Legal Practice Notes

This Practice Note maps the rules governing pay for directors of quoted companies, set against rising shareholder activism and greater media scrutiny of executive reward. It distils the statutory reporting regime on directors’ remuneration for quoted companies and highlights key provisions of the Companies Act 2006 ( CA 2006), the UK Listing Rules ( UKLR), the Financial Reporting Council’s ( FRC) UK Corporate Governance Code ( UKCG Code), together with best practice guidance on executive pay... Directors’ remuneration—law, regulation and best practice Legislation Under the CA 2006 and the Large and Medium-sized Companies and Groups ( Accounts and Reports) Regulations 2008, SI 2008/410, directors of a quoted company must produce an annual remuneration report disclosing prescribed details of directors’ pay. For CA 2006 purposes, a quoted company is a UK company whose equity share capital: has been admitted to the Official List of the London Stock...

The Companies Act 2006 ( CA 2006) Under the Companies Act 2006 ( CA 2006), any clause in a director’s service contract that fixes, or could fix, the guaranteed period of employment at more than two years must be approved by the company’s members. Such approval is mandated because long-term service arrangements with directors are commonly regarded as especially open to abuse. The relationship between these statutory approval provisions and the general duties imposed on directors by statute is considered in Practice Note: Directors’ duties—fundamentals. For these purposes, ‘director’ includes any individual who occupies the office of director, by whatever name called (that is, regardless of the official title), and any shadow director. A company must also comply with other statutory requirements concerning directors’ service contracts; see in particular Practice Note: Directors’ service...

A director of a company that is limited by shares may encounter a broad spectrum of liabilities arising directly or indirectly from their actions or omissions in the ordinary conduct of the company’s business and affairs, whether grounded in statute, contract, or tort, as applicable. The Companies Act 2006 ( CA 2006) sets a general prohibition on excluding, restricting, limiting, or indemnifying directors for those liabilities (see the General rule against protection from liability). Nevertheless, statute recognises specific exceptions that permit directors to be protected against such liability by: the company taking out and keeping insurance for its directors against liabilities (see Insurance) the company granting qualifying indemnities to its directors in respect of certain liabilities (see Indemnities) Shareholders can also relieve directors from liability by ratifying acts of misconduct, so long as the conduct is capable of ratification (see...

This Practice Note concentrates on the legal framework and practical steps for appointing directors, and the procedures by which a director may retire or step down from office. It examines the role performed by a director. It also considers the different types of director in a company. It outlines the required notifications and related actions on any director change, including updating statutory registers and submitting filings to Companies House as necessary. The note reviews the pertinent provisions of the Companies Act 2006 ( CA 2006), together with the company’s articles of association. It further addresses the additional requirements for appointing, retiring and resigning directors of listed public companies, including the UK Corporate Governance Code ( UKCG Code), which applies to UK and overseas companies with a listing of equity shares in the equity shares (commercial companies) category in the UK (listed...

In numerous real estate sales and purchases, the agreed consideration often contains an overage element. There are various ways to structure overage. Its direct tax position turns on the chosen structure and the respective tax profiles of payer and recipient. This Practice Note reviews the main forms of overage and how direct taxes apply to both seller and buyer. Overage payments also affect SDLT and VAT, sometimes strongly enough to dictate the deal structure. Those issues fall outside this Note. For VAT, see Practice Note: VAT treatment of overage; for SDLT, see Practice Note: SDLT chargeable consideration — overage payments. In this Note, income tax references encompass corporation tax on income, and CGT covers both capital gains tax and corporation tax on chargeable gains. What is overage? Overage refers to a situation where the seller (usually, but not always, of land) keeps a right to...

What is direct effect of EU law? The doctrine of direct effect is a central principle of EU law fashioned by the Court of Justice of the European Union ( CJEU) in Van Gend en Loos. It provides a route for individuals to rely on EU law to assert rights in the courts of Member States—a remedy where EU obligations are not upheld. In Van Gend en Loos, the relevant EU rule was a Treaty article, i.e. primary law. The transport company Van Gend & Loos had brought goods from Germany into the Netherlands and was required to pay customs duties it regarded as contrary to Article 12 of the EEC Treaty (now Article 30 of the Treaty on the Functioning of the European Union ( TFEU)), which bars increases in customs duties in trade between Member States. The preliminary reference addressed the...

Within the suite of papers required to arrange funding for a development or construction scheme, the facility agreement sits as the core instrument and is regarded as the principal document. It spells out the terms and conditions on which a lender is willing to finance the scheme and participate in the project. Its provisions address every element of the funding package, and are not confined to construction-specific matters but extend across the entire arrangement. Banking and finance solicitors will prepare and negotiate the finance clauses, while construction specialists review the construction terms, acting for the lender or the borrower as required. For guidance on the overall structure and layout of a facility agreement, see Practice Note: Structure of a facility agreement for construction projects. In this Practice Note, ‘borrower’ denotes the party taking the loan, that is, the entity borrowing the money....

