Legal Practice Notes

Member resolutions The consent of a company’s members is needed for particular alterations to the company—such as revising its constitution, changing its name or adjusting its share capital—or for the company to undertake certain steps, including entering a substantial property transaction with a director or making a political donation. In this manner, the Companies Act 2006 ( CA 2006) protects members’ interests (the company’s owners) by requiring directors (the company’s management) to obtain members’ authorisation before proceeding with any such changes and actions across the company. Members give that consent by passing what is called a ‘member resolution’, more commonly described as a ‘shareholder resolution’. As most companies are limited by shares this usage is widespread, but because some are limited by guarantee, the inclusive and correct expression covering both is ‘member’ (see Q& A: What is the difference between a member and a...

In certain corporate takeovers, the purchaser may arrange the deal so that the price is satisfied by issuing new shares and/or loan notes in the acquiring company. Rather than, or in addition to, receiving cash, the vendor shareholders swap their existing shares (or loan notes) for fresh shares and/or loan notes created by the corporate buyer. This Practice Note explains the tax consequences for the selling shareholders and the acquirer in such arrangements. It covers both parties’ positions under the relevant tax rules. This method of acquisition plainly offers a cash flow benefit to the buyer and, provided specific conditions are met, the securities exchange is also treated as a reorganisation for tax purposes. Consequently, no capital gains tax (or corporation tax on chargeable gains) is due from the selling shareholders at the point they dispose of their shares. Where the...

This Practice Note carefully examines the overarching principles for assessing class questions in-depth. For fuller guidance on what, in practice, could or could not split a class, please refer to: Checklist of factors which may (and may not) fracture the class in a scheme of arrangement or restructuring plan. Statute and Practice Statement Under Part 26 of the Companies Act 2006 ( CA 2006), which regulates the scheme of arrangement (scheme) procedure, and CA 2006, Pt 26A, which regulates the restructuring plan ( RP) procedure, the applicant must, at the outset, seek a formal court order to convene the relevant meeting(s) of creditors, members, or any class(es) in question, to approve the proposed scheme/ RP. Absent properly constituted meetings of the applicable classes of creditors and/or members, the court lacks jurisdiction and, at the later sanction hearing, cannot lawfully proceed to sanction the scheme/ RP....

This Practice Note concentrates on the regulatory obligations in the AIM Rules for Companies ( AIM Rules) that apply to an AIM company undertaking a transaction categorised as a reverse takeover. Under the AIM Rules, a reverse takeover broadly involves an AIM company acquiring a business, company or assets (the target) where the target exceeds the size of the AIM company itself, or where the deal would lead to a fundamental alteration in the AIM company’s business, board or voting control... There are parallel provisions on reverse takeovers in the UK Listing Rules issued by the Financial Conduct Authority ( FCA) for entities on the Official List. The listed company regime is, in general, more prescriptive than the framework that governs AIM companies... Key provisions The principal requirements that an AIM company must observe when undertaking a reverse takeover are contained in Rule 14 of the AIM...

This Practice Note outlines the formal requirements for witnesses, covering who may witness another person’s signature on a document connected to a commercial deal, such as a deed or simple contract, as well as witnessing electronic signatures and the current approach to video witnessing in practice. For guidance on witnessing wills, see Practice Note: Validity of Wills—signature. We have created a collection that serves as a comprehensive, interactive resource to help users recognise and navigate the concepts and frequent issues and pitfalls in executing documents, including the witnessing of signatures. Each stage or phase provides practical guidance, precedent clauses and Q& As relevant to that stage. For further details, see: Execution collection. Witnessing What is the difference between witnessing and attestation? Witnessing is the act of observing the execution of a document. Attestation adds the further step of noting, on the document itself, that the witness has seen the...

Introduction Environmental permitting is one of the principal regulatory regimes in the UK. Its purpose is to control pollution and emissions from industrial and other operations. It is a core element of UK business regulation, placing controls on activities that could pollute the environment or harm human health. Permits set conditions for the construction, operation and decommissioning of a regulated facility, and prescribe how regulated activities are undertaken. This Practice Note summarises enforcement procedures, offences and civil sanctions under the Environmental Permitting ( England and Wales) Regulations 2016 ( EPR 2016), SI 2016/1154, which provide a single, unified permitting regime for facilities and activities. For detail on other key aspects of EPR 2016, see Practice Notes: Environmental Permitting Regulations 2016—permit determinations and appeals; and Environmental Permitting Regulations 2016—permits, applications and exemptions. EPR 2016 consolidated and revoked the Environmental Permitting ( England and Wales)...

