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This Practice Note outlines the law concerning criminal recklessness. The subjective test for recklessness Certain statutory and common law offences allow the prosecution to prove mens rea through ‘recklessness’. Put simply, recklessness is where the accused takes an unjustified risk that results in unlawful harm or damage. The House of Lords in R v G reaffirmed the subjective approach to recklessness. Before R v G, two distinct tests were used, depending on the offence charged: Subjective recklessness from R v Cunningham: the prosecution had to establish that the accused personally foresaw the risk. Objective recklessness from R v Caldwell: the prosecution only needed to show that the risk would have been obvious to a reasonable person, without proving the accused themselves foresaw it. In R v G, the House of Lords concluded that the objective test could operate unfairly where a defendant did not foresee the
This Practice Note examines the remedy of rescission, explaining when and in what manner a contract can be unwound (at common law, in equity and under statute) and thereby terminated and brought to an end. It covers the consequences and effects of rescission, the principal grounds for setting aside an agreement (misrepresentation, mistake, undue influence, duress, non‑disclosure, fiduciary misdealing and bribery) and the main obstacles to claiming rescission—affirmation, the intervention of third‑party rights and the impossibility of restitution. For further guidance on rescission in the context of misrepresentation, see Practice Note: Misrepresentation—rescission as a remedy. There are many ways in which a contract may reach its end; see: Terminating contracts—how and when a contract ends—overview for a brief and accessible summary, with links to the related further practical guidance, including Practice Note: Termination and expiry of contracts. For a table
What is a res judicata? A res judicata is a determination by a court or tribunal with jurisdiction over the cause of action and the parties, which finally disposes of the issues decided so they cannot be litigated again by those bound, save on appeal. Final judgments entered by default or by consent fall within this concept, whereas rulings on purely procedural points and any decision lacking finality do not. The doctrine’s aim is to bring litigation to an end and shield parties from being harassed by the same dispute twice. in personam—binds the parties and their privies in rem—binds all persons, privy or otherwise (ie a judgment binding the whole world) A party may rely on res judicata: as an estoppel to defeat an opponent’s claim or defence; and/or as the basis of their own claim or
The offence of causing grievous bodily harm with intent Wounding or causing grievous bodily harm (GBH) with intent can be tried solely in the Crown Court on indictment. Elements of the offence Under the Offences against the Person Act 1861 (OATPA 1861), the prosecution must establish that the defendant unlawfully and maliciously: wounded with the intention of causing GBH, or caused GBH with that intention, or wounded intending to resist or prevent the lawful arrest or detention of any person, or caused GBH intending to resist or prevent the lawful arrest or detention of any person ‘Unlawfully’ and ‘maliciously’ Unlawfully The wounding or causing of GBH must be unlawful. Such conduct may be lawful if used: in self-defence in defence of another in defence of property for the prevention of crime where the victim gave express or implied consent For further information on these defences, see below:
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Depending on the facts, a sum paid or a benefit given on the termination of an office or employment can be taxed in full, taxed in part, or, in limited cases, be wholly exempt. For a summary of the potential tax treatments of termination payments, see Practice Note: Termination payments and tax. The starting point for any termination sum is to consider whether it is chargeable, on basic principles, as earnings from, or an emolument of, an office or employment under section 62 of the Income Tax ( Earnings and Pensions) Act 2003 ( ITEPA 2003) or instead falls within other provisions of ITEPA 2003 that deem specified categories of termination payments to be earnings. For instance, since 6 April 2018, ITEPA 2003, s 402B has treated non-contractual payments in lieu of notice ( PILONs) as earnings for tax purposes under UK law......
What is a Value Creation Plan? A Value Creation Plan ( VCP) is an employee incentive crafted to deliver exceptionally large pay-outs when very demanding share price targets are met. Awards may take the form of: a cash bonus; or a share-based arrangement (such as a conditional share award or a nil cost option), which can be settled in shares or cash. In every case, vesting is driven mainly by ambitious share price growth requirements over the performance period—usually at least five years, reflecting investor expectations that a VCP should generate substantial and sustainable value over a five-year period—with additional measures commonly operating alongside. Most often, the pay-out on a vested award is calculated as a percentage of the value created above the relevant share price hurdle, and is capped. To date, VCPs have largely been implemented as one-off programmes by fully listed...
