Forsters are delighted to announce that we have been shortlisted in three categories at the upcoming Legal Cheek Awards.
Forsters has this year been shortlisted in the following categories:
Best law firm for quality of work 2023
Best law firm for peer support 2023
Best law firm for work/life balance 2023
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 2022-2023 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 The Banking Hall on the evening of Tuesday 14 March 2023.
Learn more about Graduate Recruitment at Forsters here.
Private Client Partner, Patricia Boon, speaks to Jersey Finance about what Family Governance means and why it is so important for wealthy families in Asia.
Speaking to Business Development Consultant, Maria McDermott, Patricia explains the concept of family governance and shares why it is so important in succession planning, particularly in times of divorce or conflict.
22 Forsters lawyers have been listed in the Spear’s 500 Directory, a complete guide to the HNW market.
In its eighth year, 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:
Commercial Real Estate Partner and Head of Later Living, Amy France, has spoken to Property Week about the International Longevity Centre’s research into Later Living and how this can trigger progress by tackling issues that have held back growth and innovation in the sector.
With the number of over-65s set to reach 17 million by 2040, the research suggests that the number of older people’s housing units constructed per year will need to rise from 7,000 to 50,000.
A considerable boost in production is therefore necessary and France outlines several steps that can be taken to facilitate this. She specifically mentions sector-specific legislation, local authority targets and widespread planning exceptions as methods to increase clarity, accountability and viability of developments. She also references flexible tenure options, such as shared ownership agreements and stamp duty land tax removals.
France says: “There is no lack of good ideas for how we can get the sector motoring. We need the public and private sectors to work together to escalate delivery. This means putting some meaningful incentives in place for later-living development to thrive.”
This article was first published in Property Week on 19 January 2023 and is available to read in full here, behind their paywall.
Our Property Litigation team is pleased to note that its instruction by the Secretary of State for Defence in regard to ‘R (Annington Property & others) v Secretary of State for Defence’ has been included in The Lawyer’s ‘Top 20 Cases of 2023’.
Senior Partner, Natasha Rees, and Property Litigation Partner, Julia Tobbell, are leading on this high profile and ground-breaking case.
The Lawyer describes the case as one of the most prominent judicial reviews of 2023. It concerns the MoD’s proposed repurchasing of homes from Annington Homes using enfranchisement legislation. Forsters are advising on the property law aspects of the proceedings.
The Lawyer has reported on this case as part of its annual report, ‘The Top Cases of 2023’. A copy of the report can be purchased here.
Private Client Partners, James Brockhurst and George Mitchell will be attending the STEP Cayman Conference 2023.
James Brockhurst will also be speaking at the session entitled ‘Digital assets, artificial intelligence, and the tech world – challenges for trustees in the Cayman Islands’ alongside Petri Basson of Hash Data, Chris Duncan TEP of Carey Olsen and Zoe Wyatt of Andersen LLP.
This international wealth structuring forum takes place from 19-20 January and aims to explore a range of topical issues pertinent to the trust industry with a special focus on wealth structuring.
You can find out more about the event and register here.
Family Trainee Solicitor, Ellen Jones, has authored an article for the Family Law Journal entitled ‘The role of grandparents’.
Many grandparents play important roles in the lives of their grandchildren, often devoting significant amounts of time and financial resources to their grandchildren’s upbringing. However, irrespective of the commitments grandparents make, they do not have an automatic right to have contact with their grandchildren. Ellen addresses various topics including the definition of ‘grandparent’, the obligations of grandparents, what happens if a grandparent is denied contact with their grandchild and what would happen if a parent dies.
Reference to the full article can be found below:
Family Law (journal) > 2022 > December > In Practice > The role of grandparents – [2022] Fam Law 1548 (behind a paywall)
For further information on this topic, please contact our Family team.
