some or all of the assets and liabilities of the existing company to the newco.
This may trigger unnecessary and “dry” tax charges at the level of the shareholders, who have simply engaged in a share swap (i.e. no cash/liquidity has entered the structure), as well as possible transfer tax charges on the disposal of the existing company shares (and assets), as well as liabilities for the existing company when it transfers its assets to newco.
In addition, lenders’ permission may be required, with the result that existing debt/financing arrangements may have to be resecured and, one fears, renegotiated. Other contracts held by the existing company may need to be novated, employees and their share incentive arrangements may have to be moved (subject to potential renegotiation with unions or employee representatives), and litigation (both current and future) may be prejudiced if, for example, the assets/liabilities of the existing company are transferred to newco.
Further, hours of management time will be expended on reviewing the implications of, and processing, all of this.
What is Re-Domiciliation?
By contrast, once a decision has been taken to move to the U.K., a simple re-domiciliation process—whereby the existing company remains the same entity throughout but moves its place of incorporation to the U.K.—would, as the U.K. government’s consultation paper says, “give companies maximum continuity over business operations and substantially reduce administrative complexity compared to other routes of relocating to and incorporating in the U.K.”
The U.K. government’s intention is that re-domiciled companies will generally retain their corporate history, management structure, assets, intellectual and other property rights, contracts and regulatory approvals (paragraph 2.2 of the consultation paper).
Who Will be Able to Re-Domicile?
In contrast to certain other jurisdictions, the U.K. government currently does not intend to impose any economic or substance-based thresholds before a company may take advantage of re-domiciliation to the U.K. Singapore, for example, has two main tests:
Size: The foreign corporate entity must meet any two of the below:
total asset value in excess of S$10 million ($7.4 million);
annual revenue in excess of S$10 million;
more than 50 employees.
Solvency/good standing.
According to the consultation paper, the U.K. government is only considering adopting the second of these tests. As such, to re-domicile to the U.K., a company must be able to pay its debts, and the application should be made in good faith and not intended to defraud existing creditors.
A response to the consultation by, among others, the Law Society of England and Wales, posits that questions of shareholder, creditor and stakeholder protection should be matters for the departing jurisdiction and that the U.K. should not seek to impose its own regime in these areas. In addition, the consultation paper refers to other key criteria, such as no national security risk and the consent of the exiting jurisdiction, and indicates that re-domiciliation will only be permitted for entities that are comparable to U.K. forms of company.
Other jurisdictions (such as Hong Kong) have, we understand, limited re-domiciliation to investment funds so that they may take advantage of a particular fund regime which hitherto only related to Hong Kong established funds. However, the U.K. government doesn’t currently intend to be so industry/sector specific.
Indeed if, as the government is considering, re-domiciliation is coupled with an uplift to the market value base cost for the company’s capital assets (as at the date of the re-domiciliation), it may instead be single purpose property-owning vehicles that will benefit more from seeking re-domiciliation. They will achieve not only a stamp duty land tax (SDLT) saving for the buyer but also eliminate the “pregnant” corporation tax on chargeable gains liability which would arise on the latent gain on the U.K. property assets owned by the company. It is therefore likely that an uplift to market value will only apply to capital assets that are outside the scope of U.K. corporation tax immediately before the date of the re-domiciliation application.
U.K. Tax Implications
A key consideration for any foreign company considering re-domiciling to the U.K. will be the applicability of exit charges from its current jurisdiction, but various U.K. tax considerations will also arise as referred to in the consultation paper.
Will a Re-Domiciled Foreign Company Automatically be U.K. Tax Resident?
Currently, companies are U.K. tax resident and so subject to U.K. tax on their worldwide income (save where any relevant double taxation agreement applies) if they are either:
incorporated in the U.K; or
centrally managed and controlled (CMC) in the U.K.
If re-domiciliation deems a company to be incorporated in the U.K., then it would seem logical that such a company should be tax resident in the U.K. even if the board of directors (i.e., CMC) remains offshore. It also seems fundamental that companies originally incorporated in the U.K. should be treated no worse than companies that have re-domiciled to the U.K.
However, being U.K. tax resident may not be enough to take advantage of all tax breaks. For example, the enterprise investment scheme currently requires that the issuing company must have a permanent establishment in the U.K. for a three-year period commencing on the date of the issue of the shares.
Stamp Duty Reserve Tax
Very broadly, stamp duty reserve tax (SDRT) is chargeable on shares and securities issued by a company incorporated or registered in the U.K. So, the expected starting point could be that shares or securities by a company which re-domiciles to the U.K. would become chargeable securities for SDRT purposes.
