14 Forsters lawyers featured in Legal Week’s 2025 Private Client Global Elite Directory

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Forsters’ Private Wealth team recognised once again in Legal Week’s Private Client Global Elite Directory 2025.

The Private Client Global Elite directory is a highly respected global listing that features the top private client lawyers and advisors. Those included are peer-nominated and selected based on their exemplary skills, experience, and contributions to the private wealth sector.

The following 14 Forsters’ lawyers have been recognised:

Private Client Global Elite:

  • Emily Exton
  • Jo Edwards
  • Nicholas Jacob
  • Roberta Harvey
  • Rosie Schumm
  • Xavier Nicholas

Private Client Global Excellence:

  • Alfred Liu
  • Ashleigh Carr
  • Carole Cook
  • Charlotte Evans-Tipping
  • Dickon Ceadel
  • Hannah Mantle
  • Maryam Oghanna
  • Patricia Boon

Their inclusion in the listing demonstrates Forsters’ dedication to excellence and our commitment to delivering the highest quality legal services to our clients.

Forsters advises Frank Butler Farms on the development of Barnsgrove

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Forsters’ Rural Land and Business team has been crucial to the development of Barnsgrove, a new private membership club near Greywell, Hampshire. Owned by James and Jo Butler of Frank Butler Farms, Barnsgrove spans 20,000 sq.ft. and offers a clubhouse, café, bar, fitness studio, gym, private offices, and wellness rooms. This project aims to provide locals with a space to work, exercise, relax, and socialise.

Forsters supported the Butler’s to transform their farm’s future amid economic challenges.

Jo Butler commented, “our journey to get to where we are today has not been an easy one, especially when it came to planning – S278 and S106.  Forsters have been such a support to the business throughout that process.  Barnsgrove is not a standalone business project at Frank Butler Farms.  Like any other farm in the current economic climate, we’ve had to constantly look at alternative sources of income and safeguard the farm for future generations by utilising the land we’re custodians of. Alongside Barnsgrove, Forsters have also helped us with legal support for a solar farm project; with new commercial property lets; refinancing; and in securing sales on development areas we’ve managed to recoup as a result of coming out of dairy”.

Victoria Salter-Galbraith commented, “Forsters has a long-term relationship with Frank Butler Farms and I have been fortunate to act for Jo and James for most of my career. Jo and James are both so driven and forward-thinking so it’s always exciting to be involved with the next step in their plan for the farm which has been in James’ family for several generations. Having spent some time working at Barnsgrove, I can attest to what a wonderful space they have created right in the heart of the North Hampshire countryside.”

Forsters’ advise has been pivotal in realising Barnsgrove, ensuring it stands as a testament to community-focused development.

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Victoria Salter-Galbraith

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Zahava Rosenthal to speak at STEP’s inaugural CPD masterclass series

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Senior Associate, Zahava Rosenthal, has been invited to speak at STEP’s new masterclass series. The series is set to be a blend of in-person events and online webinars to enhance knowledge and skills in the complex issues families face in planning their future. It will give attendees the opportunity to hear from leading experts in the field and network with their peers.

To kick off 2025, the first event will be on Mental Capacity, taking place in London on 5 February. The session will cover a range of topics including:

  • LPA abuse: how to spot and prevent the misuse of Lasting Powers of Attorney
  • Predatory marriage: where the law stands and what to do when it doesn’t protect a client.
  • Case study: a reminder of the dos and don’ts when assessing testamentary capacity.

Zahava will be delivering her presentation that she co-wrote with KC Alex Troupe from St John’s Chambers.

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Zahava Rosenthal

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35 Forsters’ lawyers recognised in the Spear’s 500 Directory 2025

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We are delighted to see 35 of our lawyers recognised in the Spears 500 Directory 2024:

Property Lawyers

Corporate, Litigation and Disputes Lawyers

Landed Estates Lawyers

Family Lawyers

Tax Lawyers

Contentious Trust Lawyers

Cryptocurrency

Spears 500 is a highly regarded guide, showcasing the best private client advisors in the industry for HNW and UHNW clients.

It all starts with planning – Amending planning permissions

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Despite the Town and Country Planning Act 1990 having been around for some time, there has been a run of case law on the scope of Section 73 (S73) applications, dealing with amending planning permissions.

Section 73 permits an already consented development to come forward with variations to the conditions on the original planning permission (or the deletion of conditions).  Government guidance published in 2014 referred to section 73 applications being for “minor material” amendments.  However, recent case law confirmed that this materiality limitation has no statutory basis. 

Another way to amend a planning permission is under Section 96A which permits “non-material” amendments to be made to any part of a planning permission. 

With the recent case law in mind, we’ve summarised the various ways that you can amend planning permissions under these two sections:

S96A

  • An application to make non material amendments to any part of the planning permission (e.g. description of development, conditions, informatives);
  • When deciding whether the proposed changes are within the scope of S96A (i.e. if they are non-material) you need to look at the changes within the context of the whole development;
  • You also need to consider whether cumulatively, the proposed changes, together with any others approved under previous S96A applications, are non-material;
  • Cannot be used to extend the time period for implementing a planning permission;
  • The application must be made by someone with an interest in the application site;
  • 28 day determination period;
  • No requirement on the Council to consult on the application;
  • No right of appeal if the application is refused;
  • Automatically amends the original planning permission if the approval is granted.  If you change your mind and want to build out under the original unamended planning permission you will need to submit a further S96A application to remove the changes granted by the first S96A approval;
  • A Council’s decision to grant a S96A approval can be judicially reviewed.

S73

  • An application that grants a new planning permission with varied conditions;
  • Can be used to vary or delete conditions, but not to add conditions or to vary the description of development or any informatives;
  • Case law in 2024 confirmed that variations approved under S73 are not limited to “no- material” amendments. This reference was included by the Government in guidance they published on amending planning permissions, but there is no reference to the materiality of amendments in section 73 of the Town and Country Planning Act 1990. Further case law has confirmed that as long as the proposed changes to the conditions do not result in a conflict with the operative part of the planning permission (i.e. the description of development) then there is no limitation of the extent of the variation that can be permitted;
  • Cannot be used to extend the time period for implementing a planning permission;
  • The application can be made by anyone (notice requirements must be complied with if the applicant is not the sole owner of the application site);
  • The determination period is the same as for the original planning application;
  • The applicant can appeal the Council’s decision to refuse to grant the S73;
  • If granted, the application results in a new planning permission with the same conditions as the original planning permission but amended as per the S73 application. The developer can therefore either implement the original planning permission or the new amended planning permission. Care needs to be taken if there are multiple S73 and S96A applications to ensure one planning permission picks up all of the proposed changes;
  • A Council’s decision to grant the new amended planning permission can be judicially reviewed.

The Levelling Up and Regeneration Act provides for a new way to amend planning permissions which has yet to come into force. Under S73B amendments that are not substantially different from what was originally consented can be made to any part of a planning permission, but cannot be used to extend the time periods for implementation. Whilst this is welcomed given the constraint of S73 only enabling variations to conditions it is feared that there could be a lot of case law around what is meant by “substantial”. There is also uncertainty as to when the provision will take effect as it will require secondary legislation to be brought forward, and the Government’s “To Do” list is pretty lengthy at the moment!

For more information on Planning you can get in touch with our team here.

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Shaping the future of private client – Rosie Schumm co-chairing Private Client Global Strategy Forum 2025

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Partner in our Family team, Rosie, is co-chairing this year’s forum alongside Joshua Rubenstein, from Katten. Over 3 days from the 22-24 of January, Rosie and our Head of Private Client, Xavier Nicholas, will be amongst the industry leaders discussing the future of the private client sector.

The conference, taking place at Gleneagles in Scotland, includes expert-led sessions and strategic insights on some of the most topical issues facing the industry:

  • Global mobility- jurisdiction shopping
  • Intergenerational wealth transfer
  • Guarding against Predatory Marriages
  • Surrogacy: challenges, solutions and best practices for advisers

As co-chair Rosie will be leading the discussion on the challenges facing high-net-worth individuals and how advisors are best placed to guide them through the year to come.

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Rosie Schumm

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A Centenary of Land Registration

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Anyone who practices property law will recall 1925 as the year in which a comprehensive redrafting of English property law statutes was undertaken.  The raft of legislation in that year included the first Land Registration Act which is therefore now coming up for its centenary.  The purpose of that act was to consolidate earlier legislation relating to land registration and to facilitate the comprehensive registration of all property in England and Wales.  Its centenary therefore provides a good opportunity to review the current state of registration.

Land registration had first been introduced for some London boroughs as early as 1899.  Initially it was not compulsory to register transfers of land but this was bought in according to local authority areas over the following century so that by 1990 all transactions for value triggered first registration of the title.  Take up of registration was therefore initially relatively slow and by 2004 only some 40% of land (by land area) had been registered.  However, a broadening of the requirement for registration (for example to cover gifts as well as transfers for value) led to an acceleration of the process and by 2018 the Land Registry was estimating that 85% of all land in England and Wales had been registered.  The latest estimate is that some 89% of land is now registered with around 26.5m Land Registry titles in existence.

In its 2016 five-year business plan the Land Registry included a section entitled “a comprehensive register” and set out an aspiration for all publicly held land to be registered by 2025 with all remaining private land to be registered by 2030.  Almost certainly this plan was derailed by the Covid pandemic and it is interesting to note that the three year business plan published in 2022 makes no reference to completing the registration process.  By that stage the Land Registry was presumably distracted by the need to improve its service following the disastrous collapse in its efficiency caused during Covid.

So, a century after the 1925 Act there is clearly still some way to go with at least 10% of land still unregistered.  If you look at the registration map it is clear that in the countryside there are quite large swathes of agricultural land still unregistered, presumably because this land has not changed hands in the last 35 years.  In due course this will therefore be registered.  In urban areas there are small pockets of unregistered land and examination shows that these often relate to churches, schools and other communal facilities where there has been no change of ownership for a long period.  This land might never be registered unless some form of compulsion is brought in. An interesting conclusion to draw from this is that it takes a very long time to change anything in UK property law.  The government should therefore remain cautious when making promises to “bring the feudal system of leasehold to an end” within a few years – let’s watch this space.

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New year, new opportunities for Build to Rent – Helen Streeton writes for BTR News

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Build to Rent was once considered a niche segment of the UK’s housing market. It has now gained significant attention from investors over the past year.

Despite the UK’s continued macro-economic headwinds and uncertainty in terms of new legislation, the Build to Rent market is poised to play an increasingly important role in the UK’s housing delivery.

Investor interest ticking upwards

Overall, investor appetite for residential assets is increasing across all living sectors. Interest in Build to Rent is now at a level comparable to that seen in other high-demand sectors such as data centres, logistics, and purpose-built student accommodation (PBSA).

Investors are increasingly recognising the potential of Build to Rent as a sustainable long-term investment, combined with growing demand for rental properties, since fewer people can afford home ownership due to high property prices and restrictive mortgage access.

With more individuals and families having no option but long-term rental solutions, Build to Rent has positioned itself as a solution to the chronic shortage of homes in the UK. The sector offers stability and resilience amid broader market volatility, making it an attractive proposition for institutional investors looking for reliable returns.

Tax changes have already led to a reduction in the number of buy-to-let properties – the abolition of mortgage interest rate relief being one measure that has impacted supply.

Landlords also face higher costs due to new legislation such as the Renters’ Rights Bill, once it becomes law. These changes are expected to continue shrinking the private rented sector (PRS) market, further driving demand for Build to Rent homes.

Obstacles to look out for

Looking ahead in 2025, considerable funds are available for deployment in Build to Rent, but there is a challenge around achieving satisfactory returns – factors such as high construction costs, interest rates, inflationary pressures and the broader economic climate all impact here.

A key concern is the potential impact of government policies and other demand-side stimulants aimed at revitalising the Build to Sell market. These initiatives could inadvertently shift resources away from Build to Rent, leading to a reduction in supply.

Developers may opt to focus on traditional sales, given the stronger demand from the home-buying market, ultimately reducing the volume of Build to Rent stock available.

Building Safety Act requirements around higher-risk buildings together with a sticky planning system remain obstacles to getting buildings out of the ground. These factors are resulting in delayed or stalled projects, putting pressure on an already constrained housing supply.

Build, build, build: the role of Build to Rent

One solution which the government has recently proposed to the UK’s housing crisis is its revised National Planning Policy Framework (NPPF), which is far less prescriptive than previous versions, focusing more on addressing local needs for both ownership and rental housing.

Local authorities will be increasingly willing to consider Build to Rent as a solution to meet housing demand, particularly in areas where high levels of rental demand exist. However, developers will need to demonstrate through the planning process how their Build to Rent schemes will address specific local needs. This approach allows for greater flexibility, offering developers the opportunity to tailor projects to meet the diverse requirements of local communities.

Whilst changes to the NPPF aim to unclog the planning system, Labour’s proposed housing target of 300,000 homes per year until 2029 is unachievable within the current economic climate and regulatory framework.

However, Build to Rent is well-positioned to contribute significantly due to its investment structure and offering, which isn’t contingent on sale absorption rates. By providing high-quality rental homes, Build to Rent can help to alleviate pressure on the broader housing market.

Another piece of legislation working its way through Parliament is the Renters’ Rights Bill, which includes provisions to abolish Section 21 no-fault evictions and introduce rent review processes.

While these changes primarily affect the PRS sector, they highlight a broader trend towards tenant protection. Investors in the Build to Rent sector will need to adapt to these changes, ensuring that their properties remain compliant with evolving tenant rights regulations.

In conclusion, the Build to Rent sector is well positioned to play a pivotal role in shaping the UK’s housing landscape in 2025. The sector has the potential to meet the growing demand for rental homes, contribute to ambitious housing targets, and provide stable investment returns.

As new challenges and opportunities emerge, stakeholders in the Build to Rent sector must remain agile and proactive, ensuring that this vital sector continues to thrive amidst the ever-changing housing landscape. Build to Rent is a necessity if Labour wants to meet the UK’s housing needs.

This article was published on BTR News on 10 January 2025, and can be accessed here.  

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Xavier Nicholas named one of ePrivateclient’s 50 Most Influential for 2025

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Head of our Private Client team, Xavier Nicholas has again been recognised in ePrivateclient’s 50 Most Influential rankings.  

Following a judging process based on achievements in the last 12 months, the listing identifies the leading practitioners in the private client sector, showcasing the most talented and highly regarded advisors.

Xavier has led our Private Client team for over half a decade. During this time, his focus as head of the group has included the growth of the practice and succession planning within the partnership team – particularly within our international practice. Over the last year, Xavier has spearheaded the firm’s response in advising clients on the impact of the upcoming non-dom changes.

This is the third consecutive year that Xavier has been included in the 50 most Influential list, as he continues to be recognised for his technical aptitude and his experience in advising on complex international matters.

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Sophie Wilson on parental alienation – The Family Justice Council’s guidance

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The Family Justice Council (“FJC”) has recently released guidance on how the courts should treat allegations of ‘alienating behaviour’ in court proceedings involving children. The FJC is an advisory body, whose guidance will be followed by Family Court judges across England and Wales.

This guidance outlines three elements that need to be evidenced for there to be a finding of alienating behaviour by the court, as well as explaining how these allegations cross over with allegations of domestic abuse.  

Defining Parental Alienation

The guidance outlines that there is no scientific basis for ‘parental alienation syndrome’, and expresses concern that parental alienation is being increasingly exploited within family litigation. This guidance has therefore been produced with the aim of assisting the court in prioritising the welfare of the child where such allegations have been made.

Instead of referring to a generic concept of ‘alienating behaviour’, the guidance offers a narrower definition: it is the child’s unexplained reluctance, resistance and refusal (“RRR”) to spend time with a parent that has come about due to  psychological manipulation by the other parent. The guidance suggests that findings of alienating behaviour will be ‘relatively rare’.

There are 3 elements to alienating behaviour, and these all need to be fulfilled for a finding of alienating behaviour. These are:

  1. The child is reluctant, resisting or refusing to engage in a relationship with a parent or carer;
  2. The RRR is not a result of the actions of the parent making the allegations (for example, if the parent making the allegations is found to have perpetrated domestic abuse then a finding of alienating behaviour would not be appropriate, as the RRR of the child would be an appropriate justified reaction (“AJR”) to the abuse), and the RRR is not a result of other factors such as a child’s attachment; and
  3. One parent has engaged in psychological manipulation that has directly or indirectly impacted the child and led to the child’s RRR to engage in a relationship with the other parent.

Emphasis is placed on the fact that a child can have alignment and attachment issues that result in RRR without any alienating behaviour having occurred from the other parent. It explains that children respond to their parents separating with a wide range of emotions, and this can play out in resentment or anger towards one parent, or through other situations such as the child making derogatory comments about a parent to third parties. Such behaviours in themselves do not amount to alienating behaviour as that additional element of psychological manipulation has to be evidenced and found.

Psychological manipulation can arise, for instance, where a parent reinforces a child’s loyalty with emotional warmth, whilst withdrawing emotional warmth in response to their child’s perceived disloyalty when they are wanting to maintain a relationship with the other parent.  

Crossover between domestic abuse allegations and alienating behaviour allegations

The guidance emphasises how parental alienation and domestic abuse are very different. If domestic abuse is found, this may have resulted in an AJR (where a child’s rejection of a parent is understandable given the circumstances). There also may be protective behaviours displayed by one parent if the other parent has been abusive. Both of these scenarios will not lead to a finding of alienating behaviour.

Although allegations of domestic abuse and alienating behaviour can be heard at the same court hearing, the court will first determine whether domestic abuse occurred and then consider the allegation of alienating behaviour in the context of that finding. If there is a finding of domestic abuse which led to an AJR, then the allegation of alienating behaviour will fail.  

How will it affect the children involved?

The court is directed to have regard to the wishes and feelings of the child concerned, and the guidance offers a reminder that the welfare of the child is always the paramount consideration in any case. The voice of the child should not be dismissed, even in the absence of compelling evidence showing that psychological manipulation has taken place.

The court is also directed not to treat a finding of alienating behaviour in relation to the parent with whom the child lives as an automatic trigger for a change in the child’s placement. In such a case, the court should consider what the welfare consequences of moving the child would be. The finding of alienating behaviour should be looked at in the ‘wider factual matrix’ of the child and family’s circumstances, and in some cases Cafcass will produce a report outlining whether a change in placement is appropriate and/or practical.

There may also be a variety of steps taken by the court, designed to support the child throughout proceedings. These include appointing a guardian, working with third parties such as schools or consulting with Cafcass as to programmes that could support the family.

This helpful guidance should lead to clearer and swifter outcomes for families in some of the most difficult cases which appear in the Family Court. For most parents, going to court remains a last resort. Whether within the court process or outside of it, we routinely work with a variety of parenting experts, therapists and mediators who can help support parents and children even in the most difficult situations.

Lucy Barber shares her views with The Times on Land Registry delays

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Across England and Wales, countless homeowners are facing stress and uncertainty when submitting applications with the Land Registry. Due to longstanding delays, and lack of staffing or funds, property owners are seeing transfers and registrations of ownerships taking at least a year or two to be registered, having to turn to their solicitors to help prove ownership to complete simple tasks like setting up utilities. For other concerns, like removing restrictive covenants, even after waiting years there can be no end in sight.

The backlog is partially due to stamp duty holidays during the pandemic leading to an increase in the numbers of registrations, but can also be attributed to a need for technical experts. When plans are assessed by a caseworker, years after the fact, any irregularities on plans or plots that need addressing become ultimately more difficult – the sellers won’t be around to help.

Speaking to The Times, I explained how we frequently see delays affecting our clients.

“One of my team checked to see how long it would take to register a simple freehold transfer [of ownership] and they were getting return dates of 2025 or even 2026. If you’ve got a freehold transfer, it’s a 50/50 chance it’ll come back quicky. If you’ve got a new lease for a home on a development you bought off-plan [before it was built], that’s almost certainly going to be a two-year wait before you’re registered as the owner.

Lots of people still feel very uneasy about the fact they are not yet the registered owner of their property. They also can’t send evidence to local authorities or utility companies that they own the property unless they’ve got a letter from their solicitor. We are writing lots of letters saying ‘we acted for this person and can confirm they purchased this property on that date’.”

Applicants can ask for prioritisation in some instances, but this doesn’t solve the overall backlog and delays. The industry is doing all it can to help the Land Registry and property owners, but more support is needed.

Read the full article here in The Times.

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UK Government opens Electronic Travel Authorisation (ETA) scheme to non-European nationals

An ETA gives you permission to travel to the UK, providing digital evidence of pre-arrival clearance similar to those already in place in Australia, Canada, New Zealand and the USA. It does not constitute a visa or immigration permission.

All international travellers including non-visa nationals will need permission in advance to enter or transit through the UK with the exception of:

  • British nationals
  • Irish nationals
  • Individuals already holding a UK visa
  • Persons legally resident in Ireland who do not need a visa to visit the UK, if entering the UK from Ireland, Guernsey, Jersey and the Isle of Man.

Timing

The ETA has already been rolled out to Gulf Corporation Council visits and is now expected to open to eligible non-European visitors from 8 January 2025. Eligible European nationals will be able to apply for the ETA from 5 March 2025, with a mandatory requirement from 2 April 2025.

Why is the UK government introducing the ETA scheme?

At present, non-visa nationals do not require pre-clearance for short stays or transit through the UK and advance passenger information is restricted to that provided by carriers from flight date. This means that UK border control and law enforcement authorities have little information and time to assess whether a risk is posed in advance of an individual arriving in the UK. The ETA is intended to provide the UK with an opportunity to pre-assess whether a traveller presents a security or other risk, reduce queuing times on arrival and improve the arrival experience to the UK. The EU is due to implement a similar scheme called European Travel Information and Authorisation Scheme (ETIAS) in 2024 (deferred from November 2023) which will operate in a similar way to the ETA and will require UK citizens not holding a visa issued by an EU Member State to hold valid clearance prior to travel into the Schengen Area.

Applying for an ETA

The procedure is promised to be simple and fast. Applicants (including children) will need to apply by either using the UK ETA app, or by completing an online application form. Applicants will need to provide their personal details, passport information, travel itinerary, email address and answers to questions about criminal offences and immigration history. It is intended that applicants will eventually provide fingerprints remotely through the use of an app. The Home Office have been running feasibility trials of fingerprint self-upload technology. This information will be checked against Home Office systems and international security data to determine whether the individual is cleared for visa-free travel to the UK. The ETA application fee will cost £10 per applicant (the Government intend to increase this fee to £16. There is no date confirmed yet and it will need to go through parliamentary approval first).

Individuals will receive notification of ETA approval by way of email. It is advisable for travellers to carry a print out of this email with them when travelling to the UK. The ETA itself is not a physical document but will be electronically linked to the passport they applied with and this passport must be used for travel into the UK. ETA holders are expected to use the ePassport gates (if eligible) or see a Border Force officer when arriving in the UK.

An ETA will last for two years and can be used for multiple visits to the UK. If an individual renews their passport before their ETA expires, they will need to apply for a new ETA.

When to apply?

Applications will need to be submitted with sufficient time to present the ETA approval to their carrier before travelling to the UK. Decisions will typically be made within three working days of submission however decisions may take slightly longer if further checks are required. Travellers are advised to apply earlier if possible and not to book travel until the ETA has been approved.

What will happen if ETA approval is not secured before travelling to the UK?

All Airlines and travel carriers will be under an obligation to ensure they have checked a traveller’s ETA prior to departure to the UK. Individuals requiring an ETA who travel without one may face a penalty charge and delays on arrival at the UK border.

It will also be a criminal offence to knowingly arrive to the UK without an ETA if one is required.

What happens if an ETA is denied?

The Immigration Rules require that ETA must be refused where the applicant has previously been sentenced to imprisonment for more than 12 months, been convicted of a criminal offence within the previous 12 months, breached UK Immigration Rules in the past, or has other adverse character, conduct or associations, among other reasons.

If an ETA is refused, the individual will need to apply for either a standard visitor visa to visit the UK, a Temporary Work – Creative Worker visa to come to the UK as a creative worker, or a Transit visa, to transit through the UK. We would expect the Home Office to set out the reasons for refusal in writing, and these should be taken into account when preparing a visitor visa application.

For further information please contact our UK Immigration team, or your usual Forsters contact.

UK Government opens Electronic Travel Authorisation (ETA) scheme to non-European nationals

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Forsters team supports Ministry of Defence in settlement of landmark litigation, bringing Armed Forces housing back into public ownership

The Ministry of Defence (MOD) and Annington Homes have today announced that they have reached a major deal to bring the Armed Forces housing estate back into public ownership.  MOD will re-acquire c36,000 houses from Annington Homes for a total purchase price of £5.9945bn, as well as unwinding the complex and costly set of contractual arrangements between the parties which has governed their relationship since 1996.

The transaction marks the culmination of landmark litigation between the parties concerning the scope of MOD’s enfranchisement rights.  Forsters has advised MOD in relation to the enfranchisement and subsequent litigation since 2020 and the firm was also selected to handle the transactional elements of the deal, which is one of the largest property transactions in UK history. The entire Forsters team has worked immensely hard on behalf of MOD, alongside Slaughter and May who advised on the public law aspects of the litigation, to help bring matters to a successful conclusion.

The Forsters team comprised Senior Partner Natasha Rees, Real Estate Disputes Partner Julia Tobbell and Commercial Real Estate Partner Ben Brayford.  They were supported by Senior Associate James Carpenter (Real Estate Disputes), Counsel Andrew McEwan, Senior Associates Alexandra Burnaby and Alex Harrison and Paralegal Kelly Pryor (Commercial Real Estate).

Matthew Evans writes for Property Week on the M&S verdict, planning, and carbon

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Two governments later, after rounds of decisions and appeals, detailed reports and public commentary, Marks & Spencer (M&S) have finally been granted planning permission by Angela Rayner to demolish its flagship Oxford Street store. Speaking to Property Week, I look at the main challenges that delayed this outcome, and how this affects planning as a whole.

Overturning Michael Gove’s previous decision, Rayner’s stance favouring redevelopment is cautiously welcomed by the planning industry. However, the debate around retrofitting or redevelopment is an example of how disrupted the UK’s planning system is, hindering rather than helping development.

A significant problem in the delayed decision making process were the broad range of environmental and planning experts involved, and their conflicting views on points that currently lack clarity or policy. The key issues being:

  • Whole-life carbon (WLC) assessments are a case of ambiguity, opinion versus opinion. As a developing tool, we need more certainty on the findings and the impacts, taking into account the lifetime of the build and not just embodied carbon.
  • We need to see much clearer policy on retrofitting, and how this is considered in the development process versus demolition, however this is already being addressed in government consultation.
  • If not demolition – what are the alternatives?  Numerous options were put forward by M&S in their case for redevelopment, but these were not considered sufficient. We need more guidance on what is required for alternatives, to ease the process.

This decision goes beyond retail, with potentially hundreds of other similar situations to this across the UK across different sectors. Without better understanding on the issue of retrofit versus demolition, many buildings risk becoming obsolete given the work needed to improve their energy performance.

“The burning question that remains is whether the M&S case should ever have reached this stage. Does it say more about the previous political environment than the planning process, or was it the perfect storm of political incompetence and planning stagnation?”

Read the full article here.

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Top 5 things to know about Biodiversity Net Gain

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Biodiversity net gain (“BNG”) is now an integral part of the planning system, mandatorily applying to all applicable developments and requiring at least a 10% uplift of the biodiversity value of the site post-development.

BNG is a point to be considered at site acquisition and appraisal stage, as well as being factored into the design and planning application. Here are five key points to know for those developing land which will be subject to the BNG requirements:

1. Planning permissions granted or applied for before the BNG regime took effect are not subject to the statutory requirements.

The BNG regime took effect on 12 February 2024 for the majority of sites, and 2 April 2024 for small sites.

A planning permission already granted before the obligations take effect will not be subject to the BNG requirements. Equally, a planning permission applied for before the above dates, but granted afterwards, will also not be caught. As a follow on consequence, if such a planning permission is later varied by section 73, that variation will likewise not be subject to the BNG obligations.

2. It is not necessarily easier to meet the BNG requirements on brownfield land.

The rules apply equally to brownfield and greenfield land and regardless of the level of the baseline. The assumption is that often, brownfield sites will have a lower baseline ecological value than their greenfield counterparts. Whilst in some cases this will be the position, it is not necessarily the case. As a particular example, open mosaic habitats are often found on brownfield land and are classified as a ‘high distinctiveness’ habitat in the statutory metric. It therefore remains important to do robust initial assessments of the onsite habitat as early as possible and not assume that a brownfield site will have a low ecological baseline value.

3. The BNG regime applies even where the relevant condition is not imposed on the face of the permission.

The pre-commencement condition requiring a biodiversity gain plan to be submitted is deemed to be imposed regardless as to whether it is included within the decision notice itself. The government guidance on BNG provides councils with a standard form of wording to include as an informative on the decision notice, with the aim of not introducing conditions conflicting with the statutory requirements.

It is important to bear this in mind when reviewing decision notices possibly with the intention of acquiring sites to develop or for investment purposes.  

4. It is possible to phase a planning permission for BNG purposes.

Phased development for BNG purposes refers to either (i) outline permission where the reserved matters permit or require the development to come forward in phases; or (ii) any planning permission subject to conditions which permit or require the development to come forward in phases.

Permission for phased developments will be granted subject to the planning conditions requiring the following:

  • An overall biodiversity gain plan will need to be submitted to the local planning authority prior to commencement of the development as a whole.
  • No phase of the development can commence until a biodiversity gain plan for that phase has been submitted to and approved by the local planning authority.

If the preference is to phase the BNG delivery, this will need to made clear at application stage and it will be reflected on the decision notice.

5. Whilst the biodiversity gain plan will be secured by planning condition, details on the BNG strategy for the development and how the 10% gain will be secured must be submitted at application stage.

Applications for planning permission will need to include a statement as to whether the applicant believes that planning permission would be subject to the biodiversity gain condition and if not, why not.

Where it is considered that the BNG requirements are applicable, the following information will need to be submitted at application stage (non-exhaustive):

  • The completed biodiversity metric calculation tool, showing the calculation of the biodiversity value of the onsite habitat.
  • If any activities have been carried out on the site since 30 January 2020 which have lowered the biodiversity value of the site, a statement confirming those activities and the date when they were carried out.
  • A plan showing the location of the onsite habitat included in the calculations and any irreplaceable habitat.

Sophie Smith is an Associate in our Planning Team and has a particular interest in the Biodiversity Net Gain regime introduced by the Environment Act 2021.

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Victoria Du Croz speaks to FT and others on Labour’s plans to develop “grey-belt” land

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The Labour government has introduced significant changes to England’s planning system, concerning the development of low-grade greenbelt land. As part of Labour’s plans, there was a commitment that 50% of homes built on this land would be affordable, however, this has been dropped due to concerns about financial viability. Instead, the plans pivot to alternative “grey belt” land being open for redevelopment, requiring that these projects include 15 percentage points more affordable housing than other local projects.

Housing Minister Matthew Pennycook explained that this adjustment aims to avoid an inundation of developers asking for exceptions to the 50% rule, whilst reducing the risk of unviability scuppering rural new build projects.

Speaking to numerous publications, Victoria Du Croz, Head of Planning, warns: “Without increased clarity the definition of grey belt will be played out at appeal and in the courts, delaying planning applications and fundamentally delaying the provision of new homes.”

Read the full articles here in the Financial times, Architects Journal, BE News, CoStar, and MailOnline.

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Corporate Re-domiciliation – Guess who’s back, back again?

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You’d be forgiven for having forgotten all about the corporate re-domiciliation consultation that was undertaken three years ago. But, following that consultation’s Response in April 2022, an independent expert panel was established to consider in more detail how a UK corporate re-domiciliation regime could work and recently, a report was published setting out that panel’s findings.

The report details how the panel envisages such a regime working, with recommendations as to application requirements, process, timing and legislation changes, among other matters. The report is exhaustive and thorough (in its full 114-page glory), and so we’ve summarised the key points below.

(Please note: the tax position of entities under both the incoming and outgoing regimes warrants its own section in the report and is outside the scope of this summary.)

What is corporate re-domiciliation?

Corporate re-domiciliation allows a legal entity incorporated in one jurisdiction to, essentially, give up that jurisdiction and become incorporated in another jurisdiction while retaining its legal personality throughout. Although several jurisdictions currently have such a regime (for example, Singapore and Canada), the UK doesn’t and it’s the imposition of such a regime in the UK which the report considers.

Key findings

The question of whether a one-way or two-way regime would be preferable was raised in the consultation and it was clear from the response that the latter was favoured. The report agrees, recommending that any UK corporate re-domiciliation regime should work both ways, i.e. non-UK entities should be able to leave their country of incorporation and become incorporated in the UK (incoming re-domiciliation), while UK-incorporated entities should be able to leave the UK and become incorporated elsewhere (outgoing re-domiciliation) (in each case, subject to the non-UK jurisdiction permitting the change).

Initially, the regime is likely to only be available in respect of UK companies, although overseas entities will have the choice as to whether to incorporate as a limited or unlimited, and as a public or private, company. The report suggests that expanding the regime to LLPs could be considered at some point in the future.

Although Companies House will be the relevant UK authority dealing with corporate re-domiciliation, the report suggests that it will be the entities themselves which will project manage the switch, liaising with Companies House and the relevant authorities in the overseas jurisdiction. In addition, the panel recognises the need for certainty and advocates minimising any discretionary powers which are to be given to Companies House. The report does however suggest that the Secretary of State could be given certain reserve powers, for example, being able to determine which jurisdictions are excluded from the regime from time to time.

Although ideally, de-registration in one jurisdiction and registration in the new jurisdiction would occur simultaneously, the panel recognises that this may not always be feasible but recommends that the period between the two should be kept as short as possible. To ensure continuity of the entity’s legal personality, de-registration should only occur once registration in the new jurisdiction has taken place.

Incoming re-domiciliation

The report proposes that only solvent bodies corporate that intend to carry on business as a going concern in the UK will be able to re-domicile into the UK, with such entities being required to provide a solvency statement as part of their application process. No other economic substance or size criteria is put forward by the panel.

Any incoming entity will be treated, as far as possible, as a UK-incorporated company, although the panel recommends that re-domiciled entities should, by their registration number, be able to be differentiated from UK-incorporated entities.

Protection of stakeholders will be a matter for the law of the departing jurisdiction.

Outgoing re-domiciliation

The report suggests that insolvent companies shouldn’t be able to re-domicile out of the UK. In addition, UK law should make clear that re-domiciliation will not affect any obligations or liabilities of the company which were incurred while it was incorporated in the UK.

Certain information should continue to be available in the UK after re-domiciliation and the company should be required to maintain an authorised representative in the UK to accept service of proceedings for 10 years following re-domiciliation out of the UK.

In order to protect key stakeholders, the report suggests that the passing of a special resolution agreeing to re-domiciliation should be required and also that any non-consenting shareholder(s) should be granted a period of time in which to file an unfair prejudice claim. In addition, consideration needs to be given to the protection of creditors who should be able to apply to court to object to the re-domiciliation in certain circumstances.

The report also proposes that re-domiciliation out of the UK could be deemed a “trigger event” for the purposes of the National Security & Investment Act 2021 (NSIA 2021). As such, certain companies may need to obtain clearance under the NSIA 2021 before re-domiciling. See here for more information about the NSIA 2021.

What next?

The government will need to consider these recommendations in depth and there’s likely to be a further consultation once more detailed proposals about the regime have been ironed out. This will need to take into account the views of regulatory bodies, such as the Financial Conduct Authority and the Panel on Takeovers and Mergers.

Many legislative changes will be required and the report sets out numerous amends that will be required to the Companies Act 2006. Taxation legislation will also need amending and other, more specific pieces of legislation may also be affected.

Although the imposition of such a regime is, in our view, to be welcomed, it’s clear that the changes required will not be effected swiftly and the devil will most certainly be in the detail for the lawmakers tasked with putting it in place.

Disclaimer

This note reflects the law as at 29 November 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

Still a long way to go for leasehold reform – Lucy Barber writes for EG

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Lucy Barber, Head of Residential Property, writes for EG on the latest update on the Leasehold and Freehold Reform Act 2024, and comments on how complex the task of reforming the enfranchisement industry will be.

The 2024 Act was sped through legislation in the wake of Rishi Sunak calling for General Election in July, but now “serious flaws” are being highlighted, requiring additional primary legislation before they can be implemented. The Government has prioritised elements of the Act that relate to building safety measures, leaving leaseholders waiting a little (or a lot) longer for the reforms they have been anticipating. The two year rule is set to be scrapped in January 2025, although this has not been considered much of a hindrance, however all else is subject to further consultation. This includes the Act’s ban on building insurance renumeration, and the Act’s provisions on service charges and legal costs, and the valuation rates used for calculating enfranchisement premiums.

The enfranchisement industry, a sector largely on pause for years, would benefit from a prompt decision on the valuation issues within the Act, including changes to deferment rates and capitalisation rates. However, these issues will not be looked at until the “serious flaws” in the Act are fixed. Unless they simply resolve to scrap the proposals to change the valuation basis of lease extensions, the industry will continue to wait in limbo and in addition challenges to the Act have now been initiated using the Human Rights Act 1988 which may delay things further.

As well as the discourse the current Act, the Government has recommitted to publishing a new draft Leasehold and Commonhold Reform Bill in the second half of 2025. The Bill is to be focussed on reinvigoration of commonhold through a comprehensive new legal framework. This would, however, bring changes to mortgages, insurance, conveyancing, and property management. Furthermore, flat owners will be compelled under these commonhold proposals to be the owners of the building and, as such, take on the responsibilities associated under the Building Safety Act 2022, amongst other ownership duties.

“For now, the position is still uncertain, the timing is uncertain and the eventual drafting of the legislation is uncertain. Leaseholders and freeholders are in the same position they have been in for many years. There are no quick and easy answers to any of the issues that have slowed up the legislation to date; if there were we would no doubt be a lot further forward.”

Read the full article here in EG Radius.

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Uncover the proposed amendments to the Employment Rights Bill

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After seven weeks of consultations and discussions, the Government has this week tabled a 53-page Amendment Paper to its landmark Employment Rights Bill (we have summarised the Bill here). The proposed amendments are wide ranging, with some significant reforms hidden amongst other more standard administrative changes. Whilst most of the proposals have been put forward by the Employment Rights Minister, Justin Madders, there are also contributions from several non-Labour MPs. It is unlikely that any of those opposition-led amendments will pass into law, but they certainly provide a useful indication of the perceived shortcomings of the Bill as it currently stands. By contrast, there is a strong likelihood that most, if not all, of Labour’s own proposals will pass into law.

