As part of its ongoing focus on inclusion in the workplace and commitment to minimising employment barriers for people living with disabilities, Forsters is proud to announce it has obtained the UK government’s Disability Confident Committed Certification. Disability Confident is a government scheme designed to encourage employers to recruit and retain disabled people and those with health conditions.
Championing inclusion is a core part of Forsters’ strategy, and the firm’s EnABLE committee develops and drives initiatives which support individuals with disabilities. Most recently this has included contributing to the design of Forsters’ new premises in London’s Marylebone by engaging a third-party consultant to review the building plans from a disability perspective. Key adjustments were made to ensure that accessibility was at the heart of the design of the new offices.
Additional actions Forsters has taken to obtain Disability Confident Committed Certification include:
Promoting a culture of being Disability Confident and ensuring that all partners and employees have sufficient disability equality awareness including relevant training.
Introducing a comprehensive Workplace Adjustments Policy, which standardises the process, making adjustments easily accessible for people with all types of disabilities.
Forsters’ Talent team participating in training with MyPlus, a specialist disability consultancy, equipping them with enhanced knowledge and understanding of disability inclusion.
Providing a fully inclusive and accessible recruitment process with disabled people who meet the minimum criteria for the job being offered an interview.
Being flexible when assessing people so disabled job applicants have the best opportunity to demonstrate that they can do the job.
Supporting employees to manage their disabilities or health conditions.
Ensuring managers are aware of how they can support staff who are sick or absent from work.
Ensuring Forsters’ website is disability friendly.
Dearbhla Quigley, Chair of Forsters’ EnABLE committee, said:
“Our move to new offices in Marylebone is a major milestone for the firm and the fact that accessibility has been at the heart of its design is testament to the importance placed on creating an environment that works for all. The EnABLE Committee continues to seek out ways in which Forsters can be as supportive as possible to all of those with disabilities, whatever their form and however they are affected.”
Emily Exton, Forsters’ Managing Partner, added:
“People are at the heart of Forsters and securing Disability Confident accreditation is another stride towards ensuring access, equality and opportunity for all. Removing barriers to employment allows us to recruit and retain the best talent and is part of ensuring the kind of inclusive and diverse working environment which we know leads to provision of the highest levels of service to our clients.”
Lifecycle of a Business – Private or public company?
11 July 2023
News
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina.
On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
So, First Things First…..
Private or public company?
When setting up a UK company limited by shares, a decision will need to be made about whether to incorporate as a private limited company or a public limited company (PLC). Most UK companies are incorporated as private companies. However, that is not to say once a private company always a private company. A private company can, subject to satisfying certain requirements at the relevant time, re-register as a public company under the Companies Act 2006 (Act).
The main reason why a public company is incorporated is for the ability to offer shares to the public, which a private company is prohibited from doing. If a company is seeking a listing of its shares on a stock exchange then a PLC will be required either by converting an existing private company into a PLC or setting up a new PLC holding company in the group structure which will list. However, there is no requirement for a PLC to have its shares listed on a stock exchange and a PLC can be unquoted and its shares not traded.
The main differences on incorporation of a private and public company in England and Wales are:
a PLC requires a company secretary and at least two directors whereas a private company only requires one director;
a PLC requires a trading certificate to commence business or trading or exercise borrowing powers whereas this is not required by a private company;
in order to obtain a trading certificate, a PLC must have a minimum allotted share capital of a nominal value of at least £50,000/EUR57,100; and
shares in a PLC must be paid up as to a quarter of their nominal value and the whole of any share premium. In effect, on incorporation a PLC must have £12,500 paid up in nominal value for its shares. Shares in a private company can be issued nil paid and a private company can be set up with a minimal amount of share capital, e.g. one share of £1 nil paid.
Previously, the minimum allotted share capital amount of £50,000 meant that there was certain comfort that one was dealing with a company of substance when dealing with a PLC. The amount of £50,000 was enacted in the Companies Act 1985 but has not increased over time and is not a barrier to setting up a PLC in today’s money terms.