SDRT is charged at the rate of 0.5% on transfers and 1.5% in respect of certain clearance services and also depositary receipts.
Currently, foreign companies list in the U.K. through a depositary interests (DI) structure, but presumably one of the key benefits of re-domiciliation will be that the shares of the company will be capable of direct listing and trading?
Under current rules, if a foreign company has listed DIs, those DIs are not subject to SDRT (where they represent foreign securities, i.e., not U.K. incorporated, shares not registered in the U.K. and the company’s CMC does not take place in the U.K.). Following re-domiciliation (even assuming that CMC stays offshore) presumably the existing DIs will become subject to SDRT?
Loss Importation?
There is a possible tension here between the U.K. tax authority, HM Revenue & Customs (HMRC) and the U.K. Treasury. HMRC will defensively want to ensure that losses generated abroad stay abroad, and do not reduce the U.K. tax take; while the Treasury may be keen to attract innovative start-ups, especially those with green credentials. For such companies, being unable to carry forward and use their existing losses could be a real bar to re-location.
Base Cost?
The consultation paper seeks views on whether there should be an uplift to market value. As discussed above, provided the assets are outside the scope of U.K. corporation tax, that would seem a sensible position to incentivize companies to move to the U.K. (especially as they may incur exit charges when they leave their current jurisdiction).
Personal Tax for Shareholders
The consultation paper gives away no clues regarding the government’s current thinking on how re-domiciliation will impact the tax treatment of the re-domiciled company’s shareholders—other than the ominous comment that anti-avoidance measures may be needed.
It is not entirely unreasonable to anticipate that the shares in a company which is now deemed to be a U.K. company for all other regulatory purposes may well be treated as being U.K. situs for inheritance tax purposes. A similar rule may also well apply for capital gains tax purposes. Since March 16, 2005, Section 275(1)(da) of the Taxation of Chargeable Gains Act 1992 has provided that “Shares or securities of a company incorporated in any part of the United Kingdom are situated in the United Kingdom.”
Value-Added Tax?
Re-domiciliation in and of itself may not be sufficient to change where a company “belongs” from a value-added tax (VAT) perspective. As HMRC note in HMRC Notice 741A para 3.2:
“You belong in the U.K. for the purposes of either making or receiving a supply of services when you have any of the following:
a business establishment in the U.K. and no fixed establishment elsewhere that’s more closely connected with the supply
a business establishment outside the U.K. and a fixed establishment in the U.K. that’s most directly connected with the supply
no business or fixed establishment anywhere, but your usual place of residence is the U.K.”
Typically, a business establishment is where the board of directors meet, while a fixed establishment means “any establishment … characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services supplied to it for its own needs” and “to enable it to provide the services which it supplies.”
This point was emphasized in the recent Court of Justice of the European Union (CJEU) case of Titanium Ltd v Finanzamt Österreich (Case C-931/19) EU:C:2021:446 (June 2021) where the court was asked whether the passive letting of property in Austria (which did not require human and technical resources in Austria) could be regarded as a fixed establishment.
The CJEU confirmed that the Jersey company which owned the property (Titanium) would need to have had human and technical resources in Austria to create a fixed establishment. The fact that Titanium had appointed an independent real estate agent to manage the letting was not sufficient; Titanium needed to have its own staff in Austria to create a fixed establishment.
Belonging is an important concept for U.K. VAT, because it dictates the place of supply for services. The basic B2C (business-to-consumer) rule is that the supply is deemed to take place where the customer is, and so many legal fees may be invoiced to an offshore client without U.K. VAT.
A company which re-domiciles to the U.K. without bringing its business to the U.K. may nonetheless find that it is assumed to belong in the U.K. and will need good evidence to demonstrate that supplies to it are still outside the scope of U.K. VAT.
U.K. Source?
The U.K. typically imposes a 20% WHT on the payment of interest on a loan capable of lasting a year or more where the interest has a U.K. source and the lender is outside the U.K. There are many factors which determine whether the interest has a U.K. source, but it seems probable that HMRC may consider that a company which has re-domiciled to the U.K. may well have brought the interest into the U.K. WHT net.
Planning Points
It may seem obvious, but think carefully about why you want to re-domicile—for example, will it be easier to achieve an initial public offering (IPO)? The Financial Conduct Authority (FCA) will not admit shares to the premium or standard segment of the Main Board of London Stock Exchange (LSE) of a non-U.K. company that are not listed either in the company’s country of incorporation or in the country in which a majority of its shares are held, unless the FCA is satisfied that the absence of the listing is not due to the need to protect investors.