Of those proposals, the headline amendment is the extension of the time limit for bringing claims in the Employment Tribunal. The limit has been stretched from 3 months to 6 months for all Tribunal Claims, giving employees much more time to enforce claims against their employers. Though significant, this amendment is not altogether surprising. It was included as one of several commitments in Labour’s Plan to Make Work Pay earlier this year, and it builds upon the general employee-friendly stance that Labour appears to have taken in recent months.

At this stage, it is not quite clear what impact the extended time limit will have. On the one hand, it could give prospective claimants more time to pursue a resolution with their employer outside of the Tribunal. On the other hand, it could open claims to a whole raft of employees who would have otherwise fallen foul of the relatively tight three-month deadline. If the latter does prove to be the case, then it will be interesting to see how the already-strained Tribunals deal with an even more demanding case load. 

We have summarised some of the other significant proposals in the Amendment Paper below.

1. Initial period of employment

    The Amendment Paper specifies that the ‘initial period of employment’ referred to in the Bill will be between three to nine months. The Government intends to pass secondary legislation in respect of this ‘probationary’ period, lessening the obligations on employers when making dismissals during that time. This amendment directly relates to the Bill’s proposal to give employees protection from unfair dismissal from day one of their employment.

    2. Changes to guaranteed hours

    There have been a number of minor changes to guaranteed hours contracts for workers, including rules on payments to workers when their shifts are moved, cancelled, or curtailed. 

    3. Gender equality” definition

    Under the Employment Rights Bill, the Government can produce secondary legislation requiring employers to create equality actions plans to promote gender equality. To that end, the Amendment Paper has extended the definition of “gender equality” to include menstrual problems and menstrual disorders. 

    4. Non-disclosure agreements

    The Liberal Democrat MP Layla Moran has proposed a clause which will render as void any non-disclosure agreement that purports to prevent workers from disclosing any type of harassment, including sexual harassment. 

    5. Prohibition on ‘substitution clauses’

    The Conservative MP Nick Timothy has proposed a clause which will prohibit the use of ‘substitution clauses’ in agreements between employers and employees, workers, or dependant contractors.

    It now remains for the Public Bill Committee to debate the Bill, as amended, over the next two months. The Committee will hear evidence from a number of academics, industries, and trade unions during that time, with a view to reaching a conclusion on the Bill on 25 January 2025.

    The Terminally Ill Adults (End of Life) Bill – difficult decisions ahead?

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    Summary

    If passed, the Terminally Ill Adults (End of Life) Bill will apply the principles of the Mental Capacity Act 2005 (the “MCA”) when assessing the ability of certain terminally ill individuals to take the decision to seek assistance in dying.

    The Bill frames the matter as an individual’s ability to “make a decision to end their own life”. This implies a holistic assessment, not just a medical decision. The Bill sits uneasily with the existing MCA regime, not least because there is little (if any) law on the capacity required to end one’s life.

    Attorneys appointed under lasting powers of attorney (“LPAs”) for both property and finances and health and care should not be directly involved in an individual’s decision to seek assistance in dying. They could, however, be required to provide support with other decisions surrounding it.

    The Bill recognises that medical professionals’ involvement in the proposed assisted dying regime must be a matter of individual conscience. Should the Bill become law, an attorney’s fiduciary duties may mean that they are not permitted such a conscientious objection.

    Analysis

    Clause 3 of the Bill provides that, at each stage of the proposed assisted dying process, the terminally ill person’s decision-making capacity is to be judged in accordance with the MCA.

    The Bill envisages that, at every relevant stage, the terminally ill person will need to be free of any cognitive impairment that renders him or her unable to: (i) appreciate the information relevant to the decision to end his or her life, (ii) retain it, (iii) use it or weigh it to reach a decision and (iv) communicate that decision (as per the criteria set out at sections 2 and 3 of the MCA).

    Two issues emerge from this proposal:

    1. First, what is the “relevant information” for the purposes of the decision to terminate one’s own life?  It is either an extremely complicated question or a stark, binary one.  Any assessment of capacity to request assistance with dying – required on at least five occasions during the proposed process – will turn on this (as yet undefined) test.

        There is little guidance on the point, not least because suicide was treated as a crime until 1961 and the subject remains largely taboo. The case of Re Z [2004] EWHC 2817 (Fam) considers the question of capacity to end one’s own life, but does not set out a clear test.

        The MCA implies that any decision to seek assistance in accelerating one’s own death would include an understanding of the reasonably foreseeable consequences of deciding to do so (as required by s3(4) MCA). This could set the bar relatively high.

        Any such formulation might come up against a public policy argument in favour of maintaining a lower capacity requirement so that terminally ill individuals are not unduly restricted from accessing a regime intended to alleviate their suffering.

        It has been suggested that, unusually, the relevant test could be set out in separate guidance. In the absence of any clear precedent, this seems a sensible step.

        2. Clause 2 of the Bill restricts its definition of a terminally ill person to an individual who:

        • has an inevitably progressive illness, disease or medical condition which cannot be reversed by treatment; and
        • whose death in consequence of that illness, disease or medical condition can reasonably be expected within 6 months

        An individual might meet the first limb of the Bill’s test, but not the second (meaning access to assisted dying could be desired, but not yet available); or might have a significant disability or medical condition which, whilst not inevitably progressive, is causing them to wish to end their life.

        The MCA involves a regime of supported decision-making. Among other things, it provides that:

        • an individual must not be treated as unable to make a decision unless all practicable steps to help him to do so have been taken without success (section 1(2) MCA); and
        • to the extent that they cannot take a given decision, the decision is to be taken in accordance with their best interests (section 1(4) MCA)

        An individual who has received a terminal diagnosis (but is not yet within the 6 month window proposed by the Bill) might wish to use the assisted dying regime in future. If so, they might require his or her attorneys’ support in arranging their affairs to maximise future opportunities to obtain assistance in dying.

        This could include support with decisions regarding:

        • his or her choice of where to live (e.g. to be close to suitable medical facilities, particularly if his or her physical symptoms are likely to make travel difficult in future)
        • understanding the effects of proposed medical treatment (which might interfere with his or her decision-making capacity, and so preclude future access to assistance in dying) and
        • the costs involved in funding the above (or, indeed, funding the application itself for assistance in dying itself)

        Mental capacity is decision-specific. Depending on the test of capacity adopted, it is possible that an individual might be capable of seeking assistance in dying, but not making other decisions. If so, the decision to seek assistance in dying would be relevant to any best interests decision being made by their attorneys in other areas, meaning the attorneys would need to take the donor’s wishes on this matter into account.

        The Bill includes so-called “conscience clauses”, ensuring medical professionals are not obliged to advise on (clause 4) or participate in (clause 23) the assisted dying process. It would, presumably, be open to LPA attorneys to resign their appointment if they were uncomfortable helping to make arrangements that might help facilitate an assisted death.

        It is to be hoped that the attorneys would not be criticised for any such resignation. Given that any such resignation could leave a terminally ill person or otherwise incapacitous person without an attorney when one is really needed, would an attorney’s decision to step down be treated as requiring a best interests decision? Should the Bill pass, it would be better for any donor to discuss the matter with prospective attorneys from the outset, to ensure anyone appointed is prepared to provide support in taking such decisions if the need ever arises.

        Amy France speaks to Property Week about the Older People’s Housing Taskforce report

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        The long-awaited report from the Older People’s Housing Taskforce has called for a new national strategy for an ageing population, including revisions to the National Planning Policy Framework to strengthen the need for older people’s housing.

        Property Week has reported on the new strategy where many industry professionals have also shared their views. 

        Our Head of Later Living, Amy France, said: “With suitable housing for older people being critically low in the UK, we welcome the recommendations from the Taskforce which outline tangible actions that will boost the delivery of homes, rather than simply reiterate the scale of the issue. 

        “The Taskforce has not forgotten to provide for those who wish to remain and potentially be cared for in existing homes – still the greatest preference amongst older people – with references to the need to think holistically about social care, housing and the NHS. By building up community and primary health services, the aim is to keep patients healthy and out of hospital, with care provided in the home which should provide a massive boost to quality of life and health outcomes, not to mention lowering the burden on the NHS.”

        This full article was published on 26 November 2024 and can be read here.

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        Ploughing through taxes: what do the IHT changes really mean for farmers?

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        The latest Government budget, as has been well publicised, has caused outcry amongst the farming community with somewhere between 20,000 – 40,000 braving snow to make their voice heard. But what do the inheritance tax (IHT) changes really mean for farmers?

        Agricultural and Business Property Reliefs

        Most of the discussion has centred around the Agricultural Property and Business Property Reliefs being capped at £1m, with IHT payable at 20% thereafter. The Government say that only 500 estates or so will be affected each year. Is this true? Let’s look at some recent government figures.

        The below graph is from the Government’s “Farm Business Income in England, 2023/24 forecast“. Farm Business Income (“FBI”) is the total output generated by the farm business minus total farm costs. There is some discussion as to what an “average farm” is but the Government suggests that the English average is about 210 acres. It is not immediately obvious how they defined “farm”. For example, is this the area owned by one entity or is it the area farmed by one business? To highlight a different view of “average”, Tom Heathcote, former head of agri-consultancy at Knight Frank and founder of Heathcote Farm Consultancy, said that “an average UK farm to include around 800 acres (600 arable, 150 grass, 50 woodland), one house, two cottages, and a mixture of modern and traditional buildings” (Farmers Weekly).

        Calculating your potential IHT bill

        If we proceed assuming that the “government average” is correct combined with the average price of arable land (£11,000 per acre or so currently), you reach a pure land value (excluding buildings, machinery or any farm houses) of £2,310,000 for an “average” arable farm. Assuming there is a farm house, agricultural buildings, expensive machinery (bearing in mind second hand combine harvesters that are one or two years old can cost £300,000 or more) some woodland and possibly farmworker cottages, this could value of the overall business could easily reach £3,000,000 (if not more).

        Chart showing average farm business income

        The impact on farms

        If we however assume a relatively conservative value of £3,000,000, this means that an “average” arable farm based on government numbers could be looking at an IHT bill now of up to £400,000 (assuming they are paying 20% on the value above £1,000,000). If we assume that it is owned by a married couple, it includes their main home, they make full use of their gifts to each other and some land up to the £1,000,000 cap is transferred to the next generation on the death of the first, this could reduce the bill to nothing (with the £1,000,000 APR allowance having been used twice and the full £1,000,000 nil-rate band having been used). That, however, relies on multiple moving parts, the above assumptions and planning structures that are not appropriate or even possible for many farms.

        An average general cropping farm (according to the Government forecasts) such as this would have made £53,000 in 2023/2024, a cereals farm even less at £34,000. This will also be subject to income and other taxes. Bearing in mind subsidies are disappearing, how volatile farming can be and just how expensive machinery is, how is the “average” farm going to find the money to pay their IHT bills?

        While larger estates, particularly those in trust where the tax bill will be 3% every 10 years on the value above £1,000,000, may be able to absorb the cost, it is still going to have a large impact on farming. I have already been involved in discussions where trust owned estates are planning to move away from agricultural land holdings because they no longer make sense against higher-yielding assets in order to meet their tax liabilities. This will ultimately mean farmland will be sold and it will lead to reduced investment into our agricultural sector. Neither of these are necessarily good for food security or the tenant farming sector.

        Succession planning

        The figures will be much more nuanced than this article suggests, but this will clearly impact many farms. Farm owners will need to ensure that they have considered their succession planning in detail, and not just from a financial perspective. For example, the farm will likely need to provide for the person gifting in their retirement, so gift with reservation of benefit rules need to be carefully considered. It is also a big decision to give away part of your business during your lifetime when you still rely on it and potentially farm on it.

        It is more important than it has been for decades to take advice on farm succession planning. 

        Tax Effective Fundraising

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        It’s not easy raising funds; it’s high risk for the investor given the majority of start-ups don’t work out.  Investors have different options available to them to protect against this risk, with some start-ups and some investors able to take advantage of various tax incentive schemes that are in place which assist with de-risking investments.  This article takes a look at those schemes.

        Whilst start ups often need external investment in order to grow and scale, investors will want a return on their capital: either reliable dividend income or long-term capital growth or, ideally, both. However, typically start-ups simply do not envisage profits for many years, and when they do start to generate profits, paying out dividends is unlikely to be a priority (for them or investors); often, they will need to plough the profits back into the business instead to scale it. Coupled with higher risks of failure (and so capital losses for investors), the tax system recognises that investors need to be enticed into investing into start-ups and other early-stage businesses.

        Investment schemes

        To give start up companies a level playing field there are a number of investment schemes that give investors enhanced tax breaks when they introduce new capital into the business by subscribing for shares. The Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS), and Venture Capital Trust Scheme (VCT) each encourage investors to finance smaller companies.

        • Both SEIS and EIS are regularly used by start-ups, though thought should be given to raising capital this way and then later receiving institutional investment from investors that may want liquidation preferences that sit above the ordinary shares held by your early investors.
        • VCT was designed to spread investment risk over a number of companies; investors invest in the venture capital trust, which will then buy shares in a number of qualifying companies.

        Tax breaks

        Traditional investing by a UK tax resident in the shares of a UK company comes with an income tax charge on any dividend for investors, along with a capital gains tax (CGT) charge on the gain they make when they come to sell. Shares are generally acquired out of post-tax income and any capital losses may typically only be set against capital gains.

        The schemes give investors a varying number of tax breaks, which can include:

        1. Deferral of capital gains on assets sold to finance an acquisition of qualifying shares – meaning more money can be spent acquiring more shares and a tax bill delayed
        2. Income tax deduction on a percentage of the value of the investment in the year that it is made
        3. CGT relief on the gain made in the qualifying shares
        4. Ability to set any losses against income

          This makes investing in eligible companies much more attractive, as investors can benefit significantly if values rise, but also have valuable tax benefits if the companies fail. This attempts to make higher risk start up companies that need funding to grow, succeed and thrive a more enticing prospect compared to safer, more reliable, established companies.

          Investee company conditions

          Following perceived abuse of the schemes, new rules were introduced in 2018. These put in place a two-part condition, which requires the investee company to:

          1. Intend to grow and develop over the long-term (e.g have plans in place to increase revenue, customer base and number of employees (i.e. an SPV for a specific project would not meet this test)); and
          2. Have a significant risk of loss of capital to the investor greater than the net return (risk here means the commercial risk of the company failing in the market), i.e. the company must be highly likely not to deliver a return to the investor, including the benefit of tax relief).

            In addition, there are a number of other conditions which the investee company must meet to enable investors to benefit:

            SEISEISVCT
            Type of companyUnquoted (can be listed on AIM)Unquoted (can be listed on AIM)London Stock Exchange or on any other EU regulated Market, i.e. not on AIM. At least 70% of the VCT’s investments must be in unquoted companies (can be listed on AIM)
            Ownership / subsidiariesThe company must not be controlled by another company and must not have any subsidiaries that are not 51% or more subsidiariesThe company must not be a 51% or more subsidiary of any other company and must not have any subsidiaries that are not 51% or more subsidiariesThe VCT itself must not be a close company. Broadly this means that the VCT company must not be controlled by five or fewer shareholders or any number of directors
            AssetsThe company must have no more than £350,000 in gross assetsThe company must have gross assets of less than £15 million before the EIS share issue and less than £16 million afterwardsThe companies that the VCT invests in must have gross assets of less than £15 million before the VCT share issue and less than £16 million afterwards
            EmployeesThe company must have less than 25 employeesThe company must have less than 250 employees (500 if the company is “knowledge intensive”)Each company that the VCT invests in must have less than 250 employees (500 if the company is “knowledge intensive”)
            Time limits / restrictionsNo previous EIS or VCT investments can have been made. The company must be less than three years oldEIS cannot apply if it has been more than seven years since the company’s first commercial sale (ten years if the company is “knowledge intensive”)Subject to some exceptions for “follow up investments”, VCTs cannot invest if it has been more than seven years since the target company’s first commercial sale (ten years if the company is “knowledge intensive”)
            TradeThe company must be trading, not have previously carried out another trade and must not carry out an excluded trade*The company must be a trading company but must not carry out an excluded trade*The VCT’s income must derive wholly or mainly from shares or securities. The VCT must distribute by way of dividend at least 85% of its income from shares. No more than 15% of the value of a VCT’s total investments can be in any one company. At least 70% of the companies invested in must be trading companies but must not carry out an excluded trade*
            LimitsNo more than £250,000 per group can be raised in any three-year period (for SEIS to apply as mentioned above the company must not have any subsidiaries that it owns less than 51% of the shares in – this is the group for these purposes)No more than £5 million per year can be raised from any combination of SEIS, EIS and VCT. No more than a total of £12 million (£20 million if the company is “knowledge intensive”) per group can be raised from any combination of EIS, SEIS and VCTNo more than £5 million per year can be raised from any combination of SEIS, EIS and VCT. No more than a total of £12 million (£20 million if the company is “knowledge intensive”) per group ca be raised from any combination of EIS, SEIS and VCT
            LocationMust be a UK resident company carrying on a trade in the UK or an overseas company with a UK permanent establishment carrying on a tradeMust be a UK resident company carrying on a trade in the UK or an overseas company with a UK permanent establishment carrying on a trade

            *Carrying out an excluded trade means that more than 20% of the company’s business and excluded trades include:

            1. dealing in land, commodities, futures, shares, securities or other financial instruments
            2. dealing in goods other than in the course of an ordinary wholesale or retail distribution trade
            3. financial activities, such as banking or insurance
            4. leasing assets for hire
            5. receiving royalties or licence fees (save for intangible assets)
            6. legal or accountancy services
            7. farming / woodlands and timber production
            8. property development
            9. nursing home or hotel management or operation
            10. producing coal or steel
            11. shipbuilding
            12. energy generation or supplying or creating fuel
            13. providing services to a connected person conducting an above trade

            Investor conditions

            There are also conditions for the investor themselves to meet:

            SEISEISVCT
            Type of shares acquiredNewly issued ordinary sharesNewly issued ordinary sharesShares in the VCT can be bought on the open market, however second-hand shares will not entitle you to up front income tax relief
            Payment for sharesCash onlyCash onlyCash only
            Tax avoidanceThe subscription for the shares of the company must not form part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of taxThe subscription for the shares of the company must not form part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax
            Period of ownership to qualify for CGT relief on saleThree years minimumThree years minimumFive years minimum
            ConnectionThe investor cannot be an employee of the company or any qualifying subsidiary during the period of three years commencing with the date the shares are issued (a director position is acceptable but compensation must not be excessive). The investor must not have a substantial interest in the companyThe investor must not be connected to the company (i.e. either alone or with associates owning or entitled to acquire more than 30% of the share capital, voting power or assets or any subsidiary on a winding up OR being an employee of the company or its group (can be a director but must not receive excessive compensation))VCT cannot have more than 15% of its total investments in any one company

            Investor benefits

            Provided that these conditions are met, the investor can receive the following benefits:

            SEISEISVCT
            Annual investment upon which investor can obtain tax relief£200,000£1 million
            (£2 million if at least £1 million is invested in knowledge intensive companies)
            £200,000
            Percentage of investment on which income tax relief can be claimed50%30%30%
            Income tax relief on dividends?NoNoYes
            CGT relief on initial investment50% capped at £100,000100%N/A
            Type of CGT relief on initial investmentDeferralDeferralN/A
            Gains exempt from capital gains when investment sold?Yes, if income tax relief was receivedYes, if income tax relief was receivedYes. The VCT itself is also exempt from corporation tax on chargeable gains
            Relief for capital losses against incomeYesYesNo
            Inheritance tax (IHT)Any investment made in a SEIS-qualifying company held at the time of death is exempt from IHT after it has been held for two yearsAny investment made in an EIS-qualifying company held at the time of death is exempt from IHT after it has been held for two yearsNo relief from IHT as holding shares in an investment company

            The capital gains deferral for EIS and SEIS allows an investor to defer their gain from the sale of any asset by spending the proceeds on EIS or SEIS shares. You must make the investment between one calendar year before and three calendar years after you sell the asset.

            A bit of maths

            An investor sells an unrelated capital asset for £140,000, making £100,000 of profit. Usually, this £100,000 would be subject to CGT. However, they invest the full £100,000 of profit into a company that qualifies for EIS. Their CGT on the £100,000 is therefore deferred.

            In that year they obtain £30,000 worth of income tax relief. Their net investment cost is therefore, £70,000.

            If you have any questions around any of the above or wish to discuss your options further, please contact our Tax team who would be delighted to assist.

            Disclaimer

            This note reflects the law as at 27 November 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Lifecycle of a Business – Shareholder activism: What can a company do?

            Office building exterior

            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.

            We’ve already discussed various topics, including funding, employment and commercial contracts, but it’s now time to discuss when things go wrong…

            Shareholder activism: What can a company do?

            We have previously written about the rise of shareholder activism (the article can be accessed here). At its heart, shareholder activism is a way in which shareholders in a company can seek to influence the direction of a company, challenge approaches that are being taken, or have their voices heard. This can relate to matters such as the financials of the company (which in turn can affect distributions to shareholders) to its business affairs.

            This article looks at some recent examples of shareholders flexing their muscles and considers how disruption may be minimised in their general meetings; a key place in which activists play a part.

            Recent Examples

            This year has seen ExxonMobil bringing claims against shareholders in the US. They argued that too many petitions were being put to the company, particularly in relation to climate change, stating that, “Our lawsuit put a spotlight on the abuse of the shareholder-access system”. The case has since been dismissed but has underlined that climate change remains high on the agenda for activist shareholders.

            It also saw the activist investor Eminence Capital increasing its stake in Reckitt, the hygiene, health and nutrition brand. This came at a time when the company’s share price fell following a court order in the US for it to pay $60 million in connection with a claim brought in relation to one of its baby formulas. Increasing shareholding is a tactic a number of activist shareholders employ, in order to increase their voting power.

            More recently, AJ Investments is liaising with other shareholders regarding its push for the sale of Ubisoft. This has come after calls were also raised for changes to the management of the company, including for the CEO to step down following poor performance by the company in the video game market against its key competitors.

            Shareholder Rights

            Certain rights are afforded to shareholders in respect of general meetings, many of which are used by activists. These include:

            1. Shareholders holding 5% of the paid-up voting share capital have the right to call for a general meeting to be held and for resolutions to be voted on. This then starts the process by which the directors of the company have to arrange the meeting; a failure to do so will mean that the shareholders can arrange for it to be held.
            2. Shareholders can also require a statement of up to 1,000 words to be circulated to the shareholders of the company relating to a resolution that is to be put to a general meeting or other business to be dealt with at such meeting. Broadly speaking, the company must circulate this statement if it’s received from a shareholder or shareholders holding at least 5% of the voting rights or at least 100 shareholders with the right to vote and who hold shares in the company on which at least £100 has been paid (on average).
            3. At the meeting itself, shareholders may have the right to speak, which can mean posing questions to the directors.
            4. As long as they have voting rights, shareholders can vote at general meetings which means that they can seek to block, or at least record a dissatisfaction, of matters being discussed at the meetings. If they can form a voting block with other shareholders, minority shareholders may, for example, be able to stop special resolutions from being passed. 

            General Meeting

            Once a general meeting has been called, the company and its directors can take steps to assist with the smooth running of proceedings.

            Prior to the start, the chair should be fully prepared, having sought advice on their role and duties at the general meeting and the process for matters to pass. A chair’s script is often prepared which will set out, amongst other matters, the resolutions to be put to the meeting and the voting procedures. If possible, the chair should find out as much about the shareholders attending as possible, including their main concerns and objectives. 

            At the meeting itself, care should be taken to ensure that the relevant persons are in fact able to attend the meeting and speak and vote on the matters that may be put forward. A key form of activism is for shareholders to put questions to a general meeting and to vote for or against certain matters.

            By their nature, general meetings provide a space for active debate and to allow the chance for opinions to be aired and information regarding the company to be sought. However, certain powers are afforded to the chair where matters go beyond this (which may be set out in the articles of association of the company, which should be checked carefully prior to the start of the meeting). Examples include:

            1. So that the general meeting can progress, anyone causing a disruption should be encouraged to ask questions instead or be given the opportunity to discuss the particular matter with the company outside of the meeting. Where a number of people are involved in the disruption, they could be asked to appoint one representative. 
            2. An adjournment of the meeting may be utilised for the purposes of halting any disruptions and regaining the proper order of proceedings.
            3. The ultimate final step is for the chair to remove someone from the meeting. It is advisable for warnings to be given beforehand and for the consent of the meeting to be obtained prior to the removal of such persons. Practically speaking, any removal of shareholders should be dealt with in a reasonable way.

            The key thing to keep in mind is that companies should not automatically assume that all shareholder activism is bad and that they should take all steps possible to stop engagement at general meetings. Professor Alex Edmans (who has been a speaker at a Forsters’ event for full disclosure) has considered activism in detail. His words that “engaged ownership generally create long-term value for shareholders” should be remembered and his exhortation that “rather than viewing activism as blanketly bad (or blanketly good) and seeking to regulate it, we should understand the value of—and seek to promote—the right kind of engagement” is an important one to remember. However, regardless of where you stand on the merits of activism the key takeaway is that no-one will want a disrupted, disjointed, badly run meeting, so companies and executives would do well to prepare themselves along the lines outlined in this article.

            Disclaimer

            This note reflects the law as at 18 November 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Aaron Morris
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            Aaron Morris

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            Land Registration Gap – Stalled titles: Tackling the Land Registry Delays

            Rolling green hills are adorned with scattered trees and stone walls, creating a peaceful rural landscape. In the distance, soft hills rise under a clear, bright sky.

            The land registration gap in the UK is a significant issue, being the period between the date of completion of a purchase and the date on which the purchaser is registered as proprietor of the relevant title at HM Land Registry. The “gap” has been exacerbated by delays in processing applications as, although the Land Registry aims to provide an efficient service, many applicants experience extended waiting times, which can hinder property transactions and affect land ownership clarity.

            Recent reports state that the average processing time for straightforward applications has stretched to several weeks and complex cases can linger for months, with registering a transfer of part estimated to take up to 20 months. These delays are often attributed to a combination of increased demand, staffing shortages, and the growing complexity of applications due to changes in property law and ownership structures. As a result, a backlog has developed, leaving many property owners in limbo regarding their land rights. However, the assurance of the Land Registry is that legal ownership rights are secured from the moment the application is received, not at the point at which it is processed and completed. The Land Registry states it protects the transaction it is registering from the day it is received by it.

            Notwithstanding the Land Registry’s position, this registration gap poses various risks. Unregistered land can lead to disputes over ownership, complicate sales or mortgages, and create uncertainty for developers. Furthermore, delays can result in financial losses for individuals and businesses that depend on timely transactions for investment and development. The long delays at the land registry exacerbate issues as parties may not have access to accurate or up-to-date information, which can cause uncertainty when serving break notices and notices under the Landlord and Tenant Act 1954, which must be served by or upon the legal owner. However, should the delay in the registration cause legal, financial, or personal problems not related to a land transaction or put a property transaction at risk, there is the option to apply to the Land Registry for the application to be expediated.  The Land Registry are aiming to process expedited applications within 10 working days.

            To address these challenges, the Land Registry has been implementing measures to improve efficiency, including digital transformation initiatives and enhanced staff training. However, the urgency to close the registration gap remains. Streamlining the application process and reducing wait times is essential for ensuring clearer property rights, fostering confidence in the real estate market, and supporting economic growth in the UK. As these efforts continue, closing the registration gap will be crucial for the stability and transparency of land ownership in the country.

            Forsters’ Family Partner Simon Blain wins Family Law Commentator of the Year award at the LexisNexis Family Law Awards.

            Simon was recognised alongside his co-host Anita Mehta for their Resolution podcast – Talking Family Law.

            As Resolution family law experts, Simon and Anita welcome guests to take a deep dive into topical issues in Family Law including surrogacy, prenups, and navigating parenting after separation.

            This win recognises Simon’s ongoing contributions to the field of Family law, in providing accessible and engaging content for listeners.

            Our Family team are members of Resolution, a community of family law professionals who work with families and individuals to resolve issues in a constructive way. Their main message is around ensuring better support for families and children going through difficult times.

            If you would like to hear more, you can find the Resolution podcast here.

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            Simon Blain

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            Forsters’ Middle East team win ‘Family Governance Service Provision Team of the Year’ at the WealthBriefing MENA Awards 2024

            Chair rows face large windows; outside, an aeroplane ascends over the airport runway. Sunlight floods the seating area, casting long shadows on the carpeted floor.

            Forsters’ Private Wealth team has been recognised for their unique approach to advising UHNW families across MENA as they were awarded Family Governance Service Provision Team of the Year at the WealthBriefing MENA Awards 2024 .

            Showcasing ‘best of breed’ in the MENA region, the awards recognise outstanding organisations which the prestigious panel of independent judges deemed to have ‘demonstrated innovation and excellence during the last year’.

            Winners and highly commended companies were announced on 21 November 2024 at the Gala Ceremony in Dubai.

            Forsters’ dedicated Middle East team

            With an established track record in the region stretching back 25 years, our Middle East team is well known for its expertise in family governance. This award acknowledges our reputation for delivering best-in-class aservices to our clients.

            As trusted advisers to individuals and their families across MENA and beyond, our approach to Family Office Governance is truly unique. Placing a significant emphasis on psychology as well as the legal and technical aspects, we look at the overall picture of what the family is seeking to achieve. We take the time to understand each family member and the family as a whole. This allows us to uncover challenges and support them in achieving their goals and long-term prosperity.

            Our use of Family Office structures as a multi-generational succession tool, goes beyond the usual investment purposes and forms part of a wider Family Governance exercise to enable families to make decisions easily.

            Although our office is in London, the team are in the Middle East monthly to advise our clients. Having cultivated strong relationships with many private wealth and family office professionals in the region, we are renowned for our ability to co-ordinate complex, cross-border advice involving multiple jurisdictions.

            The Private Wealth Middle East team is part of Forsters’ wider Middle East group advising clients based in the region on a wide range of services including:

            • Family Governance
            • Estate and Succession Planning
            • UK and International Tax
            • Trusts Structuring
            • UK Residential and Commercial Property
            • Employment
            • Asset Management
            • Banking and Finance
            • Joint Ventures

            Please do get in touch with any of the team, to find out more about our Middle East services.

            Deadline looming for Biometric Residence Permit holders

            UPDATE: The Government have stated that migrants should keep their expired BRP cards and that they may be able to use their expired BRP cards to travel to the UK until 31 March 2025 if both: their BRP expired on or after 31 December 2024, and if they still have permission to stay in the UK.

            Biometric Residence Permits (‘BRP’) will expire at the end of the year. Understand what urgent action is required before 31 December 2024.

            If your BRP expires on or before 31st December 2024, you don’t need to make an application for a BRP renewal of your physical card. Instead, you must register for a UK Visas and Immigration (‘UKVI’) account on the Home Office website before the end of the year, to access your eVisa. Failure to do so will create complications when trying to re-enter the UK in the new year.

            If you hold a BRP card and have an eVisa you are not required to create a UKVI account and no further action is required.

            Why is this happening?

            The UK government is developing a fully digital Border and Immigration system. The Home Office is phasing out physical immigration documents including BRP cards by the end of 2024 and replacing this with an online records system in the form of eVisas.

            What is an eVisa?

            An eVisa is an online record of your immigration status and the conditions of your permission to enter or stay in the UK. In the future you’ll be able to use an eVisa to travel to the UK – you will not need to carry a physical document, except for your current passport, which must be registered to your UKVI account. Until the end of 2024 you will still need to carry your physical document when you travel, if you have one.

            How do I access my eVisa?

            You will need to create a UKVI account online to be able to access your eVisa. Updating your physical document to an eVisa does not affect your immigration status or conditions of your permission to enter or stay in the UK. There is no charge to create a UKVI account.

            What happens when I create a UKVI account?

            By registering for a UKVI account, you will be able to access an eVisa to prove your immigration status with a share code through the Home Office’s ‘View and Prove’ service. This share code will allow you to prove your right to work to an employer and your right to rent to a landlord. The share code can also be issued for other purposes, such as proving your right to study to educational institutions. These share codes can be used prior to the expiry of your physical BRP.

            It is important to be aware that that individuals should still travel with their physical travel documents and visas until 31 December 2024.

            How do I register for a UKVI account?

            All existing Biometric Residence card holders must create an online UKVI account by 31 December 2024. To create a UKVI account, please follow the the link here.

            What do I need to register for a UKVI account?

            To create a UKVI account and access your eVisa, you will need:

              • Your date of birth

              • Your BRP number or Unique Application Number (UAN)

              • Your passport (if you do not have a BRP)

              • Access to an email address and mobile phone number

              • Access to a smart phone

            Once you have created your UKVI account you will be able to view the details of your eVisa online, for example your type of permission, when it expires and your conditions of stay. You will also be able to update your personal details and register your passport in your UKVI account so that you can easily travel to and from the UK.

            How we can help?

            We can help you set up your UKVI account and access your eVisa ahead of the impending deadline or answer any queries you may have. Please do contact our Immigration team or your usual Forsters contact for assistance as soon as possible.

            Deadline looming for Biometric Residence Permit holders

            Download this briefing as a PDF Contact us

            Fountain pen

            Ben Barrison shares his thoughts on potential reforms to the Landlord and Tenant Act 1954

            Exterior office building

            Partner and Head of Real Estate Disputes, Ben Barrison, shared his thoughts with CoStar, Property Week, and BE News, on The Law Commission launching a consultation on potential reforms to the Landlord and Tenant Act 1954.

            The overall consultation focuses on Part 2 of the Act, dealing with ‘security of tenure’ for business tenancies. Discussion points focus on the security of tenure model, alternatives to this, and how this reflects the rise of online retail and sustainability needs. This follows 70 years on from the introduction of the Act, and 20 years since the last review. 

            ‘Of the four options they are considering, a modernised contracting-out regime, to reflect the 20 years of tech advancement since it was last updated, would be an important first step and this would retain the balance the Act brings to commercial landlord and tenant relationships. Apart from security of tenure, there is a great deal of additional work for the Law Commission to do in terms of the other mechanics of the 1954 Act to deliver a modern regime for determining the lease terms and opposing renewal/termination cases. The 1954 Act is currently too slow and cumbersome for the digital age, but the overarching intent remains good.’

            Read the full articles here on CoStar, Property Week, and BE News

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            The Lifecycle of a Business – Dispute resolution: What are a company’s options?

            A group of six people is sitting and discussing around a wooden table in a modern office with large windows and colourful sticky notes on the glass.

            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.

            We’ve already discussed various topics, including funding, employment and commercial contracts, but it’s now time to discuss when things go wrong…

            Dispute resolution: What are a company’s options?

            While disputes are something commercial parties naturally seek to avoid if at all possible, one will arise at some point in the lifecycle of most businesses. When a dispute does arise, there are a variety of legal mechanisms available to seek to resolve matters. These include adversarial proceedings in which a binding decision is made by a court or tribunal, as well as “alternative dispute resolution” procedures based on party to party negotiation.

            Adversarial proceedings: arbitration vs. litigation

            If adversarial proceedings are to be pursued, the two main options are litigation and arbitration. In litigation, disputes are determined by a country’s national Courts. In contrast, when parties choose to arbitrate, they agree to submit their dispute to a privately appointed tribunal for determination, usually pursuant to an arbitration clause in their contract.

            Aside from this difference, the procedures in litigation and arbitration are often similar. The parties will typically serve statements of case, give disclosure of relevant documents and exchange factual or expert witness evidence, with the proceedings culminating in a trial, sometimes known as an evidentiary hearing.

            Whether arbitration or litigation is preferable is context-sensitive. However, litigation may be the better option in the following scenarios:

            • Precedent: Arbitrators’ decisions on points of law do not bind other Courts or tribunals (not least because they are usually confidential – see below). Litigation will therefore be preferable where it is important to obtain a decision that will bind other parties in future (e.g., a case regarding the meaning of a clause in a supplier’s standard terms and conditions).  
            • Multi-party disputes: Arbitration requires all parties to have agreed to submit the dispute to arbitration. It is therefore often unsuitable for cases involving multiple parties, not all of whom have signed up to the same arbitration clause or otherwise agreed to arbitrate. That said, complex transactions increasingly involve all parties signing up to the same arbitration clause with a view to achieving a “one stop shop” for dispute resolution. Further, the rules of the leading arbitral institutions increasingly provide mechanisms for related disputes to be consolidated. Multi-party arbitration is therefore becoming more common.
            • Cost: It is sometimes said that arbitration is cheaper than litigation. While this may be true in some contexts, as a general rule, hard-fought commercial arbitration will often end up being more expensive than litigation, given the need to pay the tribunal’s costs (which can be extensive) on top of the other costs of the proceedings.

            On the other hand, arbitration may be preferable to litigation in some contexts. For example:

            • Enforcement: Most countries are parties to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the New York Convention. This makes enforcing arbitral awards more straightforward than enforcing Court judgments in many jurisdictions, particularly emerging markets.
            • Confidentiality: Unlike Court proceedings, arbitral proceedings are conducted in private, with all submissions and evidence remaining confidential. This is likely to be desirable, for example, in cases involving sensitive commercial information or trade secrets.
            • Neutrality: While parties from the same jurisdiction will be content for their disputes to be resolved by the national Courts of that jurisdiction, parties from different jurisdictions may well wish to opt for arbitration to provide a neutral forum.

            Alternatives to adversarial proceedings: “without prejudice” negotiations including mediation

            As an alternative to adversarial proceedings, parties can pursue a variety of negotiation-based forms of “alternative dispute resolution” or “ADR”.

            At its simplest, ADR involves negotiations between the parties or their lawyers either in person or via correspondence on a “without prejudice” basis. Such negotiations cannot be referred to before a Court or tribunal, and this encourages parties to take a pragmatic, “cards on the table” approach to resolving matters.

            If the parties consider that a more structured approach would be beneficial, a further option is mediation. Here a third party mediator is engaged to facilitate the without prejudice negotiations between the parties, usually at an in person meeting. Unlike a Court or tribunal, a mediator will not make any decision which binds the parties. However, they are able to provide an impartial view on the strengths and weaknesses of their cases, and this can be helpful in encouraging more realistic settlement discussions.

            Whichever option is pursued, ADR has the potential to resolve disputes more quickly and cheaply than adversarial proceedings, allowing the parties to return to their day to day business activities and, in some cases, to maintain their business relationship. In circumstances where the outcome of adversarial proceedings is often unpredictable, a settlement via ADR also has the advantage of crystallising the parties’ positions, with neither party being entirely vindicated, but neither losing outright.