This Practice Note examines the issues to be considered in relation to medical evidence in disability discrimination claims in the employment tribunal, ie prohibited conduct claims under Equality Act 2010 ( Eq A 2010). It clarifies that deciding whether a claimant is disabled is the employment tribunal’s function, not the province of a medical expert. The Practice Note considers if the tribunal may take account of material other than clinical opinion, describes what a medical report will ordinarily address, places the burden on the claimant to supply medical evidence, explores when the tribunal may decline to accept such evidence, and sets out how statements from GPs about depressive conditions ought to be treated. It further records that, in general, a single, jointly-instructed medical expert should provide the evidence, and outlines the principles the tribunal should follow where a party seeks to instruct an...

How design is addressed under the NEC ECC Some families of construction contracts provide distinct, dedicated forms to be used where the contractor assumes responsibility for both designing and building the works—the JCT suite, for instance, and by way of example, includes the widely recognised JCT Design and Build form. By contrast, the NEC3/ NEC4 suites adopt a notably different approach and omit a standalone design-and-build contract. NEC4 did add the Design Build and Operate ( DBO) contract; however, as its title implies, that form is expressly intended for situations where the employer wants the contractor not only to design and construct but also to operate/maintain an asset for a period. The NEC Engineering and Construction Contract ( ECC) is deliberately crafted to be suitable whether the Contractor has no design role, takes on the entire design, or assumes...

Netting Netting is a contract-based arrangement between two counterparties. In essence, it provides that whenever they deal with one another, they do not maintain separate cross-claims against each other. Rather, at any moment there is only a single consolidated amount outstanding, owed by the party whose notional cross-claim has a lower value than its counterparty’s claim. Accordingly, there is, at any time, just one obligation to pay between them. Netting plays a vital role in the context of derivatives. Under a swap, for instance, two parties agree to exchange streams of payments with one another in practice. Each side makes periodic transfers to the other at set intervals over time. However, the amounts each pays are determined on different bases from one another. Consider the most prevalent interest rate swap (a fixed-to-floating interest rate swap): one side pays regularly by reference to a floating...

Introduction Defining the relevant market is traditionally the first step in most competition law analysis. It offers an impartial conceptual structure for systematically pinpointing competitors (or potential competitors) that may constrain a firm’s behaviour. The European Commission ( Commission) describes these forces as ‘effective and immediate competitive constraints’. Competition authorities use market definition in several contexts, in particular for merger control, the assessment of anti-competitive agreements, and abuse of dominance cases. merger control — competition authorities appraise the impact of the proposed merger. For this purpose, the Commission and the Competition and Markets Authority ( CMA) delineate the markets in which the merging parties operate, and the competitive pressure the combined entity would encounter within those markets anti-competitive agreements — when authorities suspect a restrictive agreement between suppliers or purchasers, they typically examine whether it generated anti-competitive effects. This entails defining the markets that may have been...

This Practice Note explores when an individual living in a care home may postpone paying their fees by entering a deferred payment agreement ( DPA), and outlines the measures a local authority should adopt to make sure the DPA offers sound security for the monies advanced. A DPA is a mechanism through which the local authority covers the expense of a person’s care home placement where, absent the arrangement, that person would be liable for those costs. Sums disbursed by the authority build up as a debt, secured against an appropriate asset—most commonly the person’s former home. That liability becomes payable after the person’s death or, if earlier, on the sale of the property or other collateral. Deferred payment agreements—relevant law When assessing DPAs, the initial sources to consult are the primary legislation, regulations and guidance. These include: sections 34 and 35 of the Care Act 2014 ( CA...

Introduction Over roughly the past decade, motor insurers have refined a method for spotting and handling personal injury claims from road accidents, especially alleged whiplash said to result from low-speed impacts. The focus is on collisions that seem minor in nature, typically arising in the following circumstances: two or more vehicles were travelling slowly, or, less commonly, their contact amounted to a slight glancing blow or gentle nudge one vehicle was stationary and another struck it, often at the rear, at very low speed Where an insurer considers a case fits this pattern, the defendant’s insurers may defend the claim on the footing that: whiplash (or another injury) cannot be sustained in such a low-speed impact, asserting there is a threshold of physical force below which an occupant will not be injured consequently, the claimant cannot satisfy the court that they suffered the stated injury, or indeed any injury, in this...

On construction projects, flaws commonly emerge within the works. Under the majority of building contracts, the contractor must return to site to make good any defects that arise or are identified within a set period after practical completion of the works, and to do so on site. In the industry, this window is usually called the defects liability period ( DLP), though JCT contracts call it the rectification period, NEC uses the term defects date, and FIDIC refers to the defects notification period. What is a defect? As the DLP deals with remedying ‘defects’, it is important to consider the scope of that term and to understand what it is taken to cover. ‘ Defect’ is not a technical term of art and there is no single ‘standard’ definition of what amounts to a defect in building works. In general terms, however, a defect is work that does not...

The ordinary time limit for defamation and malicious falsehood claims A claimant has one year to issue a defamation claim from the point when the cause of action arises, namely the date the defamatory statement is first made public (section 4A of the Limitation Act 1980 ( LA 1980), inserted by section 5 of the Defamation Act 1996). The Court of Appeal in Siniakovich v Hassan- Soudey confirmed that a claim is treated as ‘brought’ on the day the claim form is first delivered to the court office, even if the office properly declines to issue it because the whole of the appropriate fee has not been paid. For libel, the claimant’s ignorance of any publication at the time is irrelevant to accrual, and so does not postpone the start of the limitation period applicable to their claim. In most varieties of slander and...

What are deemed marine licences? The Planning Inspectorate ( PINS) is responsible for examining and considering applications for nationally significant infrastructure projects ( NSIPs) under the Planning Act 2008 ( PA 2008). See Practice Note: Examination of nationally significant infrastructure projects—general. Where proposals fall within specified locations—principally the English inshore and offshore zones (see: Geographical scope of DMLs below)—section 149A of the PA 2008 allows development consent orders ( DCOs) for NSIPs to include provisions which deem a marine licence to have been granted under sections 65–115 of the Marine and Coastal Access Act 2009 ( MCAA 2009). Nonetheless, in practice, some promoters may prefer to lodge a standalone application for a marine licence with the Marine Management Organisation ( MMO) instead of asking for it to be deemed through a DCO, as in certain situations that pathway can prove more...

This Practice Note concentrates on stamp duty, mortgages, the execution of documents, absent title deeds, sales of part and further matters, including searches and contract plans, when deducing title to unregistered land. It sets out how to approach each aspect and, where relevant, outlines both current practice and the historical position. Stamp duty Confirm that every instrument executed before 1 December 2003 bears the proper stamp. For leases, be aware that a lease completed before 1 December 2003, or one granted under an agreement for lease entered into before 10 July 2003, remains subject to the stamp duty regime. If any stamping is missing or defective, require the seller to arrange late stamping at their own expense......

Practice Note This Practice Note explains the procedure for seeking a declaration of parentage under the Family Law Act 1986 ( FLA 1986). It covers issuing and serving the application, evidential requirements, directions and case management. It also addresses declarations concerning adopted children, the legal impact of a declaration, and post-declaration steps to re-register a birth. Scientific testing, including DNA tests, is considered... The process for an application for a declaration of parentage is governed by the Family Procedure Rules 2010 ( FPR 2010), SI 2010/2955, Pt 8 together with FPR 2010, PD 8B. Although the declaration is sought under Pt 8, applications are brought using the alternative procedure in FPR 2010, SI 2010/2955, Pt 19—see Practice Note: FPR 2010, Part 19—alternative procedure for applications. The application must be made on Form C63 ( Application for declaration of parentage under FLA 1986, s 55A), and a court fee is...

Debt for equity swap A widely used restructuring approach is a debt for equity swap; financial creditors take shares in the reorganised corporate vehicle in return for reducing or writing off their debt claims against the company (and the remainder of the group). Many highly leveraged transactions have slender equity buffers and existing shareholders frequently end up ‘out of the money’. A debt for equity swap cuts balance sheet liabilities and lets lenders share in more of the upside after a restructuring when the business returns to profit (as equity holders, entitled to dividends once there are adequate distributable reserves) or on any subsequent sale. The valuation will indicate where the value breaks; that tranche will expect to receive the greatest equity allocation post‑restructuring (see Practice Note: Where the value breaks and negotiating strength). The corporate rescue exemption in section 322(5E) of the...

What are the methods of raising finance? When a corporate entity seeks funding, it must decide whether to borrow from creditors or issue shares on the equity markets. The choice hinges on several factors, including the preferences and requirements of prospective creditors/investors, and the characteristics of the entity raising capital. For a comparison of obtaining funds through debt versus issuing equity, see Practice Note: Debt securities and equity compared. Loans versus debt securities Loans appear in many guises. A straightforward, frequently used facility is an overdraft. In commercial finance, other common options include: Term loans Revolving credit facilities Lending can be provided by a single lender (bilateral) or a group (syndicated or club deals), and may be secured or unsecured. It can support both short-term and long-term requirements. For more detail, see: Types of...