Practice Note This Practice Note offers a concise overview of the equity and incentive compensation schemes and agreements that US startups routinely use to recruit and retain essential personnel. Although it focuses on US companies, many of the matters highlighted are equally pertinent to a non- US company in the early phases of development. To effectively advise US startups, and the investors who frequently fund them, it is crucial to understand startup equity and incentive pay structures, and the reasons they may differ from those found in more established businesses. The discussion below broadly surveys remuneration practices among investor-backed, Kickstarter-funded, and bootstrapped startup ventures, where founders aim to scale the company swiftly (and enhance its value) with a view to an exit or liquidity event via an initial public offering ( IPO) or a sale. This environment is...
Organisations routinely use equity awards and cash bonuses to motivate key personnel. The opening section of this Practice Note examines principal issues for awards designed to persuade a crucial hire to take up a role with the employer (i.e., a sign-on bonus or sign-on equity awards). The following section considers short- and long-term cash incentives aimed at encouraging executives to stay and/or concentrate on defined performance targets. This Practice Note is organised into the following parts: Sign-on bonuses and sign-on equity awards Short-term cash incentives Long-term cash incentives For guidance on equity incentives that help retain key employees, refer to Practice Notes: Understanding types and taxation of US equity compensation, Designing a US public company equity compensation plan, and Drafting a US private company equity compensation plan. Sign-on bonuses and sign-on equity awards Sign-on bonuses Sign-on bonuses most often arise where an employee would lose equity, deferred...
The Practice Note is organised into these sections: Fundamentals of ESPPs ESPP qualification requirements Optional ESPP terms and design considerations Tax treatment of ESPP awards ESPPs and corporate transactions ESPPs and securities laws Fundamentals of ESPPs An employee stock purchase plan ( ESPP) that satisfies section 423 of the US Internal Revenue Code ( IRC) enables a sponsoring corporation to give employees of the company and participating corporations rights to buy its stock (or stock of a related parent or a related subsidiary) at a price below FMV. These rights are sometimes called stock options or purchase rights, and the framework setting out the terms on which such rights are granted is often described as an offering. In this Practice Note, these tax-qualified employee stock purchase plans are referred to simply as ESPPs; however, not all employee stock...
Designing equity compensation plans for public companies This Practice Note examines how publicly held companies structure equity compensation plans. Such businesses commonly issue equity awards to senior leaders and other key staff (and, in many cases, even to relatively junior employees) to align their interests with shareholders. Equity compensation covers non-cash remuneration for employees and other service providers, including non-executive directors and contractors. This Practice Note outlines the principal legal and practical considerations associated with these arrangements. Equity awards help reduce cash expenditure, which is particularly appealing for start-ups with limited funds seeking to attract top talent, and they also encourage recipients to engage in the company’s growth. For equity incentive plans relating to privately held companies, see Practice Note: Drafting a US private company equity compensation plan. Types of equity compensation Share options Restricted shares Restricted share units Employee share...
US privately held businesses frequently motivate senior leaders and other pivotal staff with equity awards, aligning their aims with the company’s owners. While these equity arrangements often mirror public company programmes (see Practice Note: Designing a US public company equity compensation plan), important distinctions arise from the shares’ lack of liquidity. Notably, there is now a route for some award holders to postpone income tax for up to five years under US section 83(i) of the Internal Revenue Code ( IRC), introduced by the 2017 tax reforms (section 83(i))... This Practice Note is organised as follows: Legal issues Plan drafting Section 83(i) eligible plans US tax issues Beyond the IRC and the s 409A considerations outlined later, two key US tax topics often relevant to equity awards in private companies are tax‑favoured incentive stock options ( ISOs) and the new section 83(i)...