            Given these benefits and the burden placed on the state by running the Court system, the English Courts are increasingly keen to encourage parties to explore ADR as an alternative to Court proceedings. In Churchill v Merthyr Tydfil, a landmark Court of Appeal decision in 2023, the Court ruled (contrary to previous authority) that the Courts have the power to stay claims in order to compel ADR in certain circumstances. From May 2024 onwards, certain low value claims (those worth less than £10,000) are also required to be mediated before they can be determined in Court, and it seems likely that compulsory mediation will become increasingly common in future.

            Disclaimer

            This note reflects the law as at 10 October 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Edward Richards
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            Edward Richards

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            Amy France tells EG about the diversification of the later living sector

            A modern block of flats rises upward, featuring glass balconies and mixed cladding. It is set against a bright, blue sky with scattered clouds and nearby leafy branches.

            After a lacklustre year so far, we are finally seeing some positive movements in the later living sector. The exciting part is that many of the new developments demonstrate the diversification of the industry in terms of ownership models and affordability, both of which have been anticipated for some time.

            Although the primary focus on the Older People’s Housing Taskforce has been to explore ways to increase the provision of homes to meet a high level of projected demand, we are also anticipating in-depth guidance on how the sector should adapt to meet the increasingly sophisticated nature of those consumer demands. In practice, this means a much greater choice of tenures across a much wider variety of locations.

            We might still wait with bated breath for the outcomes of the task force, however there are signs that the sector is already rising to the diversification challenge, fuelled by a gradual increase in investment.

            Affordable options

            A recent example is New York-based private investor Meadow Partners’ partnership with shared ownership specialist Affordable Housing & Healthcare Group to build a £500m senior living shared ownership portfolio. AHH is an affordable housing-focused provider with a footprint in the South West which has a unique shared ownership model, in that it typically sells off 50% of its retirement living developments and rents the other half to occupiers. In a similar move, albeit on a smaller scale, Vistry Group has recently agreed a £19m deal with Anchor to build 77 affordable homes in the East Midlands.

            It is not just affordable housing that is spreading beyond its usual parameters. We are also seeing retirement villages, most commonly found in London and the South East, gaining ground elsewhere in the UK. In this regard, Adlington Retirement Living stands out, having recently announced plans to build a 96-home community in Leicester, to add to its 18 independent retirement communities created since 2008 across the North West, Yorkshire, Wales, Bedfordshire and the Midlands.

            The level of amenity is an area that can be adjusted by developers to deliver more affordable options, with some developments scaling back to one multi-purpose community room to accommodate social activities. Mid-market solutions might, for example, forgo an on site restaurant, particularly in town centre locations, where there is less need.

            This trend will continue as economic conditions improve and developers become more ambitious in terms of scale. Shared facilities between a higher number of homes reduces operating costs and consumer prices. There is also hope that the new government, with its emphasis on housing delivery, might finally reduce some of the current strain on senior living developments caused by the planning system and serve to boost numbers.

            Catalyst for action

            Another key shift is a growing provision of rental housing for older people. This is happening for a plethora of reasons that deliver multiple benefits to consumers, providers and the general health of the housing market. These include greater flexibility over the timing of the sale of the family home, quicker access to services and care, no maintenance worries, no exit fees and no long resale periods.

            So far, Birchgrove is the only dedicated developer building retirement homes solely for rent. But with such a huge and growing demand, others are likely to follow. Birchgrove itself is exploring different formats. For example, in conjunction with Hybr, the developer has launched an intergenerational living scheme in north London which will see students, key workers and retirees living alongside one another.

            As the sector races to address the deficit of housing for older people, it is pleasing to see that, at the same time, careful thought is going into meeting the needs of a diverse range of people. The eventual publication of the findings of the task force should act as a further catalyst for action, with backing from the UK’s new pro-housing and development government.

            It would be great to see Labour’s planned new towns becoming a template for delivering the right balance of the different types of senior housing into a single location. Certainly, the older generation deserve to have their varied needs met just as much as other demographics, such as first-time buyers and families, which have been the priority for so long. Let’s hope that this new focus on diversification continues at pace.

            This article was published in EG on 26 October 2024.

            Amy France
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            Amy France

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            Forsters continues period of accelerated growth with appointment of new Head of Immigration

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            Leading immigration partner Tracy Evlogidis joins Forsters from Withers to head the practice. This latest appointment is the third major lateral partner hire for Forsters this year.

            London: 23 October 2024. Forsters, the leading London firm, announces today that Tracy Evlogidis is to join the firm to head up its immigration practice.  This is the third lateral partner appointment for Forsters in 2024, following the recent arrival of Head of Employment and Partnerships Jo Keddie from Winkworth Sherwood and Dispute Resolution partner Steven Richards from Foot Anstey. Tracy will be joined by two senior associates and an associate.

            Tracy Evlogidis will provide a significant boost to Forsters’ immigration practice which serves a diverse range of private and corporate clients.  She brings over 25 years’ experience heading immigration practices at Withers and previously at Harbottle & Lewis, Speechly Bircham (now Charles Russell Speechlys) and Morgan Lewis. 

            Tracy is a market-leading immigration lawyer with a long track record of delivering successful results for complex citizenship and residency applications. She is ranked in the Legal 500’s “Hall of Fame” and has been recognised as a “Leading Individual” in various Chambers & Partners directories. Recognised as a leading immigration authority, she works closely with the Home Office while being regularly consulted on policy and legislative proposals through her senior level contacts and participation in key working groups.

            She advises on all areas of UK immigration and nationality law and has particular expertise in providing strategic advice to domestic and international businesses and senior executives – specifically high net worth individuals and leaders in the corporate and entertainment sectors. Her client base spans a wide range of industry sectors including, finance, fintech, legal, luxury brands, fashion, sport, education, design and charitable institutions.

            Brexit and the recent removal of the Tier 1 Investor visa have added significant complexity to the UK immigration landscape for high net worth individuals and international businesses alike.  Forsters recognises that the current demand from its clients for leading edge immigration advice is significant.

            Tracy’s client base aligns closely to that of Forsters and her expertise, experience and approach are fully aligned with the firm’s strategy and collegiate working culture.

            Tracy Evlogidis said:‘The recent change in Government and generally emotive mood around UK borders have pushed immigration issues towards the top of the business agenda.  Post Brexit we have a pretty challenging set of circumstances both for corporates and high net worth individuals and against this backdrop Forsters felt like absolutely the right place from which to serve my clients.”

            Xavier Nicholas, Head of Private Client at Forsters, said: ‘We look forward to welcoming Tracy to the firm. She will be a fantastic addition to our talented team of lawyers. She will add immense value – both on the private client side and to our client base of corporates, private equity funds, and family offices – all of which need support in navigating the challenging immigration landscape.’

            Natasha Rees, Senior Partner at Forsters, commented: “The arrival of Tracy Evlogidis at Forsters adds heavyweight immigration expertise at a time when our client base has told us that they really need it.  Tracy is the third major lateral hire we have announced in recent months and we welcome her to the partnership.  She will make an instant and positive impact, for both our team and our clients.’

            For further information please contact:

            Ben Girdlestone, Byfield Consultancy

            [email protected]

            Tel: 07961 405459

            Notes to editors: 

            Founded in 1998, Forsters is a leading law firm based in London’s Marylebone. The firm acts for a diverse range of clients across four key service lines – private client, real estate, corporate and dispute resolution.  Clients include real estate funds, property companies, high net worth individuals, investors and entrepreneurs.

            With 70 partners and more than 500 people, Forsters is widely recognised as having some of the brightest and best talent in the market and a commercial, client-centric and collegiate working culture. 

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            Help! How do I stop my neighbour letting out their property on Airbnb?

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            In the current cost of living crisis, with sky-high property prices, and incoming rental law reform, an increasing number of leaseholders and homeowners are turning to short-term letting agencies such as Airbnb to generate extra income from their property. While these short-term lettings might seem like a quick and easy way to generate income for the occupier, they can be disturbing to those living nearby and can have legal ramifications. So, can you stop your neighbour from letting out their property on a short-term basis?

            Failure to obtain planning permission

            Your neighbour may require planning permission to let the property on a short-term basis. In London, you must obtain planning permission if you are intending to let your property out for over 90 days a year (see Sections 25 and 25A of the Greater London Council (General Powers) Act 1973). You can check the local authority’s planning portal to see whether your neighbour has obtained the relevant permissions. If planning permission has not been obtained, the local authority may be willing to take enforcement action to restrain the unauthorised use.

            Breach of the lease

            If your neighbour holds their property pursuant to a long lease, the lease might require the property to be used only as a private residence: to let the property on a short-term basis is likely to be a breach of this provision. The lease may also prohibit the letting of the property on a short-term basis without consent from the landlord and/or without appropriate planning consent. The use of the property as a short-term letting may also invalidate the building’s insurance and be contrary to the terms of the leaseholder’s mortgage. If any of these apply, you may be able to ask your landlord to take steps to force your neighbour to comply with the terms of their lease.

            Private or statutory nuisance

            The use as a short-term letting may constitute either a private or statutory nuisance, or both.  In the first instance, you may wish to alert the local authority of the actions of your neighbour, as they may be able to take action against the neighbour if their actions amount to a statutory nuisance, which can include things like noise and light from a premises or an accumulation of waste. The local authority may serve an abatement notice to restrain the nuisance. Alternatively, you could bring civil proceedings for an injunction compelling your neighbour to stop any private nuisance. These proceedings are expensive but the threat of proceedings and your neighbour’s liability for costs could be sufficient to stop your neighbour’s actions.  

            If you require advice in relation to any of these issues, please contact our real estate disputes team.

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            Katya Churchill

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            Forsters secures a treble win at the STEP Private Client Awards 2024

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            Forsters were recognised as the winners of three awards at the prestigious STEP Private Client Awards 2024, showcasing the firm’s Private Wealth team as a global leader, particularly in family governance and digital assets. The team was also shortlisted for Employer of the Year, Family Business Advisory Practice of the Year and International Legal Team of the Year (large firm).

            The judges commended Forsters in each of the three winning categories:

            Digital Assets Team of the Year

            Forsters has a very established and fast-growing practice on digital assets and has gone from strength-to-strength handling complex client issues, while continuing to deepen its expertise in the area. Not only does it offer trailblazing legal advice on complex, novel international issues, it has shown dedication to development of skills and knowledge across the industry.

            In a very competitive category, Forsters excels across all areas, with outstanding technical expertise and innovative initiatives, particularly in family governance and digital assets. It handles complex multi-jurisdictional matters with a focus on both technical and human aspects of wealth. Its Skills Academy and pro bono work also set it apart.

            Trusted Advisor of the Year – Nicholas Jacobs

            The judges commented that Nicholas Jacobs is in a class of his own. He is the foremost expert on family governance for Asian families and has made it his purpose to understand how cultural norms around communication and respect impact those families. This deep commitment has resulted in meaningful impact to his clients.

            The STEP Private Client Awards took place on 19 September 2024. The awards are regarded as the hallmark of quality within the industry, recognising and celebrating excellence among private client professionals. Attracting entries from across the globe, submissions are judged rigorously by an independent panel of experts made up of internationally renowned private client practitioners.

            The Lifecycle of a Business – See you in court…? Employment claims against a company

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            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.

            We’ve already discussed various topics, including funding, employment and commercial contracts, but it’s now time to discuss when things go wrong…

            See you in court…? Employment claims against a company

            Companies will have disgruntled employees from time to time. Having well drafted contracts, effective policies and procedures and good HR management can often resolve or limit issues, but sometimes employment litigation is inevitable. This article provides a brief introduction to the employment litigation process, but we strongly recommend that you get in touch with your employment legal advisor if litigation is on the cards.

            Most employment litigation takes place in the Employment Tribunal and often relates to:

            • Unfair dismissal – where an employee alleges that their dismissal was not for a “fair” reason (being conduct, capability, redundancy, legal reason, some other substantial reason) or that a fair procedure was not followed. In addition, an employee can bring a claim for automatic unfair dismissal where they have been dismissed for one of ten statutory reasons (such as asserting the right to be paid at least the national minimum wage).
            • Constructive dismissal – where an employee alleges that they have been treated so badly they have no option but to resign and treat themselves as having been dismissed.
            • Discrimination – where an employee alleges that they have suffered some form of adverse treatment due to a “protected characteristic” (such as age, sex or race). Discrimination can take several forms, including direct discrimination (such as not being promoted directly because of your protected characteristic), indirect discrimination (where the employer operates a policy or practice which adversely affects a particular group with the same protected characteristic) and harassment (where an employee is bullied or harassed by colleagues because of a protected characteristic).
            • Whistleblowing – where an employee alleges that they have suffered a form of detriment or been dismissed due to raising concerns about their employer’s practices.
            • Monies owed – where an employee alleges that they have not been paid what is due to them (such as salary, notice pay or in respect of annual leave).

            Compensation for employment claims varies and often depends on the type of claim and the employee’s salary. Compensation for certain claims (such as unfair dismissal) is capped (at the lower of year’s salary and, currently, £115,115). Other claims, for example, whistleblowing and discrimination are uncapped and compensation awards tend to reflect any injury to feelings and, where the employee has been dismissed, the time it will take for them to find comparable income.

            Please note that there are many other types of employment claims which can be brought in the Employment Tribunal. It is also possible for employees to bring certain claims in the county court or high court. These tend to be for breach of contract and can often be valuable – in particular claims in relation to unpaid bonuses.

            Who can bring a claim?

            Generally speaking, all employees can bring most types of employment claims, however some claims have service length requirements. For example, at the time of writing, only employees with at least two years’ service have the right to bring an unfair dismissal claim. However, the Labour government has committed to changing this and we are awaiting the detail.

            Given the current service length requirement, it is a common litigation tactic for employees to allege some form of whistleblowing or discrimination in order get a claim off the ground.

            The process

            The time limits for bringing a claim in the Employment Tribunal are short and employees typically need to take action within three months of the issue (for example, the alleged poor treatment or dismissal) having occurred.

            Before an employee can file a claim in the Employment Tribunal, they need to first follow the ACAS early conciliation process. This provides the parties with an opportunity to see if settlement can be achieved before any claim is filed. If settlement cannot be reached, ACAS will issue the employee with a certificate which allows them to then proceed to file a claim at the Employment Tribunal.

            Once a claim is filed and accepted, the employer will be provided with a copy and is required to submit a response within 28 days. It is important that an employer spends time getting its response correct as this is the first opportunity it will have to set out its position. Once the response has been accepted, the Employment Tribunal will look to list a hearing and set out a timetable leading up to it. In essence, this will require the parties to disclose certain documents, agree a bundle of relevant documents to be referred to at the hearing and exchange witness evidence prior to the hearing.

            The cost of defending employment litigation can be considerable and, unlike in a court, it is not normal for the losing party to pay the winning party’s costs (so it is unlikely that an employer will recover its legal costs even if it wins). Depending on the nature of the allegations, employers may also need to consider the reputational impact of fighting a claim and attending a hearing which will most likely be in the public domain. On the other hand, depending on the nature of the employer’s business and workforce, taking a stand and fighting against the employment claim could help to avoid setting a precedent that a company will always settle.

            Where parties do agree a settlement prior to a hearing, this can be documented by way of an ACAS COT3 agreement or a settlement agreement, normally depending on whether the employee is legally represented or not.

            Disclaimer

            This note reflects the law as at 6 September 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Forsters celebrates the recognition of two Partners in the 2024 eprivateclient NextGen Leaders list

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            We are delighted to announce that two of our Partners, George Mitchell and Dickon Ceadel, have been recognised in the 2024 eprivateclient NextGen Leaders list. This definitive annual list highlights the leading young private client practitioners in the UK and UK Crown Dependencies, showcasing their exceptional talent and dedication to the field.

            In light of George and Dickon’s recognition in the list, we got some useful insights into their career journeys to learn more about the pivotal moments that inspired their specialisms, how Forsters has supported their growth, and the advice they would give to their trainee selves. Their stories provide a glimpse into the dedication and passion that drive their success and offer inspiration to aspiring private client practitioners.

            What was the pivotal moment that inspired you to choose your specialism?

            George

            Initially a corporate tax lawyer, I was inspired to become a private wealth lawyer about a decade ago when I helped an entrepreneur navigate a complex tax issue. I found the experience rewarding, as it allowed me to not only solve legal problems but to be part of the client’s personal and business journey. Seeing the impact my advice had on their success sparked a passion for developing long-term relationships with clients and supporting them through significant milestones, as well as helping them to build an enduring legacy, whether in a business or in a family.

            Dickon

            I don’t think there was a specific moment as such. When I started my training contract, I wanted to be a private client lawyer and when in that seat I really enjoyed working with individuals and the problem-solving side of the work. I then had a chance to do a family seat and found that the work ticked those same boxes, but was even more varied – involving strategic and advisory work but also fast-paced litigation and complex negotiations, and helping support people thorough what are often difficult periods of their lives. I ended up doing two family seats and qualifying as a family lawyer and haven’t looked back since.

            How has Forsters supported your growth?

            George

            Forsters has been instrumental in my professional growth over the past decade, from my days as an associate to becoming a partner. Forsters’ entrepreneurial spirit, which has remained a key part of its culture since its founding about 25 years ago, has empowered me to develop my broad practice. The firm’s dynamic environment and supportive culture, combined with Forsters’ reputation for excellence in private wealth law, has enabled me to grow both personally and professionally.

            Dickon

            I joined Forsters in 2017 as a 2.5 years PQE solicitor (having applied for a training contract many years prior but not making it past the interview stage…), became a Senior Associate in 2019 and was made up to Partner in 2023. Forsters has been an amazing environment in which to develop as a lawyer and grow my practice. Throughout my time at the firm, I have been exposed to high quality work and afforded an increasing amount of client contact and responsibility. The firm has always been extremely supportive with, and encouraging of, business and personal development initiatives.

            What is one piece of advice you would give to your trainee self?

            George

            Enjoy making friendships in your intake, as they will support you through work and beyond.

            Dickon

            Polish your shoes more regularly.

            Dickon Ceadel
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            Dickon Ceadel

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            The Lifecycle of a Business – Employee grievances

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            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.

            We’ve already discussed various topics, including funding, employment and commercial contracts, but it’s now time to discuss when things go wrong…

            Employee Grievances

            It is fair to say that not everything in business is smooth sailing, especially when it comes to staff. Dealing with staff grievances properly is important to help minimise workplace conflicts and improve employee relations.

            Keep reading if you want to find out:

            • what could trigger a grievance
            • why having a grievance procedure is important
            • our top tips for getting the grievance procedure right.

            What is a grievance?

            An employee could have a grievance (i.e., a complaint) for many reasons. Common grievances that we come across include:

            • how an employee has been treated by another – this could be as a result of a series of events or an isolated incident
            • working conditions relating to hours and/or pay
            • how an employee has been managed by their line manager
            • the nature of an employee’s work – this could be because they are given work they were not hired to do, or they are being given too much or not enough.

            By raising a grievance, an employee forces an employer to investigate the issue with a view to resolving the matter fairly and promptly.

            Employees are generally expected to try and deal with concerns informally first of all, and many matters can often be ‘nipped in the bud’ by discussion with an employee’s line manager. Where concerns cannot be resolved informally, an employee has the right to submit a formal grievance in accordance with his or her employer’s grievance procedure.

            The importance of a grievance procedure

            Employers are required by law to have a written grievance procedure in place. Such a procedure will typically include the following stages:

            • submitting a grievance in writing
            • conducting a hearing (so that the employee can explain the detail of their complaint)
            • investigating the issue(s) at hand
            • delivering a written outcome and implementing any recommendations
            • giving the employee the right of appeal.

            Grievance procedures should adhere to the ACAS code of practice for disciplinary and grievance procedures, which helps ensure that employers act appropriately.

            Failure to follow a fair process can land an employer in hot water. Not dealing with a grievance properly could be a breach of the implied contractual duty of trust and fidelity and generally increase the chances of things ending up in the employment tribunal; in certain circumstances where the principles of the ACAS Code has not been applied, any compensatory award given to the employee could be subject to a 25% uplift.

            Handling a grievance effectively

            Below we set out our top tips to getting the grievance process right:

            • Consider the appropriate people to be involved and ensure decision makers are impartial. Sometimes engaging external support, such as external legal or HR advisors, will be appropriate.
            • Conduct a reasonable investigation to ensure that all the key facts are established.
            • Try to deal with issues promptly and have regard to any timescales set out in the grievance procedure.
            • Allow employees to be accompanied.
            • When making decisions, act consistently with previous decisions around similar grievances, as appropriate.
            • Keep the employee updated, especially if things are taking longer than planned and/or the employee is absent from work.
            • Take steps to keep matters confidential.
            • Take appeals seriously and consider them carefully.

            Disclaimer

            This note reflects the law as at 27 August 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Navigating the removal of the Bankers Bonus cap: A fine line for banks to tread

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            The removal of the bonus cap last October 2023 marks a significant shift in the UK banking sector, presenting both opportunities and challenges for banks as employers. This policy change is poised to enhance London’s competitiveness on the global stage, aligning remuneration packages with those offered in major financial hubs such as New York and Tokyo. However, it also brings a host of employment law considerations that banks must navigate carefully.

            Barclays was the first UK bank to axe the bonus cap, following the lead taken earlier this year by Goldman Sachs, JP Morgan and most recently Citi, with more UK banks expected to follow suit. In a recent article for The Banker, Head of Employment and Partnerships, Jo Keddie shared some brief insights for the banking sector, warning of the fine line to tread to ensure changes are implemented in a fair and compliant way.

            In this article Jo provides a more comprehensive overview of the employment issues banks need to consider when removing the bonus cap, to ensure they don’t get caught out.

            Enhancing Competitiveness and Talent Retention

            One of the primary benefits of scrapping the bonus cap is the ability to offer more competitive remuneration packages in London and other banking hubs in the UK. We expect that it will help the City attract and retain top talent, as strong performers seek financial recognition for their contributions. With fewer restrictions on bonus amounts, London can now compete more effectively with other global banking centres, potentially drawing business back to the City from other European banking hubs.

            The removal of the cap is likely to facilitate greater labour mobility. International banks can now transfer employees to UK-based roles without financial detriment, enhancing the UK’s appeal as a destination for top banking talent. Importantly, safeguards such as variable pay with deferral, malus, and clawback provisions remain in place to mitigate excessive risk-taking as the new changes come into effect across a growing number of banks in the UK.

            How to fairly adjust remuneration packages

            Historically, banks responded to the cap by raising base pay levels and introducing role-based allowances. With the cap’s removal, banks face the challenge of adjusting remuneration policies to allow for increased bonuses on top of already high salaries. This may involve phasing out role-based allowances in favour of a more flexible pay structure.

            With these changes comes the potential for an increase in discrimination claims as employees. With “star performers” pressing for significantly increased bonuses, there is inevitably going to be others at various levels who have felt undervalued also pressing for larger bonuses and using the changes to secure better overall packages. When facing these pressures, banks are at risk of creating a two-tier workforce, with disparities between new hires and existing employees potentially leading to disharmony and resentment.

            Contractual and Legal Considerations

            Reducing fixed salaries to accommodate higher bonuses presents contractual and legal challenges. Banks must consult employees and ensure that the overall package is attractive to gain consent for pay reductions. Imposing changes without consent could lead to breach of contract and constructive dismissal claims.
            To avoid contract claims, banks must ensure that discretionary bonus decisions are lawful, rational, and consistent. Building mechanisms into bonus policies that assess factors and KPIs rationally and reasonably is crucial. Failure to do so could result in costly and reputationally damaging claims.

            Moving forward, bankers will be closely scrutinising how any discretionary elements (as opposed to more formulaic criteria) is being exercised in respect of their annual bonus. The case law we regularly relied on when examining the exercise of discretion, may well be revisited when determining whether discretion has been exercised reasonably with regard to all the circumstances or whether, instead, it was perverse and cannot be justified.

            Failure to build in mechanisms to minimise these risks could well result in contract claims that are likely, due to the size of the claim, to be tested in the High Court. This inevitably is reputationally damaging, costly and is not a good use of management time. From experience, it also causes friction and morale issues internally amongst the affected workforce.

            Addressing Discrimination and Equal Pay

            Ensuring fairness in bonus distribution is crucial to avoid discrimination claims. Banks must justify any discrepancies in bonuses and ensure that changes to pay structures are not discriminatory. Historically, gender pay gaps in bonuses have been larger than in fixed pay, necessitating careful consideration of any changes to remuneration ratios.

            Discrimination claims could arise if changes to remuneration and bonuses are perceived to be linked to protected characteristics such as age, sex, race, or religion. Such claims would be heard in Employment Tribunals, where substantial compensation and injury to feelings awards can be granted.

            Trying to get the bonus ratios “right” for the different roles across banks will be important as will the need to try and justify different bonuses for different roles. For example, banks could set different ratios for different categories of employee and should then apply those ratios “equally” i.e. fairly to their employees doing the same work regardless of sex or other characteristics.

            Reputational Risks

            Mishandling the removal of the bonus cap could lead to reputational damage and costly claims. Banks must tread carefully, offering competitive bonus structures while ensuring fairness and legal compliance. Internal processes such as grievances should be followed to address perceived unfairness and imbalance. Remuneration policies must be carefully drafted and approved to maintain a competitive edge.

            Conclusion

            The removal of the bonus cap presents significant opportunities for the UK banking sector to enhance competitiveness and attract top talent. However, banks must navigate a complex landscape of employment law to implement these changes effectively. By ensuring fairness, legal compliance, and careful consideration of employee concerns, banks can successfully transition to a more flexible and competitive remuneration structure.

            Jo Keddie
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            Jo Keddie

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            Is your private drainage system compliant?

            A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

            It is not uncommon to find that rural properties are served by private drainage systems, however, it can be uncommon for property owners to be aware that they must ensure that their system complies with current regulations, known as the General Binding Rules. If a system is not compliant, it can affect or delay the sale of a property. The most recent update to these rules was in October 2023.

            There are different types of private drainage systems, but we find that there are two main types:

            1. Septic tanks
            2. Sewage treatment plants

            The regulations apply to all systems, but septic tanks and sewage treatment plants are especially affected as they can involve discharging sewage or water into natural water courses or the environment in general.

            Septic tanks:

            A septic tank is used for the partial treatment of wastewater from properties that are not connected to a mains sewage system. It works by collecting wastewater from toilets and drains, and retains solids within the tank, while draining the water to (usually) a drainage field, if it is compliant with regulations. The tank itself is then emptied when necessary.

            In the past, septic tanks have been known to drain into water courses which is what the regulations now protect against, as this was causing polluted water. Property owners were required to upgrade their systems before 2020 to ensure that they did not drain to a water course. It is surprising how many systems are still not complaint with the current regulations.

            Any upgrade or replacement system has to comply with the regulations as well as the current British Standards. It also needs to be large enough for your purpose, which is based on the daily volume of waste discharged. A permit is required from the Environment Agency where a system discharges more than two cubic metres of wastewater per day. It is not unusual for property owners to not have the required permit, which can also cause delays when selling a property.

            Since October 2023, it is not permitted to discharge using the same outlet as another property if the combined discharge is more than 2 cubic metres per day; and it is not permitted to have a system which is within 50 metres of another drainage system. This can cause issues if neighbours each have septic tanks.

            Property owners upgrading their systems need to ensure that they have the relevant planning permission and building regulations approval to do so.

            Sewage treatment plants:

            Unlike septic tanks, sewage treatment plants are permitted to discharge into water courses. This is because they include a secondary treatment for waste, making it clean enough to discharge into the water, as well as to a drainage field.

            A sewage treatment plant is subject to all of the same regulations as septic tanks (except for the above difference), must comply with the British Standards and have the relevant planning permission and building regulations approval.

            Summary

            In property transactions, it is always advisable for a buyer to carry out a specific survey to establish whether the drainage system is compliant with current regulations. If it is not, then it is generally a seller’s responsibility to ensure that this is rectified before completion of a sale. In practice, this can be, and is more often than not, dealt with by way of reduction to the sale price of a property, with the buyer confirming they will upgrade the system following purchase. Costs to upgrade a system differ from property to property, but it is said that upgrading a system can cost in the region of £20,000 (and it is not unusual for a sale price to be reduced by that amount), and so it is important for a seller to ensure that their system complies with current regulations before they agree a sale.

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            Jayne Beardmore

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            A landlord’s guide to tenant administration

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            Administration is a “rescue” procedure, where the primary statutory objective is to allow a company to carry on trading as a going concern. In practice, most administrations do not achieve this objective and result in a sale of certain assets and the liquidation of the remainder – the original company rarely survives.

            Administration works by imposing a moratorium on legal action against the company by creditors: thus allowing the company breathing space to reorganise its affairs. Once appointed, administrators will have the power to deal with the company’s property and assets. They will often sell off parts of the business to third parties, and may grant third parties the right to occupy the premises.

            Will Rent Be Paid?

            If the administrators continue to use the premises for the purposes of the administration – for example, by trading from it or allowing others to trade from it – then they will be liable to pay the rent and other sums due under the lease in respect of that period as an expense of the administration. This means the sums are payable as a priority, before sums owing to the majority of creditors. They will be payable at a daily rate, for the period that the administrators use the property. Rent paid as an expense is typically paid monthly in arrears, even though the lease might state otherwise (e.g. quarterly in advance).

            Rent and other sums which have fallen due for payment in respect of a period either before the administrators are appointed, or once they have stopped using the premises, are unlikely to be paid immediately or in full.

            What is the Effect on any Guarantee or Other Security?

            The administration of a tenant will not have any impact on a guarantee given by a third party company or individual, unless there are specific provisions governing this in the guarantee agreement. We recommend that you check the terms of any guarantee as soon as you can, and ensure that you understand what steps need to be taken in order to make a claim from the guarantor. If the guarantee is in the form of an authorised guarantee agreement (“AGA”) given by a former tenant, or the guarantor of a former tenant, you will need to serve notice (under s17 of the Landlord and Tenant (Covenants) Act 1995) on the guarantor within 6 months of the sums falling due. This time limit is strict, and the right to recovery will be lost if it is not met.

            The impact of the administration on any rent deposit will depend on how the rent deposit deed has been drafted, and how the deposit is held. Again, we recommend that you check the terms of the rent deposit deed as soon as possible, and ensure you understand what needs to be done in order to withdraw sums. It is usually possible to withdraw sums to settle any outstanding liabilities of the tenant under the lease. The administrators’ prior consent for this is often required, and is usually given.

            Can the Administrators Bring the Lease to an End Without My Consent?

            No. Unlike some other insolvency procedures such as liquidation, administrators do not have the power to disclaim leases.

            If the administrators do not want to use the premises you may find you are offered a surrender early on. Administrators will often ask for a complete release of liability under the lease upon surrender. You should consider any such offer very carefully, since accepting it may bring forward your liability for business rates or limit your ability to recover unpaid arrears or claim for dilapidations.

            You should also be careful of any attempts by the administrators to return keys to the property, as this may give effect to a surrender by operation of law if accepted by the landlord (or its agents). If keys are returned, then it should be made clear that they are being held on the tenant’s behalf for collection.

            Can I Terminate the Lease and Re-Let the Premises?

            Any surrender of the lease requires the agreement of both parties, in the usual way.

            Whilst a tenant is in administration, the usual position is that a landlord may not forfeit the lease without either the consent of the administrators or the permission of the Court. A landlord may request the administrators’ consent to forfeit. If the administrators refuse, their reasoning should be examined carefully- the Court may take a different view.

            If a landlord considers it likely that a tenant may shortly enter administration, it may wish to consider forfeiting the lease at an earlier stage and before these protections come into effect (assuming of course that the landlord has grounds to do so).

            There is a Third Party In Occupation: What Are My Rights?

            Administrators often let third parties into occupation of premises- often in breach of the terms of the lease! This is usually done as part of a sale of the company’s assets, by which the administrators permit the purchaser to occupy pursuant to a licence pending a formal application for landlord’s consent to assign. While the moratorium makes it harder to take action against the administrators, such action will usually be a breach of the tenant’s covenant not to assign without consent and the usual rules and the provisions of lease will apply to any subsequent application for consent that is made. You should check your rights under the lease carefully as this may be an opportunity to insist on the provision of additional security for the new tenant’s covenants and/or payment of any arrears as a condition of the assignment – most modern leases will contain provisions that entitle the landlord invoke such conditions.

            When dealing with such applications, it is worth remembering that the landlord’s duties under the lease and statute are owed to the tenant, not the proposed assignee.

            If your preferred course is to recover the premises, it may be possible to pursue a forfeiture strategy based on the breach of the tenant’s covenants but this will require the court’s permission if the administrators will not consent to it. It may not be possible to convince the Court to grant consent to forfeit where the occupation of the premises by the third party is helping to achieve the aims of the administration, and rent is being paid.

            How Do I Get the Court’s Permission to Forfeit or Enforce the Adminstrators’ Duty To Pay Rent?

            The administration will be listed in the High Court and, like most creditors, landlords can make applications in the administration for the Court to determine. These applications are governed by the insolvency legislation, so the Court will consider your application in the context of the whole administration process and, if successful, its impact on other creditors. These additional considerations can sometimes see one creditor’s rights not enforced even though there appear to be clear grounds for doing so on a purely contractual level. That said, many applications can and do succeed, so it is important to take stock early and execute any strategy with the benefit of expert advice.

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            Charlotte Ross

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            The holding pattern for non-doms – interim update but full details yet to come

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            On Monday 29 July, the government published an update on its plans for the UK’s non-dom regime.

            In a few areas, the latest proposals expand on those set out by the previous government on 6 March. For most of the detail, we will need to wait until the budget, which will be published on 30 October. While that is later than expected, it will buy the government time to follow through with its pledge to consult with stakeholders.

            Income and gains – the FIG regime

            The government has confirmed that it will press ahead with the four-year foreign income and gains (“FIG“) regime. This will be residence-based, with the concept of “domicile” being removed for tax purposes.

            The remittance basis, whereby UK residents who are not UK domiciled are not taxed on foreign income and gains unless they are “remitted” to the UK, will be abolished from 6 April 2025.

            Under the FIG regime, individuals who have not been UK tax resident in any of the last 10 tax years will be exempt from tax on their foreign income and gains in their first four years of UK tax residence, regardless of any remittances.

            The previous government had stated that foreign income and gains arising in non-UK resident trusts (and distributions from those trusts) would also be tax-free during the four-year period. The latest paper is silent on this, suggesting that this part of the policy will be retained.

            As announced before, anyone who is not (or ceases to be) eligible for the FIG regime, will be subject to income tax and capital gains tax (“CGT“) on their worldwide income and gains. Outside of the FIG regime, the income and gains of “settlor-interested” trusts will be taxed on settlors.

            Transitional rules

            The previous proposals included transitional rules for individuals who were already UK resident. Here, there are some changes:

            • Reduced rate of tax on foreign income earned in 2025/2026 – Originally, it was proposed that existing remittance basis users who did not qualify for the FIG regime on 6 April 2025 would only pay income tax on 50% of their foreign income in the 2025/2026 tax year. This relief will not be introduced.
            • Temporary Repatriation Facility – The Temporary Repatriation Facility (“the TRF“) will go ahead. This will allow those who have previously been taxed on the remittance basis and who have unremitted income and gains to remit them and pay tax at a reduced rate.

              The TRF was originally intended to be available for a two-year window from 6 April 2025 to 5 April 2027, with a reduced rate of 12%. In the latest paper, it is stated that “the rate and the length of time that the TRF will be available will be set to make use as attractive as possible.” It is, therefore, possible that we could see a lower rate or a longer period to encourage more inward investment.

              The policy paper states that the government is “exploring ways to expand the scope of the TRF, including to stockpiled income and gains within overseas structures”. This is new, as the proposals previously stated that the TRF would not be available for income and gains in trusts.

              Further details on the TRF will be set out in the October budget.
            • Capital gains tax rebasing – The proposed rebasing for CGT purposes of personally held assets is being kept. This will allow current and past remittance basis users to rebase foreign assets to their value on a specific date. This could reduce the chargeable gain if an asset is disposed of on or after 6 April 2025 and the individual is not eligible for the FIG regime.

              Originally, the rebasing date was 5 April 2019. It is now stated that the date will be set in the October budget.

            Inheritance tax

            As was announced in March, the abolition of the concept of domicile will also apply to UK inheritance tax (“IHT“) – again, to be replaced with a residence-based system.

            This change is now due to take effect from 6 April 2025, which is sooner than might have been expected. The previous government had intended to consult on the details. The new government has stated that it will engage further with stakeholders, but does not intend to carry out a formal consultation.

            It is envisaged that, from 6 April 2025:

            • An individual will become liable to IHT on their worldwide assets once they have been UK resident for 10 years. It is not clear whether these 10 years must be consecutive or cumulative over a longer period.
            • Once within the scope of IHT, individuals will remain so for 10 years after ceasing UK residence.
            • The residence status of a settlor will dictate whether non-UK assets within a trust are subject to IHT. It appears that residence will be determined at the time of a “chargeable event”. This would include the transfer of assets into trust, each 10-year anniversary of the trust, and a distribution of trust assets. It would also include the death of a settlor who could benefit from the trust.

            The last of these changes will end the existing IHT shelter on non-UK assets provided by “excluded property” trusts.

            Prior to the general election, the Labour Party had stated that there would be no “grandfathering” of existing excluded property trusts. The latest policy paper states that the government “recognises that trusts will already have been established and structured to reflect the current rules, so is considering how these changes can be introduced in a manner that allows for appropriate adjustment of existing trust arrangements, while ensuring that the treatment of all long-term residents of the UK is the same for IHT purposes.”

            The intrigue caused by this elusive statement looks set to continue until further details are provided in the budget.

            Planning ahead

            The announcements on Monday confirmed the government’s intention to end the non-dom regime and the remittance basis of taxation, which have been features of the UK’s tax system since 1799.

            The transitional provisions for the FIG regime, and the suggestion of concessions on the IHT treatment of existing trusts, will give some reassurance to those who have planned in reliance on the existing regime and now need to map out their future.

            In each case, the path ahead will require careful consideration once further details are announced on 30 October 2024. In the meantime preparatory steps can be taken so that planning can proceed as soon as possible following the budget and ahead of 6 April 2025. Please contact the Forsters Private Client team to find out we can help.

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            Xavier Nicholas

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            From Start-up to Exit: the Acqui-Hire

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            As an entrepreneur an exit may seem a long way away when first assembling your team, but if you get that really right, you may find yourself receiving offers from buyers that would like your team for themselves. In a nutshell, that’s an acqui-hire: an acquisition which is aimed at obtaining a team.

            It is otherwise a relatively loose term, and it can take different forms such as:

            1. An acquisition of the corporate entity. However, larger acquisitive corporates may well not want to buy an unknown corporate and bring it into their group, particularly if they only want certain assets and don’t want to pick up liabilities.
            2. An asset acquisition, perhaps where some IP that has been created is to be acquired alongside the team.
            3. A simple payment to release the team from terms such as non-competes, and to waive any possible claims the seller may have against the buyer, perhaps with an IP licence to prevent claims in the future that the buyer is misusing the seller’s IP.