Once incorporated there are several differences between an unquoted PLC and a private company. This article does not focus on the differences between a listed PLC and an unlisted PLC or private company nor does it address any tax considerations.
Key on-going differences between an unlisted PLC and a private company
In addition to requiring two directors and a company secretary on an on-going basis, some other key differences are:
Shareholder resolutions and meetings – A PLC is required to hold an Annual General Meeting (AGM) each year whereas a private company is only required to do so if required by its articles of association (Articles). A PLC must give 21 days’ notice of an AGM, unless all the members entitled to attend and vote agree to a shorter period. A private company must give 14 days’ notice of an AGM unless its Articles specify a longer period.
All meetings of a private company can be held on shorter notice than 14 days if agreed by a majority in number of the members entitled to attend and vote at the meeting and holding 90% (or a higher percentage specified in the Articles not exceeding 95%) of nominal value of the shares entitled to vote. PLCs have a higher threshold – general meetings of PLCs (not AGMs) may be held on shorter notice if agreed to by a majority in number of the members entitled to attend and vote at the meeting and holding 95% of nominal value of the shares entitled to vote.
Private companies can pass written resolutions of its members whereas PLCs cannot and must convene a meeting.
Share capital – The regime around share capital matters is more onerous for a PLC. As highlighted above a PLC’s shares must be paid up as to a quarter of their nominal value and all of any share premium (except for shares allotted pursuant to an employee share scheme).
Private companies, in addition to disapplying statutory pre-emption rights on the allotment of new shares, can exclude the operation of the same in relation to all or specific allotments of shares. PLCs can only disapply these statutory pre-emption rights. Furthermore, directors of private companies with a single class of shares, have the general power to allot shares whereas PLC directors require shareholder authority to do so.
There are strict rules for a PLC if it proposes to issue shares for non-cash consideration. An independent valuation of the consideration must be obtained in advance of the allotment and be sent to the allottee. Shares cannot be issued: (i) if the consideration is an undertaking for services to be performed or work to be done for the company or any other person; or (ii) otherwise than cash, if the consideration includes an undertaking which is or may be performed five years after the date of allotment.
PLCs are also limited in share reconstructions and re-organisations. Share buybacks and redemption of shares are not allowed out of capital, whereas these are permitted by private companies. Private companies are further permitted to reduce their share capital by means of the solvency statement procedure under the Act unlike PLCs.
The financial assistance regime, whereby a company is prohibited from giving financial assistance directly or indirectly for the purposes of the acquisition of its shares, no longer applies to private companies but is still applicable to PLCs.
On a serious loss of capital, directors of a PLC must convene a general meeting to discuss what steps must be taken within 28 days of one of them becoming aware of a PLC’s net assets falling to half or less of its called-up share capital. The meeting must take place no later than 56 days after the date of the director becoming aware.
Accounts and accounting records – A private company must file its accounts at Companies House within nine months after the end of the relevant accounting period, whereas a PLC must file accounts within six months. Accounting records must be maintained for three years by a private company and six years by a PLC.
A PLC must lay annual accounts and reports before a general meeting and is required to circulate the accounts 21 days before the meeting. Private companies are not required to lay accounts before a general meeting but are required to circulate copies to members no later than the date for filing of accounts or, if earlier, the date it files the accounts.
Takeover code – The UK Takeover Code applies to a PLC with its registered office in the UK and where its place of central management and control is considered by the Takeover Panel to be in the UK, Channel Islands and Isle of Man. Unless a private company has, in the previous ten years, had its shares listed/admitted to trading, issued a prospectus or otherwise had its securities subject to a marketing arrangement or prices quotes for a certain period, the Takeover Code will not apply.