In addition, U.K. incorporated public companies listed on the London markets give shareholders the protections afforded by the U.K. Takeover Code. Shares in a listed U.K. company can be traded directly rather than using a DI structure for settlement which is required for non-U.K. and Channel Islands incorporated companies.
Once a “move” to the U.K. has been decided, then query whether re-domiciliation is the answer rather than incorporating a new U.K. holding company; historically it has been considered easier on certain markets of the LSE (i.e., that do not require a minimum trading and financial history) to list a new clean company rather than a company that has a long corporate history.
Having considered the advantages of re-domiciliation, also consider the downsides; for example, as referred to above, a U.K. tax resident company is typically subject to tax on its worldwide income. Re-domiciliation should be achieved without any real disposal of any shares or assets of the company, but will the jurisdiction you are leaving impose an exit charge? While the U.K. government’s intention is to respect existing approvals and intellectual property rights, ensure that your exiting jurisdiction shares that view and treatment.
Re-domiciliation is likely to necessitate disclosing the company’s constitutional documents, so be aware that any existing share incentive arrangements that are achieved through the drafting of share rights will need to be disclosed to HMRC.
A further obvious point is to ensure that you have accurate records and documents at the time of the re-domiciliation, as once the company has left its old jurisdiction it may become much more difficult to obtain these.
Finally, it may be that re-domiciliation could effectively be a one-way trip. The U.K. government does not seem keen to allow a two-way regime, and even if it does, there may be possible exit charges should the company change its mind about being located in the U.K.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Forsters shortlisted in two categories at the Legal Cheek Awards 2022
24 January 2022
News
Forsters are delighted to announce that we have once again been shortlisted in two categories at the upcoming Legal Cheek Awards.
Forsters has this year been shortlisted in the following categories:
Best Law Firm for Work/Life Balance 2022
Best law Firm for Peer Support 2022
The Legal Cheek Awards are held annually to celebrate the law firms providing the best training opportunities and experiences and are based on the Legal Cheek Trainee and Junior Lawyers Survey 2021-22 of over 2,000 trainees and junior lawyers at nearly 100 of the leading UK-based law firms.
This year’s awards ceremony will take place in-person at Landing Forty Two, The Cheesegrater on the evening of Thursday 24 March 2022.
Graduate Recruitment Partner, Emily Holdstock, and More Than Law Podcast host, Miri Stickland, are joined by various guests as they discuss some of the common myths and frequently asked questions surrounding training contracts and the application process. With more content released weekly make sure you bust all of the myths with our Graduate Recruitment team as we close in on our 2022 Summer Vacation Scheme deadline at the end of January 2022.
Episode 1
Do you need to start off knowing exactly which practice area you want to qualify into? Graduate Recruitment partner Emily Holdstock, newly qualified solicitor Tamsin Collingridge and trainee Molly Haynes join podcast host Miri Stickland to discuss whether it is OK to be undecided.
Are there unwritten rules you need to follow in training contract interviews? Partner Katherine Ekers and trainees Ellen Jones and Cameron Turnbull join podcast host Miri Stickland to discuss what to wear and whether to eat the biscuits offered!
Does showing commercial awareness really mean faithfully memorising the contents of the Economist each week? Podcast host Miri Stickland is joined by Partner Katherine Ekers and trainees Phoebe Jackson and Annalisa Gardner to discuss the tricky issue of how to show commercial awareness.
Senior Partner Smita Edwards, Graduate Recruitment Partner Emily Holdstock and Graduate Recruitment officer Emma Cooper join Miri Stickland to discuss why diversity and inclusion is so important to Forsters, the preconceptions that applicants may have about the firm and why they should look past them, our D&I strategy and initiatives the Graduate Recruitment team are taking to promote diversity.
Is only work experience in law firms relevant to a training contract application? Graduate Recruitment partner Emily Holdstock and trainees Ellen Jones, Candice Johnson and Joe May join podcast host Miri Stickland to discuss how work and volunteering experience in other sectors can also be a huge asset.
Is there a ‘right’ answer to the questions you are asked at interview? Partner Katherine Ekers and trainees Tatiana Kinsky and Oliver James join podcast host Miri Stickland to give their insights.
Moving house can be an inherently stressful process. The best way to ensure a smooth transaction is to be prepared with all papers and possible issues in advance, so these do not stall the process due to late discovery, and enabling your solicitor and agent to ensure all matters are properly addressed in advance. We have set out below a short checklist, which is not exhaustive, but should assist in initial preparations so that you can hit the ground running once a buyer is found.