            Acqui-hires usually happen relatively early in the growth trajectory of a business (possibly during a distressed time too), but they aren’t necessarily straightforward. For example, some of the key points that start-up teams faced with the option should be considering are:

            1. What will happen to the company afterwards (assuming the corporate is not acquired)? Is it to be wound down? And if so, how long will that take? Or will there be a retained and continuing business? Linked with this, careful thought needs to be given as to what the deal means to creditors.
            2. How is the price to be structured? The buyer will want to retain the people it’s acquiring, so may seek to defer some value and link it to retention. You’ll need to think through what happens if the buyer, for example, terminates without cause.
            3. What will the price mean for any investors? For those operating in the digital assets space, this may also include people who invested for tokens.
            4. The employment proposition for those moving over. Again, it’s likely that the buyer will seek to include deferred incentives, such as options, as part of the package. In addition, visa/immigration considerations may need to be considered, depending on the circumstances.
            5. The tax treatment of the proposed deal structure. This will depend on many factors so taking early advice is crucial in order to maximise deal value.

            So, if you’re being talked to about an acqui-hire, there’s a fair bit to consider, but at the very least it demonstrates what a great team you have.

            Disclaimer

            This note reflects the law as at 24 July 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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            Daniel Bryan

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            Forsters’ next-gen talent shines through in the latest Chambers HNW Guide 2024

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            Our specialist teams advising high-net-worth private clients continue to be recognised as best in class in the latest Chambers HNW Guide.

            The guide, which ranks the leading professional advisors to the Private Wealth market based on extensive market research, praises Forsters’ blend of experience and energy: “The team covers multiple areas and is made up of very experienced senior team members with ample experience, as well as younger advisers who are full of energy.”

            We maintain high rankings across our full range of expertise:

            • Private Wealth Law – Band 1
            • Private Wealth Disputes – Band 1
            • Real Estate: High Value Residential – Band 1
            • Family/Matrimonial Finance: Ultra High Net Worth- Band 2
            • Art and Cultural Property Law – Band 2.

            This year’s rankings also highlight Forsters’ breadth of Private Wealth talent from seasoned advisors to rising stars with new and elevated individual rankings for Senior Associates and Partners:

            • Emma Gillies, elevated to Band 5 in Private Wealth Law
            • James Brockhurst, newly ranked as Up and Coming in Private Wealth Law
            • Hannah Mantle, elevated to Band 4 in Private Wealth Disputes
            • Anna Jassani, newly ranked as an Associate to Watch in Real Estate: High Value Residential
            • Charles Miéville, elevated to Band 2 in Real Estate: High Value Residential.

            The 2024 HNW Guide recognises a total of 26 individual lawyers at Forsters including a record number of Senior Associates. Other notable highlights include:

            • Catherine Hill, elevated to Band 2 in Art and Cultural Property
            • Nick Jacob and Dan Ugur continue to be recognised as ‘foreign experts’ in Singapore
            • Joanne Edwards continuing inclusion in the Spotlight Table for Family/Matrimonial: Mediators.

            Explore our complete list of 2024 rankings here and do get in touch with any member of our market leading private wealth team to find out how we can support you.

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            ERMAs 2024: Forsters win Solicitors Firm of the Year

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            The ERMAs is a celebration of the professionals working in the leasehold enfranchisement and right to manage sector.

            Enfranchisement is a specialist area of law, and Forsters has been dedicated to developing a team with the ability to advise on all aspects of the regime, from lease extensions to the most complex collective enfranchisements.

            Being awarded ‘Solicitors Firm of the Year’ is a testament not only to the team’s commitment to their clients, but for remaining at the forefront of change in this sector which has recently seen the passing of the Leasehold and Freehold Reform Act 2024.

            “We have an excellent enfranchisement team at Forsters who all share a passion and commitment to enfranchisement and who are involved in some of the most complex enfranchisement cases in the UK. The ERMAs is a special date in the diary for all enfranchisement practitioners and I am so pleased that the team has been acknowledged for their determination and hard work”.

            Natasha Rees, Senior Partner


            “A thoroughly deserved win by our enfranchisement team at the ERMA’s last night which confirms their position as leaders in this specialised area of property law”.

            Lucy Barber, Head of Residential Property


            “As an enfranchisement specialist, it was important for me to work in a firm that was fully committed and experienced in advising on this niche area of law. The Forsters’ enfranchisement team offers that and so much more, and so I’m thrilled that this was recognised last night”.

            Caroline Wild, Senior Associate


            “Forsters has a fantastic enfranchisement team which is packed with talent. It’s great to see that celebrated by this award”.

            James Carpenter, Senior Associate

            ERMAs

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            Natasha Rees

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            Connor Rutherford wins the Property Litigation Association’s Alan Langleben Memorial Blog Competition

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            In this year’s ‘The Alan Langleben Memorial Blog Competition’, the Property Litigation Association challenged its members to tackle the topic of leasehold reform. Trainee, Connor Rutherford, was awarded first prize and saw his entry published in EG.

            On Connor’s winning entry, the judges commented:

            “His blog is logical and coherent and points out that although, in respect of the Leasehold and Freehold Reform Bill, the legislators seem to be moving us towards commonhold, there are no suggestions/provisions as to approach and implementation.”

            Since the competition was launched, the Leasehold and Freehold Reform Act 2024 has received royal assent. Follow this link to read our latest briefing.

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            Connor Rutherford

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            The future of the UK’s non-dom regime under the Labour Party

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            With promises of ‘change’ ringing through Westminster and across the nation, Sir Keir Starmer has been appointed the new Prime Minister of the United Kingdom. As had widely been expected, the Labour Party obtained a significant majority in the UK General Election and will have a strong mandate to govern. With a new party in Government, what does the future hold for the UK’s non-dom regime?

            Background

            The previous Conservative Government announced on 6 March this year that it would seek to abolish the current tax regime for individuals who are UK resident but not UK domiciled in favour of a residency-based system, which would apply from 6 April 2025.

            The proposals were that, from 6 April 2025, the remittance basis of taxation, which allows UK resident individuals who are not UK domiciled to pay tax only on foreign income and gains that are “remitted” to the UK, would be abolished and be replaced with a new regime under which those who have been UK resident for at least four years would pay income tax and capital gains tax (“CGT”) on their worldwide income and gains. It was made clear that the new rules would also apply to income and gains arising within trusts, such that the generous trust protections introduced in 2017 would no longer be available to those who have been resident for four years, even if their trusts were set up before 6 April 2025.

            For further details of the original Conservative proposals please read our briefing here.

            Labour’s plans

            Income and gains

            No legislation in respect of the proposed reforms to income tax and CGT was put before the previous Parliament, and with that Parliament prorogued on 24 May 2024 (and subsequently dissolved on 30 May 2024), it will be up to the new Parliament to enact legislation to reform or abolish the non-dom regime.

            Labour’s General Election manifesto stated that they would “abolish non-dom status once and for all, replacing it with a modern scheme for people genuinely in the country for a short period.” This has been a long-standing, and much mentioned, aim of the Labour Party, but unknown is

            (i) the extent to which the new regime will mirror the proposals set out by the previous Conservative Government, (ii) when we might see the detail of Labour’s proposals, and (iii) from what date the new regime would take effect.

            Following the March 2024 Budget, Labour expressed broad support for the Conservative proposals, but argued that the proposals still contained a number of “loopholes”, with reference to the transitional reliefs proposed by the Conservatives.

            In particular, Labour have indicated that they would eliminate the proposal that non-domiciled individuals already resident in the UK would only be subject to income tax on 50% of their foreign income in the 2025/2026 tax year. Their manifesto refers obliquely to removing the “non-dom discount loophole in 2025/2026”, which seems to indicate their intention to follow-through with the Conservative proposals with fewer restrictions and that they intend for the changes to take effect from 6 April 2025. Whether the changes will remain a legislative priority now that Labour has gained power remains to be seen.

            At the same time, however, Labour have also suggested that they recognise the need to encourage UK investment and would consider additional incentives. We could, for example, see an extension or reformulation of the Temporary Repatriation Facility. This is likely to be an area where there will be extensive lobbying, so we will need to wait to see what any draft legislation looks like.

            Inheritance tax

            On IHT, Labour have indicated that they do not agree that trusts established prior to 6 April 2025 should continue to be sheltered from IHT.

            In their manifesto, they stated that they “will end the use of offshore trusts to avoid inheritance tax so that everyone who makes their home here in the UK pays their taxes here.” From this, it would seem that Labour also intend to tie the IHT status of assets held in trusts to the residence status of the settlor or the beneficiaries of a trust.

            However, Labour have not commented in detail on the Conservatives’ proposals for a reformed residency based IHT regime, so again we will have to wait for further detail on this front.

            Labour were conspicuously silent on IHT generally in their manifesto and prior to the election refused to rule out reform of the regime. It has been suggested that Labour may also seek to restrict certain IHT reliefs not aimed specifically at non-doms, in particular agricultural property relief and business property relief. It has been suggested that there will be a consultation process on the IHT regime generally and the concept of domicile.

            What next?

            Rachel Reeves, the newly appointed Chancellor of the Exchequer, has said that there will be no “emergency” Budget and that there will not be a Budget before September, and she has stated that she would not deliver a Budget without a formal forecast from the Office of Budget Responsibility, which requires 10 weeks’ notice. Labour’s Annual Conference will take place from 22 to 25 September 2024, so it may be that any Budget is delayed until after this.

            It is possible, if Labour decide to substantially mirror the Conservatives’ proposals, that we might see draft legislation prior to a Budget. However, given that there will be a summer recess (albeit there have been suggestions that the recess may be shorter than usual), and that there will be other legislative objectives, it is more likely that draft legislation will coincide with Labour’s first Budget.

            It is, therefore, likely that we will need to wait a little longer to see the substantive details of Labour’s proposals.

            Whilst we await the details, it is sensible to plan ahead and consider the options available. Please do get in touch with our Private Client team to find out more.  

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            John FitzGerald

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            The new Labour Government: 5 key employment law changes

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            The election is now finally over and the UK has woken up to a new Labour Government. In its campaign, the new Government made it clear that its “New Deal for Working People” would be an integral part of its future plans, suggesting new employment legislation would be introduced within 100 days.

            Given the impact of these changes, we provide a summary of the 5 key employment law changes which we believe employers should be aware of. As always, the devil will be in the detail, and some of these proposals may change over time, but one thing is certain: we will all be kept very busy focussing on how best to address and implement these proposals between now and the Autumn!


            1. Basic Individual Rights from Day 1

            This is the new Government’s most significant change. Briefly:

            • The Government have committed to granting all workers with important rights from the first day of their employment in relation to unfair dismissal, parental leave and sick pay. Currently, these rights are typically subject to minimum service requirements.
            • By far the most significant of these proposals is in respect of unfair dismissal, where the Government has committed to removing the 2-year minimum service requirement for bringing a claim (where compensation is capped at the lower of £115,115 or 1 year’s pay).
            • A requirement of qualifying service has been part of the law of unfair dismissal since it was introduced with the Industrial Relations Act 1971. At the time, the requirement was also two years and, although the threshold has since varied, it has never been less than six months.
            • We foresee that, in the next few weeks and months, employers might consider quick dismissals before the new rules comes into effect – e.g., removing employees where there is any doubt over their long-term future. Currently, it is easier and less expensive to remove employees who have less than 2 years’ service.

            2. Probationary Periods and Hiring Going Forwards

            • The Government has also referred to the need for “probationary periods with fair and transparent rules and processes”. We envisage a maximum length for these being set (to avoid employers extending probationary periods beyond unreasonable limits) and rules requiring employers to follow dismissal procedures when letting staff go and prohibiting them from dismissing employees without justifiable reasons or cause.
            • In practice, employers will likely need to upgrade and fine-tune their recruitment policies and processes to ensure that:
              • they are compliant and reduce the risk of unfair dismissal claims by their new recruits; and
              • any risks are mitigated by hiring the right people in the first place. We expect to see more careful screening by employers, more investment in psychometric or other testing to ensure a potential candidate is a good fit for the role, and far more rigour and time spent in continuous assessment of new hires during the first few months of their employment.
            • Going forwards, there will need to be more formal monitoring and feedback sessions during an employee’s probationary period, and these should be properly documented. Management will need to be focussed on areas of underperformance and conduct issues and not shy away from these matters, to ensure that any later decision to dismiss can be properly justified.

            3. The Right to Disconnect

            • The New Deal states that a new “right to switch off” would provide workers with the right to disconnect from work outside of working hours and not be contacted by their employer.
            • Whilst similar concepts already exist in some other European countries (like Belgium and Ireland), it will be new to the UK so it will be interesting to see how it is adopted, given the UK’s more 24/7 culture.
            • The Government has said that employers and workers will have the opportunity to agree bespoke workplace policies or contractual terms, suggesting that the right would not be absolute. We suspect that future guidance or a Code of Practice may emerge in the coming months; in any event, employers will likely need be creative in this regard and consider practical measures such as training to respect out of hours emails, calls and cover arrangements.
            • It is likely that any ‘disconnect’ proposals which employers consider will need to be considered against other well-being initiative and existing policies, such as those relating to flexible working and leave.

            4. Zero hours contracts

            • The Government has suggested it will introduce new rules designed to prevent the abuse of zero hours contracts. Initially this was thought to be an outright ban on zero hours contracts, but the Labour Party’s position has subsequently softened.
            • Instead, we understand that employers will be allowed to continue to use zero hours contracts provided they are not “abused” or exploitative (for example, where an employer does not guarantee any work, but the worker is obliged to be available for any work that is offered).
            • A new law is planned to set out the minimum standards expected, and there would be a new right to a contract that reflects hours that are regularly worked (as judged against a 12-week reference period).
            • Employers will need to review their use of zero-hour contracts to ensure that they comply with the new rules.

            5. Fire and Re-hire

            • The current Government has introduced a new statutory ACAS Code of Practice on Dismissal and Re-Engagement, which is due to go into effect imminently, on 18 July 2024. Unreasonable failure to comply with this risks a Tribunal award against an employer being increased by 25%. Where this relates to a failure to meet collective consultation obligations, the potential liability could be considerable.
            • The new Labour Government appears poised to go a step further and has suggested that it will end the practice of “fire and rehire” as a lawful way to change an employee’s contractual terms and introduce a new “strengthened” code of practice.
            • Potential areas for change on fire and rehire include:
              • improving information and consultation procedures; and
              • adapting unfair dismissal and redundancy legislation to prevent workers being dismissed for failing to agree to a worse contract.
            • Whilst “fire and rehire” practices have been under scrutiny in recent times, they can, where used reasonably and with proper consultation, be a helpful tool for employers to implement necessary changes. It will be vital to ensure any future exercises comply with the new rules and anticipated code of practice.

            Please do get in touch with our Employment Team if you’d like to discuss how any of these Labour proposals will impact your organisation and how best to plan for these changes.

            Jo Keddie
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            Jo Keddie

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            Forsters advise Norgine on HQ letting

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            Forsters have advised Norgine Limited on the acquisition and legal aspects of the fit out of their new 24,000 square foot premises at ARC Uxbridge.

            Norgine is a uniquely positioned, specialty pharmaceutical and consumer healthcare company, with over €500 million of annual revenues and a 120-year track record of bringing life-changing products to patients and consumers across our core markets of Western Europe, Australia and New Zealand.

            Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised Norgine and was assisted by Owen Spencer, Molly Haynes and Polly Streather.

            EPC Conversion Factors – Guidance Note

            A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

            In June 2022, there were updates to the EPC calculation methodology, that are typically seeing worsening of EPCs that use gas and do not comply with the latest building regulations. Typically, non-domestic properties of this type have experienced a 1-grade drop.

            Landlord building implications

            Was your EPC lodged prior to June 2022? Does your property use gas?

            If your property falls into both of the above categories, your current EPC was calculated using the old methodology, at renewal of EPC, you may be at risk of a worse EPC score or rating, even if you have completed improvement works. Depending on the property, a worse EPC may negatively impact:

            • Tenancy contracts/green lease clauses
            • Existing funding or investment agreements (if clauses are linked to the EPC rating)
            • Current Minimum Energy Efficiency Standards, if you are currently close to a D or E rating.

            To understand the potential implications to your EPC, it may be time to commission a new EPC assessment (this does not necessarily need to be lodged if your current EPC is still valid), to enable accurate forward planning if issues arise.

            Landlord lease implications – new leases and tenant alterations

            It is now commonplace for commercial tenants to be under an obligation for their alterations to not negatively impact the EPC rating. The concern for tenants arises where works have been carried out since the EPC was initially lodged (prior to June 2022). Upon completion of the works (if these works necessitate a new EPC), there is a significant risk that the overall EPC rating could come down. Tenants may face challenges proving that the completed works are not the cause of the downgraded EPC rating, which could complicate their position.

            Actions going forward – mutual benefit/clarity

            To provide clarity for both landlords and tenants on the current position of the building where:

            • The EPC was lodged prior to June 2022
            • Gas is used at the property.

            Consider commissioning a new EPC assessment (as previously mentioned this does not necessarily need to be lodged if your current EPC is still valid). This can then be used to evidence a correct baseline which ensures clarity for both a landlord and tenant on the EPC rating of the property (allowing the tenant to accurately assess the impact of any alterations they may be planning) and gives the landlord an ability to plan what future investment will be required to ensure they continue to have a good and marketable asset well into the future.

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            Colin Brown

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            Record number of shortlistings at the STEP Private Client Awards 2024/25: Forsters’ named finalists in six categories

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            Forsters’ Private Wealth team has been shortlisted in the most number of categories of any firm, with six nominations in the STEP Private Client Awards 2024/25:

            • Private Client Legal Team of the Year (large firm)
            • International Legal Team of the Year (large firm)
            • Family Business Advisory Practice of the Year
            • Employer of the Year
            • Digital Assets Practice of the Year
            • Trusted Advisor of the Year, Nicholas Jacob TEP

            The STEP Private Client Awards are seen as the hallmark of quality within the private client sector, recognising and celebrating excellence among private client professionals. Attracting entries from across the globe, submissions are judged rigorously by a top tier of independent panel of experts comprising of internationally renowned practitioners in the wealth management arena. Finalists are recognised for a wide range of capabilities including their; ability to demonstrate their capacity to undertake complex and demanding client issues; world-class innovation and commitment to the industry.

            Forsters’ six nominations demonstrates the breadth of specialisms that the team advise our private clients on and showcases the strength of the trusted relationships that we build with both our clients and our intermediary network.

            The news follows our continued success at the annual STEP awards, where Forsters have been named winners in at least one category since 2018 and most recently won three awards at the ceremony last year.

            The winners will be announced at the Awards Ceremony on 19 September 2024. The full shortlist can be found here.

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            Nick Jacob

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            The Lifecycle of a Business – Endeavours clauses

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            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.

            We’ve already discussed various topics, such as, set up, directors, funding, employment and shareholder-related matters, but now let’s concentrate on Commercial Contracts.

            Endeavours clauses

            An endeavours clause is a provision in a contract that requires a party to use a certain level of effort to try and achieve a specified result. These clauses are commonly used when a party is willing to attempt to fulfil an obligation without committing to do so absolutely. There are several “levels” of endeavours clauses, each of which require different amounts of effort, such that it can be unclear as to how far a party must go to try and meet the obligation.

            Failure to fulfil an enforceable endeavours clause constitutes a breach of contract, which can have various repercussions, including your being liable to pay damages to the other party and termination. As such, it is crucial that you have a clear understanding of the scope of any endeavours clause before agreeing to it.

            Levels of endeavours clauses

            There are three “standard” endeavours clauses (“best endeavours”, “reasonable endeavours” and “all reasonable endeavours”). For two of these, case law has resulted in a fairly clear understanding of what will be required from the endeavouring party (the obligor). Accordingly, the extent of a party’s obligations will depend on the agreed wording of the clause.

            Best endeavours

            A best endeavours clause (for example, “The Company shall use best endeavours to deliver the Goods to the Buyer within the timescales set out in clause 9”) imposes the most onerous standard on the obligor.

            Whilst not an absolute obligation, the starting point is that a best endeavours clause “means what the words say; they do not mean second-best endeavours” (Sheffield District Railway Co v Great Central Railway Co).

            Essentially, the obligor must put itself in the shoes of the person to whom the obligation is owed (the obligee). Therefore, by agreeing to a best endeavours clause you commit to doing everything possible to achieve the desired result, even if it means sacrificing your own commercial interests and incurring significant costs. For example, in a case between Jet2.com and Blackpool Airport, the Court of Appeal held that the airport was obliged to open outside of its usual operating hours to accommodate Jet2’s flight times. By agreeing to use best endeavours to promote the budget airline’s flights, the airport had inadvertently agreed to open during night-time hours, regardless of the inconvenience and financial cost involved.

            If you are the obligor, we recommend that you take legal advice before agreeing to use “best endeavours” but, at the very least, you should think extremely carefully about the steps that such a clause will require you to take (and the cost and practicalities of these).

            Reasonable endeavours

            “Reasonable endeavours” (for example, “The Purchaser shall use reasonable endeavours to obtain the necessary approvals, consents and licences by 20 April 2024”) is the least burdensome of the three standard clauses, but even so, it should not be agreed to lightly.

            Case law has determined that the standard imposed by a requirement to use “reasonable endeavours” is a question of “what would a reasonable and prudent person acting properly in their own commercial interest… have done to try” to achieve the objective (Minerva (Wandsworth) Ltd v Greenland Ram (London) Ltd). This implies an objective approach based on the reasonable obligor, not the obligee as is the case for “best endeavours”.

            The courts have considered the obligations behind a “reasonable endeavours” clause in minute detail. Crucially, the obligor is not typically required to sacrifice its own commercial interests and may be entitled to consider the impact on its profitability. In addition, the likelihood of achieving the desired result should be considered and once the obligor has taken all reasonable steps to achieve the objective, it is not required to continue trying.

            Although less demanding than a “best endeavours” clause, this obligation is still significant and will form an enforceable commitment that may be challenging to meet. In particular, any attempt to manipulate circumstances to avoid fulfilling the obligation will likely constitute a breach.

            All reasonable endeavours

            The third commonly used endeavours clause is “all reasonable endeavours” (for example, “The Contractor shall use all reasonable endeavours to complete the Project by the Long Stop Date”). Whilst such clauses are commonly seen as a compromise between best and reasonable endeavours, this is not necessarily the case, and their meaning is controversial.

            The courts have indicated, without deciding the point, that it is “probably a middle position somewhere between” reasonable endeavours and best endeavours. However, it has also been suggested that in meeting an all reasonable endeavours obligation, an obligor would be required to take all reasonable courses of action, thereby sacrificing its own commercial interests to comply with the obligation.

            The current stance is that a court will interpret it based on the context of the contract and the parties involved. This obviously results in uncertainty as to what an obligor will actually be required to do in practice to comply with such a clause. As such, obligors should be cautious when agreeing to an all reasonable endeavours clause; it would be prudent to consider such a clause to be equally as burdensome as a best endeavours clause and to take legal advice before agreeing to such wording.

            Alternative options

            Over time, variations of the three most commonly used endeavours clauses have come into being. You may see phrases such as “commercially reasonable endeavours” and “all reasonable but commercially prudent endeavours”, which are used to try and soften a reasonable endeavours obligation. However, case law on these terms is inconclusive, making it unclear how the courts might differentiate between them. Consequently, including such clauses in a contract is risky and may result in uncertainty regarding the parties’ obligations. As such, it is advisable to avoid using these variations.

            It is also relatively common to see terms such as “best efforts” instead of “best endeavours” and “all reasonable steps” instead of “all reasonable endeavours”. Although the courts are likely to treat these as interchangeable phrases, we suggest sticking to the tried and tested “endeavours” wording.

            Practical takeaways

            • Ideally, any endeavours clause should clearly outline the steps a party must take to fulfil its obligations. For example, if one party needs to spend money to achieve the result, the contract should specify this and include the maximum amount to be spent. Similarly, if a party is required to speak to certain people within a set timeframe, the contract should list who these people are, what needs to be discussed and include a deadline for the discussions
            • Draft any endeavours clauses very carefully and seek legal advice if you are unsure about the requirements and the extent of your obligations. Failing to meet an endeavours clause may result in your being in breach of contract
            • Limit yourself to “reasonable endeavours” or “best endeavours”. Avoid using vague or diluted language as it can create uncertainty and, if the matter goes to court, you might discover that your obligations are more burdensome than you had anticipated
            • If you are the obligor, maintain an accurate record of the steps taken towards satisfying your obligations. Such evidence could be extremely helpful to you if a dispute arises

            Disclaimer

            This note reflects the law as at 14 June 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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            Josh Baxter

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            Continued recognition for Forsters family lawyers in Spear’s Family Lawyers Index 2024

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            Six of our family lawyers from across the team have been listed in this year’s Spears Family Lawyers Index 2024:

            The Index recognises the top family lawyers for high net worth clients in the UK, ranking individuals that have the ability to combine expert legal knowledge with an emotional understanding of a client’s situation to produce the best results.

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            Joanne Edwards

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            Forsters boosts Dispute Resolution with appointment of Steven Richards

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            Disputes Partner Steven Richards joins Forsters from Foot Anstey to add specialist fraud and contentious insolvency expertise to the firm’s full-service Dispute Resolution practice.

            Forsters, the leading London law firm, announces today that Steven Richards is to join the firm on 11 June 2024. Steven has over two decades of experience advising on a wide range of commercial litigation and contentious insolvency matters. He joins Forsters from Foot Anstey where he led the dispute resolution practice for several years before heading up the firm’s fraud team. Prior to that Steven trained and practised at Jones Day (formerly Gouldens).

            Steven’s appointment marks a period of continued growth for Forsters following the recent arrival of highly ranked and market recognised Employment Partner Jo Keddie and her team from Winckworth Sherwood. The firm, which celebrated its 25th anniversary in 2024, moved to new premises in Baker Street in January this year.

            Steven has extensive commercial litigation experience and has a strong track record of acting on big ticket, complex disputes and achieving successful outcomes for a range of both domestic and international clients. He advises high net worth individuals, private companies, insolvency practitioners and financial services organisations on a wide range of disputes and has a particular expertise in civil claims involving allegations of dishonesty and fraudulent conduct. He also has significant experience in dealing with corporate disputes, banking and finance litigation, professional negligence, contentious insolvency, insurance claims, business critical issues and injunctive relief.

            The addition of Steven Richards to Forsters’ Disputes Resolution practice will boost its already thriving general commercial litigation capability, while adding specialist contentious and insolvency expertise.

            Benedict Walton, Head of Commercial Dispute Resolution at Forsters, said: “Clients turn to our disputes practice for the most complex commercial claims. Steven’s addition to the team adds significant bench strength in the important areas of fraud and contentious insolvency. I’ve known Steve for many years and he brings a fantastic track record of high profile litigation experience, successful practice building and a progressive and collaborative working approach, all of which will be highly beneficial as the team continues to strengthen and grow.”

            Steven Richards said: “I am really excited to join Forsters at a time when the firm is growing and going from strength to strength. Forsters’ diverse client base and culture feels like a natural fit for me and my practice. The firm is the right place from which to serve my clients who will have access to market leading contentious expertise from the wider practice which, in turn, will help them navigate their most complex business challenges.”

            Natasha Rees, Senior Partner of Forsters, commented: “Forsters is enjoying a period of strong momentum as a business and so we are really pleased to welcome Steven Richards to the partnership. He will be an excellent addition to the Disputes practice and of instant benefit and value to clients across the firm.”

            Forsters’ Asia team win ‘Estate Planning Team of the Year’ for Greater China at the WealthBriefingAsia Awards 2024

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            Named ‘Estate Planning Team of the Year’ (Greater China) at the 2024 Wealth Briefing Asia Awards, Forsters Private Wealth Asia team were recognised for their unique approach to advising HNW individuals and families, trustees and family offices in the region on international cross-border estate and succession planning.

            The annual WealthBriefingAsia Awards programme recognises the most innovative and exceptional firms, teams and individuals. The awards have been designed to showcase outstanding organisations, deemed to have ‘demonstrated innovation and excellence during the last year’.

            The award winners were announced at the ceremony on 30 May 2024 in Singapore.

            Forsters’ dedicated Private Wealth Asia team

            With an established track record in Greater China, including Hong Kong and the wider Asia region stretching back 33 years, Forsters’ Private Wealth Asia team are renowned for their expertise in estate and succession planning with a cross-border focus.

            Taking a unique approach to estate planning particularly in the context of family governance for multigenerational business families; the team make it a priority to understand the psychology of the families they advise and marry this with the practical and commercial aspects to preserving family wealth and mitigating the risk of family disputes.

            Only after taking the time to get to know the family, and understand their dynamics and needs, do the team create the bespoke structures that help establish family harmony and ensure the successful transition of wealth from one generation to the next. Many clients have built international businesses with assets and family members based across the world; lending added complexity to their planning needs.

            The award showcases Forsters’ continued commitment to serving families in Asia and follows the team’s recent promotion of Alfred Liu to Partner. Nick Jacob and Daniel Ugur are also two of only three lawyers recognised in the Chambers HNW Guide as foreign experts for Singapore. This team, which also includes Private Client Global Elite Rising Leader, Patricia Boon, travel to the region monthly to advise clients and have cultivated strong relationships with many private wealth advisors based there.

            The Private Wealth Asia team is part of Forsters’ Asia group advising clients based in the region on a wide range of services including:

            • Estate & Succession Planning
            • Family Governance
            • UK Tax
            • Trusts Structuring
            • UK Residential & Commercial Property
            • Matrimonial & Divorce
            • Contentious Trusts & Estates.

            Please do get in touch with any of the team, to find out more about our Asia services.

            WealthBriefing Asia Awards

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            Nick Jacob

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            The Lifecycle of a Business – Talking Non-Disclosure Agreements

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            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.

            We’ve already discussed various topics, such as, set up, directors, funding, employment and shareholder-related matters, but now let’s concentrate on Commercial Contracts.

            Talking Non-Disclosure Agreements

            The use of confidentiality or non-disclosure agreements (an NDA) has come under press scrutiny over recent months, largely because of their abuse in relation to sexual harassment cases. Their use in the commercial and corporate world is, thankfully, far less sinister, but it is nonetheless important to understand how NDAs operate, when you might be asked to sign one and what you should look out for before signing one.

            Why have an NDA?

            In the corporate/commercial context, parties to a prospective transaction or commercial arrangement may need to disclose commercially sensitive business information to one another for the purposes of evaluating whether to enter into the transaction/arrangement. For example, a prospective investor who is considering providing funds to a tech company may insist on seeing ‘proof of concept’ or reviewing other competitive information prior to agreeing to invest. The tech company would of course be looking to protect itself against the prospective investor running off with its billion-pound idea. In a commercial scenario, a service contract will in all likelihood contain confidentiality provisions, but during the contract negotiations, a SaaS provider, for example, may need details about the prospective customer’s technical infrastructure or business processes in order to be able to tailor its service or evaluate whether it can in fact provide the service. In such a situation, it would be highly advisable for the prospective customer to seek the protection of an NDA.

            An NDA aims to provide a level of protection for the party disclosing the confidential information (the Discloser) who is at risk of the information being:

            • used on an unauthorised basis;
            • misused to obtain a commercial advantage; or
            • accessed by unauthorised parties due to a failure to protect it.

            At what stage is an NDA required?

            A Discloser should ideally ensure that the party receiving the confidential information (the Recipient) is bound by adequate confidentiality obligations prior to its disclosing the sensitive information. Although making a disclosure prior to such obligations being in place is not necessarily fatal from a protection point of view, an NDA executed after a disclosure has already been made will need to expressly apply to any such disclosures; this could require jumping through some additional contract law hoops relating to ‘consideration’ and so should be avoided if at all possible.

            What should an NDA include?

            The structure and level of detail included in an NDA are generally driven by the type and sensitivity of information being disclosed (e.g. trade secrets or sensitive personal data), the reason for the disclosure, the identity of the Recipient (e.g. is it a large company with multiple employees and advisors or a single individual?), the Recipient’s standing in the market (e.g. is it a potential competitor of the Discloser?) and the timing of the exchange of information.

            Some NDAs may be structured as full form agreements whereas others might take the form of a shorter form letter agreement but either way, the NDA should deal with the following elements:

            What is classified as “confidential information”?

            A Discloser is likely to prefer a broad, catch-all definition which identifies illustrative categories of confidential information, rather than an exhaustive or more precise definition which could result in loopholes.

            However, information will not necessarily be deemed to be “confidential information” simply because it is defined as such in the NDA and attempting to capture non-sensitive information may result in the courts ruling that the NDA is unenforceable. The information in question must be worthy of some protection, for example because the Discloser may suffer damage if the information were to become commercially available to its competitors.

            The parties will also need to clarify what is excluded from the definition. This will usually include information already in the public domain or developed independently by the Recipient.

            What is the term or duration of the NDA?

            This will depend on the particular transaction, but an NDA may endure indefinitely, for a specific term or it could terminate upon the occurrence of a particular event (such as completion of the Recipient’s acquisition of the Discloser’s company).

            An indefinite term shouldn’t be included as a matter of course; the sensitivity of most confidential information will decrease over a period of time and in such a case, the courts may deem an ever-lasting NDA to be unreasonable. The parties should instead consider what would be a reasonable term in the context of their transaction/arrangement, taking into account the type of information, how long it is likely to retain its commercial significance and any security measures that the Discloser requires to be put in place.

            How may the confidential information be used?

            An NDA will likely detail the purpose for which the confidential information may be used, for example in the Recipient’s evaluation of a transaction.

            It is also likely to include certain other circumstances when disclosure of the confidential information will not be deemed a breach of the NDA. For example, a Recipient should be permitted to disclose the confidential information if ordered to do so by a court or regulatory authority.

            The Recipient’s treatment of the confidential information?

            A Discloser may require the Recipient to implement certain security measures to safeguard the confidential information, which could include record-keeping obligations, protective software, restrictions on the number of physical copies that may be made and so on. The parties should try to strike a balance between the sensitivity of the information, the term of the NDA and the security measures the Recipient is required to implement, as it may be too onerous for the Recipient to be obliged to maintain costly security measures in respect of information that isn’t particularly sensitive.

            The NDA may also provide that the Recipient must return or destroy the confidential information upon request by the Discloser or upon termination of the NDA. Again, the parties will need to strike a balance as the Discloser may want this requirement to be unconditional, whereas the Recipient may have a legitimate need to retain the information in case it is required to disclose it to a regulatory or other authority, or it may be impractical to destroy the information or guarantee to erase every last piece of data from all of its systems which may be stored on historic encrypted back-ups.

            Consideration should be given to the treatment of information which the Recipient creates itself, but which derives from the disclosed confidential information, such as internal reports, notes, analyses and so on. This is likely to be a particular issue where the Discloser and Recipient operate within similar industries or even compete with one another. In the context of acquisition discussions which break down, the Discloser will want to ensure that these derivative materials are destroyed, lest they be used by the Recipient to develop a similar product or otherwise compete against the Discloser.

            What are the remedies for breach?

            When an NDA is breached, the Discloser faces the challenging task of proving the loss incurred, often complicated by questions of remoteness, foreseeability and mitigation. To address these challenges and ensure adequate protection, NDAs may include various remedies. For example, liquidated damages provisions set predetermined amounts which are payable upon breach. While, on the plus side, this enables complex evidentiary issues to be bypassed, the Discloser should take care that the agreed amount is not disproportionate to its legitimate interest, otherwise a court may rule that it is an unenforceable penalty.

            Additionally, NDAs often expressly reserve the right for the Discloser to pursue equitable remedies, such as an injunction to stop the breach. In reality, it is these types of remedies which a Discloser is likely to want to pursue to prevent the confidential information from being circulated more widely, although once a breach has occurred, the damage has often already been done.

            Restrictive covenants

            Sometimes the Discloser requires an added layer of protection in the form of restrictive covenants to prevent, for example, the Recipient from soliciting the Discloser’s customers, employees and suppliers, particularly if they are an existing or potential competitor.

            Health warning

            In the main, Recipients have no intention of acting dishonourably, understand the need to enter into an NDA and are happy to comply with their confidentiality obligations. However, it is important to bear in mind that while NDAs serve as important legal tools in focusing the parties’ minds and deterring breaches through the threat of legal consequences, they are not absolute barriers against the unauthorised use or disclosure of confidential information and cannot physically prevent a determined Recipient from misappropriating your sensitive data.

            Enforcement relies on the ability to detect the breach and pursue prompt legal action using the remedies provided for in the NDA. As such, it is recommended to seek legal advice to ensure that your NDA is tailored for your transaction/arrangement and includes remedies relevant to your particular circumstances, while also using those tried and tested terms that the courts have ruminated over time and time again. Using such terms helps to create certainty between the parties and their legal advisors as to what is meant by the provisions and also assists the courts, in the event of a dispute, to correctly interpret the terms of the NDA and make an appropriate order.

            If you have any queries about the above or wish to discuss your NDA requirements in more detail, please get in touch with your usual Forsters’ contact or any member of the Forsters’ Corporate team.

            Disclaimer

            This note reflects the law as at 24 May 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Diversification opportunities for farmers following recent planning changes

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            There has been some good news for owners of farms and estates with the government confirming a series of reforms to permitted development rights under Classes Q and R of the GPDO 2015 which will make diversification and growth on farms and estates easier.

            Class Q covers the change of use from agricultural buildings to dwellinghouses, and Class R covers the change of use from agricultural buildings to various commercial buildings. The new reforms introduce the following changes:

            • An increase from five to ten on the maximum number of residential dwellings which can be created from a barn conversation;
            • An increase from 865m2 to 1,000m2 on the total permissible floorspace for residential dwellings created from barns, with a limit of 150m2 per individual unit;
            • The ability to construct small single storey extensions to barns (subject to certain size constraints);
            • An extension of the permitted uses to which agricultural buildings can be converted under Class R. The new permitted uses include outdoor sport and recreation facilities, larger farm shops, and farm training centres; and
            • An increase from 500m2 to 1,000m2 on the limit to the total internal floorspace of buildings that can be converted under Class R.

            As of 21 May 2024, all of these changes have now taken effect. However, it is worth noting that the changes will not apply to ‘Article 2(3) land’ such as National Parks, World Heritage Sites, the Broads, Areas of Outstanding Natural Beauty, or conservation areas. In addition, the changes are subject to a number of more specific parameters, limiting their scope in places.