The more onerous rules and obligations applicable to a PLC may have cost consequences and can affect a company’s ability to carry out certain share capital transactions. Given this, then unless a PLC is required at the time of incorporation or in anticipation of an offer of shares to the public or listing on a stock exchange, private companies are usually incorporated rather than setting up as a PLC.
Disclaimer
This note reflects the law as at 11 July 2023. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
UK signs digital trade deal with Singapore strengthening their trading relationship and offering new business opportunities
14 March 2022
News
On 25 February 2022 the UK and Singapore signed the UK-Singapore Digital Economy Agreement (DEA), the first digitally-focused trade deal signed by a European nation. The DEA aims to strengthen and increase the UK’s trading relationship with Singapore which was worth £20 billion in 2020.
For Singapore, this is its fourth digital economy agreement following deals with Chile and New Zealand, Australia and Korea. The DEA will support the UK’s bid to join Singapore and 10 other nations in the Trans-Pacific Partnership. Such membership would grant the UK access to an £8.4 trillion free trade area with associated business opportunities.
What are the key benefits of the DEA?
Open digital markets – The deal will help provide UK businesses with open access to Singapore’s digital economy so that they can operate in fair competition, including a commitment not to impose customs duties on the sale of electronic content to Singapore.
Digital trading systems – The deal will cut red tape by moving away from archaic requirements and pave the way for global trade in the modern environment. Border processes will be streamlined and labour-intensive and costly administrative paperwork for customs clearance for goods and services will be replaced by electronic versions. Electronic contracts, signatures and invoicing processes, as well as common digital systems for e-payment, will enable faster and cheaper cross-border transactions.
Data and data flow – Data is a key component of the global economy. Under the DEA, both countries have committed to banning unjustified restrictions on the cross-border flow of data, meaning that trade in services, such as financial services and legal advice, can continue to grow. However, this commitment is overlaid by the requirement for each country to have data protection frameworks in place to protect personal data, ensuring that the transfer of data is secure. Furthermore, neither country will introduce data localisation requirements, meaning UK businesses can choose where to store and process their data so avoiding unnecessary costs.
Financial services – UK financial services firms providing services in Singapore will not be required to store data there locally, thus avoiding risks and costs for multiple data servers. Both countries will co-operate further in innovative financial services such as FinTech and RegTech. It has been agreed that the existing FinTech Bridge between the UK and Singapore will be enhanced, allowing both jurisdictions to capitalise on their market leading FinTech sectors.
Legal services – The UK government notes that the DEA is the first trade agreement in the world to include specific commitments on technology in legal services (Lawtech). Both jurisdictions are renowned legal hubs and will share knowledge in this area and encourage LawTech providers to look at opportunities in the other jurisdiction.
Consumer and business protection – Laws will be adopted to protect consumers on-line against misleading, fraudulent and unfair conduct. Neither country will require businesses to transfer their intellectual property, such as source code and cryptographic algorithms, as a condition for market access, ensuring that businesses have confidence that their proprietary technology is protected when entering the market. Given the ever-increasing threat of cyber-attacks, the two countries have also signed a memorandum of understanding to work together to build stronger cybersecurity defences, ensuring a safe and secure cyberspace.
Linking two financial centres
The DEA links two global financial centres and hi-tech and service hubs. The UK expects this strengthened relationship to allow it to capitalise further on its position as a pre-eminent service exporter. According to the British Chamber of Commerce a third of the UK’s exports to Singapore are already digitally delivered, including in finance and engineering.
The signing of this innovative DEA provides both the UK and Singapore with the opportunity and framework to capitalise on the growing global digital economy, especially in the FinTech sector, and strengthen their trading relationship.
Disclaimer
This note reflects our opinion and views as of 14 March 2022 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
Return of the SPAC? – Listing Rules Changes for UK SPACs
13 October 2021
News
In an effort to encourage a greater number of special purpose acquisition companies (SPACs) to list in the UK, the Financial Conduct Authority (FCA) has made a number of changes to the Listing Rules. Such changes came into effect on 10 August 2021.