Dissolution A limited partnership established under the Limited Partnerships Act 1907 ( LPA 1907) may come to an end by its: dissolution, or insolvency Much of the legal framework applicable to general partnerships under the Partnership Act 1890 ( PA 1890), alongside relevant case law, also extends to limited partnerships and is drawn upon throughout this note. This Practice Note outlines what ‘dissolution’ entails for a limited partnership. With effect from 6 April 2017, the LPA 1907 was amended by the Legislative Reform ( Private Fund Limited Partnerships) Order 2017, SI 2017/514 ( LRO). HM Treasury first released a draft of the LRO in January 2017, accompanied by an explanatory document. The LRO followed a government consultation that opened in July 2015 and closed in October 2015, proposing updates to UK limited partnership legislation to make these structures more effective vehicles for private equity and...

A dormant company is formed and run much like any other company. Nevertheless, the standard duties on accounts and audit that ordinarily apply to a company are relaxed for a dormant company as such. What is a dormant company? A company is dormant throughout any period in which it has had no significant accounting transaction of any kind......

This Practice Note summarises the duties on directors to declare their interests in shares under the Companies Act 2006 ( CA 2006) and the UK Market Abuse Regulation, including reporting obligations for dealings by directors and other persons discharging managerial responsibilities ( PDMRs) of listed companies. This Practice Note does not cover the disclosure obligations of companies. Register of directors' interests in shares—continued relevance for all companies Under the Companies Act 1985, companies were obliged to keep a register of directors’ interests in the company’s shares. There is no equivalent obligation in CA 2006, so this register is no longer mandatory. In practice, however, companies (in particular public companies) are likely to retain a register of directors’ interests to monitor any notifications made, eg disclosures by PDMRs under the UK Market Abuse Regulation (see Disclosures by PDMRs under the Market Abuse Regulation below). A company may have to...

STOP PRESS: A major overhaul of the UK listing framework took effect on 29 July 2024, involving the abolition of the premium and standard listing segments and the introduction of a single listing category for equity shares in commercial companies. The commercial companies category is strongly disclosure‑led and sits alongside other categories, including those for shell companies, secondary listings and closed ended investment fund categories, among others. A new UK Listing Rules sourcebook took effect to deliver these reforms, and the former Listing Rules sourcebook was also withdrawn concurrently. For further information and background, see Practice Note: Reform of the UK listing regime—fundamentals. This Practice Note reflects the regime as it stood before 29 July 2024. It explains the requirements of the Disclosure Guidance and Transparency Rules concerning a company’s annual financial report and, in relation to that report, the associated statutory...

Practice Note A company’s annual report and accounts will typically contain an appropriate explanation of the directors’ relevant responsibilities for preparing those accounts. For some companies, including such directors’ responsibility statements is a legal requirement, while others include them as a matter of best practice. This Practice Note outlines the requirements to include directors’ responsibilities statements within the annual accounts and reports of certain companies under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules ( DTRs), the Financial Reporting Council’s UK Corporate Governance Code ( UKCG Code) and the FCA’s UK Listing Rules ( UKLRs). The directors’ responsibility statement has its roots in the 1992 Cadbury report, which recommended that a company’s report and accounts should feature a formal statement by the directors confirming that responsibility for preparing the accounts rests with the board of directors, and that this should sit...

Under the Companies Act 2006 ( CA 2006), company directors owe their company a set of general duties, which include the obligation to further the company’s overall success. For an introduction to the general duties, please see the Practice Note: Directors' duties—fundamentals......

Directors are the agents of a company who manage its day-to-day business and owe a number of duties to it The Companies Act 2006 ( CA 2006) for the first time put into statute a range of common law and equitable duties that had evolved through court decisions over hundreds of years, and it also altered company law in specific respects. Sections 171 to 177 CA 2006 set out the statutory general duties owed by a director to their company: act in line with the company’s constitution and exercise powers only for the purposes for which they were given act, in good faith, in the way the director believes would most likely promote the company’s success for the benefit of its members as a whole, while having regard to various matters (the duty to promote the success of the...

This Practice Note summarises counter-terrorist financing ( CTF) measures, covering the offences and duties found in the Terrorism Act 2000 ( TA 2000) and associated laws. It explains what constitutes terrorist financing, how it intersects with the anti-money laundering ( AML) framework, and why it matters for businesses. What is terrorist financing? Terrorist groups require money to organise and execute attacks. The TA 2000 makes both involvement in terrorist activity and the financing of terrorism criminal offences. Broadly, terrorist financing covers supplying or gathering funds from lawful or unlawful sources, intending, or knowing, that they are to be used to commit an act of terrorism, regardless of whether the money is ultimately applied to that end. Counter-terrorist financing and anti-money laundering CTF and AML are distinct concepts, though their objectives overlap. Within UK law, the CTF and AML regimes operate alongside each other. Numerous...