Xavier Nicholas recognised as one of the 50 Most Influential in ePrivateclient 2022
19 January 2022
News
Head of Private Client, Xavier Nicholas, has been listed in ePrivateclient’s 2022 50 Most Influential – a ranking of the most highly regarded figures in the international private client world.
Xavier is recognised for his expertise in personal taxation, trust and estate planning, and family governance, for individuals and trustees in the UK and overseas.
ePrivateclient’s “50 Most Influential” aims to identify leaders within the private client profession – promoting talent and highlighting the best within the field.
The full list can be viewed here, behind the paywall.
Corporate Re-Domiciliation to the UK: Stuart Hatcher and Lianne Baker write for IFA Magazine
19 January 2022
Views
Corporate Partner, Stuart Hatcher, and Knowledge Development Lawyer, Lianne Baker, have written for IFA Magazine on corporate re-domiciliation to the UK.
In their article, entitled ‘On the Cards? – Corporate Re-Domiciliation to the UK’, Stuart and Lianne discuss the Government’s consultation into whether the UK should effect a corporate re-domiciliation regime, allowing non-UK businesses to relocate to the UK without affecting their legal identity.
“The Government’s aim is to “strengthen the UK’s position as a global business hub” and one way to achieve this is to allow overseas entities to relocate to the UK easily and cheaply. Since Brexit, the UK has no “re-location” process and with other countries, including Canada, Singapore and Australia, permitting corporate re-domiciliation, the UK does not want to risk losing its position as a leading financial centre.
National Security and Investment Act: Stuart Hatcher and Lianne Baker write for Investment Monitor
19 January 2022
Views
Corporate Partner, Stuart Hatcher, and Knowledge Development Lawyer, Lianne Baker, have written for Investment Monitor on the UK’s National Security and Investment Act.
In their article, entitled Will the UK’s National Security and Investment Act harm dealmaking?’, Stuart and Lianne discuss the newly implemented act, which gives the UK government greater powers to scrutinise takeovers, and explore what the new act will mean for foreign investors.
“The act is broad-reaching, applying to both UK and overseas entities and assets, and will particularly impact overseas investors, although the key factor will be whether the investment is made in a sensitive industry by a party that could be considered a risk to national security.”
For investors, practical advice would be:
Think ahead – create a workstream to consider the act early on
Challenge your lawyers to consider the act as soon as possible
Work out how to best build specific due diligence on the act into your transaction
Engage with the other side early regarding whether the act applies and how to deal with it in the context of deal documentation.
Who is responsible for fixing a leak in a rental flat?
13 January 2022
Views
What should I do if there is a leak coming through the floor of my upstairs neighbour’s flat, but I cannot contact them? James Carpenter answers the reader’s question in The Sunday Times.
“I’m unclear on how to tackle this: it seems as if they can get away with damaging my property…”
Property Litigation Associate, James Carpenter, answers the reader’s question in the Home section of The Times on how to deal with a leak from an upstairs neighbour’s flat when you cannot contact them to alert them to the issue.
James outlines that the most effective response would be to take action against the freeholder of the block, as the freeholder is the landlord of both the reader and the neighbour.
The terms of the reader’s lease should oblige the freeholder to enforce covenants in the leases of its other tenants. As such, the reader should write to the freeholder, to demand that they force the neighbour to remedy the leak, or, failing that, carry out the work themselves. If the freeholder fails to take action, they will be liable to the reader in damages.
The reader may also have claims against the neighbour and his subtenant in the tort of nuisance, but as this is a specialist area, the reader should take legal advice.
In the meantime, James advises that the reader continues in their efforts to contact the neighbour and its sub-tenant to alert them to the issue.
Collective Proceedings Orders: Caroline Harbord and Candice Johnson write for Solicitors Journal
13 January 2022
Views
The last three months have heralded a period of unprecedented excitement in the sphere of collective competition claims, state Dispute Resolution Senior Associate, Caroline Harbord, and Trainee Solicitor, Candice Johnson.
“These long-awaited decisions (considered all the way up to the Supreme Court and back) provide the first glimpses of how the CAT will apply the novel ‘opt out’ group litigation regime in practice, and are welcome judicial guidance in this area.”
“With the judgments coming thick and fast, and numerous further CPO applications being listed, this article provides an overview of the ‘opt out’ regime, and a summary of the key practical takeaways arising from each of the recent CPO decisions from the perspective of claimants, lawyers and litigation funders.”