            The changes have come as a result of the Department for Levelling Up, Housing and Communities’ consultation on introducing additional flexibility to the agricultural sector, published last year. The intention behind the changes is to encourage greater housebuilding and commercial development on farms, areas which have typically lagged in light of stringent planning requirements. It will also help create new sources of income, diverse business opportunities and increase the value of property. It remains to be seen whether the major parties will commit to any further changes to permitted development rights going into the upcoming General Election, but the recently published DLUHC consultation on changes to permitted development rights certainly indicates that this could be the case.

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            Forsters shortlisted for ‘Solicitors Firm of the Year’ at the 2024 ERMAs

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            We received the exciting news today that Forsters has been shortlisted as a finalist in the ‘Solicitors Firm of the Year’ category at the News on the Block Enfranchisement and Right to Manage Awards 2024.

            Celebrating its 15th anniversary, we are delighted to participate and be recognised in this prestigious awards ceremony. Well done to our Enfranchisement Team in securing this shortlisting, and good luck to all the other finalists.

            We look forward to the award ceremony, and celebrating the excellence in our industry, on 11 July at Leonardo Royal Hotel, St. Paul’s.

            Click here to view the full shortlist.

            ERMAs

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            Natasha Rees

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            Private drainage systems on third party land – all the information you need at your disposal…

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            Buying a property with a private drainage system, such as a septic tank, comes with an array of factors to consider. However, those factors are amplified when the system is located on land that is not part of your property.

            The first and most pressing concern is to understand how a system on third party land works (for example, who uses it, rights to use it, access for maintenance, splitting maintenance costs). 

            You also need to consider whether the drainage system complies with the General Binding Rules.

            How the drainage system works

            Where a drainage system is located on third party land it may either be used exclusively by your property, or sometimes is shared with neighbouring parties.

            Where the drainage system is located on neighbouring land you should ask the question:

            ‘Does the title to the property have a sufficient legal easement for use of, and access to, the  drainage system (for repair and maintenance)?’

            The length of time the drainage system has been there should also be considered. There may be the possibility of acquiring an easement due to a long historic period of use. If this is the case, and you are buying the property in question, you should obtain a statement of truth or statutory declaration. The statement can be from the seller, or the neighbours on whose land the drainage system is located (if amenable and with sufficient period of knowledge), which will confirm the length of use. This will support an easement application at the Land Registry.

            If the drainage system is shared with neighbouring properties you should make enquiries as to how many share the system, any maintenance regimes and costs, and consider a survey to ensure there are no issues.

            The General Binding Rules

            Drainage systems can either be:

            • Cesspits/cesspools – these are sealed tanks that collect effluent, but don’t discharge any liquid residue to the surrounding land.
            • Septic tanks – these collect effluent and historically then filter liquids out over a ‘soakaway’ or ‘drainage field’. Soakaways are no longer permitted and need to be upgraded to a drainage field. It is also illegal to discharge effluent into a watercourse from a septic tank without an environmental permit. Without such a permit, the septic tank would need to be upgraded to a sewage treatment plant (mentioned below) or connected to the public foul sewer, however this may not be possible. 
            • Sewage treatment plants – these clean the effluent to a greater degree, and so can sometimes discharge into ditches or watercourses. 

            The General Binding Rules (the guidance to which was most recently updated in 2023) govern situations where a septic tank or small sewage treatment plant discharges waste water to surface water (such as a stream or other watercourse). They therefore do not apply to cesspools.

            Where a drainage system which is subject to the General Binding Rules doesn’t comply with them, the person responsible for it must either connect it to a public foul sewer, or change the system so that it complies. If neither of these things are possible, the operator must apply for a permit. Note that a permit won’t be granted if the Environment Agency think it is reasonable for the operator to connect to the public foul sewer, or that it could meet the General Binding Rules by making changes to the system.

            The guidance to the General Binding Rules particularly notes that, in the case of septic tanks, prior to a sale an agreement taking responsibility for the replacement or upgrading of the septic tank should form part of the sale negotiations.

            Once you have determined that the General Binding Rules apply, which ones the system needs to comply with depends in part on when it was installed. The key dates are:

            • discharges starting before 1 January 2015
            • discharges that started after 1 January 2015 but before 2 October 2023; and
            • discharges starting after 2 October 2023. 

            Some of the rules apply to all discharges irrespective of when the system was installed. Examples include:

            • limits to discharge volumes
            • the type of waste that may be discharged; and
            • ensuring that any discharges are not in a groundwater source (protection zone 1) without an environmental permit. 

            On a sale, it is therefore important to determine the nature of the drainage system in order to assess whether the General Binding Rules apply, how the system complies with them, and if an agreement for upgrading or replacing the system will be needed. 

            Please note that building regulations and planning permission may also have been, or will be, needed for any drainage system. 

            Key takeaways:

            • If the drainage system is on third party land, it is important to establish that there are adequate rights to use it.
            • The application of the General Binding Rules depends on the nature of the drainage system and the date of commencement of discharges.
            • It may be necessary to agree to upgrade or replace any non-compliant septic tank as part of a sale.

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            Will Tidy

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            The Leasehold and Freehold Reform Act 2024

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            On 24 May 2024, the Leasehold and Freehold Reform Act (the “Act”) was the last act passed in the current Parliament, and, quite possibly, by this Government. It was pushed through the Commons at speed to ensure it received Royal Assent before Parliament was prorogued. The debate of the House of Lords amendments started at 19:21 and 11 minutes later all 67 amendments were passed. Parliament was prorogued at 20:46.

            It is striking that the Act grew from 65 clauses and 8 schedules to 124 clauses and 13 schedules during its passage through Parliament. That speaks to the complex and technical nature of the matter area; but equally raises questions about the scrutiny those amendments received.

            In the course of the debate, Sir Peter Bottomly praised Michael Gove for “getting a grip of the horrors in residential leasehold.” However, it remains to be seen whether the Leasehold and Freehold Reform Act and indeed Michael Gove’s legacy will stand the test of time. The new Act’s journey into the statute book has obvious parallels with the Landlord and Tenant Act 1987. The 1987 Act was also rushed through by a Conservative government three days before the dissolution of Parliament in the build up to the General Election of that year. It is widely regarded as one of the worst examples of legislative drafting and has a resulted in significant amounts of often unnecessary litigation for tenants and landlords alike. Unfortunately, there is scope for the new Act to go the same way.

            Much of the commentary so far has focused on what is not in the Act. Michael Gove’s plan to remove ground rent for existing leaseholders or cap it at £250 was the most high-profile absentee. However, the ban on forfeiture of long residential leases and the introduction of commonhold also ended up on the cutting floor.

            So what now? The Act is, of course, not yet in force. The parts of the Act that amend the Building Safety Act 2022, and deal with rent charge arrears, will become law on 24 July 2024. The remainder of the Act (including the 990 year lease extension, the new ‘standard valuation method’ (which will make it less costly for leaseholders to extend their lease or buy the freehold), the tenant’s right to buy out its rent, the ban on leasehold houses and the changes to service charge demands to make them more transparent) will be commenced by the Secretary of State via statutory instrument.

            As Parliament is now in purdah, this responsibility will fall to the next government. The question of how the deferment and capitalisation rate should be fixed is complicated, politically charged and is highly likely to result in a human rights challenge. However, given the broad cross-party support for the Act, there is little doubt that the next government will grasp the nettle and bring the Act into force. When exactly this will be is anyone’s guess. Perhaps the most realistic guide is Baroness Scott’s 1 April 2024 written response, which estimated that the majority of the reforms would come into effect during 2025-2026.

            In the interim, the leasehold enfranchisement industry remains in purgatory, although we now at least have an Act. For now, all we can do is work together to ensure that the new legislative landscape is understood as clearly as possible, so we are ready for the new Act when it becomes law.

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            James Carpenter

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            The Lifecycle of a Business – Commercial Contracts: Key Features

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            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.

            We’ve already discussed various topics, such as, set up, directors, funding, employment and shareholder-related matters, but now let’s concentrate on Commercial Contracts.

            Commercial Contracts: Key Features

            The principal purpose of a commercial contract is to set out the terms which have been agreed between the parties. Some of the terms may vary depending on the legal framework of the contract (for example, whether it’s a B2B (business-to-business) or B2C (business-to-consumer) contract), while others may depend on the type of contract in question (for example, whether it is a supply contract, a distribution agreement or some other type). Certain terms may be subject to negotiation between the parties, whereas some terms may be agreed extremely easily. What is important is that the parties completely understand exactly what they are agreeing and that the contract clearly sets out the terms agreed. This can reduce the risk of disagreement, and (potentially) costly litigation, at a later date.

            In this article, we take a brief look at some of the key commercial terms. (Note that the legal requirements to create an enforceable contract are not discussed).

            1. Consideration

            This is the price payable for the goods or services. It can be calculated in a number of different ways, for example, a cost per item, payment per month, a percentage of turnover or by reference to other parameters.

            If a price needs to be calculated, the calculation mechanism should be clearly expressed in a way that can be easily worked out. Including a worked example, which has been agreed between the parties, may be advisable where a particularly complex pricing mechanism applies. In such a situation, we strongly advise speaking to your legal advisors who will be able to assist you in the drafting of such provisions.

            There may be different components which are either included or excluded from the price (for example, delivery costs, certain maintenance services, upgrades and so on) and it is important to ensure that the contract accurately reflects these. Separately, there is the issue of VAT; generally, if a contract is silent on VAT, a stated price is deemed to be inclusive of VAT.

            The timing of any payment should also be considered and set out.

            2. Services

            The obligations of each of the parties to the contract and the services to be delivered will need to be agreed and included. These can be extremely detailed and lengthy and, in such a case, they may be included as a schedule to the contract.

            The obligations on a party can vary by degree, from absolute obligations that must be carried out, through to a party agreeing to try to carry out certain obligations by agreeing to use “reasonable endeavours” to do so (for more information about “endeavours” clauses, please see here). In some cases, a party may have a discretion as to how and when it must meet an obligation.

            The parties should think about the level of obligation agreed and the consequences of any breach. For example, where the breach is particularly serious or the obligation is so important that a breach would render the contract pointless, the non-defaulting party may want the ability to be able to terminate the contract immediately. In other cases, a refund of part of the fee, the provision of an alternative option or the remedying of the breach at no cost to the non-defaulting party may be sufficient.

            3. Term

            The term is the time period for which the contract applies. Contracts can be for a fixed term (for example, 12 months following which the contract will automatically terminate) or a rolling term (for example, an initial 12-month term which automatically renews for successive 12-month terms until one of the parties actually terminates the contract) or both(!) depending on the nature of the contract.

            Where parties are entering into a new contractual relationship, for example, a new supply contract, it may be advisable to initially agree a short fixed term, thereby limiting the risks inherent in a new relationship. Conversely, there may be certain contracts that require consistency and continuity and so a longer term may be preferable.

            4. Termination

            Contracts can provide expressly for circumstances in which the parties can terminate a contract. These may apply in addition to, or to the exclusion of, any other rights of termination that arise in law.

            The parties should carefully consider and agree the circumstances in which a party can terminate the agreement. Common provisions include termination for breach, if a party suffers insolvency or where there is no cause but reasonable notice is given (the length of the notice period is often set out in the contract).

            There may be circumstances in which certain actions are needed to be carried out on termination of the contract or shortly thereafter. These could include, for example, having to provide final accounts, a handover process, being obliged to return certain information, etc., and any such requirements should be clearly set out in the contract.

            Termination of a contract may not necessarily terminate every provision in the agreement; there may be certain clauses that the parties intend to continue even though the contract has otherwise terminated (for example, limitation of liability clauses, confidentiality provisions and restrictive covenants).

            5. Indemnities

            This is an agreement by one party to “make whole” another party in respect of any loss that other party suffers, either in specific circumstances under the contract or generally.

            A party should consider carefully whether it wishes to give an indemnity and the consequences of the same. If an indemnity is to be included, the parties need to ensure that the wording accurately reflects what is agreed between them and the party providing the indemnity may want to include certain safeguards, such as financial caps, and ensure that the provision is tightly drafted.

            6. Limitations on liability

            Most contracts will contain provisions that seek to exclude or limit a party’s liability under the agreement, such as stating that a party’s liability shall not exceed a total sum of £x, specifying the type of claims a party can (and cannot) make, setting time limits within which claims can be made and so on.

            These clauses are often heavily negotiated as the parties are on opposing sides of the discussion and the result will go to the level of financial protection that each party will have during the contract term.

            Wider considerations are also likely to come into play as such provisions are often subject to other legal controls. For example, the exclusion of liability for certain losses may be prohibited by law or a limitation clause could be void if a court considers it to be unreasonable.

            Ultimately, the terms of a contract will vary from contract to contract and the emphasis will be different depending on the substance of the commercial agreement. Taking legal advice when drafting such contracts or putting in place a template contract or set of terms and conditions is recommended and will ensure that the key terms are covered, are drafted clearly and correctly and that any “legal” issues are dealt with.

            If you have any queries about the above or wish to discuss your commercial contracts or any part of them in more detail, please get in touch with your usual Forsters’ contact or any member of the Forsters’ Corporate team.

            Disclaimer

            This note reflects the law as at 16 May 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Naomi Trinh
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            Naomi Trinh

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            The rise of the Branded Residence

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            True to its name, a Branded Residence is a property attached to a brand. Historically, we’ve predominantly seen renowned hotel brands absorbing the lion’s share of the market: Six Senses/The Whiteley, The Four Seasons/Twenty Grosvenor Square, Raffles/the OWO, the Peninsula/the Peninsula Residences, to name but a few.

            Recently, other well-known names have started to move into the market: fashion designers, car manufacturers, jewellers and even luxury restaurants are demanding a place at the branded residence table.

            Why invest in a Branded Residence?

            These prestigious brands have a track record in the highest levels of customer care, hospitality and amenities, resulting in, quite literally, all singing all dancing accommodation – residential living with the services, facilities and luxuries of a hotel.

            Never has the word “turnkey” been more apt than for a hotel branded residence. Need your car? The valet will have it at the entrance before you’ve made it downstairs. Staying in the UK intermittently/for short periods at a time? Someone will stock your groceries before you arrive. Looking for somewhere to eat? The concierge knows a place – and can get you a table, at short notice. And that doesn’t even cover the world-class gyms, swimming pools, spas, private dining rooms, private cinemas, not to mention the highest levels of security… the list goes on.

            On top of this, there is of course the fact, that by aligning themselves to a particular property/development, these brands are accepting a certain level of responsibility with regard to the running and overall “feel” of a building, often beyond their contractual duties; there is automatically a reassurance as to the quality and management. Whilst there is likely to be an independent managing agent “running” the residential aspects, it is likely be the household name that people remember and automatically associate with the property, wrongly or rightly and for good or bad reasons. This offers comfort to buyers – they are not just purchasing a property, they are investing in a trusted brand.

            What are the legal implications?

            The agreement for lease (i.e. the purchase contract) and the long residential lease which would need to be entered into by buyers on completion are likely to be very similar to those seen on a high-end new build estate without the branded element. The legal paperwork will often be more detailed than that of a second-hand sale and purchase in order to:

            1. cover the ongoing development;
            2. deal with snagging/the Seller’s pre-completion obligations;
            3. address any other complexities across the site; and
            4. take into account any third party operator involved (such as a hotel brand).

            That said, there is unlikely to be a significant amount to consider legally on the branding side. This can be positive (global brands often means hugely complex, sensitive and probably confidential agreements) but ultimately this is simply because it is unlikely that a brand operating at this level will agree to enter into a direct contractual relationship with individual buyers.

            Given that the majority of “new” long residential leases are granted for a term of 250 – 999 years, it is understandable that these companies are unwilling to be held to ransom for the duration of these leases which often vastly exceed the term of the agreement between the freeholder/superior landlord and the brand in question. In some instances, developers (and/or the brands themselves) may even require a waiver signed by the buyer, confirming that they understand the brand could withdraw from the estate in future.

            The considerations are largely commercial and, as one might expect, tend to relate to the costs involved. A luxury brand is likely to come with a luxury price tag, not to mention luxury services and therefore, luxury service charges. Service charge deposit deeds requiring 6 – 12 months of service charge on account are often required by management companies at this level, employing concierge teams of the highest calibre costs money and buildings insurance on these schemes isn’t cheap.

            In conclusion, branded residences offer a harmonious blend of luxurious living and hotel-style services. With turnkey convenience, world-class amenities, and the assurance of a trusted brand, buyers invest not only in property but also in a lifestyle. While, as a potential buyer, considerations on the branding side are likely to be more commercial than legal, buyers should be sure to appoint a lawyer who is well-versed in the intricacies of new developments/off-plan paperwork, and of course be prepared for the potential costs of such a high-end living experience.

            Georgina Haddon
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            Georgina Haddon

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            Forsters’ CTE team support the inaugural Junior Litigators Forum

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            Head of Contentious Trusts and Estates, Roberta Harvey will be chairing the inaugural Junior Litigators Forum, hosted by ConTrA and Informa Connect.

            Taking place from 9-10 May 2024 at The Grand Hotel in Birmingham, the conference will bring together junior litigators to discuss issues surrounding trusts and estates. The agenda will be delivered by senior industry figures and rising stars, including topics such as:

            • Keynote sessions delivered by HHJ Paul Matthews and Ellen Radley (Forensic Document Examiner).
            • Debate: Will challenges get easier every year (and so they should).
            • It’s a free country: testamentary freedom verses forced heirship Professional negligence in wills, trusts, and probate.
            • When the gloves come off: dirty tricks in litigation and how to deal with them.
            • Trustee blessing applications and other useful directions.
            • Building your personal brand.

            Senior associate, Ashleigh Carr, will be giving the ConTrA address alongside her ConTrA Co-Chair James Lister, Partner at Stevens and Bolton.

            Spear’s Legal Indices: Forsters’ Landed Estates lawyers retain their Top Recommended status

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            Forsters Partners Henry Cecil, Andrew Lane, Rupert Mead, Polly Montoneri and Consultants Penny Elliot and Christopher Findley, have retained their ‘Top Recommended’ status in the latest Spear’s Legal Index.

            The Spear’s rankings showcase the highest calibre of landed estates lawyers, advisers who can support their clients on wide ranging issues, from tax and succession planning to land development and diversification.

            The full listing can be viewed here.

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            Henry Cecil

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            Chambers High Net Worth Awards 2024: Forsters shortlisted for Residential Property Team of the Year

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            Forsters have been shortlisted for ‘Residential Property Team of the Year’ at the Chambers High Net Worth Awards 2024.

            The awards reflect the team’s achievements over the past 12 months including their outstanding work and excellence in client service. The awards honour law firms across the world and we are delighted to be recognised.

            The winners will be announced on 11 July.

            HNW Awards Shortlist

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            Author

            Lucy Barber

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            The Lifecycle of a Business – An Introduction to Incentive Arrangements and their Associated Tax Treatment

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            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.

            We’ve already discussed various topics, such as, set up, directors, funding and shareholder-related matters, but now let’s concentrate on “Employment: 9 to 5”.

            An Introduction to Incentive Arrangements and their Associated Tax Treatment

            In this article, we briefly outline some of the common types of share and cash incentives provided to directors/employees, and their associated tax treatment. Such incentives are a great way for businesses to attract and retain talent, ensuring that employees are rewarded in a way which aligns with the interests of a business more generally. In essence, they allow an employee to benefit from the growth in value of a business.

            References to employees in this article include directors.

            Issue of shares

            Employees can be issued shares in a business. This gives an employee real ownership in a business straightaway (rather than an option to buy later), often with certain voting rights and the right to dividends. Such shares can be gifted or purchased by an employee.

            Income tax will normally be due from the employee to the extent that the employee pays less than the market value of the shares that are issued to them. However, if the shares are subject to forfeiture provisions which last for no more than five years, a different tax treatment can apply.

            A number of elections can also be made which will alter the tax treatment in some circumstances.

            Enterprise Management Incentive (EMI) share option scheme

            EMI schemes can be a very tax efficient way to incentivise staff, especially where a company has the potential for growth. Under the HMRC approved EMI share option scheme, employees can be granted options over shares (i.e. the right to acquire them at a certain price in the future) having a maximum value (at the date of grant) of £250,000. As with all option plans, the hope is that the value of the shares is worth more than the pre-agreed price at the time they are acquired.

            EMI schemes can also include conditionality and time frames; companies can, for example, set performance or length of service milestones which need to be met before EMI options vest.

            However, although EMI options benefit from favourable tax treatment, the company in question must be carrying on a “qualifying trade” and so it is not always possible to grant EMI options; for example, the business of owning and operating hotels is not a qualifying trade for EMI purposes.

            CSOP share option scheme

            Another form of HMRC approved share option scheme is the CSOP, under which an employee can be granted options over shares having a value (at the date of grant) of up to £60,000.

            Unlike the EMI scheme, it is not necessary for the company to be carrying on a qualifying trade and, provided that the option is exercised, broadly, no earlier than three years from the time that the option is granted, the employee will not be subject to income tax on either the grant or exercise of the option. (Note that in some situations, it is possible for the option to be exercised earlier, for example, if the company is subject to a successful takeover.) Instead, the employee will be subject to capital gains tax (CGT) on the difference between the price paid on exercise and the market value of the shares when sold. At present CGT is payable at a much lower rate than income tax so this is a significant advantage of exercising a CSOP option.

            Since CSOPs must comply with a number of HMRC conditions, it is necessary to ensure that these conditions are, and will continue to be, satisfied. In addition, given that the options have to be granted at a price equal to the current market value of the shares when the option is granted, a CSOP scheme will only act as a successful incentive if the share price increases after the date of grant.

            Unapproved share option schemes

            As the name suggests, unapproved share option schemes are not approved by HMRC and therefore the drafting of the scheme rules can be flexible. However, although income tax is not payable when the option is granted, on the exercise of the option the employee will be subject to income tax on the difference between the price paid on exercise and the value of the shares at that point.

            If the shares are tradeable at the point of exercise (for example, because the exercise is triggered by an exit event such as a takeover) employer and employee national insurance contributions (NICs) will also be due.

            Phantom share scheme

            Under a phantom share scheme, the employee does not hold shares or a share option, but the economic effect is to track the performance of the shares as if the employee held shares or an option over shares.

            Since the employee will only ever receive cash, the proceeds under a phantom share scheme are treated in the same way as other remuneration and so are subject to income tax and to employer’s and employee’s NICs.

            Cash bonus scheme

            A cash bonus scheme is treated in the same way as if the employee had received a salary and so the amount received under the scheme will be subject to income tax deducted under the PAYE scheme and also to employer’s and employee’s NICs.

            What happens when an employee leaves?

            With all incentive plans, companies should think about what happens to a participant’s interest once their employment comes to an end. It is important that this is made clear in any scheme documentation to avoid any later dispute. Typically, schemes will have a concept of “good” and “bad” leaver. “Good” leavers are normally those who leave due to no fault of their own (such as ill health or where they have been made redundant) and will often retain some of their interest (subject to any specific HMRC restrictions) – this could be all of it or only that which has vested before their employment ends. “Bad” leavers (such as those whose employment is terminated for cause) will often forfeit all of their entitlements.

            If you would like to discuss any of the points raised in this article or incentive arrangements in any more detail, please get in touch with your usual Forsters’ contact or a member of the Forsters’ Corporate Tax team or Employment and Partnerships team.

            Disclaimer

            This note reflects the law as at 30 April 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice. In particular, incentive arrangements and their tax treatment are complex. This note provides a brief summary of the key points only.

            Forsters advised Stax on leasing new space

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            Forsters have acted for Stax subsidiary Stax UKCo Ltd in relation to taking a new lease in the West End of London.

            Stax is a global management consulting firm, providing services to corporate and private equity clients.

            Glenn Dunn, Head of Forsters’ Corporate Occupiers group, led the team and was assisted by Owen Spencer and Molly Haynes.

            The Economic Crime and Corporate Transparency Act 2023 – an overview

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            The Economic Crime and Corporate Transparency Act 2023 (ECCTA) received Royal Assent in October 2023 and aims to reform the law relating to economic crime and corporate transparency. These reforms were begun by the passing of the Economic Crime (Transparency and Enforcement) Act 2022 (ECA), which we have previously written about, but ECCTA goes further and, in some cases, amends the ECA.

            As such, ECCTA is a wide-ranging piece of legislation, touching on many areas. Certain parts are already in force, while others require secondary legislation before they can take effect. This overview summarises the key provisions. More detailed notes about specific areas will follow.


            Economic Crime Act


            Register of Overseas Entities (ROE)

            The ROE was established pursuant to the ECA and, broadly, requires the registration of overseas entities which hold UK property and such entities’ beneficial owners. ECCTA will result in several amendments to the current ROE regime. These amends generally close gaps which were left open by the ECA and as a result, ECCTA is an attempt to ensure that the true beneficial owners of UK property are registered, rather than other entities within the corporate structure. Many of the amends are now in force, but in some important cases are subject to transitional provisions that defer their practical effect until after 4 June 2024. Other measures require the drafting of secondary legislation before they can take effect.

            The most significant changes expand the scope of who constitutes a registrable beneficial owner (RBO) where trusts are involved in the structure.

            For example, ECCTA widens the definition of an RBO so that any corporate trustee in the chain of ownership will need to be registered, regardless of whether it was exempt from registration under the ECA. So, where an overseas entity is owned by a UK company which is then owned by a corporate trustee, the current ROE regime would only require the registration of the UK company as an RBO; however, the new regime will require details of the corporate trustee to be registered as well.

            Currently, where UK property is owned by an overseas entity, which is acting as a nominee, the details of the beneficial owners of that nominee entity are required to be registered. ECCTA will close this loophole, such that the true beneficial owners of the property will need to be registered.

            Another key change is that overseas entities which have not complied with their ROE updating duties or which have failed to provide additional information requested by the Registrar of Companies will not be able to register title to property at HM Land Registry and so will be prevented from buying or selling UK property until they comply.

            Trust information held on the ROE which is currently protected from disclosure except to government and law enforcement is expected to become disclosable on application. Further regulations are needed on this particular change to determine who may bring such an application and on what grounds. Such secondary legislation is expected to be published later this year.

            Companies House

            ECCTA widens the powers and role of the Registrar of Companies and tightens the information and filing requirements for bodies corporate and limited partnerships.

            Prior to ECCTA, Companies House was essentially a repository for certain information which, by law, had to be filed by (mainly) corporate entities. As such, the reliability of the register was restricted by the accuracy of the information provided, with the Registrar of Companies having limited power to query any aspects of this information, correct errors and follow up on inconsistencies. Under the provisions of ECCTA, the Registrar of Companies is better able to question the information provided and even reject it in certain cases.

            Other provisions tighten requirements in relation to certain administrative details, such as registered office addresses and company names, some of which are already in effect.

            Perhaps the most significant change for the majority of entities will be the requirement to verify the identity of both new and existing directors, members of limited liability partnerships, persons with significant control and certain people connected with limited partnerships. Although not yet in force, this will require such persons to verify their identity with Companies House (probably by scanning in a form of photo ID) and, in the case of directors, will preclude their being appointed until completed.

            Currently governed by the Limited Partnerships Act 1907, limited partnerships will find that their information provisions and filing requirements will be quite substantially increased by ECCTA. The new provisions seek to better align these requirements with those in place for bodies corporate and so, for example, comprehensive information about the partners will need to be filed going forward.

            The process of filing itself will also be more tightly regulated, with only ID verified persons or Authorised Corporate Service Providers (such as solicitors) permitted to make filings.

            Strict penalties will apply for failure to comply, including fines and imprisonment. The person making the filing or causing the filing to be made could also be guilty of a criminal offence if such filings include any false statements.

            Corporate criminal liability

            Failure to prevent fraud

            A new offence, failure to prevent fraud, has been created by ECCTA. This will hold large organisations liable for certain fraud offences which are committed by their associates (being an employee, agent, subsidiary or someone who performs services on the organisation’s behalf) if the organisation benefits from the fraud and does not have reasonable fraud prevention procedures in place. What constitutes “reasonable fraud prevention procedures” has not yet been clarified but we expect governmental guidance to be issued in due course.

            The offence applies to “large” organisations only, i.e. those that in the financial year preceding the offence satisfy at least two of the following three conditions:

            1. a turnover of more than £36 million
            2. a balance sheet total of more than £18 million
            3. more than 250 employees.

            Corporate groups are caught if they cumulatively satisfy two of these thresholds. Although “smaller” entities are not caught directly by the legislation, we expect that those organisations which do satisfy the thresholds, will require their suppliers and other entities involved with their businesses to evidence that they have the appropriate procedures in place, resulting in the legislation having a wider remit than appears on a literal reading.

            An organisation found guilty of the offence could be liable to an unlimited fine and of course, there is likely to be significant reputational damage.

            Identification principle changes

            Until the coming into force of ECCTA, a body corporate could only be found criminally liable for an offence if the actual offence was committed by an individual who represented the entity’s “directing mind and will”. As organisations have grown in size and management complexity over the last 50 years, this became an increasingly difficult criteria to fulfil, with the end result being that it was usually smaller organisations that were prosecuted.

            ECCTA has now amended this area of the law by putting in place a new test whereby an organisation can be found liable if a “senior manager” acting within the scope of their authority commits one of the specified economic crime offences set out in the legislation.

            If found guilty, the organisation will be subject to a (potentially unlimited) fine and the individual in question may also be imprisoned.

            Cryptoassets

            Additional powers have been granted to law enforcement agencies so that they are better able to seize and recover cryptoassets which are either associated with illicit activity or constitute the proceeds of crime.

            Money laundering

            ECCTA aims to tighten legislation which deals with money laundering by providing law enforcement agencies with new intelligence gathering powers and enabling businesses to share information between themselves more easily for the purposes of preventing, detecting and investigating economic crime.

            Strategic lawsuits against public participation (SLAPPs)

            SLAPPs, being legal actions essentially intended to harass and intimidate the other side, have become rather a media focus, often being brought against investigative journalists and other writers. ECCTA seeks to provide the defendants of these actions with more rights and protection.

            Removal of statutory cap on Solicitors’ Regulation Authority (SRA) financial penalties

            The SRA is the body which regulates solicitors in England and Wales. Prior to ECCTA coming into force, the SRA was restrained by a £25,000 cap on any financial penalty it awarded; this cap has now been abolished and no limit applies.

            Disclaimer

            This note reflects the law as at 22 April 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice. In particular, ECCTA is a lengthy, detailed and complex piece of legislation. This note provides a brief summary of the key provisions only.

            Changes to planning controls bring consistency to enforcement rules and increased powers to local planning authorities (LPAs)

            Construction Planning

            Reforms which change the planning enforcement rules set out in the Levelling-Up and Regeneration Act 2023 (LURA) will come into force on 25 April 2024.

            It will now be the case that LPAs can enforce against all breaches of planning control for a period of up to 10 years. This marks an increase from the previous 4-year time limit for bringing enforcement action against building or engineering operations and changes of use to a single dwelling-house. The single 10-year tariff for bringing enforcement will apply where alleged operational development was substantially completed on or after 25 April 2024, or where the date of an alleged change of use to a single dwelling-house was on or after 25 April 2024. These changes will not apply where the alleged operational development or change of use occurred before 25 April 2024, as confirmed by a Government statement published earlier this month; this will be welcome news to developers, who will be ‘in the clear’ for enforcement action where an LPA has not taken action within 4 years and where they are able to demonstrate that any unlawful use of a single dwelling-house or unauthorised works were substantially completed on or before this date.

            The regulations also give power to LPAs to use Enforcement Warning Notices (EWNs). EWNs constitute the taking of enforcement action and allow LPAs to invite regularisation applications when it appears that a breach of planning control has occurred.

            The restriction on appeals against enforcement notices is a further key change to planning controls. Changes to Ground (a) (an application for retrospective planning permission) will limit circumstances in which an appeal against an enforcement notice can be brought on Ground (a). This will apply in circumstances where an application for planning permission has already been made to regularise the breach. These amendments do not apply to appeals against enforcement notices that were issued, and have not been withdrawn, before 25 April 2024.

            The Planning Inspectorate will also have the power to dismiss appeals against enforcement notices and certificates of lawfulness on the grounds of undue delay by the appellant in progressing the appeal, unless steps are taken by the appellant, within a period specified by notice, to expedite the appeal. These changes do not apply to enforcement appeals or appeals against a refusal to grant a certificate of lawfulness that were made before 25 April 2024.

            The Secretary of State also gains the authority to determine the procedure for lawful development certificate appeals.

            Please get in touch with our Planning Team if you would like to find out more.

            Forsters promotes four Senior Associates in annual promotions round

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            Forsters, the leading London firm, announces today the promotion of four Senior Associates to new roles with effect from 1 April 2024.

            The promotions are as follows:

            • Private Client Senior Associate Alfred Liu has joined the Forsters partnership
            • Commercial Real Estate Senior Associates Joanna Brown and Andrew McEwan are promoted to Counsel
            • Rural Land & Business Senior Associate Victoria Salter-Galbraith is also promoted to Counsel.

            Natasha Rees, Senior Partner at Forsters, said: ‘We have promoted four outstanding Senior Associates this year. They are all talented individuals who have consistently demonstrated exceptional legal expertise and a relentless focus on delivering results for our clients. They will all continue to contribute greatly to the success of the firm in their new roles. These promotions demonstrate the ongoing growth of and investment in the firm following our recent move to Marylebone and the arrival of Employment & Partnership partner Jo Keddie, Counsel Danielle Crawford and Senior Associate Daniel Parker’.

            Alfred Liu joined Forsters in 2017 from Gowling WLG. Nominated as a Rising Star in The Legal 500, he was also named as one of ePrivateclient’s Top 35 under 35 in 2020. He advises high net worth individuals, fiduciaries and family offices on a diverse range of private wealth matters, particularly where there are international and multigenerational complexities. With family roots in Hong Kong, Asia is his second home and he has focused a large part of business on growing client relationships in the region.

            Joanna Brown joined Forsters in 2020 as part of a team from Orrick. Her practice focuses on commercial real estate, including landlord and tenant matters with a focus on the retail sector. With a long track record of advising shopping centre clients, Joanna brings extensive expertise to the table in respect of major shopping centre developments, commercial office space and prime retail real estate across the UK.

            Andrew McEwan trained at Forsters before qualifying into the Commercial Real Estate team in 2014. He has developed broad commercial real estate expertise but enjoys complex development work in particular. Alongside this practice focus, he plays a leading role at Forsters in shaping the use of generative AI and technology in relation to real estate transactions.

            Victoria Salter-Galbraith joined Forsters in 2018 from Bircham Dyson Bell. Victoria was made a Fellow of the Agricultural Law Association in 2024. Named in ePrivateclient’s Top 35 under 35 in 2021, in addition to appearing in the CityWealth Leaders List since 2020 for Landed Estates & Property, she regularly acts on all aspects of agricultural and rural property matters (with particular expertise in historic property and viticulture).

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            Forsters secures Disability Confident Committed Certification

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            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.”

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            Key partner hire for Forsters with the appointment of Jo Keddie

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            Highly ranked and market recognised Partner Jo Keddie joins the firm from Winckworth Sherwood to strengthen Forsters’ full service Employment and Partnerships practice, which will continue to deliver leading edge employment advice to a diverse client base.

            Forsters, the leading London firm, announces today that Jo Keddie is to join the firm on 2 April 2024. Jo joins from Winckworth Sherwood LLP, where she headed its Employment and Partnerships team. She also led the firm as Senior Partner from 2021 to 2023, having originally joined the partnership in 2010. In addition to Jo, colleagues Danielle Crawford and Daniel Parker will be joining the team at Forsters as Counsel and Senior Associate respectively.

            Jo’s practice is a close strategic fit to that of Forsters. She represents a broad suite of clients in contentious and non-contentious matters, including corporates, senior executives and charities and has a wealth of experience in investigatory work involving regulatory bodies, corporate clients, and individuals.

            Jo has top tier rankings in both the Legal 500 and Chambers directories for her expertise in acting in partnership and senior executive cases and has recently featured in The Lawyer’s prestigious Hot 100 listing for the second time.

            Over the past year, Jo has acted in a number of high-profile litigation matters and investigations delivering her hallmark of pragmatic, commercial and strategic advice. Jo’s recent experience includes acting for several FTSE 100 C-Suite clients and Fund Managers in respect of their high value (regularly seven figures) and often complex departure terms. She has also advised a number of financial institutions, corporates and charities in successfully investigating and defending claims for unfair dismissal, whistleblowing, race and religious discrimination, sex discrimination/harassment and age discrimination.

            The appointment of Jo is a significant boost to Forsters’ Employment and Partnerships team. Jo, who will head the practice, will join employment partner Joe Beeston and his team, adding further strength, depth and experience to the firm’s offering. The addition of three senior lawyers to Forsters’ full-service employment practice will bolster and scale up Forsters’ market presence, including in the financial and professional services, partnerships, private equity, sciences, technology, real estate and healthcare sectors among others.

            Jo Keddie said: ‘This is such an exciting time to be joining Forsters following its move into amazing new premises at Baker Street. The opportunity to play a lead role in the firm’s strategic investment in employment and partnerships was compelling for me personally and we now have a fantastic platform to grow our team dynamically, as well as enhance the range of services we offer to our clients.

            ‘Culturally we are completely aligned in as much as we are focused on delivering successful strategies and outcomes for a diverse range of clients. Danielle, Dan and I greatly look forward to working closely with Joe and all our new colleagues to deliver a client-led strategy at Forsters. It is a perfect fit for us and our clients at every level.’

            Natasha Rees, Senior Partner of Forsters, commented: ‘We are thrilled to have Jo Keddie and her team join us at Forsters. They will be a fantastic addition to the Employment and Partnerships team and the wider firm. Our clients have just seen us move to superb new premises at Baker Street, which are designed to help us deliver best-in-class advice. Our decision to appoint Jo was completely driven by what our clients need from us. We are really excited to have Jo joining the Forsters partnership and we are delighted that three such talented lawyers will be enhancing our team.’

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            Totum’s Rising Star Award 2024: Natalie Carter is awarded Highly Commended

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            Business Development and Marketing Executive, Natalie Carter, has been awarded Highly Commended in Totum’s Rising Star Awards 2024.

            Working with our Private Wealth department, Natalie has been charged with seeking new business opportunities, building connections and developing strategic partnerships.

            She joined Forsters in 2019 on a work experience placement, which turned into a permanent role in the BD & Marketing team. Over the last five years, her role has evolved from dealing with practical, task-driven responsibilities to that of a trusted advisor.

            Natalie’s recognition is a testament to her focus and dedication, as well as the firm’s commitment to the career development of their employees.

            The full article on this year’s winners can be read here.

            The Lifecycle of a Business – Getting the most out of recruitment and motivating and retaining valued staff

            Abstract Office Building

            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.

            We’ve already discussed various topics, such as, set up, directors, funding and shareholder-related matters, but now let’s concentrate on “Employment: 9 to 5”.

            Getting the most out of recruitment and motivating and retaining valued staff

            Our recent article talked about the steps that a first-time employer needs to take before they actually employ any staff . We’re now going to think about the next stage.

            A plethora of factors is causing employers to step back and evaluate their approach to staffing; factors which have been around for a while but which, cumulatively, are having a significant impact.

            First, there was Brexit, which resulted in the net migration out of the UK of a notable portion of the workforce. This was followed by COVID-19, which triggered a seismic shift in working practices, including a move towards home and hybrid working. There has also been the introduction of Gen-Z into the workforce, who have brought with them a fresh mindset and different approach to established working norms. On top of these, economic factors, including higher interest rates and the “cost-of-living-crisis”, have resulted in job applicants requesting more from their remuneration packages. All of these factors have shifted the priorities of the workforce and have changed the demands being placed on employers.

            So, how can an employer ensure that they appeal to the right recruits for their business? How can an employer motivate somebody to reach their potential in the business? And how might an employer look to retain valued individuals?

            We’ll consider some potential responses to these questions below.

            Recruiting for your business: not just a job role

            The nature of recruitment has changed steadily over recent years, with the involvement of recruiters becoming increasingly prevalent, as opposed to individuals approaching potential employers directly.

            With this “middle-man” approach seemingly becoming the norm, it is important that you (as an employer) know what you are looking for. Are you looking for an individual to fulfil a perfectly sculpted job description? Or, are you looking for an individual who can grow with the business as a long term prospect? The likelihood of finding the best talent will be increased by focusing on the latter.

            A high-level job specification and having an awareness of the key competencies is very important, but actually contemplating how the successful recruit will integrate with your existing workforce is paramount. Recruiters not only have on-going relationships with employers, but with candidates as well, and will be very familiar with the candidate’s personality and their fit with your business. Therefore, being able to articulate the personal specifications that you envisage the successful candidate having has become just as important as knowing what their role will entail.

            Motivation: getting the best from your workforce

            With the labour market becoming fairly volatile, it is particularly important that employers know how to both motivate and retain their workforce to ensure that they stay incentivised to give their time and energy to your business.

            When looking to motivate an individual, the key lies in effective two-way communication. Line managers should seek to understand what an individual is seeking to gain from their role: this could include taking on specific types of work or specialist projects, for example. There might be a long term goal that the individual wants to work towards (such as a promotion or qualification), and working towards this together is likely to incentivise the individual to equally invest their time in the company when they appreciate that the company is also investing in their development.

            Financial motivation is also a reality. Following the introduction of gender pay reporting and ethnicity pay reporting, there is a growing conversation surrounding pay and remuneration transparency. Although reporting is not a requirement for all businesses, much of the workforce are beginning to look towards, and expect, transparent remuneration structures.

            How to keep those motivated individuals working for YOU

            Motivation and retention employ similar techniques, but whilst motivation is best seen through a professional lens and can be identified as having a cohesive workforce where everybody is positively achieving their individual professional goals and the goals of the company, retention tends to take a more personal perspective and results in individuals staying at a company long-term.

            Retention can result from the “perks” of a job, including a competitive benefits and remuneration package, an inclusive culture and a sustainable work-life balance. Strong remuneration and a benefits package have long been the key ingredients for retention within the job market, but the cultural aspects of a workplace are becoming increasingly significant. For example, in determining what makes a “good employer”, employees now often cite the importance of an employer nurturing diversity and allowing individuals flexibility in their working day, including flexibility of working hours and location.

            The younger generation of the workforce are increasingly looking for an environment that nurtures their authentic selves which means that, if an employer is looking to retain their workforce, they would do well to allow the differences amongst their workforce to thrive and be recognised.

            Disclaimer

            This note reflects the law as at 13 March 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Commitment to Sustainability: Forsters and Kelly Noel-Smith shortlisted for industry awards

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            Forsters LLP and CSR Partner, Kelly Noel-Smith, have been shortlisted in The Legal 500 ESG and LexisNexis Legal Awards 2024.

            LexisNexis Legal Awards: Award for Sustainability – Forsters

            Since our inception in 1998, Forsters has pioneered its approach to sustainability, and we are proud to see this commitment recognised.

            This year has seen our most ambitious commitments to date.

            In 2021, we signed up to a science-based emission reduction target to halve our greenhouse gas emissions by 2030. We were one of the first firms of our size to make this pledge. In Autumn 2023 our reduction target was approved by the Science Based Target initiative.

            We have a rigorous best practice programme in place driven by significant external commitments and characterised by a thoroughness of approach both internally and in how we support our clients and wider stakeholders.

            The LexisNexis Legal Awards celebrate groundbreaking contributions to the legal industry. The winners will be announced on 14 March.

            The Legal 500 ESG Awards: Environmental/Sustainability: Private Practice Champion of the year (internal) – Kelly Noel-Smith

            We are delighted to announce that Kelly has been recognised for leading our approach to sustainability and establishing Forsters’ best practice programme.

            Kelly has been an integral driver of change, which has included:

            • Building a CSR team
            • Creating our Green Impact Group
            • Spearheading our 2021 commitment to a science-based emission reduction target
            • Creating and leading our Sustainability Board
            • Establishing our Sustainability Hub in 2020
            • Initiating a Sustainability Collaborations programme with clients and intermediaries to consolidate sustainable ways of working operationally.

            The inaugural Legal 500 ESG UK Awards will celebrate the very best ESG initiatives across the UK legal market. The winners will be announced on 24 April.

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            Forsters’ Residential Property team shortlisted in the RESI Awards 2024

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            Once again our Residential Property team at Forsters has been shortlisted for ‘Legal/Professional Team of the Year’ in the RESI Awards 2024.

            The RESI Awards, organised by Property Week, celebrate the fantastic achievements of the residential property sector.

            This shortlisting recognises the high-quality work we deliver for our clients. We are delighted to be named amongst other industry leaders.

            Our Residential Property team acts for clients on all aspects of their property requirements, supporting clients to navigate the legal practicalities of buying, selling, financing, and managing your asset. We provide a client-focused service, giving technical advice whilst also taking a commercial approach to ensure we achieve our clients objectives.

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            Maryam Oghanna and Ashleigh Carr to speak at the Trusts in Litigation Conference 2024

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            Contentious Trusts and Estates Senior Associates, Maryam Oghanna and Ashleigh Carr are attending and speaking at the Trusts in Litigation 2024 Conference taking place 21-22 March 2024.

            The conference, hosted by the Contentious Trusts Association (ConTrA) and Informa Connect, brings together professionals in the world of contentious trusts to share knowledge and develop networks.

            Ashleigh, as the co-chair of ConTrA, will be chairing the conference alongside the founders of ConTrA and her current ConTrA co-chair, James Lister, Partner at Stevens and Bolton.

            Maryam will be presenting the session entitled ‘Enforcement across borders’, exploring methods of enforcement for offshore assets and the difficulties arising in pursuing a judgment debtor in multiple jurisdictions. She will be joined by Sebastian Auer, Partner at Gasser Partner; Ami Sweeney, Associate Director at Grant Thornton; and Faye Hall, Partner at FRP Advisory.

            Non-dom rules to be replaced with four-year temporary residence regime

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            The Chancellor of the Exchequer, Jeremy Hunt, has announced that the government will abolish the current tax regime for individuals who are UK resident but not UK domiciled in favour of a residency-based system, which will apply from 6 April 2025.

            The proposed changes are wide-ranging and will affect both individuals currently living in the UK and those planning to move to the UK. The good news is that the 6 April 2025 implementation date gives those who are already UK resident time to take advice and plan before the changes take effect.


            Non-Dom Rules Replaced


            Summary

            From 6 April 2025, the remittance basis of taxation, which allows UK resident individuals who are not UK domiciled to pay tax only on foreign income and gains that are “remitted” to the UK, will be abolished. It will be replaced with a new regime under which those who have been UK resident for at least four years will pay income tax and capital gains tax (“CGT“) on their worldwide income and gains.

            Draft legislation has not been published, but the government has made it clear that the new rules will also apply to income and gains arising within trusts. The result is that the generous trust protections introduced in 2017 will no longer be available to those who have been resident for four years, even if their trusts were set up before 6 April 2025.

            Four years of residence tax-free

            • Individuals who become UK resident after a period of at least 10 years of non-UK residence will not pay UK income tax or CGT on their foreign income and gains in their first four years of UK residence, even if they bring the income and gains to the UK.
            • This means that individuals who are only temporarily UK resident will be able to spend their foreign income and gains freely in the UK without incurring UK tax – and without the need to navigate the complicated remittance basis rules.
            • Foreign income and gains arising in non-resident trusts, and distributions from those trusts, will also be tax-free during the four year period.

            Transitional rules

            For those who are already UK resident, there will be several transitional rules.

            Pre-6 April 2025 income and gains

            • The remittance rules will continue to apply to unremitted foreign income and gains generated prior to 6 April 2025 on assets held personally. That is, the income and gains will continue to be free of tax provided they are not remitted.
            • This will not be the case for income and gains arising in trusts before 6 April 2025, which will be taxed in full if matched against distributions made on or after 6 April 2025 regardless of whether they are remitted (though distributions made within the first four years of residence won’t be matched or taxed).
            • Those who are already UK resident may need to consider planning in advance of the changes.

            Temporary Repatriation Facility

            • A new Temporary Repatriation Facility will be available from 6 April 2025 to 5 April 2027. This will allow those with pre-6 April 2025 unremitted income and gains to remit them and pay tax at a reduced rate of 12%. Again, this will not be available for pre-6 April 2025 income and gains in trusts.

            Reduced rate of tax on foreign income earned in 2025/26

            • Existing remittance basis users who will have been UK resident for at least four years on 6 April 2025 will only pay income tax on 50% of their foreign income in the 2025/2026 tax year.

            Capital gains tax rebasing

            • Those who have been UK resident for more than four years (whether in 2025/26 or later) will be able to choose to “rebase” any assets held personally on or before 5 April 2019 to their market value on that date, so that only the post-5 April 2019 gain will be subject to CGT on a disposal.

            Inheritance tax

            The inheritance tax (“IHT“) regime, which is currently based predominantly on domicile, will also move to a residency-based system. The government intends to consult on the details. However, it is proposed that individuals will be subject to IHT on their worldwide assets after they have been UK resident for at least 10 years, and will remain so for 10 years after ceasing residence.

            It is envisaged that the current regime will continue to apply to non-UK situated assets settled onto trust by a non-UK domiciled individual prior to 6 April 2025. For trusts established on or after 6 April 2025, chargeability to IHT will depend on whether the individual was within the scope of IHT at the time of funding the trust.

            Planning ahead

            The remittance basis has been a feature of the UK’s tax system since 1799. With both the government and the main opposition party now committed to its abolition, its future seems all but certain. Hopes that a replacement regime would be the subject of consultation (not just on the detail of the IHT aspects) will be dwindling rapidly. Many will be disappointed that both main political parties have committed to a limited inpatriate regime when compared to those offered by some other countries in Europe.

            For those who are already UK resident, however, the transitional provisions that have been announced present opportunities that will deserve careful consideration as further details become available.

            The Lifecycle of a Business – What to think about as a first-time employer

            Employee meeting

            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.

            We’ve already discussed various topics, such as, set up, directors, funding and shareholder-related matters, but now let’s concentrate on “Employment: 9 to 5”.

            What to think about as a first-time employer

            A key part of any operating business is its workforce. To the untrained eye, becoming an employer appears to happen overnight; one minute there is just a company name, the next it has employees (…and much more!). But “appearances can be deceptive” and there are some non-negotiable foundations to be laid before the first employee walks through the door (or logs on remotely).

            In no particular order, the housekeeping matters that you will need to have addressed as a first-time employer are: employer’s liability insurance, immigration considerations, relevant documentation and payroll and pension services.

            Employer’s liability insurance

            All employers have an obligation to ensure the health and safety of their employees. One way that the law ensures that this obligation is fulfilled is by requiring all employers to take out a valid employer’s liability insurance policy, covering disease and bodily injury of employees in the UK, with minimum cover of £5 million for each potential claim. Failure to have this in place on or before an employee’s first day is a criminal offence, carrying with it fines of up to £2,500 for every day that a valid policy is not in place.

            Immigration

            Unless an employee has the automatic right to work in the UK (i.e. they are a British or Irish national) or otherwise has a visa allowing them to work, the employee will need to be “sponsored” by their employer in order to have the right to work in the UK. Where this is the case, the employing entity will need a “sponsor licence”. To get this arranged, a comprehensive application needs to be submitted to the Home Office; this can take a few months to process, meaning that some pre-planning will be required in the event a future hire needs to be sponsored.

            Documentation

            There is a minimum suite of documentation that an employer must provide to new employees. This includes certain mandatory policies (such as disciplinary and grievance procedures), best practice policies (such as those relating to equal opportunities and whistle-blowing), the minimum particulars of employment and data privacy documentation.

            The particulars of employment, which must be provided to an employee on or before their first day of employment, set out the bare bones of the employment arrangement, such as the names of the parties, rate of pay, commencement date, place of work, job title and so on. Typically, however, employers will provide more comprehensive contracts of employment which, if well drafted, will include bespoke clauses for the specific employment relationship, including in relation to confidentiality, intellectual property and post-employment restrictive covenants.

            Employers process lots of employee and candidate data and they must provide privacy notices to the individuals whose data they will be processing, explaining how and why they will process their personal data.

            Payroll and pensions

            Last, but absolutely not least, employers must organise all applicable financial processes (and if necessary, appoint a payroll provider to manage the processes on their behalf). This will include setting up an auto-enrolment pension scheme for all eligible employees and making sure that all pay arrangements meet the National Minimum Wage requirements. Employers must also ensure that they are registered with HMRC (which they can do up to four weeks in advance) and that appropriate deductions for income tax and National Insurance contributions are made.

            All of this might feel a little daunting, particularly alongside everything else which goes with establishing a business in the UK but, thankfully, the Forsters’ employment team are always at hand to assist and guide new businesses during these early stages…and beyond…

            Disclaimer

            This note reflects the law as at 6 March 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Anthony Goodmaker awarded Property Lawyer of the Year at the YN Property Awards 2024

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            Following the announcement in early February that Anthony Goodmaker, Partner in Forsters’ Commercial Real Estate team, was made a finalist in the YN Property Awards, we are delighted to share he has since been awarded Property Lawyer of the Year 2024.

            This award is testament to his dedication to his work and his clients. Speaking of the award, Anthony says “I am delighted to win this award at an event which raises significant funds for an amazing charity in the community. I am honoured to have been chosen by the judging panel in what has been a difficult year in the real estate industry. We hear a lot about this being the era of the specialist lawyer but hopefully this award also shows that there’s nothing wrong with being a generalist too, especially in this market!”

            The YN Property Awards are an opportunity for professionals across real estate to come together and celebrate industry successes while raising vital funds for Norwood, the oldest Jewish charity in the UK. Each year Norwood supports more than 2,500 people, including some of the Jewish community’s most vulnerable children, adults and families. From specialist therapy to counselling to parent programmes, their work is invaluable. We are very pleased to continue supporting this worthy cause.

            Well done to Anthony, alongside all the other winners and finalists for their achievements.

            Anthony Goodmaker
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            Anthony Goodmaker

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            The Lifecycle of a Business – How can a company reduce its share capital?

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            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 far, we’ve covered initial considerations, directors and funding, so now let’s have a think about “Shareholders”.

            How can a company reduce its share capital?

            Every company limited by shares has a share capital. This is the amount of money paid to the company by its shareholders when they subscribe for their shares and consists of the nominal value of the share plus any share premium. It might total pennies or hundreds of millions of pounds.

            In theory, because the shareholders of a company have the protection of limited liability and so cannot be liable for the company’s debts, a company’s share capital is the fund of last resort for its creditors. The company may make distributions of its realised profits to shareholders, but they cannot get their capital back. However, companies have many reasons for wanting to reduce their share capital. These might include:

            1. having too much share capital;
            2. having lost capital, so the share capital no longer represents the company’s assets;
            3. cancelling liabilities on partly paid shares;
            4. creating distributable reserves; or
            5. simplifying corporate structures.

            For example, a company might have a substantial share premium account. It might also have significant cash, but also accumulated losses that prevent it from paying a dividend. If the share premium account is reduced, it could increase its reserves, so enabling a dividend to be paid, while not affecting the number of shares in issue.

            Company law therefore allows reductions of capital subject to strict limitations. A company can reduce its share capital by a special resolution confirmed by the court (as has long been the case), but the Companies Act 2006 gave private companies access to a quicker and easier method, where the special resolution is supported by a solvency statement by the directors and the court is not involved.

            A reduction of capital supported by a solvency statement is conducted as follows:

            1. The directors meet to approve the reduction and sign the solvency statement. All the directors must sign the solvency statement to confirm that:
              1. they have taken into account the company’s liabilities; and
              2. there is no grounds on which the company could be found to be unable to pay its debts and that it will continue to be able to do so for the next 12 months (or, if the company is to be wound up, that it will continue to be able to do so within 12 months of the commencement of the winding up).
            2. The shareholders approve any amendment required to the company’s articles of association (for example, because they prohibit a reduction of capital) and the reduction of capital, each by special resolution, either at a general meeting or by written resolution. The solvency statement must be signed by the directors not more than 15 days before the resolution is passed and be made available at the general meeting or circulated with the written resolution.
            3. The directors all sign a statement of compliance confirming that:
              1. the solvency statement was provided to all the shareholders; and
              2. the resolution was passed within 15 days of the solvency statement being made.
            4. Within 15 days of the special resolution being passed, the signed solvency statement, a copy of the special resolution(s), the compliance statement, Companies House form SH19 and a copy of any amended articles of association are delivered to Companies House with the necessary fee (currently £10 or £50 for same day processing, although Companies House fees are to increase from 1 May 2024 with the revised fee for registering a reduction of capital being £33 or £136 for same day processing). The reduction of capital takes effect only when the registrar has accepted and registered the filing.

            Once registered, the company can then take the steps approved by the resolution, usually either by repaying the shareholders directly or crediting the amount reduced to a reserve, and making any necessary changes in its registers. The company is permitted to reduce its share capital “in any way” as long as there is at least one non-redeemable share remaining, so it has a great deal of scope to reorganise its capital under this section.

            The above assumes that all shareholders are being treated in the same way. If it is intended to treat shareholders differently (perhaps to pay one shareholder out or to return capital relating to a certain class of shares) it may be necessary to consider obtaining class consents and take into account the risk of a shareholder bringing a claim for unfair prejudice.

            Reductions of capital: a tax perspective

            Repayment of share capital

            When capital is returned to an individual shareholder without first passing through the company reserves, the repayment of capital (i.e. the amount paid for the shares, which will be the sum of the nominal value and the share premium (if any)), is treated by HMRC as a capital distribution and so within the capital gains tax (CGT) / corporation tax on chargeable gains rules. There is a part disposal of the underlying shares (some small part disposals may be ignored at the time of the repayment and, instead, the consideration in question is deducted from the allowable deductions on the subsequent disposal of the shares). Where the repayment is not “small” then it may be possible to claim Business Asset Disposal Relief (BADR) but HMRC are alive to possible abuse and may recharacterise as income under the transactions in securities (TIS) rules (and it is often prudent to seek a clearance from HMRC before undertaking the transaction where the reduction of capital is in respect of a “close” company).

            If the payment goes beyond the amount paid for the shares there is an income distribution.

            Distribution from reserves

            If a company decides to transfer the funds from the capital reduction to its reserves, generally this is treated as a realised profit. The company can then decide to make a dividend payment to its shareholders from that profit or leave it in its reserves.

            If it decides to pay a dividend to its shareholders then an individual recipient will be subject to income tax, but a corporate shareholder will generally be able to rely on an exemption from corporation tax.

            Conclusion

            Undertaking a capital reduction within your company can be a complex process and the best method of doing so will vary greatly depending on the circumstances of your company and your shareholders. Please contact the Forsters’ Corporate team if you would like tailored advice for your company.

            Disclaimer

            This note reflects the law as at 29 February 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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            Anson Revisited: What does HMRC’s updated guidance mean for UK resident members of US LLCs?

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            The US and the UK are separated by the vast and tumultuous waters of the Atlantic Ocean. Those with connections to both countries will often find themselves rowing against the tide between two very different and complex regimes. With the right specialist advice, they can navigate the cross-border challenges safely and make the best use of planning opportunities.

            Understand the issues, avoid the traps, and discover ways to plan ahead in our Navigating the Atlantic series for US-connected clients.

            UK Tax Treatment for Members of US LLCS

            In this instalment, we explore the impact of HMRC’s recently updated guidance on the UK tax treatment of US LLCs and why planning ahead is more important than ever to avoid double taxation.


            Moving to the UK


            Introduction

            On 12 December 2023 HMRC published updated guidance (issued in International Manual 180050, see also 161040) on the UK tax treatment of profits arising within a limited liability company (an “LLC”) incorporated in the US. The guidance indicates that taxpayers will face an uphill struggle if they now wish to claim double tax relief on the basis of the decision of the United Kingdom’s Supreme Court in Anson v HMRC [2015] UKSC 44 (“Anson”).

            Background

            In Anson, the taxpayer (Mr Anson), who was UK resident, was a member of a Delaware incorporated LLC. The profits of the LLC were apportioned between and distributed each quarter to its members. The LLC was classified as a partnership for US tax purposes and was, therefore, transparent for US federal and state tax purposes: Mr Anson (and not the LLC) was liable to US tax on his share of the profits as they arose.

            HMRC sought to charge Mr Anson to UK income tax on the profits he received from the LLC (i.e. on the distributions) and argued that the profits that had been taxed in the US were the profits of the LLC and not of Mr Anson. On that basis, they argued that Mr Anson was not entitled to the benefit of the US/UK double tax treaty because the US tax and the UK tax were not payable on the same profits.

            The First-tier tribunal (“the FTT”) found in Mr Anson’s favour, finding as fact that under Delaware law the profits of the LLC belonged to the members and not to the LLC. The case ultimately reached the Supreme Court, which also found in favour of Mr Anson by virtue of the FTT’s finding of fact: if Mr Anson’s share of the profits belonged to him under Delaware law, the distribution of his profits to him represented the mechanics by which he received the profits to which he was entitled and did not represent a separate profit source. As both US and UK tax arose on the same profits, Mr Anson was able to benefit from relief under the US/UK double tax treaty.

            HMRC’s Initial Guidance Relating to Anson Published On 25 September 2015

            Shortly after the Supreme Court’s decision in Anson, HMRC published guidance in which they stated that “HMRC has after careful consideration concluded that the decision is specific to the facts found in the case…Individuals claiming double tax relief and relying on the Anson v HMRC decision will be considered on a case by case basis.”

            Perhaps tellingly HMRC also said that “where US LLCs have been treated as companies within a group structure HMRC will continue to treat the US LLCs as companies, and where a US LLC has itself been treated as carrying on a trade or business, HMRC will continue to treat the US LLC as carrying on a trade or business”. HMRC’s guidance reassured the corporate community that group relief would continue to be available where US LLCs were part of the group structure.

            Although not particularly helpful, this guidance suggested that HMRC conceded that where the facts of a case and those found in Anson were alike, the profits of an LLC should be treated as belonging to its members such that double taxation relief would be available.

            HMRC’s Guidance Published in December 2023

            However, it appears from the latest guidance that HMRC has decided to take a more robust approach. In INTM180050 HMRC now state: “Based on HMRC’s understanding of Delaware LLC law (as at 06 December 2023), and contrary to the conclusion reached by the FTT in HMRC v Anson…HMRC continue to believe that the profits of an LLC will generally belong to the LLC in the first instance and that members will generally not be treated as “receiving or entitled to the profits”of an LLC.”

            HMRC go on to say that it understands that the LLC law of the other US states is largely the same as that of Delaware so that it would generally not regard the profits of other US LLCs as belonging as they arise to the members.

            From HMRC’s perspective it follows that individual members will only be chargeable to UK tax on any dividends or other distributions that they receive from the LLC (a consequence of HMRC continuing to regard LLCs as being ‘opaque’ for UK tax purposes), and that such receipts will be taxed at the dividend rate of income tax (currently up to 39.35%). If the LLC is taxed as a partnership in the US, HMRC warns that in its view no relief is available under the treaty because it believes the same income is not being taxed in both jurisdictions.

            Based on HMRC’s 2015 guidance taxpayers with similar facts to Anson were claiming treaty relief but in its new guidance HMRC say that where a taxpayer has claimed such relief, “HMRC will consider opening an enquiry or making a discovery assessment in accordance with its normal riskbased approach.”

            Implications of HMRC’s Updated Guidance

            For UK resident individuals who are members of US LLCs, the significance of the latest guidance is that HMRC is putting the taxpayer on notice that it disagrees with the FTT’s finding of fact in respect of Delaware law; as this finding underpinned the Supreme Court’s decision that Mr Anson could claim double tax relief, HMRC are now asserting that taxpayers with similar facts to Anson cannot rely on that decision to claim such relief.

            Whilst the FTT’s finding in relation to Delaware law is treated as a finding of fact and therefore does not set a binding precedent for future cases, the Supreme Court considered that the FTT was entitled to make its findings about the interaction between Delaware legislation and the LLC’s operating agreement (it is generally understood that the LLC in Anson was not unusual). Further, as HMRC’s revised position is not based on new law but merely disagreement with the decision in Anson, it remains open for taxpayers to continue to file on the basis of Anson (with appropriate disclosure in the tax return).

            What Planning Options are there Beyond Relying on Anson?

            The latest guidance indicates that HMRC are likely to push back on any attempt by a taxpayer simply to rely on Anson and may intend to re-litigate the point (albeit largely running the same arguments). HMRC may or may not win on any re-run of the Anson litigation. However, unless a taxpayer is determined to fight the point, if possible, we would suggest that it would be more time and cost effective for a taxpayer to structure their affairs so as to avoid the risk of double taxation. For example, to the extent possible, taxpayers could:

            • structure their investments/ business interests through an entity that is treated as being either transparent or opaque in both the US and the UK; or
            • if they are able to do so, claim the remittance basis of taxation and not remit any income from the LLC.

            Conclusion

            There is a certain policy logic for HMRC’s revised guidance which doubles down on its view that US LLCs should generally be treated as ‘opaque’ (often the desired treatment from a UK corporation tax perspective); HMRC’s position enables it to adopt a more uniform approach that, in practice, does not require it to review the relevant state legislation and an LLC’s operating agreement in every case.

            However, it is an unsatisfactory outcome for individual taxpayers, particularly for those who want to receive their distributions in the UK and who justifiably wish to rely on the Supreme Court decision to benefit from treaty relief but do not want to incur the expense of challenging HMRC’s updated view. Taxpayers who want certainty of treatment may have to either accept an unpalatable double tax cost or see if they can structure or restructure their affairs accordingly.

            Disclaimer

            The members of our US/UK team are admitted to practise in England and Wales and cannot advise on foreign law. Comments made in this article relating to US tax and legal matters reflect the authors’ understanding of the US position, based on experience of advising on US-connected matters. The circumstances of each case vary, and this article should not be relied upon in place of specific legal advice.

            This article has also been published in ePrivateClient, which can be found here.

            Rosie Schumm to speak at Private Client Forum Americas 2024

            Three cyclists ride along a paved road at sunset, surrounded by grassy fields and distant hills under a vibrant sky.

            Family Partner, Rosie Schumm, has been invited to speak at the Private Client Forum Americas 2024.

            The Private Client Forum Americas is a prestigious forum that brings together the most elite advisors to ultra-high net worth individuals, to discuss issues across the Americas, with an outlook on the rest of the world.

            The 2024 conference will take place in Mexico, from February 28 until March 1.

            Rosie will be co-presenting a session on Wednesday 28 February entitled, ‘Private Affairs, Public Interest: Family and Divorce’, alongside Gretchen Schumann of Rabin, Schumann and Partners, Nancy Murphy, of Teitler and Teitler and Santiago Garcia Luque of Garcia Alocer.

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            Rosie Schumm

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            Victoria Salter-Galbraith is named Fellow of the Agricultural Law Association

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            We are delighted to announce that Rural Land and Business Senior Associate, Victoria Salter-Galbraith, has been made a Fellow of the Agricultural Law Association (ALA).

            The ALA is the UK’s most esteemed organisation on matters related to law and business of the countryside. The association focuses on the law in an apolitical way to promote its knowledge and understanding among those who advise rural business.

            To achieve the status of Fellow, Victoria sat an in-depth examination for which she received the joint highest mark in the country.

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            Victoria Salter-Galbraith

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            The Lifecycle of a Business – General meetings – a step by step guide

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            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 far, we’ve covered initial considerations, directors and funding, so now let’s have a think about “Shareholders”.

            General meetings – a step by step guide

            While the board of directors of a company is responsible for the day-to-day, operating decisions of the company, there are various issues which, under the Companies Act 2006 (the Act), require shareholder approval. (A company’s articles of association (the articles) and any shareholders’ agreement which is in place may also set out matters which require shareholder consent.) For private limited companies incorporated in England and Wales, such approval is usually obtained by the passing of shareholder resolutions, either in an actual meeting of the shareholders or by written resolution.

            Shareholder meetings

            Meetings of shareholders are referred to as general meetings and any number of general meetings can be held throughout the year. Private companies may also hold an annual general meeting (AGM) once a year, at which, for example, directors may be elected, dividends declared and the annual accounts approved. Private companies are not required to hold an AGM under the Act, although their articles may provide otherwise.

            Until recently, general meetings were usually held in-person but as technology has improved and become more widespread, there’s now the option to hold virtual or hybrid general meetings as well. There are pros and cons to such meetings, which pose additional factors to consider and as such, they fall outside the scope of this article.

            Step 1: Calling the general meeting

            General meetings are usually called by the board of directors and the calling of the general meeting, together with the form of the notice of the general meeting, should be approved by the directors.

            Shareholders representing at least 5% of the paid-up voting shares in the company may also request the directors to call a general meeting. (The process for calling such a general meeting is a little different and is outside the scope of this article.)

            Notice of the general meeting must be sent to all shareholders who are entitled to receive notice (plus the directors and company’s auditors (if any)) and the notice must include certain information. As a minimum, the notice must set out the date, time and location of the general meeting and the general nature of the business to be conducted. If any special resolutions are to be tabled at the meeting, the wording of the special resolutions must be included in the notice. Other, administrative information must also be provided, such as how a member can appoint a proxy to attend the meeting and vote on their behalf. In addition, the articles and any shareholders’ agreement must be reviewed to ensure that any provisions dealing with notice entitlement are complied with; this may be particularly relevant where, for example, there are different classes of shares in issue. Failure to send due notice will result in the meeting not having been validly convened.

            It’s also important to consider what supporting information (if any) is required to be provided to the shareholders ahead of the meeting. For example, when an AGM is being called, a copy of the company’s annual report and accounts will need to be provided; these usually accompany the AGM notice.

            Notice of the general meeting can be sent in hard copy form or, subject to certain requirements, in electronic form. Notice may also be placed on a website (again, subject to certain requirements).

            Step 2: Ensure that the correct notice period is given

            Under the Act, the length of notice required to be given for a general meeting called by the directors is generally a minimum of 14 clear days, although the articles may set out a longer period. (A longer period is also required where certain resolutions are being proposed.) Reference to “clear days” means that the day that the notice is given and the day of the meeting are not to be taken into account. When calculating the notice period, don’t forget about delivery. Under the Act, delivery by post or e-mail is deemed to occur 48 hours after posting or sending (non-working days shouldn’t be taken into account), although the articles may provide for a shorter deemed delivery period. So, for example, assuming that the articles are silent about deemed delivery, if notice is sent on Monday 25th March 2024, the earliest date that the general meeting can be held will be 11th April 2024.

            A shorter notice period may be given if a majority in number of shareholders who, together hold at least 90% of the nominal value of the voting shares, agree. This percentage can be increased in the articles to a maximum of 95%.

            Step 3: Is the meeting quorate?

            The day of the meeting has arrived but in order to be valid, the meeting must be quorate. Generally, there must be two people present (and those people must represent different shareholders) for quorum to be achieved, unless the company only has one shareholder or the articles provide otherwise.

            If the meeting isn’t quorate, the chair may choose to adjourn the meeting. Adjournment provisions are usually included in the articles.

            Step 4: Running the general meeting

            A chair will need to be appointed to facilitate and lead the meeting. This will usually be the chair of the board or another director, but a shareholder or a proxy can also take on this role. Depending on the size of the company and the nature of the business of the meeting, it may be advisable for the chair to use a pre-prepared script.

            Shareholders, proxies and, usually, directors, as well as certain other persons, are able to speak at a general meeting and it’s advisable for the chair to let them do so. The chair can, however, take certain steps to stop obstructive behaviour, including adjourning the meeting and even removing the person(s) in question from the meeting, although removal should only be used as a last resort.

            Step 4: Passing the resolutions

            How the proposed resolutions are passed will depend on how the vote is taken and the type of resolution.

            Votes can be taken on a simple show of hands (where each shareholder has one vote) or on a poll (where each shareholder has one vote for every ordinary share held). Votes will be taken on a show of hands unless a poll is specifically requested.

            An ordinary resolution will be passed:

            • on a show of hands if it’s passed by a simple majority of the votes cast by the shareholders entitled to vote; or
            • on a poll if it’s passed by shareholders representing a simple majority of the total votes of the shareholders who vote on the resolution.

            A special resolution will be passed:

            • on a show of hands if it’s passed by a majority of not less than 75% of the votes cast by the shareholders entitled to vote; or
            • on a poll if it’s passed by shareholders representing at least 75% of the total voting rights of the shareholders who vote on the resolution.

            Step 5: Post-meeting matters

            The end of the meeting doesn’t necessarily mean that the process is complete. Various formalities will need to be dealt with, for example, writing up the minutes of the meeting, making any requisite filings at Companies House and updating any registers of the company.

            Written resolutions

            Instead of holding a general meeting, the shareholders of private companies can also pass written resolutions for the majority of actions which require their approval. This is helpful for companies who have only a small number of shareholders and can be a much quicker way of obtaining shareholder approval. The procedure is set out in the Act and failure to follow this correctly can constitute a criminal offence.

            The procedural specifics will depend on whether the directors or shareholders propose the written resolution but broadly, a written resolution must:

            • be sent to all shareholders entitled to vote on the date that the resolution is circulated (the circulation date);
            • state whether any proposed resolutions are special resolutions;
            • include directions as to how to approve the resolution; and
            • set out the deadline for when the resolution must be passed (28 days after the circulation date unless the articles say otherwise). If the resolution isn’t passed by the deadline date, it will lapse.

            A copy must also be sent to the company’s auditors (if any).

            If the shareholder agrees to the resolution, they must signify as such on the document and return it to the company. A written ordinary resolution will pass if shareholders representing over 50% of the total voting rights of the shareholders entitled to vote approve it. A written special resolution will pass if shareholders representing at least 75% of the total voting rights of the shareholders entitled to vote approve it.

            Practical points

            The steps to be taken to call and hold a general meeting are fairly formulaic, especially for companies with a smaller shareholder base. However, don’t forget to consider whether a written resolution may be a more practical option.

            Thinking ahead, where possible, is advisable. Preparing the documentation required well in advance and being clear on the resolutions to be proposed and the voting process, will minimise the risk of errors and omissions.

            Whether you choose to call a general meeting or circulate a written resolution, it’s important that the statutory procedure is followed correctly and that the articles and any shareholders’ agreement are checked to ensure that they are complied with. Getting this wrong could invalidate the meeting or even be a criminal offence. Your legal advisors will be able to assist if you’re unsure.

            Lianne Baker
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            Biodiversity Net Gain obligations

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            BNG planning obligations came into effect on 12 February 2024. This means that for most developments, any planning application submitted from this date will be subject to the BNG requirements. Any existing permissions, or applications pending at this date, are not affected.

            The obligations are onerous and developers will need specific guidance. Forsters’ planning experts can offer guidance and practical advice on how to navigate the BNG requirements.

            Read our introductory briefing note

            Read our follow-up briefing note from February 2024

            Further guidance and practical examples will be circulated when available.

            For more information, get in touch with our Planning team to discuss how we can help.

            The Lifecycle of a Business – Dividends

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            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 far, we’ve covered initial considerations, directors and funding, so now let’s have a think about “Shareholders”.

            Dividends

            Our recent articles have referred to the payment of dividends to shareholders . In this article, we delve into how profits and retained earnings of a private company can be distributed among its shareholders by way of dividend. We discuss when and how much may be distributed and also look at restrictions that might apply to private companies (the additional restrictions placed on public companies with respect to dividends are out of scope of this particular article).

            What are dividends?

            Dividends are a type of distribution made by a company to its shareholders and are a way of returning some of the profits of a company directly to its shareholders. They’re generally paid in cash, but might also be non-monetary payments such as shares in the company (scrip dividends) or physical assets (dividends in specie).

            Where a company declares a dividend, and that company has only one class of share in issue, it must declare and pay dividends equally on each share. Companies with more than one class of share in issue may wish to allocate different dividend rights to each class.

            When can dividends be paid?

            A company may only distribute dividends out of the profits available to it for any such distribution, that is, the company’s accumulated, realised profits, less its accumulated, realised losses, as they are stated in the company’s annual, interim, or initial accounts (as the case requires). In other words, the company must have sufficient distributable profits to pay the dividend.

            As to timing, a dividend can be paid at any point in time but will generally be paid:

            • as a final dividend once the company’s end of year financial statements have been prepared. This usually requires shareholder approval, often at the company’s annual general meeting; or
            • as an interim dividend at any time during the financial year before the company determines its annual profits. This does not usually require shareholder approval.

            Special or “one-off” dividends can also be paid as and when appropriate.

            Amount of any dividend

            Provided there are sufficient distributable profits available to the company to cover any payment of any declared dividend, and its constitutional documents allow it, there is no restriction as to the amount of dividend that may be declared and distributed to a company’s shareholders.

            Declaring a dividend

            The manner in which a company may declare a dividend (if at all) will usually be set out in its articles of association or in a shareholders’ agreement in relation to that company and these should always be checked before declaring any dividend.

            There is no legal obligation on the company or its directors to declare a dividend. As such, a company may decide to use its profits for other purposes, for example, as working capital, to invest, to pay dividends at a later date (retained earnings), to cover any unexpected circumstances that might arise, to reinvest in its business for growth and expansion, or to pay down debt.

            Final dividends

            A final dividend usually requires the approval by ordinary resolution of the company’s shareholders (where the directors have resolved to recommend the amount of any such dividend). This approval is usually obtained at the company’s annual general meeting at which the annual accounts are also approved.

            Once a final dividend has been declared by its shareholders, it becomes a debt due and payable by the company on the date of the resolution, unless some future date for payment is specified.