As explained in our previous article, SPACs are companies that are formed to raise investment capital through an initial public offering (IPO) in order to fund the acquisition of an existing company. If no acquisition is made within a certain period of time (usually two years), the funds are returned to the investors.
Compared to other jurisdictions, such as the US, SPAC activity on the London markets has been negligible, with the main deterrent considered to be the suspension of trading in a SPAC’s shares once it announces a potential acquisition. This results in all investors being locked in while the SPAC is undergoing a reverse takeover and preparing the enlarged group for a new listing. Consequently, any investors who do not approve of the acquisition are unable to dispose of their shares until after completion.
Following Lord Hill’s review of the UK’s listing regime and recommendation report, an FCA consultation and an FCA policy statement, the Listing Rules have now been amended in an attempt to make the UK a more attractive venue for SPAC IPOs, while ensuring adequate protection for investors.
What are the changes to the Listing Rules?
Simply put, the presumption that trading in a SPAC’s shares will be suspended as soon as it announces a potential acquisition has been removed, provided that the SPAC meets the following conditions:
At least £100 million must be raised at the IPO stage.
The monies raised by the IPO must be ring-fenced to be used only to fund an acquisition or returned to investors (subject to any specified running costs of the SPAC).
Shareholders can redeem their shares at a pre-determined price prior to completion of the acquisition.
Approval of the acquisition by the SPAC’s board (excluding any directors with a conflict of interest).
The publication of a “fair and reasonable” statement written with the advice of an independent and qualified adviser if any of the SPAC’s directors have a conflict of interest in relation to the acquisition.
Approval of the acquisition by the shareholders (excluding the founders, sponsors and directors).
A time limit of two years in which to complete an acquisition, which can be increased to three years if the shareholders agree. A six-month extension is permitted without shareholder approval if the acquisition is well advanced.
Adequate disclosure of the key terms and risk factors from the time of the IPO through to completion of the acquisition.
SPACs that do not meet these requirements may still be listed, but the presumption of suspension will continue to apply to them.
The FCA has also stated that it will modify its supervisory approach such that SPACs will receive greater comfort prior to a listing that they fall within the new non-suspension regime.
The future of SPACs
The FCA’s revised approach seeks to provide larger SPACs and their investors with more flexibility, removing a significant disincentive to list in London and although the jury is still out on whether the new SPAC regime will lead to an influx of SPAC listings on the London markets, it will be interesting to see what the next couple of years brings. What is clear however, is that although the debate as to whether the UK will become the centre for SPAC activity remains open, the FCA’s flexible and market-oriented approach has been broadly welcomed.
Disclaimer
This note reflects our opinion and views as of 11 October 2021 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
Directors’ duties to avoid conflicts of interest continue in respect of acts carried out post-termination
1 July 2021
News
A director of a company owes various statutory and equitable duties to that company by virtue of their position. The statutory duties, known as directors’ general duties, are set out in sections 170 to 177 of the Companies Act 2006 (CA 2006) and comprise the following duties:
To act within powers
To promote the success of the company
To exercise independent judgement
To exercise reasonable care, skill and diligence
To avoid conflicts of interest
Not to accept benefits from third parties
To declare an interest in proposed transactions or arrangements.
Equitable duties include, for example, a duty of confidentiality to the company for so long as the relevant information remains confidential.
When do your duties as director cease?
Generally, directors’ duties to a company will commence on them becoming a director and terminate on them ceasing to hold the office of director with the company. However, the CA 2006 (section 170(2)) specifically provides that certain of the statutory duties will continue after a director’s termination, namely:
duty to avoid conflicts of interest – as regards the exploitation of any property, information or opportunity of which a director became aware at a time when they were a director; and
duty not to accept benefits from third parties – as regards things done or omitted by the director before they ceased to be a director.