Record number of Forsters’ Lawyers listed in the Spear’s 500 Directory 2022
13 January 2022
News
A record 22 lawyers have been listed in the Spear’s 500 Directory, a fitting number for the 2022 edition.
The Spear’s 500 is one of the leading guides to the top private client advisers, wealth managers, lawyers and service providers for high net worth individuals.
This year the following Partners, Consultants and Senior Associates have been recognised:
Andrew Parker Discusses Announcements from the Government Regarding Cladding Costs
11 January 2022
Views
Forsters’ Head of Cladding, Andrew Parker, appeared on BBC Newsnight discussing what the Housing Minister Michael Gove meant when he stated earlier this week, on 10 January 2022, that he will be “absolutely willing to use legal rules” to make builders pay for the removal of unsafe cladding from buildings between 11-18 metres.
Question: Can Michael Gove actually make the house builders pay, from a legal perspective?
Andrew’s Response:“He hasn’t said how he is going to do it. The plan is to encourage the developers to contribute. If they don’t, there’s an imposition in law which will come their way, though he doesn’t explain what that is.
Developers can easily say in response to these plans that they were entitled to rely on their architects, engineers, and contractors, so if they are being asked to pay, they should be able to expect a contribution from those parties.
A legal issue the government faces is that if the developers are going to participate in this process, they need to feel that they can recover their losses from those parties. A lot of these buildings are of an age that means the time in which you can make a claim has expired. Unless there is a change in legislation to extend that period, developers won’t be able to pass their losses down to said parties and so will remain reluctant to participate.”
Question: How concerned are you that this could end up as a legal battle between either the developers and those that they relied on, or developers and the government, before these necessary changes are made?
Response:“That is where the problem is. As things stand, legislation needs to be introduced for the government to be able to implement this and we all know that that isn’t going to happen particularly quickly.
Whilst I agree that the right noises are being made for these leaseholders, there is still a huge amount to work through, and if we’re not careful the lawyers are going to be the only ones that benefit.”
We Need To Talk – Financial Difficulties and Facility Agreements
6 January 2022
News
Unfortunately, businesses often face financial difficulties and the pandemic in particular, has caused problems for many. This is a stressful and worrying time for any business, even if they have no bank debt, but what are your options if you do have debt finance in place and are at risk of defaulting under the facility agreement?
Has there been a default?
Firstly, it’s important to determine whether an event of default under the facility agreement has actually taken place or whether there is a potential risk of default. If a default has actually occurred, there will often (but not always) be a grace period in which the borrower can attempt to resolve the issue.
You will need to dig out the facility agreement and carefully read through it or ask your lawyers to do that for you. It is very important to know what the position is and not assume there is a grace period. Grace periods can also be very specific.
What happens in the event of a default?
The lender’s options if an event of default has arisen will be set out in the facility agreement. Typically, this may include demanding repayment or enforcing any security in place, making a demand under a guarantee, cancelling any commitments so that no further drawdowns of the loan can be made, an increase in margins under the loan and being given access to the borrower’s records and management.
In addition, the borrower may be obliged to pay default-related expenses to the lender and is likely to be prevented from paying any dividends or making payment to any subordinated creditor.
A combination of these will usually be instigated, which can often exacerbate the borrower’s difficulties. But, it may be possible to avoid this situation.
Can these measures be averted?
The lender may be willing to enter into discussions with the borrower about possible options and next steps. Having to take drastic action, such as enforcing security, is not usually a lender’s preferred course of action and it may be possible to agree a waiver or amendment of terms which are less draconian for the borrower and could help to save the business from further financial difficulties or even insolvency.
Another option is to agree a standstill agreement under which the lender will agree not to declare an event of default for a certain period of time to allow the borrower a chance to rectify the problem.
A lender is more likely to be able to agree to some sort of compromise or help you to work through the difficult period, if they have notice of the issue. It’s therefore extremely important to raise any potential issues with your lender as soon as possible. Transparency is key and the earlier you raise the issues (or likely issues) with the lender the better (after consulting your lawyers of course…).
UK class actions: Caroline Harbord comments in the Financial Times
4 January 2022
Views
Dispute Resolution Senior Associate, Caroline Harbord, has commented in the Financial Times on UK class actions which look set to have a big year in 2022.
In the article, entitled ‘Stand by for a big year in UK class actions’ (available behind a paywall), Caroline comments on recent Competition Appeal Tribunal judgments in collective claim class actions stating that they have “reduced the evidential threshold to bring cases”.
Learn more about recent collective action rulings:
