Legal Practice Notes

In a share purchase agreement ( SPA), it is standard for the seller to grant the buyer warranties and indemnities. Why warranties and indemnities are needed For any share acquisition, the buyer starts from the maxim caveat emptor (let the buyer beware). As they cannot know with certainty exactly what they are acquiring when buying a company, the purchaser seeks protection from the default common law position by building suitable contractual terms into the SPA in the shape of warranties and indemnities. Taken together, these provisions protect the purchaser against the uncertainties inherent in the target and address the caveat emptor rule. The buyer will also undertake due diligence on the target company (or target group) to learn as much as possible before proceeding. For additional detail on the diligence process, see Practice Note: Due diligence—share and asset purchases. Without warranties or...

This Practice Note forms part of the share purchase transaction collection. Timing Work on an initial draft of the share purchase agreement ( SPA) may start as soon as the principal commercial terms are settled and the heads of terms executed. The due diligence and disclosure workstreams proceed in parallel with SPA drafting and negotiation. The sooner the buyer undertakes substantive due diligence, the earlier its findings can shape discussions on suitable warranty and indemnity protection within the SPA. In most cases, the buyer’s lawyers produce the opening draft and forward it to the seller’s lawyers for mark-up. Drafts will move back and forth until exchange (signing of the SPA), which will take place ahead of completion where there are conditions to completion, or at the same time as completion where there are none. The tax covenant is usually included as a schedule to the SPA,...

Training materials These training materials are made up of template Power Point slides that can serve as the foundation for one or more training seminars concerned with negotiating a share purchase agreement ( SPA). They are intended to assist junior lawyers, company secretaries and directors in developing an understanding of the principal points of negotiation and drafting, and they also signpost other useful materials and guidance. It is expected that those delivering training will use these slides as a practical starting point for their presentations, and then adapt them as necessary to reflect their particular circumstances......

Overview of key issues The principal matters addressed in this Practice Note are set out below: why equity incentives are a central consideration on a takeover implemented by a scheme of arrangement the differing effects that a scheme of arrangement can produce, which depend on the categories of awards granted under the target group’s share plans the situations in which it may be appropriate to amend the target group’s share plan rules and/or the target company’s articles of association to manage incentives over the target’s shares as part of the transaction the issues and questions that may arise where the relevant provision of the target group’s share plan rules refers to a scheme for the purposes of that company’s reconstruction or amalgamation the information that ought to be included in scheme-specific documents and materials, such as the scheme document and the witness statement, and which party would...

A limited company is permitted to buy back shares in itself, so long as it meets the conditions set out in the Companies Act 2006 ( CA 2006). This is referred to as a share buyback, or a purchase of own shares. In addition to CA 2006, there are further rules and guidance that matter for a listed company or an AIM company. In particular, a listed company must have regard to the UK Listing Rules ( UKLRs) and the Disclosure Guidance and Transparency Rules ( DTRs). An AIM company must have regard to the AIM Rules for Companies ( AIM Rules); however, those rules do not specifically address share buybacks, so AIM Regulation has stated that, in most circumstances, observing the UKLRs for buybacks would represent best practice for an AIM company. An AIM company is also subject to DTR 5. In...

A limited company can repurchase its own shares provided it satisfies the conditions in the Companies Act 2006 ( CA 2006). This is referred to as a share buyback, or a purchase of own shares. Beyond the CA 2006 provisions, further rules and guidance are relevant, though some bite only for a listed company or an AIM company. In particular, a listed company must take account of the Listing Rules ( LRs) and the Disclosure Guidance and Transparency Rules ( DTRs). An AIM company must consider the AIM Rules for Companies ( AIM Rules) and is also within DTR 5. Both categories of company may additionally observe institutional investor guidance. For a primer on share buybacks, see Practice Note: Share buybacks—a quick guide. For an outline of the law governing a buyback, and reasons a company might choose to conduct one, see...

Penalties for breach of the allotment provisions in the Companies Act 2006 ( CA 2006) Save for certain limited exceptions, the company’s directors must not use the company’s powers to allot shares or to confer rights to subscribe for, or to convert any security into, its shares unless they comply in full with the relevant statutory regime for: private companies with a single class of shares, or private companies with more than one class of shares or public companies (whether listed or unlisted) For wider detail on allotments in general and, in particular, by company type, see the following Practice Notes: Allotment and issue of shares—introductory points, Allotment and issue of shares—private companies with one class of shares, Allotment and issue of shares—private companies with more than one class of share and public unlisted companies and Allotment and issue of...

There are five main types of set-off: independent set-off (sometimes known as legal set-off or statutory set-off) transaction set-off (also known as equitable set-off) contractual set-off insolvency set-off banker’s set-off (sometimes known as current account set-off) This Practice Note looks at the characteristics of these five types of set-off. For information on set-off in general, see Practice Note: What is set-off and when is it available? Independent set-off Independent set-off operates as a procedural defence available for use in court proceedings. It permits mutual, reciprocal claims to be set off against each other where they are separate and not connected, in contrast to transaction set-off. Independent set-off is also described as legal set-off or statutory set-off......

The Health and Safety at Work etc Act 1974 ( HSWA 1974) HSWA 1974 applies to employers and to those who are self‑employed. The Sentencing Council ( SC) issues guidance for courts in England and Wales, setting out offence‑specific sentencing guidelines for use in the magistrates’ court and the Crown Court which, under section 59 of the Sentencing Act 2020 ( SA 2020), must be followed when sentencing organisations for health and safety offences unless doing so would be contrary to the interests of justice. These sentencing guidelines do not extend to Scotland or Northern Ireland, although courts there may have regard to them to assist their sentencing function. For information on sentencing these offences in Scotland, see Practice Note: Sentencing health and safety cases in Scotland. The SC has issued offence‑specific guidelines for courts sentencing...

Forms of business vehicle in the UK There are numerous forms of business vehicle, and choosing the most suitable structure to operate a business is vital; that selection can affect whether a business succeeds or fails. No single vehicle will meet every enterprise’s needs and expectations. Each option presents its own advantages and drawbacks. Deciding which vehicle to employ for a particular venture is complex and turns on a range of legal, tax and commercial factors; a perfect match may not exist. Moreover, the vehicle first adopted to run a given business may cease to be the best fit as that business grows and matures. The chosen vehicle should therefore be reviewed periodically. If the original vehicle proves unsuitable, a different vehicle can be used to assume the business, although changing vehicles can be expensive, depending on the...

In many lending arrangements, financiers commonly obtain security to back a borrower's duties under a loan agreement. By taking security, they secure defined rights over the charged assets if the borrower fails to make repayment when due. This Practice Note outlines the core features and key characteristics of the four categories of security recognised under English law. It also clarifies what is meant by the distinction between legal and equitable security interests, and explains the differences between them. Practice Note: Introductory guide to security in a lending transaction offers a broader primer on security in lending and serves as a helpful starting point for those new to the subject or unfamiliar with it. Practice Note: Security—frequently asked questions provides links to answers for many of the most common security questions and issues. What is security? A security interest grants the secured party rights in the security...

This Practice Note outlines the key issues that arise on a takeover carried out through a securities exchange offer. It sets out when a securities exchange offer is required under the City Code on Takeovers and Mergers ( Code), why parties might select this structure, and the principal legal and regulatory matters to address. When is a securities exchange offer required? In certain cases, the Code requires an offeror to structure its takeover as a securities exchange offer. Rule 11.2 states that where an offeror, together with anyone acting in concert, acquires by securities exchange interests in shares of any class carrying 10% or more of that class in issue either: during an offer period, or in the three months prior to the commencement of an offer period, such securities will normally have to be offered to all other holders of that class. The...

This Practice Note is about the tax implications of liquidation demergers, also known as section 110 demergers, after section 110 of the Insolvency Act 1986 This Practice Note examines the tax consequences of liquidation demergers, sometimes referred to as section 110 demergers, taking its label from section 110 of the Insolvency Act 1986. For context on the reasons a company may undertake a demerger, and an overview of alternative structures, see Practice Notes: Demergers—an introduction to the tax issues and Demergers—an introduction for corporate lawyers. Detailed Practice Notes cover the tax aspects of the principal demerger routes: statutory (or dividend) demergers, which can be direct or indirect—see Practice Note: Statutory demergers capital reduction demergers—see Practice Note: Capital reduction demergers liquidation demergers—the focus of this Practice Note Typically, a liquidation demerger involves placing a new holding company at the top of the group, then...

This Practice Note explores the use of section 110 of the Insolvency Act 1986 ( IA 1986) — commonly termed section 110 arrangements, section 110 demergers, section 110 schemes, section 110 transfers, section 110 liquidation schemes, or section 110 reconstructions. It addresses their key purpose, the standard transaction structure, the reconstruction agreement, how dissenting shareholders may contest, and tax matters. What is a section 110 arrangement? A section 110 arrangement is a statutory device to separate or demerge undertakings or assets sitting in, or owned by, a single corporate body, so that following the deal they are held by two or more corporate bodies. Such arrangements are available only within a voluntary winding up, usually a solvent winding up, i.e. a members’ voluntary liquidation ( MVL). With preparation they can deliver tax efficiency compared with alternative routes. In its basic form, a section 110...

Background On 12 October 2017, the Department for Business and Industrial Strategy ( BEIS), as it then was, opened a consultation on a streamlined energy and carbon reporting framework to commence in April 2019, following the abolition of the CRC Energy Efficiency Scheme and linked increases to climate change levy rates. This built on the 2015/2016 review into simplifying and reforming the business energy efficiency tax system. Issued under the government’s Clean Growth Strategy, further detail can be found in News Analysis: Clean Growth Strategy— Environmental Headlines ( October 2017). The proposals outlined a simplified, UK-wide reporting model to be delivered via the Companies Act 2006 ( CA 2006) within companies’ annual reports, aiming to reduce administrative burdens, heighten awareness of energy efficiency, cut bills and lower carbon. The consultation asked for views on mandatory annual disclosures, the scope of application and...

A secondary buyout ( SBO) A secondary buyout ( SBO) occurs when private equity finances the purchase of a company that has already undergone a prior buyout. They provide one route for private equity funds to realise and exit an existing buyout position. In an SBO the current private equity house sells out, yet the target's management typically remains in post following completion, albeit some managers may depart and be replaced, or, more rarely, a wholesale change of management may occur. Managers who continue are usually required to sell the interests they acquired in the target vehicle under the earlier buyout, receiving consideration from the new private equity backer. Accordingly, continuing managers dispose of the interests they previously acquired in the target vehicle and accept the consideration proposed by the incoming investor. They then participate, to some extent, by acquiring interests in the vehicle used to...

This Practice Note examines the Economic Crime ( Transparency and Enforcement) Act 2022 ( EC( TE) A 2022) in relation to property transactions in Scotland. For a grounding in EC( TE) A 2022, see Practice Note: Register of overseas entities that hold UK property—fundamentals. For the position on property transactions in England and Wales, see Practice Note: Overseas entities and land under the Economic Crime ( Transparency and Enforcement) Act 2022—property registration and restrictions. The provisions creating the register of overseas entities and requiring registration at Companies House began on 1 August 2022, with the land ownership and registration provisions commencing on 5 September 2022. Further regulations under EC( TE) A 2022—such as those defining an ‘exempt’ overseas entity—are awaited. Additional requirements for overseas entities have been introduced by the Economic Crime and Corporate Transparency Act 2023 ( ECCTA...

STOP PRESS: A major overhaul of the UK listing framework took effect on 29 July 2024, abolishing the premium and standard segments and introducing a single listing category for equity shares of commercial companies. This single commercial companies category is strongly disclosure‑led and sits alongside other listing categories, namely shell companies, the secondary listing and closed ended investment fund categories. To implement the reforms, a new UK Listing Rules sourcebook came into force, and the earlier Listing Rules sourcebook was revoked and withdrawn. For further detail, see Practice Note: Reform of the UK listing regime—fundamentals. This Practice Note reflects the regime as it stood before 29 July 2024. It summarises the additional rules that govern how quoted companies must prepare their annual accounts and reports under Part 15 of the Companies Act 2006 and regulations made under that Part......

Updated in November 2023 Introduction This guide sets out the principal matters a new business should consider before beginning operations in Romania. It is not exhaustive and does not amount to specific Romanian legal advice; such guidance must be sought from a Romanian lawyer before establishing and running a venture in the country. Accordingly, independent Romanian legal counsel should always be consulted for tailored advice. Strengthening the business climate, ensuring stability and predictability, and boosting competitiveness through innovation are central strands of the Romanian Government’s economic policy. The main route to greater competitiveness is raising productivity by diversifying and innovating the domestic industrial base. Executive branch priorities include improving the business environment by reinforcing State aid policy and advancing better regulation, which lowers administrative burdens on businesses, while enhancing transparency in decision-making and public consultation. At the same time, it intends to support private...

ARCHIVED: Lexis+® UK Corporate carried out research to assess prevailing market trends in equity capital markets ( ECM) transactions during 2019... Background and approach For this review of risk factor disclosure, we examined 38 prospectuses connected to 2019 Main Market IPOs or new admissions, along with ten AIM admission documents issued in 2019. This work forms part of our annual trend report, designed to offer insight into the current dynamics of UK ECM activity. The other components of our 2019 trend report are: IPOs in 2019— Main Market and AIM [ Archived] Secondary Offers in 2019— Main Market and AIM [ Archived] Standard listings in 2019 [ Archived] Legal and regulatory developments in Equity Capital Markets 2019 [ Archived] Prospectus Regulation risk factor disclosure requirements The Prospectus Regulation ( EU) 2017/1129 introduced more detailed and prescriptive standards for risk factor...