Legal Practice Notes

Articles of association This Practice Note functions as a guide for the drafter when preparing and/or checking articles of association (articles) for a private limited company (incorporated in England and Wales) supported by a private equity (or venture capital) fund investor (the investor) together with the company’s founders in connection with a venture capital ( VC) transaction. The transaction comprises an investment into an existing company (the Company), under which the current shareholders (typically founders of the business) retain their previously issued/existing shares in the Company. Outlined below are matters to address when preparing and/or reviewing the principal provisions of such a document, when drafting and/or reviewing. Model articles The drafter will need to obtain instructions from the parties on which provisions of the model articles for private companies limited by shares, contained in Schedule 1 to the Companies ( Model Articles)...

Articles of association This Practice Note offers guidance for the drafter when preparing and/or assessing the articles of association (articles) of a private limited company incorporated in England and Wales, where a private equity or venture capital fund (the investor) participates alongside members of the target’s senior management team as part of a management buyout ( MBO). Outlined below are the matters to weigh up when reviewing and/or drafting the principal provisions of this document. Model articles The drafter should seek instructions from the parties on which provisions of the model articles for private companies limited by shares, as set out in Schedule 1 to the Companies ( Model Articles) Regulations 2008 ( SI 2008/3229) ( Model Articles), are to apply to the investee company in which they will hold their shares ( Company)......

At the preliminary stage of a private equity investment process, it is usual for the parties to enter into heads of terms which set out the principal terms of the investment. See Precedents: and Heads of terms—non-leveraged investment—equity. The document generally takes the form of a standard agreement, a letter or a term sheet. Nature and purpose The heads of terms outlines the principal commercial terms of the proposed investment. Except for certain specific exceptions, the document is not intended to be legally binding on the parties to it......

This Practice Note This Practice Note explains how to prepare and negotiate the service description schedule for an outsourcing contract. Sometimes called the requirements schedule, the service schedule defines the supplier’s service scope and is a crucial component of the outsourcing deal. It looks at what the schedule should include, the level of specificity needed, and how it links to other elements of the agreement, including service levels and dependencies. The services description schedule in an outsourcing arrangement sets out the breadth and depth of the services the supplier must provide to the customer. It is widely viewed as the agreement’s key section because it captures the essence of the parties’ bargain. While it is commonly drafted and negotiated by each side’s commercial or operational teams, early legal involvement is vital to secure clear, precise drafting and to confirm that the schedule is...

This Practice Note outlines the rationale for, and the points to assess in connection with, contracts covering the support and maintenance of on-premise software. For deeper analysis, see the drafting notes to Precedents: Software support agreement—pro-customer and Software support agreement—pro-supplier. For more on issues particular to the service level agreement or schedule that may apply to a software support and maintenance arrangement, see Practice Note: Key issues in Saa S and hardware/software maintenance SLAs. Considerations for maintenance and support contracts It is widely recognised that on-premise software will not invariably be, or remain, free of defects, which underlines the need for maintenance. The agreement should clearly set out: what is covered within the services offered for what duration during which hours at what price Key issues to consider are: services: It can be appropriate to separate, and price...

Key takeaways Purpose of the SLL Provisions: The LMA’s Sustainability- Linked Loan Provisions set out suggested wording to embed sustainability-linked terms within loan documentation. Function and Scope: In SLLs, the interest margin flexes according to the borrower’s progress against pre-agreed SPTs, measured by defined KPIs. Sustainability Margin Adjustment: A ratchet applies so the margin moves up or down based on the count of SPTs achieved in each SLL Reference Period, with scope to customise triggers and the economic effect. Compliance and Reporting: After every SLL Reference Period, the borrower must provide a Sustainability Compliance Certificate, backed by a Sustainability Report and an independent Verification Report evidencing outcomes and approach. Consequences of Breach: Breaching sustainability-linked undertakings or representations typically does not constitute an event of default; instead, SPTs are treated as unachieved, which feeds into margin calculations and may precipitate...

IP licence An IP licence permits a licensee, with the licensor’s consent, to use IP rights that they would not be able to exploit otherwise. An IP licence may stand alone as a dedicated IP licence agreement, or be incorporated within a broader contract, eg where specified IP rights are licensed under a commercial deal, project, or collaboration. This negotiation guide highlights the principal components of an IP licence clause suitable for insertion into a wider agreement. For example IP licence clauses, see Precedents: Intellectual property rights licence clause—pro-licensor and Intellectual property rights licence clause—pro-licensee, for reference as set out here......