            Interim dividends

            Provided that the company’s articles of association or any shareholders’ agreement allows, the directors may decide to pay interim dividends at any time, provided that the company has sufficient distributable profits. (It should be noted that the model articles of association permit the payment of interim dividends by default.) The company’s annual and interim accounts will likely be produced at the board meeting at which the interim dividend is to be approved.

            An interim dividend may be varied or rescinded at any time after it is declared and before payment is actually made and may, therefore, only be regarded as due and payable when it is actually paid.

            Tax implications

            The payment of a dividend by a UK company is not deductible when the company’s taxable profits are computed.

            Generally, there is no withholding tax when a UK company pays a dividend (although there are exceptions for some types of investment funds).

            When a company may not pay a dividend

            A company’s articles of association or any shareholders’ agreement in force in relation to a company might place certain restrictions on the directors’ and/or shareholders’ ability to make dividends.

            In addition, dividends which contravene certain sections of the Companies Act 2006 (the Act) (for example, one declared where a company does not have sufficient distributable profits) or common law (for example, a distribution out of capital) are classed as unlawful dividends and should not be paid.

            Consequences of making an unlawful dividend

            Where the directors declare and distribute a dividend in circumstances where there are insufficient profits available to distribute, they will likely be in breach of their statutory duties contained in the Act, such as their duty to promote the success of the company for the benefit of its shareholders as a whole, or their common law duty to consider the interests of the company’s creditors (rather than the shareholders) in circumstances where the company is facing insolvency (our article, “A Balancing Act – when do directors owe a duty to creditors?“, considers the circumstances when a director owes a duty to creditors following the Supreme Court judgment in BTI v Sequana). This could have various adverse consequences, including disqualification as a director.

            No criminal penalties attach to the payment of unlawful dividends, but a director could be held personally liable to repay the company. For further information about this, please see here.

            Paying a dividend when the company is insolvent or subsequently becomes insolvent could also have consequences under insolvency law.

            Takeaways

            Paying dividends can send a positive message about a company’s current financial strength and future prospects. Many investors like the income associated with dividends and so may be more likely to invest in a company that pays regular dividends.

            On the other hand, a company that is still growing should carefully consider whether paying a dividend is advisable; it may be preferable to instead reinvest any profits into its future growth, pay off some debt or use the profits for working capital purposes, for example. And, as discussed above, a company that doesn’t have sufficient profits shouldn’t declare a dividend in the first place; doing so could result in the directors being held personally liable to repay the company.

            The decision whether to pay a dividend or not may not be clear-cut. Directors must consider their statutory duties, as well as the financial situation of the company, its constitutional documents, and any tax implications. Speaking to your legal advisor or accountant (or both) is advisable in this situation.

            Disclaimer

            This note reflects the law as at 14 February 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Heather Corben
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            Heather Corben

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            Forsters’ lawyers recognised in the Spear’s 500 Directory 2024

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            We are delighted to see 33 of our lawyers recognised in the Spears 500 Directory 2024:

            Property Lawyers:

            Corporate Lawyers:

            Landed Estates Lawyers:

            Family Lawyers:

            Tax and Trusts:

            Cryptocurrency:

            Spears 500 is a highly regarded guide, showcasing the best private client advisors in the industry for HNW and UHNW clients.

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            Emily Exton

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            Kelly Noel-Smith shortlisted in The Legal500 ESG UK Awards – Environmental/Sustainable Champion Award

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            We are delighted to share that CSR Partner, Kelly Noel-Smith, has been shortlisted in The Legal500 ESG UK Awards – Environmental/Sustainability Champion.

            The award acknowledges truly exceptional individual contributions to improving sustainability in private practice over the last year, with a focus on internal initiatives at law firms.

            Since joining the firm as a Partner in 2009, Kelly Noel-Smith has pioneered our approach to sustainability, developing and leading our best practice programme. Kelly spearheaded Forsters’ 2021 commitment to a science-based emission reduction target to halve our greenhouse gas emissions by 2030. We were one of the first firms of our size to make this pledge. In Autumn 2023 our reduction target was approved by the Science Based Target initiative.

            The winner of the award will be announced on 24 April.

            We are also delighted that Forsters has been shortlisted for the Lexis Nexis Legal Awards 2024 – Award for Sustainability. Winners will be announced on 14 March.

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            Kelly Noel-Smith

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            Natalie Carter shortlisted in Totum’s BD and Marketing Rising Star Award

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            We are delighted to share that BD and Marketing Executive Natalie Carter, has been shortlisted in Totum’s Rising Star Award.

            The award celebrates the rising stars of the next generation of talented business service professionals and Natalie has been nominated in the BD and Marketing category.

            Natalie joined Forsters in 2019 and has supported a wide range of practice areas throughout her time at Forsters. Her current role includes developing and executing BD and Marketing plans for the Private Wealth practice with a focus on our residential and rural property teams. Natalie was instrumental in the development and launch of our cross-practice Vineyards campaign.

            The winner of the award will be announced on 13 February.

            Forsters Announces Exciting Partnership with Local Charity the Marylebone Project

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            Forsters are delighted to be partnering with the Marylebone Project as part of the firm’s commitment to supporting charities and community groups. The relationship forms part of our wider CSR strategy, and our focus will be supporting the Marylebone Project’s various initiatives and services designed to protect vulnerable women facing homelessness. Our recent move to our new office in Marylebone provides a great opportunity for us to support our local community, with the Marylebone Project on our doorstep.

            The Marylebone Project provides a life-changing service for women facing homelessness, empowering them towards independent living. It is the largest and longest-running centre of its kind in London and the UK with over 90 years’ experience and 112 residential beds across two buildings. It is the only women’s-only homelessness centre that is open 24/7, 365 days a year.

            Marylebone Project.

            As a firm we are proud of our values; being driven by what really matters and supporting everyone to achieve. We are also a firm with strong female leadership (as of February 2024, 53% of our partners were women, including our Senior Partner and Managing Partner) which actively supports women with their professional development. The Marylebone Project aims to do the same with one of its main values being empowerment, equipping women to make informed choices and to have a voice. We look forward to working together in partnership to enrich the lives of women supported by the Marylebone Project.

            We will directly support the Marylebone Project’s services and women through fundraising, material donations, social activities and volunteering. Longer term, we hope our partnership will raise awareness of the Marylebone Project’s vital services, the experience of women who are experiencing homelessness in London and also provide skills-based support, empowering women to live fulfilling independent lives.

            Towards the end of 2023, Miriam Kennedy (Centre Manager), Evie Oglethorpe (Fundraising Officer) and Ruhamah Sonson (Operations Manager) from the Marylebone Project came to speak to the team at Forsters and to launch our partnership. The session provided an opportunity for the firm to find out more about the Marylebone Project’s vital services and hear to the stories of the women who have benefitted from its support. Evie also shared details of the ways in which Forsters’ employees can get involved and provide support throughout the course of the partnership.

            Marylebone Project.

            During the event, attendees enjoyed a delicious lunch provided by Munch, the Marylebone Project’s social enterprise catering business. Munch food is prepared by a team of women from the Marylebone Project, providing opportunities for them to improve their wellbeing, whilst gaining catering skills and qualifications.

            Marylebone Project.

            We look forward to kickstarting this partnership by supporting the London Homeless Collective’s London Walk in March, raising funds for the Marylebone Project. The London Homeless Collective is a movement of more than 25 charities that help people experiencing homelessness in London.

            “Forsters’ recent move to Marylebone provides a perfect opportunity for us to support our local community and we are thrilled to announce the Marylebone Project as our next charitable partner. As a firm we are proud of our values which include being driven by what really matters and supporting everyone to achieve. We are committed to supporting the Marylebone Project as they continue to empower women to lead independent and fulfilling lives.” – Emily Exton, Managing Partner

            “We look forward to working with the Marylebone Project to deliver a meaningful partnership, enriching the lives of vulnerable women affected by homelessness. Together, our partners and employees will participate in a range of fundraising and volunteering activities that will benefit the women supported by the Marylebone Project.” – Jeremy Roberston and Michael Armstrong, Co-leads of the Forsters’ Charity and Community Committee

            “We are so pleased Forsters has chosen to partner with the Marylebone Project, coinciding with their recent move to the area. We are grateful that Forsters feel inspired by our mission to support women in overcoming homelessness and living full, independent lives, and we’re excited for the expertise, committed volunteers and community spirit they will bring to the project.” – Miriam Kennedy, Centre Manager at the Marylebone Project


            Marylebone Project.
            Marylebone Project.

            Lifecycle of a Business – Protections for Minority Shareholders

            Exterior office building

            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 far, we’ve covered initial considerations, directors and funding, so now let’s have a think about “Shareholders”.

            Protections for Minority Shareholders

            Minority shareholders are those who cannot, by themselves, control the direction a company will take and, as a result, may be adversely affected by decisions made by the majority shareholder(s). This article sets out some of the rights a minority shareholder may seek in a private limited company in England and Wales and those provisions that majority shareholders can expect their minority shareholders to raise.

            Legislation

            Legislation offers certain limited protections for minority shareholders, some of which were mentioned in our last article, ‘What are your rights as a shareholder?’. In addition to the points mentioned in that article:

            1. a shareholder can block special resolutions where they, either by themselves or with other shareholders, hold more than 25% of the voting shares in the company. This can stop key matters passing, such as changing the company’s articles of association;
            2. a shareholder can cause a general meeting of the shareholders to be called where they, either by themselves or with other shareholders, hold at least 5% of the paid-up shares that have the right to vote. Alternatively, those shareholders with 5% of the voting rights can arrange for a written resolution to be circulated. Either action will enable the shareholder(s) to put matters in front of the other shareholders for them to vote on;
            3. any shareholder can bring a claim for unfair prejudice against the company (where actions have been, or are being, taken that are, or would be, unfairly prejudicial to the shareholders, or some of them), although it should be noted that a common outcome of this process is that the court orders the majority shareholder to buy out the minority shareholder;
            4. any shareholder can bring a derivative action against a director for actions such as negligence, default, breach of duty or a breach of trust. However, bear in mind that this is an action brought in the name of the company and so any damages recovered would not go to the shareholder; and
            5. in certain qualifying cases, where a shareholder has held their shares for at least six of the preceding 18 months, they can apply to the court for the winding-up of the company, although it should be noted that the bar for success with this route is high.

            Given the limited nature of the statutory protections on offer, minority shareholders often seek to negotiate contractual minority protections at the outset of their investment.

            Contractual Protections

            Contractual protections are usually found in the company’s articles of association and any shareholders’ agreement or investment agreement (which governs the relationship between the shareholders of a company) that is in place. They can include the following (subject to the specific requirements of the transaction and negotiations):

            1. Reserved Matters: A majority shareholder may agree a list of matters which the company cannot carry out without the consent of the minority shareholder(s). These are usually the most important matters relating to the company which would affect a minority shareholder’s position, such as changes being made to the company’s articles of association, the taking out of a substantial loan by the company, the entry into significant contracts by it or the winding-up of the company.
            2. Pre-Emption (Share Issue): Pre-emption rights on an issue of shares by the company enable a minority shareholder to avoid their shareholding being diluted by the future issue of new shares to third parties (or other shareholders), by giving the minority shareholder a right of first refusal to take up any of the new shares, usually in proportion to their shareholding at the time of issue. If a contractual protection is not included, and reliance is instead placed on the statutory pre-emption right, those holding 75% of the voting shares in the company can disapply the provision. That said, the purchase price for a minority stake can be substantial.
            3. Pre-Emption (Share Transfer): Similarly, pre-emption rights can be included in respect of a transfer of shares, giving the minority shareholder a right to purchase certain of the shares of an outgoing shareholder, usually in proportion to the shares the minority shareholder already holds in the company. However, this can again be a costly process and the minority shareholder will need to ensure they have the funds to purchase the shares.
            4. Board of Directors: A minority shareholder can, if its minority shareholding is appropriately significant (usually by reference to a percentage shareholding), request the right to appoint a director to the board and for that person to be present in order for any meeting to be quorate. If they are not able to obtain this right, they may be able to appoint an observer at board meetings so that they are aware of matters discussed by the board, albeit without having the voting rights that come with being a director.
            5. Exit Right: Tag-along rights provide an exit route for minority shareholders where there will be a change of control of the company. Here, they are able to sell their shares to the same purchaser of the majority shareholder’s shares and on the same terms. This ensures that a consistent value is paid for the shares in the company and avoids the minority shareholder(s) being left in the business with a new party. Additionally, a minority shareholder may seek to include a put option, to ensure that if a dispute arises between the shareholders, for example, they will receive an agreed value for their shares or have a mechanism in place for an independent third party to confirm the value.
            6. Information Rights: In addition to the statutory right to see certain company information, such as the company’s annual accounts and directors’ report, a minority shareholder may be able to obtain management reports throughout the year as a means of monitoring their investment in, and the performance of, the company.
            7. Dividend Policy: Having a clear dividend policy in place will help to give certainty to a minority shareholder as to when they are likely to receive a dividend from the company in respect of their investment. Without this, minority shareholders are unable to pass or block an ordinary resolution to declare dividends.
            8. Business Plan: In a joint venture scenario, a minority shareholder is likely to want to have a say in the signing-off of the annual business plan of the company, to ensure that the commercial objectives of the parties are clearly aligned.

            Protections of this nature have been in the news recently with Sir Jim Ratcliffe’s investment into Manchester United. It is reported that he will have a right of first refusal for a year if the Glazer family sell their shares, but the Glazer family will be able to drag-along Sir Jim Ratcliffe if there is a full sale of the club after 18 months of the completion of his investment and provided that he receives at least $33 per share.

            Conclusion

            If you are a minority shareholder investing in a company, or a majority shareholder who has received a request for protections from an incoming investor, please do not hesitate to get in touch with a member of our Corporate team, who will be happy to assist you.

            Disclaimer

            This note reflects the law as at 2 February 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Aaron Morris
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            Aaron Morris

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            Anthony Goodmaker shortlisted for Lawyer of the Year at the YN Property Awards 2024

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            We are delighted to announce that Anthony Goodmaker, Partner in Forsters’ Commercial Real Estate team, has been shortlisted for Property Lawyer of the Year at the YN Property Awards 2024.

            The annual YN Property Awards celebrate industry achievements across the property sector and raise vital funds for Norwood, the oldest Jewish charity in the UK. Founded in 1795, Norwood supports people with learning disabilities and autism, and offers support to vulnerable children and families.

            The winners will be announced in February 2024.

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            Anthony Goodmaker

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            Private Water Supplies

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            About one percent of the population rely on a private water supply, where water is drawn from a borehole, well, spring, lake, stream or river to service their properties. A borehole is likely the most common method for domestic properties.

            There are extensive regulations surrounding a private water supply, these are contained in the Private Water Supplies Regulations 2016, which focus on the quality of water, and the Water Resources Act 1991, which focusses quantity and supply. Local authorities have wide powers to enforce these regulations, and breaching them, or abstracting water without a licence can be a criminal offence.

            Relevant persons:

            Responsibility for the quality and quantity of private water supplies lies with the owners/occupiers of the property serviced by the water supply, the owners/occupiers of the property where the water supply is sourced, or any other person who has management or control of the water supply. The law identifies these people as ‘relevant persons’.

            Understandably, there is a requirement for a water supply to meet basic regulatory standards, ensuring that it is safe for use and consumption at all times. This is measured by testing the number of contaminants in the water and depends on the size and nature of the supply.

            1. Commercial supplies (including supplies to a number of dwellings):

            These are defined as supplies of a daily average of over 10m3 or to either public or commercial premises. Properties let to third parties also fall under this category. Risk assessments must be carried out at least every 5 years and a water test must be carried out at least annually. If it is determined that a supply is a danger to human health, a local authority has a duty to warn the occupants of the property and advise how to minimise the danger.

            2. Standard private supplies:

            This is a supply to any premises, other than a single dwelling, not used for commercial purposes. Again, these are subject to 5-yearly risk assessments and an annual test, however, a narrower number of contaminants are tested.

            3. Single dwelling supplies:

            Single dwellings that are not used for any commercial activity. In this case, a risk assessment is required only, and the supply is monitored, if requested by the owner or occupier of the property.

            4. Distributed mains supplies:

            These are rare, but occur where water is supplied by a mains provider and then further distributed through a private water network. Risk assessments are still required, even though the water originates from a mains source.

            Relevant persons are also responsible for the sufficiency of a private water supply. Supply can change in drought or severe cold weather, or as a result of a burst or leaking pipe etc.

            In these cases, relevant persons are responsible for putting in place alternative arrangements and central responsibility is with the owners of the supplies, who should have an emergency plan in place. An owner of a water supply can never just disconnect the supply, even in the event of non-payment by a user.

            If a local authority finds that a water supply is insufficient, either due to quality or quantity, then they are able to serve a ‘private supply notice’ on the owner of the supply, setting out the steps they must take to rectify the situation. This can prove expensive, particularly if the required action is to connect to a mains water supply. If an owner of a water supply does not comply with the notice, the local authority can do it on their behalf and recover the costs from the owner.

            A more serious notice – ‘a regulation 18 notice’ is served where a supply is proved to be a danger to human life. If this is not complied with, it is a criminal offence carrying up to 2 years’ imprisonment, and/or a fine.

            Abstraction:

            Taking water from a source is known as abstraction. A licence is required from the Environment Agency where an average of over 20m3 is abstracted daily. This is unlikely to be the case for a single residential dwelling. Again, abstraction without a licence, where one is required, can be a criminal offence.

            Licences are transferred with a property on a sale, but a buyer does need to contact the Environment Agency to transfer the rights under the licence.

            Summary:

            To summarise, a relevant person is responsible for the quality and quantity of a private water supply, with central responsibility lying with the owner of the supply. Local authorities can enforce the regulations, and it can be costly to comply with them, and it is essential that an abstraction licence is obtained where an average of over 20m3 of water is abstracted daily.

            Advice from a specialist should be obtained if you are purchasing a property responsible for a private water supply or serviced by one.

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            Jayne Beardmore

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            Forsters’ Private Wealth lawyers recognised in Legal Week’s Private Client Global Elite Directory 2024

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            12 lawyers from our Private Wealth practice have been recognised in Legal Week’s Private Client Global Elite Directory 2024.

            Private Client Global Elite:

            Private Client Global Excellence:

            The Private Client Global Elite Directory was created with the awareness that referrals and recommendations are the key to the private client sector. To know that someone is an excellent technical practitioner is essential, but it is also integral for the maintenance of client relationships that the advisors you refer to your clients are good personality fits and masters of communication. As such, Private Client Global Elite recognised excellent individuals as chosen by their own peers within the private wealth industry.

            The full directory can be viewed here.

            Lifecycle of a Business – What are your rights as a shareholder?

            Office building exterior

            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 far, we’ve covered initial considerations, directors and funding, so now let’s have a think about “Shareholders”.

            What are your rights as a shareholder?

            A company acts through two bodies of people – its shareholders and its board of directors. While the directors manage the day-to-day running of the business, shareholders can still exert a significant amount of influence.

            The rights of shareholders are derived from the Companies Act 2006 (the “Companies Act“), the articles of association of the company (the “Articles“) and any shareholders’ agreement in place. The rights attaching to shares will depend on the class (type) of shares that you hold and will vary from company to company. It is therefore important that you fully understand which class(es) of shares you own and the rights which apply to them.

            In this article we will consider the key shareholder rights that are provided in the Companies Act.

            Attendance and voting at general meetings

            Generally, shareholders are entitled to attend and vote at general meetings of the company. However, some classes of shares may not have this right, while others may provide weighted voting rights or a veto right over certain issues; if this is the case, it should be set out in the Articles or any shareholders’ agreement.

            Subject to any specific rights set out in the Articles or a shareholders’ agreement, a shareholder’s voting power will usually depend on the proportion of shares held (where the vote is by poll); however, in some instances a vote may be taken by show of hands and in this case, shareholders with a very small shareholding may have a significant impact on the vote. In the main, resolutions proposed at a general meeting will be either an ordinary resolution or a special resolution. An ordinary resolution is passed by simple majority (i.e. over 50%) while a special resolution must be passed by 75%.

            In addition, subject to certain conditions being satisfied, shareholders have the right to require the directors to call a general meeting, the right to require the company to circulate a written resolution and the right to require the directors to circulate a statement with respect to a matter referred to in a proposed resolution or other business to be dealt with at a meeting.

            If you are unable to attend a general meeting, you should be able to appoint a proxy to attend the meeting and vote on your behalf.

            Right to dividends

            Most shareholders will have the right to receive a share of the company’s profits in return for their investment. If a company is profitable, the directors may decide to distribute profits to shareholders by declaring the payment of a dividend (usually in cash).

            Although it is the directors who will recommend the payment of a dividend, shareholders may have to vote to approve it (this is usually the case with a final dividend, which is paid once the annual accounts have been drawn up; interim dividends which are paid throughout the year are usually declared by the directors). The shareholders cannot vote to pay a final dividend which is more than the directors have recommended, although they can vote to reduce the amount of the dividend to be paid.

            It should be remembered that the directors are under no legal obligation to declare the payment of a dividend. For example, the directors will not recommend a dividend if the company is not profitable or if it is profitable, they may decide that the profits should be re-invested into the business.

            Right to return of capital

            The share capital of a company is not owned by the shareholders, but by the company. This is to protect the creditors of the company who will often have no control over how the company is being managed and operated. If the company becomes insolvent, its creditors will rank ahead of the shareholders in terms of being “paid back” and if necessary, the share capital will be used to do this. For private companies with a small amount of share capital, this might not be of much help to creditors in reality, but the principle remains.

            That said, shareholders do have capital rights and if any share capital remains once creditors have been repaid (although this is unlikely in an insolvency context), this will be repaid to the shareholders, usually in proportion to the number of shares that they hold.

            Right to information

            Shareholders also have rights to receive certain, albeit limited information, about the company. For example, they are entitled to a copy of the company’s annual accounts and any annual report and can request to see a copy of the company’s register of members, any minutes of general meetings and the terms of the directors’ service contracts.

            Pre-emption rights

            Under the Companies Act, shareholders have a pre-emption right on the allotment of shares. Such rights may also be included in the Articles or any shareholders’ agreement. These rights aim to protect existing shareholders from having their shareholdings diluted, by requiring the company to give existing shareholders a right of first refusal over the allotment of new shares, usually in proportion to their current shareholding.

            Pre-emption rights may also apply on the transfer of shares and if so, these and the process to be followed will be set out in the Articles or a shareholders’ agreement. Such rights require any shareholder wishing to transfer their shares to offer them first to the existing shareholders, again, usually in proportion to their current shareholding.

            In determining what rights a shareholder has, much will turn on the Articles or any shareholders’ agreement. It is therefore important to check these before taking any action as a shareholder. Our next article will focus on the protections which may be afforded to minority shareholders.

            If you have any queries or concerns about your rights as a shareholder, please do not hesitate to get in touch with a member of our Corporate team who would be happy to assist you.

            Disclaimer

            This note reflects the law as at 19 January 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

            Simon Blain to speak at The Practitioner’s Forum on Trusts in Divorce 2024

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            Family Partner, Simon Blain, has been invited to speak at The Practitioner’s Forum on Trusts in Divorce 2024.

            Hosted in London on 15 February, the in-person forum brings together Trust and Family lawyers to discuss the complex issues that can arise from trusts in divorce. It is an opportunity to discover the various perspectives that shape trusts in divorce and gain insight from experienced lawyers on how to navigate these intricacies.

            Simon will be joined by Stacey Nevin of Kingsley Napley, Emma Holland of Stewarts and Tom Deely of Howard Kennedy LLP. Their session, ‘Understanding How and When Trusts are Brought into Divorce’ will cover:

            • The trust as an asset
            • Stress testing against divorce
            • The powers of the family court

            The full article can be read here.

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            Forsters represent Elsevier in HQ sale and new letting

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            Forsters advised Elsevier in relation to the sale of their long-term UK HQ in Kidlington, Oxford and associated relocation into new premises.

            Part of the FTSE 100 RELX Group plc, Elsevier is an academic publishing company specializing in scientific, technical, and medical content.

            Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised Elsevier and was assisted by Owen Spencer and Molly Haynes.


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            Xavier Nicholas recognised as one of the 50 Most Influential in ePrivateclient 2024

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            Xavier Nicholas, Partner and Head of Private Client, has been named as one of ePrivateclient’s 50 Most Influential in 2024.

            The listing identifies the leading practitioners of the private client sector, showcasing 50 of the most talented and highly regarded private client advisors.

            Xavier has been recognised for his technical expertise and his ability to advise on the most complex and high-value matters. He was also listed in the 2022 edition.

            The full 2024 ranking can be viewed here.

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            Hannah Mantle to speak at The 2024 Practitioners’ Forum on Stress Testing Trust Structures

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            Contentious Trusts and Estates Partner, Hannah Mantle, has been invited to speak at the ThoughtLeaders4 conference ‘The 2024 Practitioners’ Forum on Stress Testing Trust Structures’ on 18 January in London.

            The conference will unite contentious and non-contentious private client practitioners to examine the best practice for enhancing the resilience of trust structures and mitigating risks of attack.

            Hannah will be joining Hugh Gunson of Charles Russell Speechlys, Helen McGhee of Joseph Hage Aaronson and Christopher S. Cook of Baker McKenzie for a session, entitled ‘Fortifying Trusts Against Tax Authority Attacks’. In the session, the speakers will cover:

            • Changes in tax law that could leave a trust vulnerable
            • Trust and corporate residence issues
            • Mitigating tax implications
            • Implementation of tax advice over time
            • Other commonly encountered tax issues.

            You can register to attend the conference here.

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            Jo Edwards joins ITV’s Lorraine alongside ‘Mother Pukka’ founder Anna Whitehouse to share her top tips for a good divorce on so-called ‘divorce day’

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            Head of Family, Jo Edwards, made a further appearance on ITV’s Lorraine to share her advice for married couples considering a divorce at the start of the year (traditionally the busiest time of the year for couples making enquiries about separation).

            Jo stressed the importance of not rushing into a divorce after a difficult holiday period but taking time to reflect, consider counselling, and seeking some initial legal advice.

            Jo also discussed with Lorraine the benefits of No Fault Divorce, which has been in place in England and Wales for nearly two years. As separating couples are no longer required to apportion blame as part of the process, a “good divorce” is a reality.

            In light of Jo’s appearance on Lorraine here are Jo’s three top tips for a good divorce:

            1. Unless the relationship is abusive, don’t rush to divorce
              Try counselling and give thought to what needs “fixing” and how that may be worked on. If there is a divorce down the line, it is more likely to be amicable if you both feel you have given it your all and are emotionally ready.
            2. Don’t use children as pawns
              It’s parental conflict, not separation, which is known to cause most damage to children. If you restrict the other parent’s time with the children, or press for strict equal shared care despite the other parent having more available time, that may inflict emotional harm that stretches into adulthood. Children are entitled to grow up understanding the rich fabric of their genetic makeup; usually that means having a meaningful relationship with both sides of their family.
            3. Plan
              Surround yourself with a good support network as you go through divorce; have individual therapy; familiarise yourself with the process by reading up. Above all else, be kind to yourself (and to your spouse, if they’re struggling).

            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. 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.

            For more information, please contact Jo Edwards.

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            Employment Law: Looking Back on 2023 and the Forecast for 2024

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            It can be tough being an employer: many are still grappling with the new employment landscape left after Covid (such as remote and hybrid working arrangements) and are still trying to understand the expectations of the new generation of worker, all whilst trying to keep up-to-date with a never-ending raft of legislative changes.

            The beginning of a new year presents an opportunity to reflect on the year gone by and look forward to the year ahead. With 2024 underway, we reflect on the key employment law developments of 2023 and highlight some anticipated changes for you to look out for in 2024.

            Employment Law Review – 2023

            2023 was a significant year for employment law. The Retained EU Law (Revocation and Reform) Act 2023 created a suite of new legislation in relation to holiday, working time, TUPE and the Equality Act 2010. There were changes to flexible working and family-related rights that are due to come into effect later this year (2024). In case law, we had landmark judgments in respect of holiday pay and employment status, which offer some long-awaited clarity.

            2023 – Important case law developments

            Chief Constable of the Police Service of NI v Agnew – holiday pay

            In the significant case of Agnew, the Supreme Court held that although an unlawful deductions claim must be brought within three months of the date the last payment was made (or where there is a series of deductions, the date of the last in the series), a gap of three months in deductions does not automatically break the “chain” and neither does a correct payment. A series is not necessarily determined by a period in time but a “common fault or unifying or central vice”. As such, a series of deductions may no longer be broken by a gap of more than three months, meaning an employee could, depending on the circumstances, make a claim in respect of underpayments which were made prior to any such gap.

            This decision will have significant implications for employers across the UK. For one, it is likely to cost the Police Service of Northern Ireland £30-40 million in back pay for holiday pay claims. That being said, in Great Britain there is a two-year backstop on how far back holiday claims can go. Nonetheless, this case serves as a notable reminder of the importance of calculating holiday pay correctly.

            Independent Workers Union of Great Britain v Central Arbitration Committee (Deliveroo) – employment status

            In November 2023, the Supreme Court unanimously held that Deliveroo riders are not employees and therefore cannot be represented by trade unions for collective bargaining purposes. The key factor for determining self-employed status was that the riders have an unfettered right to appoint a substitute to perform their obligations under their contract and in practice.

            Whilst the judgment provides clarification to employers (and a helpful reminder that a genuine right of substitution will nearly always mean that an individual is not an employee), it has received criticism regarding the potential risks it poses to vulnerable workers across the UK. The Labour Party has previously indicated a desire to reform the law on employment status and to strengthen the rights and protections for workers. With an election looming this year, this is definitely an area to watch.

            Our summary of the judgment can be found here.

            Boydell v NZP Limited and other – the enforceability of non-competes

            In Boydell v NZP Ltd the Court of Appeal upheld an injunction and the decision of the High Court that it was permissible to sever part of a 12-month non-compete clause. Boydell was employed as Head of Commercial – Speciality Products for NZP Limited (“NZP”). NZP’s business, the sale of bile acid derivatives, is a niche area of the pharmaceutical industry. When Boydell resigned to work as head of the bile acid division of one of their main competitors, NZP sought an injunction relying on the 12-month non-compete in Boydell’s employment contract. Boydell argued that the non-compete was too wide to be enforceable, principally in that it benefitted not only NZP but other companies it its group. The Court of Appeal found that the non-compete clause was clearly directed towards the specialist activities of NZP and therefore the clause was capable of severance. Severing part of the restriction, to remove the benefit to group companies, did not change the overall effect of the non-compete because it was primarily aimed at the specialist activities of NZP. Although this case demonstrates the courts’ flexibility in their approach to construction of covenants, it is a reminder that, to be enforceable, restrictions should be tailored to the specific needs of the business.

            The impact of this case may be limited given the government’s proposal to reform the law on non-compete restrictions to a maximum duration of three months (see below).

            Charalambous v National Bank of Greece – the disciplinary process

            In the Charalambous case, the Employment Appeal Tribunal (the “EAT”) confirmed that it is possible for a dismissal to be fair in circumstances where the dismissing manager does not hold a disciplinary hearing with the employee. Although the dismissing manager was not present at the claimant’s disciplinary hearing, the EAT found that this was corrected at the appeal stage. In upholding the tribunal’s decision, the EAT noted, perhaps surprisingly, that although it is desirable for a meeting between the employee and decision-maker to take place, direct personal communication is not a requirement.

            Lynskey v Direct Line Insurance Services Ltd – menopause and discrimination

            The case of Lynskey v Direct Line provides a reminder for employers to be aware of the complex issues surrounding menopause and the way in which symptoms can impact performance. It has been established in a number of tribunal cases that menopause symptoms can amount to a disability under the Equality Act 2010. Ms Lynskey was successful in arguing that Direct Line had failed to make reasonable adjustments where the requirement to meet the performance standards of her role put her at a substantial disadvantage in comparison to employees who were not experiencing symptoms of menopause.

            However, whilst this case demonstrates that the tribunal may take a more holistic approach to a disciplinary process, it should not be taken as an invitation to dispense with important aspects of procedure.

            Higgs v Farmor’s School – belief discrimination

            In Higgs v Farmor’s School the EAT found that the tribunal had erred in its finding that Farmor School had not dismissed Ms Higgs for reasons connected to her protected beliefs. Ms Higgs was dismissed following a number of Facebook posts which the school considered to be prejudicial to the LGBTQ+ community. The EAT found that Ms Higgs’s views were protected under the Equality Act 2010 and remitted the case to the tribunal for redetermination. The EAT gave helpful guidance on the legal framework around the right to protection in respect of one’s belief or religion and the factors that should be taken into consideration when determining whether manifestation of belief was so objectionable as to justify the actions taken by an employer.

            Haycocks v ADP RPO – the redundancy process

            The EAT’s decision in Haycocks v ADP RPO confirmed that a redundancy appeal cannot correct a lack of consultation. How reasonable a redundancy process is will depend on the employer and the circumstances giving rise to redundancy, however this case serves as a reminder to employers of the importance of consultation at a formative stage in the redundancy process.

            2023 – Key legislation

            Minimum service levels

            Following a year (or two) consistently peppered with strikes in the rail, health, emergency services and teaching sectors, the government has now enacted its controversial Strike (Minimum Service Levels) Act 2023, which requires minimum service levels to be maintained, even during periods of strike.

            Allocation of tips

            We previously provided commentary back in October 2021 on the anticipated Employment (Allocation of Tips) Act 2023. This Act gained Royal Assent in 2023, with the measures coming into effect during 2024. The motivation behind the legislation is to provide workers with fair pay and to ensure that tips are allocated fairly amongst the workforce.

            Workers (Predictable Terms and Conditions) Act 2023

            Continuing the pursuit of instilling fairness amongst the workforce, this Act was granted Royal Assent in September 2023 and places obligations on employers to give a minimum period of notice of shift patterns or of ad hoc work to their workforce. Moreover, eligible employees will gain the right to request a “predictable work pattern”.

            Worker Protection (Amendment of Equality Act 2010) Act 2023

            This Act will require employers to take proactive steps to prevent their employees from being sexually harassed at work. The Equality and Human Rights Commission (the “EHRC”) will be publishing new guidance on what proactive steps employers are expected to take. Not only should employers carefully consider the EHRC guidance (when it is published) but they should also review and amend their existing policies to ensure compliance with the new requirements.

            Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023

            We commented in November 2023 on the changes to holiday pay, TUPE and working time reporting which came into effect on 1 January 2024. The government has now published guidance on calculating holiday pay in line with the changes.

            The Employment Relations (Flexible Working) Act 2023

            The Employment Relations (Flexible Working) Act gained Royal Assent in July 2023 and was partially enacted on 11 December via the Flexible Working (Amendment) Regulations 2023. With effect from 6 April 2024, all employees will have a right to submit a statutory flexible working request from day one of their employment. We discussed the impact of this legislation here, including the changes required in the way that employers are expected to respond to flexible working requests.

            The Carer’s Leave Act 2023

            The Carer’s Leave Act received Royal Assent in May 2023 and allows employees who have a dependant with a long-term care need to take leave to care for that dependent. One week of carer’s leave can be taken each year (regardless of the number of dependants an employee may have). Whilst there are notification requirements on the employee, an employer cannot require an employee to supply evidence in relation to a request before granting leave. An employer can postpone a request in limited circumstances.

            Extension of the protections from redundancy – pregnancy and family leave

            In December 2023, draft regulations were laid before Parliament to bring the Redundancy (Pregnancy and Family Leave) Act 2023 into operation. Under the new Act, from 6 April 2024, protection from redundancy afforded to employees on maternity, adoption or shared parental leave will be extended to employees who are pregnant and returning from such leave. More details on the impact of these protections can be found here.

            What Can We Expect In 2024

            The bills which gained Royal Assent in 2023 are very likely to be enacted in 2024. This will mean that employees and workers will benefit from the applicable enhanced rights and employers will need to ensure their compliance with any additional policies and procedures prescribed by the new legislation and be alive to the potential claims that an individual could bring.

            In addition to legislative changes, there will also be the usual changes to national statutory rates, including those for minimum wage, statutory maternity pay and statutory sick pay, which are summarised below.

            Key dates to look out for include:

            1. 1 January 2024 – the changes set out in the draft Retained EU Law (Revocation and Reform) Act 2023 and the Equality Act 2010 (Amendment) Regulations 2023 came into effect
            2. 6 April 2024 – the following regulations will come into effect:
              1. Flexible Working (Amendment) Regulations 2023
              2. Maternity Leave, Adoption Leave and Shared Parental Leave (Amendment) Regulations 2023
            3. September 2024 – it is anticipated that the new rights created by the Workers (Predictable Terms and Conditions) Act 2023 will come into force
            4. 26 October 2024 – the Worker Protection (Amendment of Equality Act 2010) Act 2013 will come into force.

            In addition:

            • in May 2023, the government published its response to the consultation on the reform of non-compete clauses which proposed capping such clauses at three months. This may also be something to look out for in 2024; and
            • the government’s Statutory Code of Practice on “fire and rehire” practices should be published in spring 2024.

            Undoubtedly the speaking point of 2024 will be the next general election. If, as currently predicted by the polls, the Labour Party is successful, we are likely to see a number of employment law reforms designed to improve workers’ rights and protections.

            April 2024 rate changes

            National Minimum Wage

            Category of worker 2023/2024 2024/2025
            Aged 23+
              £10.42
              £11.44
            Aged 21 – 22 inclusive
              £10.18
              £11.44
            Aged 18 – 20 inclusive
              £7.49
              £8.60
            Aged under 18
              £5.28
              £6.40
            Apprentice rate
              £5.28
              £6.40

            Statutory weekly cap

            2023/2024 2024/2025
            Statutory sick pay
              £109.50
              £184.03
            Statutory maternity, paternity, adoption and shared parental pay together with maternity allowance
              £172.48
              £116.75

            If you wish to discuss the above in any more detail or have any other employment or HR law related issues, please contact Joe Beeston, Partner, Remy Ormesher-Hussein, Associate or Nina Gilroy, Legal Executive, in our corporate group.

            Disclaimer

            This note reflects our opinion and views as of 5 January 2024 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.

            Forsters represent OmLog in taking new logistics lease

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            Forsters have advised OmLog SpA on the acquisition and legal aspects of the fit out of their new 126,000 square foot logistic hub in Brentwood, London.

            OmLog specialises in logistics and technology for the fashion, luxury and lifestyle sector.

            Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised OmLog and was assisted by Owen Spencer and Sarah Cook.

            Fearn v Tate named as top property case of 2023 by EG

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            In their countdown of top 10 property law cases of 2023 EG awarded the Christmas number 1 spot to Fearn v Tate, calling it one of the most high-profile cases of the century.