The Economic Crime and Corporate Transparency Act 2023 ( ECCTA 2023) ECCTA 2023 obtained Royal Assent on 26 October 2023 and is being introduced in phases across a series of commencement dates. A number of its measures will not take effect until detailed secondary legislation and guidance are set, while others require new technical systems and tools before they can operate. The Act’s core aims are to deter the misuse of UK corporate structures for crime and terrorism, enhance the UK’s broader response to economic crime, and support enterprise by improving the efficiency of the UK’s companies registry, including the reliability of its data. Since 6 April 2016, companies (and certain other types of entity) have been obliged to gather and record details of people with significant control ( PSCs). The PSC framework was created to ensure accurate, current information is available on who...

Because a corporation (body corporate) lacks a physical presence, it must designate an individual to attend and act on its behalf at a company’s general meeting where it holds shares. This can be achieved by appointing one or more people to serve as: its proxy; or its corporate representative For guidance on proxies, see Practice Notes: Appointing a proxy and Voting by proxy. For comprehensive information on voting at general meetings, see Practice Note: Voting at general meetings (including AGMs), and for guidance on hybrid or virtual meetings, see Practice Note: How to call and hold an effective hybrid general meeting. Why appoint a corporate representative rather than a proxy?......

Section 1 of the Corporate Manslaughter and Corporate Homicide Act 2007 ( CMCHA 2007) introduces the distinct offence of corporate manslaughter. The CMCHA 2007 applies across the UK and, at the same time, brings in the offence of corporate homicide for Scotland. This Practice Note addresses corporate manslaughter, not corporate homicide, because certain CMCHA 2007 provisions treat the two offences with slight differences. See Practice Note: Involuntary manslaughter. Corporate, not individual, liability The CMCHA 2007 targets organisational accountability and does not extend to directors or other individuals occupying senior positions within a company. It creates no personal liability under the CMCHA 2007. Further, CMCHA 2007, s 18 expressly provides that a person cannot be guilty of aiding, abetting, counselling or procuring the commission of corporate manslaughter, nor can a person be guilty of encouraging or assisting an offence of corporate...

Part 26A restructuring plans ( RPs) Since 26 June 2020, Part 26A restructuring plans ( RPs) have been in force by virtue of the Corporate Insolvency and Governance Act 2020 ( CIGA 2020). Section 7 and Schedule 9 of CIGA 2020 inserted a new Part 26A into the Companies Act 2006 ( CA 2006), entitled ‘ Arrangements and Reconstructions for Companies in Financial Difficulty’. The framework for their use is informed by: the applicable Practice Statement (see Practice Note: The Practice Statement for Part 26 schemes and Part 26A restructuring plans (2025)); and the Explanatory Notes, which are admissible to assist with interpretation without any need to show that the legislation is ambiguous or unclear (per Snowden J, as he then was, in Re Virgin Atlantic Airways, applying Re Flora v Wakom ( Heathrow) Ltd). These RP provisions represent a permanent reform of the UK’s...

The Insolvency Act 1986, s A1 ( IA 1986) The Insolvency Act 1986, s A1 ( IA 1986) sets out a mechanism allowing directors of insolvent companies, or those likely to become insolvent, to secure a moratorium. The initial period is a 20 business day period, with scope for extension in defined circumstances. The regime is underpinned by the Insolvency ( England and Wales) Rules 2016 ( IR 2016), SI 2016/1024, r 1A.1. Its purpose is to give otherwise viable businesses breathing space to reorganise or attract fresh investment without the pressure of creditor enforcement. The statutory architecture for this moratorium was added to IA 1986 by the Corporate Insolvency and Governance Act 2020 ( CIGA 2020), expedited in response to the coronavirus pandemic. An insolvency practitioner acts as ‘monitor’, supervising compliance, while the directors continue to manage day-to-day operations, albeit within...

When someone acquires the share capital of a company, the deal is commonly described as one of the following: a completion accounts deal an accounts date deal a locked box deal Each label captures how the parties set or refine the purchase price for the target and affects the extent to which the buyer is safeguarded against historic tax exposures under the tax covenant (also called a tax deed). In virtually every transaction, a headline price for the shares is agreed first. That figure is then adjusted using an agreed approach—the most prevalent being completion accounts, accounts date, or locked box. For more detail on the purpose and effect of a tax covenant, see Practice Note: Why have a tax covenant? Completion accounts Under a completion accounts deal, the consideration is adjusted by reference to a set of accounts prepared as at the...