This Practice Note offers a high-level summary of insurance clauses within commercial agreements. It outlines the main categories of insurance commonly used in such agreements and the principal features of insurance clauses and covenants. It is not intended to set out the law of insurance; in that regard, see Insurance contracts—overview. Nor does it consider the many other ways to obtain security for contractual liabilities beyond placing insurance. Given the potential limits of insurance cover, parties may conclude that alternative arrangements suit their needs better, for example obligations of surety such as guarantees from a group and/or parent company, or performance or guarantee bonds. See Types of security—overview for further guidance. Role of insurance clauses in commercial agreements The core function of a commercial contract is to apportion the risks and benefits of the transaction between the parties. Risk can be allocated in various ways; a clear...

This Practice Note chiefly targets brands seeking to engage influencers for specific social marketing campaigns and promotional advertising. It provides a high-level summary of the clauses commonly included in influencer contracts and flags the main points to weigh up when assessing an influencer agreement. For a template, refer to Precedent: Influencer agreement. For fuller guidance on regulating influencer activity and safeguarding them against online harms, see Practice Note: The regulation and protection of influencers. The influencer landscape is changing at pace and, although many have not ascended to the status of conventional celebrities (such as sports personalities, film actors, musicians or royals), dedicated service and support teams now work for influencers, assisting with branding and commercial dealings. Some may retain PR teams, legal advisers and financial backers, while others may never have seen or evaluated a services contract. Sensible due diligence, coupled with...

Negotiation Guide This Negotiation Guide forms part of the Practical lease negotiation collection. See also Practice Note: New starter guide—entering into new commercial leases. It provides guidance on negotiating the terms of a guarantee where a third party proposes to act as guarantor of a tenant’s obligations to a landlord under a lease of commercial premises. A guarantor’s obligations may be set out either in a clause within the lease, in a separate schedule to it, or in an entirely separate document (although the last of these is relatively uncommon). For the purposes of this guide, the relevant provisions in any such clause, schedule or separate document are referred to simply as ‘a/the guarantee’. In the context of commercial leases, the guarantor will typically be: a parent company of the tenant, or a company in the same corporate group as the tenant, or a director of and/or...

When embarking on a facilities management ( FM) arrangement, the parties must navigate a broad spectrum of contractual considerations, from choosing how best to place the contract (procurement routes and requirements) to anticipating what will occur if outcomes fall short in practice (change controls, termination and dispute resolution). This Practice Note sets out the principal contractual points to capture when assembling the formal agreement. Each point needs careful analysis and bespoke adjustment to suit any particular project needs, but it is vital that, throughout negotiations, the parties remain mindful of the overall contractual matrix of risks and responsibilities (see diagram: What does a Facilities Management contract look like—diagram). Procurement issues How will the client procure the FM relationship itself? What tendering steps will be followed and how will the agreement be entered into? Does the client’s identity and status impose further...

Practice Note: construction arrangements for UK electricity interconnector projects This Practice Note explores key considerations in the construction arrangements for UK electricity interconnector schemes. Electricity interconnectors are substantial transmission cables carrying power between one country and another. A typical interconnector scheme covers the fabrication and laying of the cable itself (usually high voltage direct current ( HVDC)) and the build and fit out of a substation at each end (a converter station) that converts electricity between Alternating Current ( AC) and Direct Current ( DC). AC is used within each national transmission network, while DC is employed to move electricity along the high-voltage subsea route. For an overview of interconnectors, and how and where they operate in Great Britain, see Practice Note: Great Britain electricity interconnectors. These projects commonly adopt either a single ‘wrapped’ construction contract or a split approach using two discrete...

Residual value agreements are a practical mechanism for apportioning an aircraft’s residual value risk. The main purposes for deploying residual value agreements are: to deliver added protection for financing parties within a specific aviation finance transaction in operating leases, to minimise a lessor’s exposure to residual value risk to give an airline reassurance about the worth of its investment in a fleet of aircraft There are multiple forms of residual value agreement. Each allocates risk in different ways and to different parties within the transaction. Such arrangements appear in several variants, each designed to apportion residual value risk differently between stakeholders. What is a residual value agreement? Within aviation finance transactions, residual value agreements distribute the residual value risk in an aircraft among various parties, or transfer that risk to a third party, such as an insurer......