Relevance of non-qualified deferred compensation arrangements and Section 409A In the United States, deferred compensation schemes are attractive to senior executives and other top earners because they let them delay recognising income and associated taxes until a later year. A qualified arrangement—such as a 401(k) plan—offers one route to defer pay. Yet for executives, these qualified plans have limited utility owing to ceilings on how much can be deferred and other constraints that apply to them. By contrast, non-qualified deferred compensation arrangements have no formal caps on deferrals and are not bound by the various restrictions that govern qualified plans. Although non-qualified plans do not restrict the sums employees may put aside, they are not without hazard. The assets backing the promise must stay available to satisfy the sponsoring employer’s creditors until benefits are ultimately paid, potentially many years or even decades hence. They must also...
What is an LLC and how is it different to other forms of business organisation? A limited liability company ( LLC) is a legal form of business organisation in the US. It is essentially a hybrid structure, blending characteristics of a corporation and a partnership together. Comparable to a UK private limited company, it grants owners limited liability protection, whilst, subject to elections made by the entity, it may potentially be treated as fiscally transparent for tax, much like a partnership. Where an LLC is regarded as, or elects to be, tax transparent, all profits and losses flow directly to its owners—who are members rather than shareholders—and tax is therefore charged on the members instead of the entity itself. Nonetheless, despite the potentially advantageous tax position of LLCs, the treatment of LLC members for tax across different jurisdictions is not always simple in practice. By way of...
This Practice Note This Practice Note outlines the framework for the executive pay deduction cap under IRC, s 162(m), as revised by the Tax Cuts and Jobs Act ( Pub. L. No. 115-97) ( TCJA) and the American Rescue Plan Act ( Pub. L. No. 117-2), s 9708. In general, IRC, s 162(m) limits to $1m the annual deduction a public corporation, or certain other reporting entities, may claim for remuneration paid to designated covered employees. Practitioners should grasp these rules—including the full reach of the TCJA amendments (effective for tax years beginning after 31 December 2017) and ARPA’s expanded covered employee definition (effective for tax years beginning after 31 December 2026)—to help their public and reporting company clients craft senior executive pay packages that reduce unfavourable tax outcomes under IRC, s 162(m). This Practice Note is organised in the following...
This Practice Note outlines the principal types and tax treatment of equity compensation awards used within wider remuneration programmes. Whether a company is privately owned or publicly held, there are many reasons to build pay structures that feature equity compensation. Linking reward to the company’s value forges a direct connection between business results and employee pay, aligning staff interests with those of shareholders. Equity can also foster an ownership mindset, encouraging behaviours and performance that enhance the company’s worth. Equity compensation appears in numerous forms and can be tailored to drive both long- and short‑term outcomes, support retention, settle in shares, cash, or a blend of the two, and, when structured appropriately, provide tax‑deferred growth advantages. This Practice Note reviews the fundamental categories of equity and equity‑based awards. For information and strategies on designing public and private company equity plans, see Practice Notes:...
Archived: This archived Practice Note gives corporate lawyers a concise overview of the principal features of corporate governance in the United States. In the context of directors’ duties, board organisation, the functions of the Chair, CEO and non-executive directors, committee composition, nominations and executive remuneration, it reviews the legislative and regulatory sources of governance obligations. Where appropriate, it references the listing rules of the New York Stock Exchange or the NASDAQ stock market. It places particular emphasis on the significant effects of the Dodd- Frank Act. It also highlights key proxy organisations and institutional investor groups within the USA corporate landscape. This Note is not maintained and is provided for background purposes only. Background Unlike the UK, the USA has not implemented a single corporate governance code for public corporations. Instead, governance requirements arise from a range of federal and state laws,...
ARCHIVED: This Practice Note has been archived and is no longer maintained. It sets out the different iterations of HMRC and DHSC guidance on the Coronavirus Job Retention Scheme ( CJRS) released over time, and supplies tracked-change comparisons highlighting alterations from one update to the next, so practitioners can quickly determine which version of the relevant guidance applied on any given date. For a guidance tracker: covering the successive versions of HMRC guidance on the Self- Employment Income Support Scheme ( SEISS), see Practice Note: Self- Employment Income Support Scheme—guidance tracker [ Archived] covering the successive versions of general guidance on coronavirus ( COVID-19), see Practice Notes: Coronavirus ( COVID-19)—guidance tracker for employment (non- BEIS guidance) [ Archived] and Coronavirus ( COVID-19)—guidance tracker for employment ( BEIS working safely guidance to 18 July 2021) [...
What is an underwater share option? An ‘underwater option’ refers to a share option (issued under any share option scheme) where the exercise price per share exceeds the prevailing actual market value of the share. Consequently, if such an underwater option were exercised and the shares sold at once, the option holder would incur a loss. Unsurprisingly, holders are disinclined to exercise underwater options, so in many situations alternative approaches to reward and incentivise those holders must be considered. Note that underwater options outside exit or leaver circumstances (ie where they do not lapse on an imminent exit or the imminent cessation of the option holder’s employment) may still carry a degree of ‘hope value’, reflecting the prospect of an improvement in the company’s position and a rise in the share price, which could lift the market value of a share above the...
Company reports, institutional shareholder guidelines and HMRC guidance all cite the ‘face value’ and ‘fair value’ of share options. These expressions mean very different things, and grasping each is vital for consistently and properly comparing the scale or value of grants made and for carefully assessing the impact from a corporate accounting standpoint. This Practice Note provides a high level overview of the distinctions between the face and fair value of a share option and clearly explains how face and fair values are applied to compare alternative remuneration packages. Face value The face value of an option is the amount by which the value of the shares subject to the option on a specified date exceeds the total price payable for them......
On 23 June 2016, the United Kingdom held a referendum on its EU membership, with a majority opting for the UK to leave the EU. On 29 March 2017, the Prime Minister sent formal notice of the UK’s intention to withdraw, setting in motion the Article 50 TEU process. At 11 pm on 31 January 2020 (exit day), the UK’s withdrawal took effect in law and the UK ceased to be an EU Member State. Exit day signalled the close of the Article 50 withdrawal phase and the beginning of a time-limited transition/implementation period, during which the interim arrangements in Part 4 of the Withdrawal Agreement applied. These transitional measures created a standstill period while the UK and the EU set about implementing the Withdrawal Agreement and negotiating the legal terms governing their future relationship, to apply after the transition ended. The EU- UK Trade and...
ARCHIVED: This archived Practice Note sets out details of the Data Protection, Privacy and Electronic Communications ( Amendments etc) ( EU Exit) Regulations 2019, SI 2019/419, together with the Data Protection, Privacy and Electronic Communications ( Amendments etc) ( EU Exit) Regulations 2020, SI 2020/1586, plus salient elements of the EU- UK Withdrawal Agreement and the EU- UK Trade and Cooperation Agreement insofar as they concern data protection. It is no longer updated and is provided for background only. For guidance on continuing divergence between data protection requirements under the GDPR frameworks, refer to Practice Note: Introduction to the EU GDPR and UK GDPR. This Practice Note examines how Brexit affects routine processing of personal data under the General Data Protection Regulation, Regulation ( EU) 2016/679 ( EU GDPR), which took direct effect in the UK and all other EU Member States on 25 May 2018, and,...
This Practice Note examines key aspects of the UK UCITS regulatory regime, covering the authorisation process, UK UCITS management companies, master–feeder structures, depositaries, remuneration, investment information, and UK implementation and areas of UK divergence following the UK’s withdrawal from the EU. What is the UCITS Directive and what is a UCITS fund? Within the EU, the UCITS Directive—also known as UCITS IV ( Directive 2009/65/ EC)—replaced the original UCITS Directive in 2011 ( Directive ( EEC) 85/611). The objective of the initial UCITS Directive was to build a single market for open-ended retail investment funds, offering improved investor protection. The final text of UCITS IV was published in the Official Journal of the EU (the OJ) on 17 November 2009, with EU Member States required to implement it by 1 July 2011. UCITS funds are authorised open-ended investment funds that may be marketed to retail...