Jo Edwards recognised as one of the ’50 Most Influential 2023′ in eprivateclient
Head of Family, Jo Edwards has been included in eprivateclient’s ‘2023 50 Most Influential’ – a shortlist of the most highly regarded figures in the UK and global offshore private client world, selected by judges based on achievements in the last 12 months considered alongside broader reputation and standing in the market.
The only family lawyer to feature in the list, Jo is specifically recognised for both her expertise in her practice, where she acts for a wide range of clients in relation to separation and divorce, predominantly high net worth and ultra-high net worth individuals from various backgrounds; but also for her work in campaigning for law reform and featuring in the media.
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.
Family Partner, Simon Blain, and Family Trainee Solicitor, Ellen Jones, have authored an article for the Family Law Journal entitled ‘Mind The Step: rights and obligations of the step-parent.
Despite step-parents being a common feature in modern families, their rights, obligations and legal relationship with the children of the family are often misunderstood. Simon and Ellen discuss various elements including who constitutes a step-parent, whether then can acquire PR, what happens if a step-parent dies and what happens if a parent and step-parent separate.
Reference to the full article can be found below:
Family Law (journal) > 2022 > November > In Practice > Mind The Step: rights and obligations of the step-parent – [2022] Fam Law 1422 (behind a paywall)
For further information on this topic, please contact our Family team.
On 5 October 2022, the Supreme Court handed down its long-awaited judgment in the case of BTI v Sequana. The decision, described as “momentous” for company law, has provided much-needed clarification on the duty owed by company directors to creditors.
Understanding your duties as a director is a precondition of the role (for a general overview of your general duties, see here), but being aware of the transition between acting for the benefit of a company’s members and its creditors is even more significant given the current economic uncertainties.
In summary, the key points to come out of the recent decision are:
The creditors’ duty is engaged later in the insolvency process than previously thought.
Directors should weigh the interests of the company’s creditors against those of its shareholders, engaging in a balancing exercise where these interests come into conflict.
The closer a company is to insolvency, the more significant the interests of its creditors become.
It remains crucial that directors continue to keep themselves fully informed and up to date with company affairs, documenting the reasons for significant decisions affecting the company.
As soon as it becomes apparent that a company is facing financial difficulties, the directors should seek independent legal advice.
Background
In 2009 the directors of a company called AWA paid a dividend of EUR 135 million to its sole shareholder, Sequana SA (“Sequana“).
At the time the dividend was paid, AWA was solvent on both a balance sheet and cash flow basis but had a contingent liability of an uncertain amount which related to the clean-up costs of a Wisconsin river. Consequently, there was a real risk that AWA might become insolvent in the future, although insolvency was not imminent, or even probable, at the time.
The clean-up costs were much higher than anticipated and AWA entered insolvent administration, albeit almost ten years after the payment of the dividend. BTI (as assignee of AWA’s claims) sought to recover the dividend from AWA’s directors on the grounds that they had made the payment in breach of their common law duty to have regard to the interests of the company’s creditors.
Both the High Court and the Court of Appeal rejected this claim. The Court of Appeal found that the creditor duty was not triggered until a company was either insolvent, on the brink of insolvency or probably headed for insolvency. Since AWA was not insolvent or on the brink of insolvency in 2009, BTI’s claim failed.
BTI appealed this decision to the Supreme Court, arguing that the real risk of AWA’s future insolvency triggered the directors’ duty to act in the interests of the company’s creditors rather than its shareholders. They lost (again).
The Supreme Court considered whether such a creditor duty exists, the point at which the duty is engaged and how the duty operates once the trigger point has been reached.
What is the creditor duty?
Directors are subject to various statutory and common law duties, with the main statutory duties being set out in the Companies Act 2006 (CA 2006). Generally, these duties are owed to the company, and not to the shareholders. Possibly the most over-arching of the statutory duties is the duty for directors to promote the success of the company; directors must act in the way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.
So, where does the creditor duty come in? The creditor duty actually stems from a common law rule that a director’s duty to promote the success of the company is modified where the company is facing insolvency, such that the interest of the company’s creditors must be considered rather than the interest of its shareholders.
This common law duty is reflected in section 172(3) CA 2006, which states that a director’s duty to promote the success of the company is subject to any enactment or rule of law requiring directors to consider or act in the interests of the company’s creditors, i.e. in an insolvency situation, the directors must consider the creditors’ interests rather than just the shareholders’.
Although the existence of the creditors’ duty is not in doubt, uncertainty has arisen in the past as to when the creditor duty would be triggered and how this duty interplays with the duty to members. The Supreme Court has now shed some light…
When is the creditor duty triggered?
The majority decision of the Supreme Court found that the creditor duty arises when the directors know or ought to know that the company is:
actually insolvent (either on a balance sheet or cash flow basis);
bordering on insolvency, i.e. insolvency is both imminent AND inevitable; or
likely to go into insolvent liquidation or administration.
The Supreme Court held that, upon the occurrence of one of these trigger events, the board should become mindful of the interests of the company’s creditors alongside the interests of the shareholders. Prior to the judgment, it had been suggested that the duty to creditors, once engaged, would completely override the interests of the shareholders, i.e. the interests of the shareholders and creditors were mutually exclusive. The Supreme Court however did not consider this to be the case; instead, the interests of the creditors should be weighed against the interests of the shareholders, with the directors engaging in a balancing exercise where these interests come into conflict. However, the nearer towards insolvency the company tips, the more significant the interests of the creditors become.
This creates, in effect, a sliding scale following the point of engagement of the creditor duty. The more serious a company’s financial difficulties become, the more weight the directors should place on the interests of the creditors until such time as insolvency becomes inevitable and the creditors’ interests override those of the shareholders entirely.
Practical implications
The Supreme Court’s judgment makes clear that the creditors’ duty is engaged later in the insolvency process than previously thought, i.e. when insolvency is imminent AND inevitable, not simply likely to happen. Given this later point of engagement, the board must continue to focus on the shareholder interest and even when the creditors’ interest comes into play, the shareholders’ interest may still be of relevance on the sliding scale basis. Directors should remain mindful of the need to reasonably consider the interests of both creditors and shareholders and undertake a balancing exercise where they begin to differ.
Such a balancing act will need to be undertaken throughout the insolvency process. One can envisage, for example, that when the creditor duty first kicks in near the start of the process, that the interests of creditors and shareholders may well be fairly equally aligned, whereas the nearer the company moves to actual insolvency, the wider apart they may become. What may be a sensible and reasonable step for all stakeholders early on, may not be so further down the insolvency line.
The judgment also raises an important issue in relation to the significance of a directors’ knowledge at the point of insolvency. Although refusing to reach a definitive conclusion as to whether directors are to be judged on whether they knew (or ought to have known) that the threshold for engaging the creditor duty has been reached, it was observed that directors are obliged to keep themselves fully informed and up to date with company affairs. This should not come as a surprise to any director, but a gentle reminder is always worthwhile. While directors cannot run a business single-handedly and will need to delegate certain aspects, this is not an excuse for a director to deny all knowledge.
The Supreme Court also acknowledged that insolvency is not a straightforward process and that the financial position of a company can fluctuate significantly before insolvency becomes inevitable. It is advisable to make and retain a written record of decisions made and why, including any key points of debate and the conclusions reached. This should be standard protocol at any board or board committee meeting, including when the financial position of the company is strong, but becomes even more important when times for the business are not so good.
Further considerations:
Ratification – Shareholders, acting unanimously, can usually ratify the directors’ breach of duty but they cannot do so if the company is insolvent. As such, shareholders cannot ratify a breach of the creditor duty.
Groups of creditors – The Supreme Court emphasised that it is the general body of creditors whose interests must be considered by the directors. How this will pan out where there are different creditor groups (e.g. secured and unsecured creditors) remains to be seen and further case law may be needed to resolve the potential conflict here.
Start-ups – Often, start-ups will be balance sheet insolvent simply because they need to spend a lot of capital. Although it is arguable that the creditor duty will apply to this type of technical insolvency, the balancing act concept should help here. We consider it unlikely that the courts will view the test as meaning that start-ups can’t take risks, always assuming that decisions have been made properly.
Summary:
Although the Supreme Court decision clarifies that the duty to creditors kicks in later down the line than previously thought and potentially enables directors to try and “rescue” the company without having to be too cautious about falling foul of the creditor duty, the practical implications for company directors do not appear to have changed too much. It remains the case that directors should:
continue to pay close attention to the operation, including the financial position, of the business
document significant decisions made by the company and the reasons for them
obtain independent legal advice as soon as it becomes apparent that the company is facing financial difficulties
Disclaimer
This note reflects our opinion and views as of 13 January 2023 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
Historic England’s General Counsel, Andrew Wiseman and Commercial Real Estate partner Victoria Towers join host Miri Stickland to unpick what a historic building is and how can they be developed and adapted for future generations, with a particular eye on the challenges around introducing energy efficiency measures into historic buildings.
Partner and Head of Planning, Victoria Du Croz, has written for EG on Michael Gove’s recent statement to the Centre for Policy Studies that the government will do everything in its power to prevent the development of homes that are “not aesthetically of high quality”.
This includes, Du Croz says, a threat to call in planning applications that are “not beautiful”.
The creation of new design codes is one tool that the government plans to use to prevent “ugliness” being imposed on communities. But there are fundamental issues with design codes, not least that design by its very nature is subjective.
Local authority-wide v granular
The National Planning Policy Framework has outlined that the new design codes should be set at the local authority level. However, borough-wide design codes fail to recognise the different street level vernacular. Walk down three to four roads in most local areas and you will see a mix of architectural styles, from Georgian townhouses to listed 1960s council housing and everything in between.
Borough-wide design codes will either lack enough specific detail, rendering them meaningless, or be so generic that they will contribute to the creation of identikit housing – a criticism already volleyed at new build schemes. If local authorities try to make them more granular to better reflect specific areas, it will be an incredible burden and at considerable cost, at a time when local authority budgets are seeing below inflationary increases over the next two years, before falling further to just 1% real term increases from 2025.
Many London local authorities already consult design review panels – impartial experts including architects and urban designers alongside engineers, sustainability specialists and built heritage experts – who provide advice in relation to the design of new schemes and public realm.
As well as having panels that can be called on to provide guidance, there are standards and policies to ensure new homes are built to a suitable standard in terms of space, light and quality. At the application stage, design and access statements, submitted alongside applications, go into detail on the design response to the local area and reasons for the proposed material palette.
Given that all these existing checks and balances are in place and are factored into a local authority’s decision, why should central government step in to alter that decision? Especially when call-ins can slow down delivery, running counter to the need for new homes.
Community Perspective
Part of the impetus for implementing design codes is to bring communities onboard with new development. And while you can go through planning portals and see people commenting on the design of schemes, most nimbyism stems from concerns about additional strain on public services and infrastructure.
The frequent refrain at public consultations is about the difficulty in getting a doctor’s appointment, concern about securing a place at the local school or the state of the local roads – all things that the community infrastructure levy is supposed to be allocated towards.
The problem with CIL in its current guise is that it is not ringfenced to deliver these improvements in the same part of a town or city as the development is happening in, meaning that local residents cannot see new infrastructure being delivered alongside the new development to alleviate pressure on services in their local area. All they see is new homes and the challenges that come with this.
Reform CIL, force local authorities to spend the money and spend it in the local area where housing is being delivered and you could remove some of these objections. Ultimately, local communities do not rail against new developments just because of how they look, it runs much deeper than that.
Poundbury (pictured, above) – often held up as the exemplar on the use of design codes (the Duchy of Cornwall created a Poundbury Design and Community Code) – not only divides opinion, it also has wider cost implications. Replicating Poundbury fails to recognise the importance of having a range of housing products on the market to cater to different needs.