            Natasha Rees, Senior Partner at Forsters, was the lead lawyer advising the leaseholders, with Sarah Heatley, working with Tom Weekes KC and Richard Moules of Landmark Chambers.

            Read more about the case, and Forsters’ involvement here and here.

            Listen to the EG Property Podcast – top 10 property law cases of 2023 here.

            Tax Efficiency and Care Homes: A Guide to Capital Allowances

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            The centre piece of the Autumn Statement was on full expensing policy. Initially introduced on a temporary basis in the Spring Budget of 2023, the policy was made permanent in the Autumn Statement.

            Full Expensing allows companies subject to UK corporation tax to secure a 100% allowance when purchasing qualifying plant and machinery which is new and unused. It is a tax saving measure for many companies because the entire expenditure on the plant and machinery can be fully deducted from the company’s corporation tax bill. Notably, there is no upper limit on the cost of the eligible plant or machinery – so the more a company invests in equipment, the more it can deduct from its corporation tax liability.

            For items which do not qualify for a 100% allowance, a 50% first-year allowance is available for expenditure on new special rate (including long life) assets, some of which are listed below.

            However, businesses should beware that the Treasury will recoup the saving if the company disposes of the asset. For instance, if a company purchases a new item of machinery and deducts 100% of the cost from its corporation tax bill, and subsequently sells the asset for £20,000, it is obliged to incorporate £20,000 back into its taxable profits.

            In our experience, full expensing, and other available capital allowance claims for care homes are frequently underestimated. This leads to businesses missing out on significant tax savings.

            In this piece we consider how full expensing, and 50% first year capital allowance, can be used in the care home setting and the types of qualifying plant and machinery which could be eligible under the scheme.

            Unfortunately, there is no list of what counts as qualifying plant and machinery and therefore it can be a time consuming exercise to identify which expenditure is eligible under the capital allowances regime. We know that many specialist items can be qualifying items but there are also ordinary items of expenditures which are not unique to care homes but are often overlooked, including:

            • Fixtures such as bathroom suites or kitchens;
            • Lifts;
            • Water and heating systems;
            • Hot and cold water systems;
            • Air conditioning units;
            • Lighting systems;
            • Electrical systems; and
            • Fire alarm and CCTV systems.

            Within a care home settings there is specialist health and care equipment which also qualify, including:

            • Patient lifts and hoists;
            • Rehabilitation equipment;
            • Specialised beds and mattresses;
            • Safety equipment;
            • Medical gas systems; and
            • Alterations within buildings to install equipment.

            These examples represent a range of specialist equipment that plays a crucial role in the care and well-being of residents in a care home setting.

            There are several benefits to making sure your business makes a valid claim under the full expensing scheme or indeed other types of capital allowance scheme. Firstly there is an immediate ability to deduct your expenditure on the qualifying item from your corporation tax bill, contributing to overall tax efficiency. Additionally, ensuring that you properly account for your expenditure in your accounts is an important part of having a compliant tax return which stands up to scrutiny by the tax authorities.

            Busting myths when it comes to gifts!

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            The US and the UK are separated by the vast and tumultuous waters of the Atlantic Ocean. Those with connections to both countries will often find themselves rowing against the tide between two very different and complex regimes.

            With the right specialist advice, they can navigate the crossborder challenges safely and make the best use of planning opportunities. Understand the issues, avoid the traps, and discover ways to plan ahead in our Navigating the Atlantic series for US connected clients.

            Gifting

            In this instalment, we bust some of the common myths when it comes to gifting and compare the tax implications of gifting in the US and the UK.


            Moving to the UK


            Myth 1: Gifts to my spouse will always pass free of tax

            It is a common misconception that gifts to spouses and civil partners are completely exempt from transfer taxes in both jurisdictions. However, such gifts may be taxable where there is a mismatch in the tax status of the donor (the person making the gift) and the donee (the person receiving the gift).

            UK

            In the UK, there is generally an unlimited exemption from inheritance tax (“IHT”) on gifts between spouses and civil partners. However, where assets pass from a UK domiciled (or deemed domiciled) spouse to a non-UK domiciled spouse, the exemption is limited to just £325,000. Gifts in excess of this will be subject to tax in the same way as gifts made to any other individual.

            There is an option for the non-UK domiciled recipient spouse to elect to be treated as domiciled for IHT purposes (in order to access the unlimited exemption) but this would also have the effect of bringing their non-UK assets within the scope of IHT, which may not be desirable. This will need to be considered carefully, on a case-bycase basis.

            US

            In the US, there is also an unlimited marital deduction from gift and estate tax on transfers to spouses in most cases. However, this will not be available where the donee spouse is not a US citizen. In that scenario, tax-free transfers in lifetime are limited to $175,000 annually (in 2023). In order to access the marital deduction from estate tax on death, assets have to be left to the non-US spouse in a special type of marital trust, known as a “QDOT”.

            Myth 2: Gifts to charity will always pass free of tax

            UK

            In the UK, in order for a gift to charity to qualify for the charitable exemption from IHT, the recipient entity must not only be operating for ‘charitable purposes’ (as defined in UK legislation), but it must also be registered as a charity in a country of the UK, EU or EEA. Critically, this means that a gift to a US charity will not qualify for the exemption, no matter how worthy the charitable cause. Lifetime transfers to non-qualifying charities can trigger immediate IHT charges (as well as charges to UK capital gains tax on assets gifted in specie, as discussed below).

            US

            While the US imposes equivalent geographical limitations for income tax purposes (i.e. a charitable gift must be made to a US organisation to qualify for relief), this limit does not apply for US estate tax purposes where charitable bequests are made by US citizens and domiciliaries. Non-US citizens/domiciliaries, however, must leave US situs property to a US organisation to qualify for the US estate tax charitable deduction.

            Myth 3: Gifts of appreciated assets will not trigger capital gains tax

            US

            In the US, gratuitous transfers of appreciated assets will not constitute chargeable disposals for US income tax purposes – i.e. any in-built capital gain will not be crystallised on such transfers. Instead, the donor’s base cost in the assets will be “carried over” to the donee and will be used to compute the gains realised on the eventual disposal of the assets by them.

            UK

            One might assume that the same will be the case in the UK, but that assumption would be incorrect. In the UK, with certain limited exceptions, a gift of an asset will be a chargeable disposal for capital gains tax purposes. If chargeable gains are triggered in the UK but not in the US on the same event, this can give rise to a risk of double taxation because the mismatch in treatment can cause a loss of relief under the US-UK double tax treaty. Advice should be sought on aligning the treatment in both countries to maximise relief.

            Myth 4: Gifts will always pass free of tax if I survive for seven years

            UK

            In the UK, outright lifetime gifts to individuals will generally be subject to the ‘potentially exempt transfer’ (“PET”) regime. This means they will pass out of the donor’s estate free of IHT if the donor survives the gift by seven years or more. If the donor survives the gift by more than three years but less than seven, the gifted sum will be subject to IHT on the donor’s death, but at a reduced rate. The PET regime can be extremely advantageous for individuals who can afford to make substantial lifetime gifts, as there are no limits on the amount that can be given away to the next generation taxfree under this regime.

            US

            However, those who are subject to US gift and estate tax will be limited in their lifetime giving, as there is no equivalent to the PET regime in the US. Instead, US citizens and domiciliaries are broadly limited to making annual gifts to (any number of) individuals of up to $17,000 (in 2023) and otherwise eating into their lifetime exclusion amount of $12.92 million. Gifts in excess of these amounts are typically subject to immediate US gift tax at a rate of 40%, which is likely to be prohibitive in most cases.

            Myth 5: I can make gifts into trust up to the available US gift and estate tax lifetime exclusion amount without incurring tax

            US

            It is common planning for US citizens and domiciliaries to make substantial lifetime transfers of assets into trust. By doing so, they can potentially remove assets (and any future growth on those assets) from their estates for US estate tax purposes. Provided the value of the assets transferred falls within their lifetime exclusion amount for gift and estate tax, this can be done without triggering tax.

            UK

            By contrast, in the UK, transfers of assets into trust are immediately subject to IHT (subject to available exemptions or reliefs). IHT is charged at a rate of 20% to the extent that the value of the assets transferred exceeds the donor’s available ‘nil rate band’ of up to £325,000. This IHT charge will be “topped up” to a maximum of 40% in the event that the donor dies within five years of the transfer. For UK domiciled (or deemed domiciled) individuals, this will be relevant to transfers of any assets, worldwide. For non-UK domiciled individuals, this will apply to transfers of UK assets only. Where it is relevant, this IHT charge will generally prohibit lifetime planning using trusts.

            Contact us

            It is clear that gifting is an area that can cause significant difficulties for individuals with tax connections in the US and the UK. It is extremely important that advice is taken from advisors with an understanding of how the two legal systems interact; ideally before any action is taken.

            Disclaimer

            The members of our US/UK team are admitted to practise in England and Wales and cannot advise on foreign law. Comments made in this article relating to US tax and legal matters reflect the authors’ understanding of the US position, based on experience of advising on USconnected matters. The circumstances of each case vary, and this article should not be relied upon in place of specific legal advice.

            Lucie Bennett
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            Lucie Bennett

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            Forsters advises Fiera Real Estate UK and Wrenbridge on the acquisition of an urban logistics development site in Waltham Cross

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            Forsters has advised Fiera Real Estate (“Fiera”) and Wrenbridge on the acquisition of a 2.6-acre site in Waltham Cross for the proposed development of a new 60,473 sq.ft. urban logistics scheme with a GDV of £25m.

            The site was purchased through the Fiera Real Estate Logistics Development Fund UK (“FRELD”). All assets in FRELD’s portfolio will meet the rigorous environmental and social requirements set out by FRE UK’s Sustainable Design Brief, which align with its ambition to drive positive change and contribute to a low carbon economy. The scheme will have ESG considerations embedded at all stages of its design process and along with future projects for the fund, it will be targeting net-zero carbon construction, BREEAM Excellent and EPC A.

            The site is situated off Britannia Road in Waltham Cross, which is a prime industrial location and two miles from junction 25 of the M25.

            Chris Button, Head of Investment Management, UK at Fiera, said, “We are delighted to complete the acquisition of this prime logistics site in joint venture with leading developers Wrenbridge and ably advised, as always, by the magnificent team at Forsters.”

            Harry Gibson, Associate Director at Wrenbridge, added: “This is our third deal locally and we look forward to preparing a planning application in the new year to be on site as soon as possible.”

            Commercial Real Estate Partner, Jade Metcalf, led on the purchase, assisted by Senior Associates, Alexandra Ringrose and Daniel Steele, and Planning Associate, Sophie Smith. Property Litigation Partner, Ben Barrison, also advised on the deal.

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            Tech Term Sheet Explainer

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            Your term sheet sets out the fundamental terms of the commercial deal you have struck with your investor(s). Getting it in a shape that everyone is happy with will make for a much smoother execution of your funding round, allowing it to take less time so that you can get back to growing your business.

            If you’re bootstrapping your way to an early round of funding, you may think twice about reaching out to an advisor to discuss your term sheet, perhaps wanting to hold off until it’s agreed commercially. I would, however, encourage you to reach out for an initial discussion before signing up to your term sheet, even if just for another perspective on what you’re signing up for.

            So, what should a term sheet include?

            Valuation

            The valuation will set out how much of the equity is being given to the investor(s).

            The term sheet may reference the “pre-money” value, being the amount the company is valued at before the funding round closes, and the “post-money” valuation, being the company’s value after (and including) the funding.

            Whatever terminology is used, it’s important to understand what you’re agreeing to give to the investor, and whether this is on the basis of the issued share capital or the fully diluted share capital (such that the term sheet may say they’re receiving 10%, but actually, on an issued basis the investor may have more, having factored in the dilutive effects of convertible instruments such as options and warrants).

            Option Pool

            While the detailed terms of the incentive plan may come later after closing an early round of funding, the term sheet will often set out the percentage option pool to be made available to incentivise key staff. Founders should note how this percentage is calculated (will it dilute everybody or not?).

            Investor Shares

            The class of shares which investors will receive should have their key rights set out. Is everyone investing for ordinary shares, or will the investors receive preference shares with specific rights?

            Preference shares in this context will typically have voting rights and have a priority return over the ordinary shares on a liquidation / exit event. If applicable, the term sheet should set out this priority return (known as a ‘liquidation preference’). It’s customary for investors of preference shares to have a 1* preference, meaning that they receive their investment back first. That said, in recent turbulent markets, there are instances of investors looking for more than this.

            Whether they then participate or not in the balance of any proceeds should also be set out, noting that if they are non-participating (as is common), such that they only receive their liquidation preference, they will likely be convertible or entitled to the amount they’d receive had they been ordinary shares (therefore the preference affords the investor a downside protection).

            Anti-Dilution

            Investors often seek anti-dilution rights, which may include a ratchet such that, if there is a ‘down round’ in the future, the investors are issued more shares in line with that ratchet. Founders should ensure that the term sheet sets out the applicable type of ratchet, and that they understand what it means.

            It’s customary for the ratchet to be what is known as a broad based weighted average ratchet.

            Founder Vesting

            Investors will expect to see good leaver and bad leaver concepts with a vesting schedule for shares held by founders setting out a founder’s entitlement if the founder leaves the company. We would encourage founders to discuss expectations here with the investors early to ensure alignment.

            Board Composition

            Including who will have a board seat and against what threshold is common. Boards are typically founder-led in their early stages with more board control given up in follow-on rounds as new investors come in and as independent directors are added.

            Veto Rights

            Investors will typically expect to have a set of investor veto matters, for which a percentage of the investor pool has to vote in favour for the company to action the matter. There may be shareholder matters and also investor director consent matters.

            Founders may also wish to seek founder consent matters, although this is not always acceptable to investors.

            Warranties

            While the detail of the warranties (contractual promises to investors, e.g. that you’re not currently involved in any litigation) will be in the long form documents, we would encourage founders to consider who will be giving warranties and agree this and the overall liability cap upfront with their investors. Previously, founders often had to give warranties by reference to a salary multiple, however more recently the market has moved to having only the issuing company provide the warranties.

            Share Transfers

            The term sheet should include reference to certain share transfer matters, to the extent they are to apply. For example, pre-emption rights (and who they are for, e.g. everyone or certain investors), drag along rights and tag along rights (and what threshold triggers these rights) and co-sale rights.

            Information Rights

            While investors may be represented on the board, they will typically expect to have contractual information rights to enhance the limited information a shareholder in a UK company is typically entitled to see. Setting out what investors will receive, and whether this is for all investors or for those that hold a certain percentage of the equity, will allow you to be aware of the administrative burden of complying with this moving forwards.

            SEIS / EIS Tax Reliefs

            If the round is going to be raising money from investors looking to obtain SEIS/EIS relief this should be acknowledged, and the founders should take advice on what this is likely to mean in terms of structuring and process for them and what the investors may expect.

            For more information about these tax reliefs, see here.


            Finally, it’s worth being aware that the majority of the term sheet is typically not legally binding, although it may contain certain parts which are, for example, provisions relating to confidentiality and, if you’ve agreed this with your investor(s), exclusivity for a period of time.

            Please get in touch if you would like to talk about your funding round and how we can team up to achieve your objectives.

            Disclaimer

            This note reflects the law as at 30 November 2023. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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            Public Rights of Way: How to keep the curtains open without seeing dog walkers!

            A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

            When purchasing a property, it is important to ensure you are fully aware of any public rights of way crossing the property or near to it.

            Those seeking peace and quiet in their new home will often want to ensure they are not besieged by local ramblers on the warpath.

            Public rights can be divided into four categories

            1. Footpaths (people on foot only)
            2. Bridleways (people on foot, cyclists and horse riders)
            3. Restricted byways (people on foot, cyclists, horse riders and any other transport without a motor)
            4. Byways open to all traffic (people on foot, cyclists, horse riders, cars and any other transport with a motor)

            There are exceptions for people in mobility scooters and powered wheelchairs.

            A local authority and highways search obtained as part of the due diligence when purchasing a property should reveal any public rights of way crossing or abutting the Property. However, your solicitor should also enquire of the seller whether they are aware of any applications or pending submissions to add any public right of way to the definitive map or extend an existing public right of way which would abut and/or cross the Property.

            The highways search will only reveal rights of way that are recorded as public rights of way at the date of the search result. Where a public right of way is shown on the local authority’s definitive map, that is conclusive evidence that it exists. However, definitive maps can be incomplete or not up to date which means that they are not conclusive evidence that no public right of way exists.

            There are different ways in which new public rights can be created including (1) by express grant, (2) by order of a public authority, (3) dedication by the landowner and (4) presumed dedication.

            Presumed dedication arises where the public at large have used a defined route for a 20 year period without permission from the landowner. Creating rights of way under presumed dedication is something that any purchaser should be mindful of when purchasing a property. Whilst the burden of proof is high for presumed dedication your solicitor should raise enquiries of the seller to determine if there has been any activity which could amount to presumed dedication.

            What can you do to ensure the privacy of your home?

            It is possible to:

            1. Deposit a landowner statement under section 31(6) of the Highways Act 1980 with a map marking any ways across the property that the owner accepts are public rights of way and includes a declaration that the landowner does not intend to dedicate any new public rights of way across their property. This will “stop the clock” on the 20 year period and (unless the public can provide evidence to the contrary) any use of the property by members of the public during this period should prevent against new rights of way being established.
            2. Apply to divert footpaths, bridleways and restricted byways provided certain requirements are met including that the diverted route is not substantially less convenient to the public. However, this can be a costly and drawn-out process especially if objections are raised. You should always get the right advice and, to avoid objections, ensure that any diversion benefits not only you but also members of the public.

            Forsters can assist you with both these options and provide advice on public rights of way that currently affect your property or may affect a future property you are interested in purchasing.

            Following a purchase, we always advise our clients to take active steps to ensure that no new rights of way are acquired which may include ensuring your boundaries are fenced, any gates specify that there is no public access, and you remain vigilant as to any members of the public gaining access to the Property.

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            Lifecycle of a Business – Demystifyng the Term Sheet

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            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 far, we’ve covered “First Things First” and “Directors: Lights, Camera, Action!” But now, let’s consider financing your business – “Show Me The Money”.

            Demystifyng the Term Sheet

            You’ve considered your fundraising options, have all your records and documents in place and have an investor in mind, so now it’s time to consider the term sheet.

            Your term sheet sets out the fundamental terms of the commercial deal you have struck with your investor(s). Getting it in a shape that everyone is happy with will make for a much smoother execution of your funding round, allowing it to take less time so that you can get back to growing your business.

            If you’re bootstrapping your way to an early round of funding, you may think twice about reaching out to an advisor to discuss your term sheet, perhaps wanting to hold off until it’s agreed commercially. I would, however, encourage you to reach out for an initial discussion before signing up to your term sheet, even if just for another perspective on what you’re signing up for.

            So, what should a term sheet include?

            Valuation

            The valuation will set out how much of the equity is being given to the investor(s).

            The term sheet may reference the “pre-money” value, being the amount the company is valued at before the funding round closes, and the “post-money” valuation, being the company’s value after (and including) the funding.

            Whatever terminology is used, it’s important to understand what you’re agreeing to give to the investor, and whether this is on the basis of the issued share capital or the fully diluted share capital (such that the term sheet may say they’re receiving 10%, but actually, on an issued basis the investor may have more, having factored in the dilutive effects of convertible instruments such as options and warrants).

            Option Pool

            While the detailed terms of the incentive plan may come later after closing an early round of funding, the term sheet will often set out the percentage option pool to be made available to incentivise key staff. Founders should note how this percentage is calculated (will it dilute everybody or not?).

            Investor Shares

            The class of shares which investors will receive should have their key rights set out. Is everyone investing for ordinary shares, or will the investors receive preference shares with specific rights?

            Preference shares in this context will typically have voting rights and have a priority return over the ordinary shares on a liquidation / exit event. If applicable, the term sheet should set out this priority return (known as a ‘liquidation preference’). It’s customary for investors of preference shares to have a 1* preference, meaning that they receive their investment back first. That said, in recent turbulent markets, there are instances of investors looking for more than this.

            Whether they then participate or not in the balance of any proceeds should also be set out, noting that if they are non-participating (as is common), such that they only receive their liquidation preference, they will likely be convertible or entitled to the amount they’d receive had they been ordinary shares (therefore the preference affords the investor a downside protection).

            Anti-Dilution

            Investors often seek anti-dilution rights, which may include a ratchet such that, if there is a ‘down round’ in the future, the investors are issued more shares in line with that ratchet. Founders should ensure that the term sheet sets out the applicable type of ratchet, and that they understand what it means.

            It’s customary for the ratchet to be what is known as a broad based weighted average ratchet.

            Founder Vesting

            Investors will expect to see good leaver and bad leaver concepts with a vesting schedule for shares held by founders setting out a founder’s entitlement if the founder leaves the company. We would encourage founders to discuss expectations here with the investors early to ensure alignment.

            Board Composition

            Including who will have a board seat and against what threshold is common. Boards are typically founder-led in their early stages with more board control given up in follow-on rounds as new investors come in and as independent directors are added.

            Veto Rights

            Investors will typically expect to have a set of investor veto matters, for which a percentage of the investor pool has to vote in favour for the company to action the matter. There may be shareholder matters and also investor director consent matters.

            Founders may also wish to seek founder consent matters, although this is not always acceptable to investors.

            Warranties

            While the detail of the warranties (contractual promises to investors, e.g. that you’re not currently involved in any litigation) will be in the long form documents, we would encourage founders to consider who will be giving warranties and agree this and the overall liability cap upfront with their investors. Previously, founders often had to give warranties by reference to a salary multiple, however more recently the market has moved to having only the issuing company provide the warranties.

            Share Transfers

            The term sheet should include reference to certain share transfer matters, to the extent they are to apply. For example, pre-emption rights (and who they are for, e.g. everyone or certain investors), drag along rights and tag along rights (and what threshold triggers these rights) and co-sale rights.

            Information Rights

            While investors may be represented on the board, they will typically expect to have contractual information rights to enhance the limited information a shareholder in a UK company is typically entitled to see. Setting out what investors will receive, and whether this is for all investors or for those that hold a certain percentage of the equity, will allow you to be aware of the administrative burden of complying with this moving forwards.

            SEIS / EIS Tax Reliefs

            If the round is going to be raising money from investors looking to obtain SEIS/EIS relief this should be acknowledged, and the founders should take advice on what this is likely to mean in terms of structuring and process for them and what the investors may expect.

            For more information about these tax reliefs, see here.


            Finally, it’s worth being aware that the majority of the term sheet is typically not legally binding, although it may contain certain parts which are, for example, provisions relating to confidentiality and, if you’ve agreed this with your investor(s), exclusivity for a period of time.

            Please get in touch if you would like to talk about your funding round and how we can team up to achieve your objectives.

            Disclaimer

            This note reflects the law as at 30 November 2023. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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            Parliamentary Launch of Resolution’s Vision for Family Justice: A Focus on Cohabitation Reform

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            On Monday 27 November, Resolution hosted the launch of their Vision for Family Justice in Parliament.

            The Vision, which sets out Resolution’s five key recommendations to improve family law/the family justice system, will provide a blueprint for Resolution’s campaigning activity ahead of the next general election and beyond. The Parliamentary launch focused on Resolution’s primary aspiration: to reform the law on cohabitation.

            Jo Edwards, Chair of Resolution’s Family Law Reform Committee and Head of Family at Forsters, spoke at the launch about Resolution’s objective to provide a safety net for cohabiting couples on relationship breakdown or the death of their partner. Resolution’s polling ahead of its annual Awareness Week, which ran from 27 November to 1 December, found that 74% of cohabitees agree that ‘the current laws surrounding cohabitation are unfit for today’s modern society’. It also showed that 59% of the population believe cohabiting couples should have better legal protection (with a further 13% being undecided, rather than opposed).

            The dramatic increase in cohabiting couples in the UK (over a 25-year period to 2021 there was a 144% increase, and cohabiting couples now represent around 1 in 5 families), makes unmarried couples the fastest growing relationship type in the UK. It was found in Resolution’s polling that 83% of the population expect these numbers to increase in the next decade. This huge growth in the numbers, coupled with people believing they are automatically protected as common law spouses (as Resolution’s polling showed), makes the lack of legal protection for cohabiting couples particularly concerning.

            At the Parliamentary launch, both Grant Cameron (current Resolution National Chair) and Jo Edwards emphasised the need for cohabitation reform and the risk of England and Wales remaining a “curious outlier” if there is failure to implement change. She called for Parliamentarians and officials to work with Resolution to change the law on cohabitation to fit the needs of modern families.

            Emily Thornberry, Shadow Attorney General, followed Jo Edwards in championing the need for cohabitation reform, acknowledging that the law as it stands is “extraordinarily unfair”. Married couples and civil partners are entitled to a fair and equitable settlement, but the law leaves no such protection for cohabitees. She emphasised that women are often, but not exclusively, the ones left disadvantaged at the end of a cohabiting relationship.

            Ms Thornberry confirmed the Labour Party’s commitment to reforming the law for cohabiting couples. She expressed a desire to make this a cross-party initiative, in order to achieve change.

            Siobhan Baillie, MP for Stroud, closed the speeches by committing to cross-party support for cohabitation reform, stating that she “warmly welcomes working together”. She concluded that there is plenty of evidence to support reform.

            Forsters’ Family team supports Resolution’s reaffirmed commitment to cohabitation reform.

            To read articles on the five key recommendations in Resolution’s Vision for Family Justice, see here:

            Resolution’s Fifth Vision: ‘Making Family Law Fit for Purpose’

            Three cyclists ride along a paved road at sunset, surrounded by grassy fields and distant hills under a vibrant sky.

            To celebrate Resolution’s 40th Anniversary, the organisation is using Awareness Week (27 November – 1 December) to launch their Vision for Family Justice. These recommendations from family justice professionals set out how the legal system can be improved to fit the needs of modern families. The fifth vision on Resolution’s agenda is ‘Making Family Law Fit for Purpose’.

            Child arrangements on separation and divorce

            One recommendation is for there to be a statutory requirement to hear the voice of the child at the first hearing in child arrangement proceedings. It was found in Resolution’s polling survey that 71% of people agreed that this recommendation “will help to overcome bias of the main carer”. The centrality of the child’s voice in proceedings is paramount and building a framework around this should be a key focus for future reform in the family justice system.

            From April to June 2023, it was found that on average it took 47 weeks for private law cases to reach a final order (more than double the time taken in 2016). Delay can be damaging for the child and so Resolution has recommended a statutory time limit on child arrangement proceedings. They also advocate for streamlining cases by calling for early proactive management from experienced judges or an early and effective triage hearing.

            Financial remedies on divorce

            In the case of spousal maintenance, Resolution has recommended that the law, in the normal course of events, should make clear that it will be for a fixed term to avoid parties returning to court. However, this should not be limited in a way which would cause hardship to the financially weaker party.

            Cases where assets exceed the parties’ needs, and where they were received by way of a gift or inheritance during the marriage, or acquired after the marriage, should be non-matrimonial property. Resolution sets out the instances where such a principle should not apply, for example, where that property is required to meet needs.

            International cases

            Since the UK’s departure from the EU, costs, delays and complexity for those divorcing, claiming maintenance and for international child cases have increased. There have been conflicting decisions for international families with connections to the UK and an EU member state, and also gaps left in domestic legislation.

            Resolution champions the simplification of the legal framework in private family law cases between England and Wales, Northern Ireland and Scotland and calls for support from the EU to allow UK accession to the Lugano Convention.

            Forsters’ Family practice supports Resolution’s proposal to improve the operation of the family justice system and calls on Parliament to facilitate making family law fit for purpose.

            To see Resolution’s other recommendations, follow the links to our summary articles:

            • Cohabitation reform (find the link to our summary article here).
            • Helping families to find solutions (find the link to our summary article here).
            • Protecting the Vulnerable (find the link to our summary article here).
            • Ensuring the family courts meet the needs of families (find the link to our summary article here).

            Clarity and simplicity for the law on limitation in “concealment” cases

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            Limitation periods reflect the uncontroversial principle that a defendant should not be exposed to a claim which the claimant has unreasonably delayed in pursuing.

            However, what should happen to the limitation period where the defendant is responsible for the claimant’s delay, having concealed the facts underlying the cause of action? This is the issue which is addressed by ss. 32(1)(b) and (2) of the Limitation Act 1980, and which was considered by the Supreme Court in its recent judgment in Canada Square Operations Limited v Potter.

            The decision emphasises the need to give the words of s. 32 their ordinary meaning, resulting in an expansion of the scope of s. 32(1)(b) and a narrowing of the scope of s. 32(2). Despite the changes in the interpretation of the provisions, it appears likely that the effects of the decision in practice will likely be relatively limited, with most cases still being likely to be decided as they would have been under the previous caselaw. The Supreme Court’s judgment nevertheless provides welcome clarification on the tests to be applied, and will simplify an area of law which has historically been subject to an array of inconsistent and complex decisions.

            Factual and legal background

            In 2006, Mrs Potter took out a loan with Canada Square. This was accompanied by a PPI insurance policy. Canada Square did not inform Mrs Potter that over 95% of the cost of the policy was commission payable to them.

            In 2014, the Supreme Court handed down judgment in Plevin v Paragon Finance, holding that a party’s failure to disclose commission in this way rendered the parties’ relationship “unfair” under the Consumer Credit Act 1974, such that the other party was entitled to recover the amounts paid.

            In 2018, Mrs Potter issued a claim against Canada Square in reliance on the Supreme Court’s decision in Plevin. Canada Square defended the claim on the basis that it was time barred, the relevant relationship having ended over six years before the claim was issued. In reply, Mrs Potter sought to rely on s. 32(1)(b) and 32(2) of the Limitation Act. As to these:

            • S. 32(1)(b) postpones the commencement of the limitation period where “any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant” until “the plaintiff has discovered the […] concealment […] or could with reasonable diligence have discovered it”.
            • S. 32(2) provides that for these purposes “deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty”.

            The Supreme Court’s judgment

            The Supreme Court was required to consider the meaning of the phrases “deliberately concealed” in s. 32(1)(b) and “deliberate commission of a breach of duty” in s. 32(2).

            “Concealed”

            The Court began by considering the meaning of the word “concealed” in s. 32(1)(b). In a series of previous decisions, the Court of Appeal had held that insofar as the concealment relied on was a withholding of information (as opposed to taking active steps to conceal), the claimant would need to show that the defendant was subject to a duty to disclose the relevant information. This duty did not need to be a legal duty, but rather could be one “arising from a combination of utility and morality”.

            The Supreme Court held that this was the wrong approach, noting that it had no basis in the statutory language; a party could perfectly well be said to conceal something which it had no duty to disclose (the Court used the example of an elderly lady hiding her pearls from a burglar). Further, applying this gloss to the statutory language would lead to unwelcome uncertainty and complexity insofar as it would require the Courts to decide in what circumstances a duty in “utility and morality” arose.

            The Court also rejected previous Court of Appeal dicta suggesting that concealment required the defendant to know that the facts withheld were relevant to the claimant’s right of action; instead it was sufficient simply that they had withheld the information.

            “Deliberately” concealed

            The Supreme Court next considered the meaning of “deliberately” concealed in s. 32(1)(b). In this context, having decided (as noted above) that withholding of information would only amount to concealment where there was a duty to disclose, the Court of Appeal had held (on the basis of pre and post-Limitation Act case law, and statutory materials preceding the Limitation Act) that deliberate concealment could exist not only where the defendant had not disclosed a fact which they knew they had a duty to disclose, but also where they had been reckless as to whether they had such a duty.

            Given that the Supreme Court had decided that concealment did not require any duty to disclose, it likewise rejected the Court of Appeal’s conclusions regarding recklessness, which were premised on such a duty being required. Looking at the matter afresh, and having also considered the meaning of the word in the context of s. 32(2) (to which most of the previous caselaw was directed – see below), the Court concluded that “deliberately” should bear its ordinary meaning; deliberate concealment therefore required a defendant to intend to withhold the relevant facts from the claimant.

            “Deliberate” commission of a breach of duty

            Following the Court of Appeal’s decision, it was undisputed that the existence of an unfair relationship under the Consumer Credit Act would give rise to a breach of duty for the purposes of s. 32(2), notwithstanding that the Act was couched in terms of an unfair relationship rather than any breach of duty.

            The issue was therefore what mental state the word “deliberate” required on the part of the defendant when committing the relevant breach of duty (on the facts, when performing the act which rendered the relationship unfair i.e., failing to disclose the commission). In this regard, the Court of Appeal had relied on a combination of pre and post-Limitation Act caselaw as well as the parliamentary materials which preceded the Act (as noted above) to decide that the test was met if a defendant was reckless as to whether his actions were in breach of duty; actual knowledge of the breach was not required. For these purposes, the Court of Appeal gave recklessness the meaning given to it in the seminal criminal case of R v G; in order to be reckless, a defendant would need to be subjectively aware they were at risk of breaching the duty, in circumstances where it was objectively unreasonable to take that risk.

            The Supreme Court was not persuaded by this analysis, noting that in its view the previous case law did not establish that recklessness was sufficient. The Court also indicated that, in circumstances where the relevant words of the Limitation Act were ordinary words of English with a clear meaning, it was impermissible to rely on the statutory materials which had preceded the act as an aid to interpretation. In what it stated was a return to the ordinary meaning of the statutory words, the Court concluded that deliberate commission of a breach of duty required the defendant to know they were committing a breach of duty.

            Decision on the facts

            In light of its conclusions, the Cout concluded that Canada Square had deliberately concealed facts underlying Mrs Potter’s right of action from her for the purposes of s. 32(1)(b), having intentionally withheld the amount of the commission. However, Canada Square had not deliberately committed a breach of duty for the purposes of s. 32(2), having been unaware that its failure to disclose the commission would render its relationship with Mrs Potter unfair.

            Conclusion

            The Supreme Court’s decision brings greater clarity and simplicity to the law, by holding that:

            • “Concealment” for the purposes of s. 32(1)(b) does not require a defendant who withholds facts relevant to a right of action to be under any duty to disclose them or to be aware that they are relevant to the right of action – it is enough simply that they are withheld; and
            • “Deliberate” in the context of s. 32(1)(b) and s. 32(2) requires actual intention to withhold the relevant facts or knowledge of the relevant breach of duty (as applicable), recklessness in either case being insufficient.

            Following the Supreme Court’s judgment, s. 31(1)(b) is broader in scope, while s. 32(2) is narrower. Whether the new law is favourable to claimants or defendants will vary on a case by case basis, although as a general rule it seems likely that in most cases the result will be the same as previously. Specifically, it appears likely a defendant who withholds information relevant to a right of action for the purposes of s. 32(1)(b) (such that they satisfy the new test) will usually also be acting immorally and with an awareness that the facts are relevant to the right of action (as required under the old test); similarly, for the purposes of s. 32(2), a defendant who is aware that they are at risk of breaching a duty of care in circumstances where it is objectively unreasonable to take that risk (as required by the old test) appears likely to know that they are acting in breach of duty (such that they satisfy the new test).

            In any event, limitation issues appear likely to be simpler for parties to plead and for the Courts to determine in light of the Supreme Court’s judgment. As was the position under previous caselaw, claimants will frequently be well advised to rely on both limbs of s. 32 in the alternative, with success under either limb being enough to deprive the defendant of its limitation defence.

            Benedict Walton
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            Benedict Walton

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            Ready to Raise Funds?

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            Being ready to raise funds is a position that every business should seek to be in even where fundraising is not an imminent objective. From a legal point of view, being ready to raise funds really just means knowing where everything is, and being able to demonstrate everything you know about your business to somebody who is taking a look at it. Plus, you want to be able to provide this information as soon as, or possibly before, it’s asked for by any potential investor.

            You’re the entrepreneur and I expect that you’re all over your business plan, but, apart from that, here are some of the key things to check are in order:

            • Your Company Books – starting with a ‘fun’ one, it’s a legal requirement to keep certain statutory registers up to date, such as your register of members. Having ‘up to date’ filings on Companies House is not the same (although potential investors will be taking a look at these too) as it’s the register that shows ownership of legal title to shares. All investors will expect to see these books to check that all is as they expect.
            • Your Cap Table – your register of members should also be translated to a user friendly cap table that you’ll be able to use to consider pre- and post- money ownership percentages and dilution on a fully diluted basis (i.e. including any option holders or holders of other convertible instruments that will not be on your register of members). Having this ready will help when you negotiate your valuation with investors too. There are online providers of software to help you manage this which may be useful once you have raised funds.
            • Your Financial Records – what potential investors will want / expect to see will depend on the stage of the business, but any accounting records should be well maintained and available for review.
            • Your IP – many companies are IP rich and IP should always be considered. For example:
              • Have all consultants signed IP assignments?
              • Has anyone who has worked on IP for the business (including founders and employees) before the company was incorporated signed IP assignments?
              • Have any other IP assets been protected or what is the strategy around that? Is the company name trademarked?
              • Has open source been used and can you demonstrate that the terms of the licence don’t require your own IP to be distributed freely?
            • Your IT
              • Do you have a summary of your IT system that you could disclose, with the documentation to support that summary should anyone wish to look at the detail?
              • Can you demonstrate that you’ve thought about cyber security? It’s a podium placer for top risks to businesses and demonstrating that you understand the issue, by setting out the approach you take to mitigating the risk, will help put minds at ease.
            • Their Data – Where is the data you control or process, what is it, and how do you go about making sure you’re dealing with it lawfully? What’s expected of you on this will depend on how data rich your business is and what stage your business is at, but regardless of the answer to those, there will be an expectation that you can show that you’re on top of it.
            • Your Customers and Suppliers – Are your customer and supplier relationships documented in up to date, unexpired and fully signed contracts? You will likely need to disclose these during the investment process (considering first any particularly sensitive information and whether confidentiality provisions apply).
            • Your team
              • Are the terms of engagement of your employees, workers and consultants all in writing and have they signed up to restrictive covenants, confidentiality undertakings and, where required, IP assignments?
              • Are any incentive schemes in place and if so, are all scheme documents available?
            • An NDA – Before disclosing anything secret, consider agreeing a confidentiality / non-disclosure agreement (NDA) with proposed investors. Having a reasonable NDA ready to sign could help this process (although keep in mind that some institutional investors may require their own paper to be used, not to be difficult, but because it’s been through their own in-house legal review and forms part of their own investment process). Similarly, institutional investors look at so many initial decks that they may not have the time or inclination to be troubled by negotiating an NDA, so think about the ‘when’ of seeking an NDA too.

            Having the above in mind will keep you on the front foot when going out to raise funds, whether it’s from angel investors, VCs or otherwise.

            When you’re at the point of considering the terms of investment, take a look at our term sheet explainer too.

            Dis