What are the remuneration codes? The FCA Handbook currently sets out four distinct remuneration codes (the Codes) in total: Alternative Investment Fund Managers ( AIFM) Remuneration Code ( SYSC 19B), which applies to Alternative Investment Fund Managers—see the relevant Practice Note: UK AIFM Remuneration Code Dual- Regulated Firms Remuneration Code ( SYSC 19D)—see the related Practice Note: Remuneration Code for Dual Regulated Firms MIFIDPRU Remuneration Code ( SYSC 19G)—see the related Practice Note: MIFIDPRU— Remuneration Code Undertakings for Collective Investment in Transferable Securities ( UCITS) Remuneration Code, located in the FCA Handbook SYSC 19E In addition, the CRR Remuneration Code is set out in the Remuneration Part of the PRA Rulebook and applies to CRR firms ( UK banks, building societies and designated investment firms). For further information, see Practice Note: PRA remuneration requirements for UK banks, building societies and systemically important investment firms. Rules on the...
Background to the HMRC's online HMRC’s online trust registration approach was devised to give effect to the EU’s Fourth Anti- Money Laundering Directive, Directive ( EU) 2015/849 (4MLD), via the Money Laundering, Terrorist Financing and Transfer of Funds ( Information on the Payer) Regulations 2017 ( MLR 2017), SI 2017/692, and to the EU’s Fifth Anti- Money Laundering Directive, Directive ( EU) 2018/843 (5MLD), through the Money Laundering and Terrorist Financing ( Amendment) ( EU Exit) Regulations 2020 ( MLR 2020), SI 2020/991. The Money Laundering and Terrorist Financing ( Amendment) Regulations 2019, SI 2019/1511 also transposed 5MLD into UK law, but addressed matters other than the registration of trusts. Accordingly, this Practice Note concentrates on MLR 2017, SI 2017/692 and MLR 2020, SI 2020/991. For guidance on implementing 5MLD in the UK, including the consultations undertaken, see Transposing 5MLD into UK law below. MLR...
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When evaluating a general damages claim, the practitioner ought initially to refer to the Judicial College Guidelines (JCG)...
This Practice Note This Practice Note reviews mechanisms used in settling litigation. A Tomlin order consists of a consent order paired with a schedule. It operates to stay proceedings on terms that have been agreed. The provisions contained in the schedule may remain confidential. This Practice Note describes the scope of confidentiality attaching to the schedule and sets out how it differs from a standard consent order. Sample wording for a Tomlin order is included, alongside links to precedents, as well as guidance on court approval. It also addresses varying, setting aside and enforcing a Tomlin order, including the considerations the court will take into account when handling applications for each. Further guidance is provided on interpreting and applying the relevant provisions of the CPR; however, some courts and divisions impose very specific requirements for both drafting and approval, and for approaching the schedule and confidentiality issues. Accordingly, you must consider the particular rules and court guide provisions in the forum where your claim is proceeding when drawing up the Tomlin order...
Date [ date ] Parties [ name of Landlord ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Landlord) [ name of Tenant ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Tenant) [ [ name of Guarantor ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Guarantor) ] [ [ name of Mortgagee ] [ of OR incorporated in England and Wales (company registration number [ number ]) with its registered office at ] [ address ] (Mortgagee) ] Definitions Within this Deed, the terms below shall be interpreted as follows: [ Annual Rent • the annual sum reserved under the Lease; ] [ Insurance Rent • the Tenant’s share of the Landlord’s costs of insuring the Property (as set out in the Lease); ] Lease • the lease of the Property dated [ date ], entered into between (1) [ the Landlord OR [ name ...
I, [ name ], of [ address ], solemnly and sincerely state that: [ Matters to be verified, set out in numbered paragraphs ] I make this solemn statement in good conscience, believing it to be true, and pursuant to the provisions of the Statutory Declarations Act 1835. DECLARED at [ details ] this [ day ] day of [ month and year ] Before me ................................................................................ [ signature of the person before whom the declaration is made ] A [ commissioner for oaths OR [ solicitor OR [ insert other qualification ] ] authorised to administer oaths ]...
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