This does not mean bringing forward sub-standard accommodation, but it does mean recognising that sourcing specific materials and bringing forward a range of housing designs can affect both the price for the buyer and the viability of a scheme – meaning less affordable housing is delivered.
It would also be a mistake to think that Poundbury has “worked” because of the design of the homes, when in fact there is a lot to be learnt from the integration of shops, business and even factories alongside the new homes. It is this interaction between uses that makes for successful development, especially the consideration and incorporation of employment land.
Getting the priorities right
New home delivery continues to be a priority across the country, though the specific mechanism for deciding how many homes we deliver and where is currently a topic of debate. What everyone should be able to agree on is that the priority is delivering a range of high-quality homes.
This can be done while still respecting listed buildings, conservation areas and even local design palettes. What the UK planning system does not need is another layer of complexity adding cost and time to new home applications.
The government can surely use its power and resources to better effect than overturning decisions made by local planning authority committees – especially when beauty is in the eye of the beholder.
This article was originally published in EG (10 January 2023) and is also available to read here behind their paywall.
Commercial Real Estate Senior Associate and member of our Film & TV Studios Group, Owen Spencer, has written for React News on the ongoing ownership saga surrounding Channel 4, and how staying in public ownership – in addition the departure from its role as “publisher-broadcaster” – may result in greater investment in regional production facilities.
In an unexpected change to the Media Bill Channel 4 will for the first time be able to make and own original content itself. “This is a key plank in the strategy to move the broadcaster away from its resilience on advertising revenue: by allowing it to monetise its content.”
With the specifics of these new freedoms yet to be finalised, Channel 4 will be keen to understand this new remit as any money spent on Channel 4 original content instead of on independently produced content “is a conflict of interest that will need to be managed.”
The broadcaster is also to double its regional headcount from 300 to 600 by 2025. While some of these jobs will be based at existing sites, reference to jobs being created ‘potentially elsewhere’ will catch the eye of the property agents.
Any plan to employ staff at new regional sites is in line with the ‘Levelling Up’ agenda, however the government may be missing a trick when it comes to growing the regional studios sector, since the broadcaster’s regional programme-making quota remains unchanged.
“If there are 300 extra jobs going North, does this mean a corresponding reduction in the numbers employed in its recently refitted London office?”
If this is the case, alongside a new statutory duty on the corporation’s board for financial sustainability, the potential sale of its London office – a £100m asset – will be an option. Such a shift would give Channel 4 the chance to become a “national champion” by helping catalyse the dispersal of skilled crews around the country.
This article was originally published by React News on 9 January 2023 and is available here in full (behind their paywall).
Head of Family, Jo Edwards, joined Lorraine to stress the importance of considering all options and taking your time to decide whether a divorce is right for you.
Although Jo has extensive experience of taking cases to court where needed, she is well-known for her conciliatory, pragmatic approach and desire to settle even the most complex of cases where possible, which could be another option if you do decide to split.
As a trained mediator and collaborative lawyer, Jo is one of only a handful of lawyers in London qualified to consult with children in mediation.
Forsters’ Family team were named ‘Family Law Firm of the Year (London)’ at the Family Law Awards 2021 and its Private Client practice is top ranked in the latest edition of The Chambers HNW Guide (High Net Worth Guide).
Jo is a previous winner of Chambers HNW Guide’s Family Partner of the Year.
Commercial Real Estate Senior Associate and member of our Film & TV Studios Group, Owen Spencer, has written for CoStar about how both the government and real estate industry should be alive to a major opportunity which could drive the ‘Levelling Up’ agenda.
With the film and television industry set to require an extra 6 million square feet of space by 2026, Spencer writes how the continued development of sites around London and the M25 may not be possible due to greenbelt protection. As such, the industry could be forced to look to new locations across the country.
What this growth industry also needs is additional crew – all trained and highly skilled. Currently, studio workers tend to live and work around the South East – where the largest studios are located.