The recent case of Burnell v Trans-Tag Limited [2021] EWHC 1457 (Ch) considered the post-termination duty to avoid conflicts of interest finding that a former director was in breach of such duty on the basis solely of his acts post-termination.
Burnell v Trans-Tag Limited
Facts
The case concerned circumstances surrounding the collapse of Trans-Tag Limited (TTL). Mr Burnell (Mr B), the claimant and CEO of TTL, sought repayment of a £250,000 loan made by him to TTL. TTL counterclaimed that Mr B, by seeking to gain control of TTL’s business for his own benefit, was in breach of his duties as a director to avoid a conflict of interest and/or in breach of his equitable duty of confidence to TTL.
TTL’s business involved the design, manufacture and sale of devices known as Tags which allowed for remote tracking and monitoring of goods, equipment and people. The company was also involved in the development of the Restore product which allowed for vehicles to be controlled remotely. All the intellectual property (IP) in the Tags and Restore devices and products was owned by a separate company, TTS. Under a licence agreement (Licence Agreement), TTS granted an exclusive licence to TTL to manufacture, use and sell the licensed products worldwide and an option to TTL to purchase the IP relating to the products on certain terms.
After Mr B ceased to be a director of TTL, the opportunity arose to acquire shares in TTS from existing shareholders. Mr B availed himself of the opportunity to acquire the shares and following the acquisition, he took immediate steps for TTS to: (a) defend proceedings by TTL against it relating to the termination of the Licence Agreement with TTL; and (b) terminate the Licence Agreement.
Findings
The High Court found in favour of Mr B in relation to the repayment of the loan but also allowed the counterclaim by TTL finding that Mr B had breached his statutory duty to avoid a conflict of interest post-termination.
This case marks a departure from existing common law whereby a claim for director’s breach of duty had to be based on the director’s actions before or at the time of their resignation. The Court confirmed the general principle that a director ceases to be subject to fiduciary duties associated with their position as director when the relationship ceases. However, section 170(2)(a) extends the application of the duty to avoid conflicts in certain circumstances (i.e. those involving the exploitation of any property, information or opportunity of which the director was aware when they were a director). As the extended statutory duty is a continuing duty the Court found that it must be possible for a breach of such duty to be based on acts which take place after a director’s resignation.
The Court held that the termination of the Licence Agreement by TTS after Mr B acquired shares in TTS must have involved the use of information regarding the terms of the Licence Agreement and concerns around the enforceability of the Licence Agreement of which Mr B became aware when he was a director of TTL. The purpose of the acquisition of shares and the termination of the Licence Agreement was to secure to TTS the right to exploit the IP of the licensed products and deprive TTL of its rights under the Licence Agreement. The Court held that Mr B had knowingly put himself in a position of conflict with TTL by acquiring the shares in TTS with the aim of acquiring the rights to the licensed products. Furthermore, the Court found that Mr B had breached his duty of confidence to TTL in relation to the information relating to the Licence Agreement.
Conclusion
It should be noted that the extended statutory duty of a director to avoid a conflict of interest post-termination in section 170(2)(a) is limited to the “exploitation of any property, information or opportunity of which he became aware when he was a director”. It is not sufficient to point to any information/opportunity as the basis of a claim against a director. It “must have some quality that permits it to be treated in law in a manner akin to property of the company” which the courts have previously characterised as “a maturing business opportunity”. In the case of Burnell v Trans-Tag, the Licence Agreement was such property/information whereas the opportunity to acquire the shares in TTS was not, as that opportunity arose after Mr B ceased to be a director of TTL.
Nothing prevents a former director from using the general skill and knowledge they acquired as a director but given this recent case, former directors will need to be mindful of their continuing duties and their post-termination actions. A breach of these duties can give rise to significant personal liability, including a damages claim and also liability to account for any profits made by such former director.
Please do get in touch with your regular Forsters’ contact if you would like to discuss further.
Disclaimer
This note reflects our opinion and views as of 1 July 2021 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