East Riding of Yorkshire Council has produced this Practice Note. It should be read alongside Practice Note: Design requirements in the planning system, which outlines the legal and policy framework governing design in the planning system. Preparatory stage Thorough preparation establishes a clear process for drafting and implementing a code, and helps secure buy‑in from key stakeholders. From the outset, define the parameters of the code. Will it operate across the whole authority or be tailored to a specific site? Alternatively, should it concentrate on a single design characteristic or aspect? Early, meaningful engagement with stakeholders—including local residents, agents, developers and planning officers—can fix initial boundaries and map the scope the code will need to cover. This early dialogue also highlights priorities that warrant inclusion. Review design guides and codes prepared by other authorities, then discuss which approaches will work in your area. Comparing examples can reveal what to adapt or...

A risk management policy describes the risks a business faces and sets out the measures to prevent those risks from arising and to lessen their impact if they do occur. This Practice Note provides a guide to the features usually included in a risk management policy... What is risk? A widely recognised definition is: Risk = probability x impact. Therefore, for any risk confronting your business, there are two key questions to ask: how likely is it that the risk will materialise, that is, what is the probability? if the risk does materialise, how severe will it be, that is, what is the impact? Regulatory requirements General risk You are required to identify, monitor and manage every material risk to your business......

This Practice Note outlines how ethics intersect with business and clarifies the aim and substance of a code of ethics. It is designed to assist you in deciding what to include in your own code of ethics, and to set the scene for our Precedents. Ethics and business ethics Ethics are the moral principles that steer our behaviour and judgements, enabling us to recognise what is right or wrong. Though connected, ethics and the law are not equivalent. The law defines the minimum mandatory standard of behaviour, whereas ethics reaches beyond this and expects a higher level of conduct. Business ethics concern the application of ethical values to business activities and functions. This applies both to individual conduct and to organisations as complete entities. Any organisation can choose to operate ethically, taking decisions because they are the right thing to do, rather than...

Key elements of confidentiality agreements—restructuring & insolvency This Practice Note outlines what a standard confidentiality agreement in a restructuring covers, and the reasons those provisions appear. It should be read together with Precedent: Confidentiality agreement—restructuring & insolvency. Why are confidentiality agreements required? Sound information is the foundation of any effective restructuring. Directors, creditors, investors and other stakeholders require insight into the debtor company and its affairs to decide if a restructuring is feasible, how it should be structured, and which participants hold an economic interest in the result. The right balance is critical—creditors must have adequate access to data to assess the company properly, understand the drivers of its difficulties and the depth of its financial distress, and thereby be positioned to maintain support throughout the process. That visibility enables them to evaluate the company, grasp the causes of the issues and the...

Forthcoming change The Serious Fraud Office ( SFO) is currently revising its guidance on DPAs, with publication anticipated in 2025 (see Collection: Guidance for corporates). This Practice Note will be revised once the new DPA guidance is released, and will be refreshed promptly to reflect any changes announced upon publication. Disclosure in the DPA negotiation process Within the deferred prosecution agreement ( DPA) negotiation process, co-operation is a decisive factor that can affect a company’s prospects of avoiding prosecution. The DPA Code of Practice ( DPA Code) sets this out at paragraph 2.8.2 and the Serious Fraud Office ( SFO) reiterates it in its Corporate Guidance; see also Practice Notes: Corporate co-operation guidance for organisations seeking a DPA and DPA process. For further reading, see Practice Note: DPAs in practice— Co-operation—the most important factor? What amounts to ‘co-operation’ in this setting has attracted...

What must a DPA contain? The statutory rules defining the contents of a Deferred Prosecution Agreement ( DPA) appear in paragraph 5 of Schedule 17 to the Crime and Courts Act 2013 ( CCA 2013). They prescribe two mandatory requirements and seven suggested terms; the latter are indicative rather than exhaustive, and the parties may agree further suitable provisions. The list of suggested terms is expressly non-exhaustive. Accordingly, the basis of the DPA and its detailed contents should be expressed with clarity, set out clearly and simply, and then put before the court for its consideration and approval. The decision in Guralp Systems Ltd v Director of the Serious Fraud Office highlights the consequences of failing to articulate DPA terms plainly and succinctly. Other appropriate terms may likewise be incorporated by...

Brexit On 31 January 2020, the UK left EU membership and moved into an implementation phase, during which EU law continued to apply. Throughout this timeframe, the GDPR remained in force in the UK and, for EEA and UK data protection purposes, the UK was broadly regarded as if it were an EU (and EEA) state. Accordingly, any mentions of EU or EEA states in this Practice Note should be interpreted as including the UK until that period concludes. For the avoidance of doubt, this covers every reference in this document to EU and EEA states during the implementation window. For additional guidance on that phase, its length, and the privacy regime expected to apply once it ends, see Practice Note: Brexit—implications for data protection [ Archived]. ARCHIVED: This Practice Note is archived material and reflects the situation before the General Data...