The 2023 revaluation list for commercial buildings increased business rates for film studios. Spencer questions if this may also favour regional studios with a lower cost base.
Spencer suggests there is scope for the government to drive its much-publicised ‘Levelling Up’ agenda off the back of the industry’s dispersal across the country by facilitating the training of studio professionals outside of the South East.
He concludes by writing: “While there are many challenges, there is an opportunity for the government to place the UK’s expertise in the studio sector centre stage in its levelling up agenda and give the regions a starring role in this growth industry.”
This article was first published on 4 January 2023 by CoStar and can be read here in full (behind their paywall).
Private Client partner, Nick Jacob, TEP and former worldwide STEP Deputy Chair, has been honoured as an Emeritus member of the global professional membership body.
This prestigious membership is awarded in recognition of ‘exceptional service and of eminence within STEP itself, at the highest global level’ for a full Member of STEP who has made a significant and high-level contribution across the organisation.
By way of response, Nick said: “I am deeply honoured to have been appointed an Emeritus Member of STEP; it means an enormous amount to me. It has been wonderful to be a part of its growth and development from day one in 1991. Nobody would have believed then that it would become what it is today.”
Nick is a Partner in our Private Client team. He advises on sophisticated private wealth planning, family succession plans, protection of the family business and avoidance of family disputes, and all aspects of international family governance.
He is a trusted adviser to a number of globally significant families with a particular focus on acting for families in Asia and is well recognised for his understanding of family governance psychology.
Click here to find out more about Nick’s practice.
Having private outdoor space is now seen as a necessity by many more people living in an urban environment, where once it was only within reach of those city dwellers fortunate enough to afford spacious surroundings.
This has resulted in many cases to the much-publicised move to the countryside. It may well mean for many that they are now, for the first time, the custodians of a property of special architectural or historical interest: a listed building.
Owning a listed building is not for the faint hearted, but it can also be a source of much joy and fulfilment. Here are five crucial things to know for those thinking of purchasing, or already owning, a listed building:
1. Special attention needs to be paid when considering any repairs, maintenance or alterations.
It is an offence to extend, demolish or carry out internal or external alterations which would affect the character of the property without Listed Building Consent, whether or not the owner is aware of that being the case. Replacing windows, fitting a new kitchen and even painting the exterior of the property could all require Listed Building Consent.
2. The listing does not just include the building itself.
It includes any item or structure fixed to it and any item or structure within the curtilage, provided the latter has formed part of the land since before July 1948. This might include anything from an outbuilding to a boundary wall, a fountain or, in some cases, statues.
3. Failure to obtain Listed Building Consent has consequences.
If consent has not been correctly obtained for works which require it the person carrying out the works will face a possible maximum penalty of two years’ imprisonment and an unlimited fine.
4. A new owner may inherit works carried out without Listed Building Consent.
It is not uncommon for works to have been carried out by a previous owner which required Listed Building Consent, but for which no Consent was obtained, or that the works were not carried out in strict adherence to the approved plans or the conditions of the Consent.
In these situations, the current owner has not committed an offence by simply owning the property. However, the local planning authority may issue an enforcement notice requiring the building to be restored to its former state or for further works to be undertaken to alleviate the effect of the works carried out without Listed Building Consent. Should the owner of the building fail to comply with the enforcement notice they will then commit an offence, for which the maximum penalty is an unlimited fine that will take into account any financial gain.
5. Seek professional advice.
It is crucial when considering purchasing a listed building, and throughout one’s ownership of it, that professional advice is sought from solicitors, architects, agents, surveyors and builders who specialise in listed buildings to ensure that potentially costly mistakes are avoided and the heritage asset of which you are a custodian can continue to be appreciated in the future.
Victoria Salter-Galbraith is Counsel in our Landed Estates team and has a passion for listed and historic buildings. She has been instructed in relation to Grade I, Grade II* and Grade II listed buildings, some with secret rooms, follies and one with a carving dating from around the time of Christ.
