The Spring Budget was delivered by the Chancellor on 15th March 2023. The key areas to note in relation to Private Client are:

Trusts and Estates:

Pensions:

The government also announced that it will consult on the taxation of ecosystem service markets and the potential expansion of agricultural property relief from inheritance tax to cover certain types of environmental land management.

For more information on the Spring Budget 2023, please see the Government Website.

For further advice and assistance please contact our Private Client Team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

The recent case of TP ICAP Ltd v NEX Group Ltd [2022] EWHC 2700 (Comm) highlights the importance of the disclosure process in a corporate acquisition/sale and also the requirements to have a clear and detailed notice of breach of warranty claim that is compliant with the requirements in the share purchase agreement (SPA), when providing notice of a claim.

The buyer (TP ICAP) intended to bring a claim against the seller, NEX Group Ltd for a breach of warranty claim failing to disclose certain documentation relating to a specific warranty under the SPA. The seller then argued that the claim should be struck out due to an ineffective notice of claim provided by the buyer.

The High Court did not strike out the breach of warranty claim under the SPA on the basis that the notice of claim provided by the buyer to the seller under the SPA failed to meet the notice requirements found in the terms of the SPA, specifically a limitation of liability clause.

This limitation required the buyer to provide written notice of the breach of warranty claim to the seller before a specified date which would state in reasonable detail the nature of the claim involved.

The warranty in question was limited by the seller’s awareness, which under the SPA was defined as the “actual knowledge” of eight specific individuals. The warranty in question was regarding there being no existing or pending non-routine investigations by a government authority in relation to the target company’s employees or officers which would have a material adverse impact on the running of the target business.

The proposed breach of this warranty was opposed by the seller as they asserted that the seller’s awareness meant that for there to be reasonable detail of the nature of the claim in the notice of claim, that it should include those individuals who are deemed to have knowledge in the SPA. The seller argued that as the notice failed to state that any of those individuals had knowledge, that it is an invalid notice. The seller also argued that because the notice did not identify why the breach would result in a material adverse impact on the target business, that the notice is ineffective.

The High Court rejected the seller’s argument. The notice requirements under the SPA did not specify that the individuals’ names would need to be included in the notice of claim. The judge was also of the view that there was nothing in the SPA that required an explanation or detail in the notice of claim as to why the breach (relating to the investigation by a governmental body) would adversely impact the running of the target company, and the omission of such in the notice would not result in the notice of claim being ineffective. The judge in this case had the view that the seller’s argument would require the buyer to do more than what is required pursuant to the SPA.

Overall, the High Court said that the breach of warranty claim should go to trial and should not be struck out due to the ineffective notice of the claim. This case is therefore ongoing; however, it does illustrate the importance of the disclosure process and in order to bring a breach of warranty claim, the buyer should ensure they comply with the SPA requirements when providing a notice of claim under the SPA.

For further advice and assistance please contact our Business Services team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Many companies have sole directors who labour under the mistaken belief that Model Articles are all they need. Unfortunately, as has been recently confirmed by Fore Investments Holdings Ltd [2022] EWHC 191 (Ch), this isn’t the case. This claim was an unfair prejudice petition brought by a shareholder of the company. The company did bring a counterclaim, but a question surrounding its validity was made. The counterclaim was dismissed, as it was held, that the company did not comply with its articles of association when serving the counterclaim.

Fore Investments Holding Ltd argued that the model articles must allow for it to operate with a sole director due to the fact that the Companies Act 2006 and the Model Articles allows for single director companies and for sole directors to make all decisions, in single director companies (Model Article 7(2)). The Shareholder bringing the claim, advised that the Articles of Association of the company did require the company to have at least two directors to be quorate (the specific article required there to be two specific directors in order to form a quorum).  When the company served the counterclaim, the company only had one director, and the shareholder suggested that the counterclaim should be dismissed.

Despite the reference to sole directors in Model Articles, the court agreed with the shareholder that Articles of Association that require at least two directors, the company must have the requisite number of directors to manage its affairs. Whilst the court acknowledged that the Companies Act 2006 touches on companies with a sole director, standard Model Articles cannot be used for companies with one director, and therefore should modify the Model Articles required to reflect the company’s position of having only one director.

Therefore, despite the company having a bespoke Model Article 11(2), the company should have amended the Model Article to allow the company to operate with only one director. If they did, then the counterclaim may have been accepted by the court, when it was served.

The case illustrates the importance of these following Model Articles:

Model Article 7(1)  “a decision made by directors  must be made either by a majority decision at a meeting or a decision taken in accordance with Article 8” – otherwise known as the “general rule”.

Model Article 7(2) “if the company only has one director, and no provision of the articles that requires it to have more than one director, the general rule does not apply” and the sole director can make decisions on behalf of the Company.

Model Article 11(2) “the quorum for directors meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two.”

Model Article 11(3) “if the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision to appoint further directors or to call a general meeting so as to enable the shareholders to appoint further directors”

It is an industry wide approach that Model Articles 11(2) and 11(3) form part of the “general rule”, therefore whilst a company has one director only they will not apply and the company can operate with a sole director. This case goes against the general rule and makes it clear that the articles must reflect how the company operates.

If you are the only director of a company, it is therefore imperative that you ensure the Articles of Association are properly tailored to your needs. Otherwise, you run the risk of not complying with your Articles of Association when making decisions, meaning that any decision made, could be deemed void. Therefore companies should review their current Articles of Association, specifically articles 7 and 11 and see whether they have adopted Model Articles 7 and 11. The Company will then need to determine whether it will need to operate as a single director company. If so the company’s Articles of Association will need to be amended to ensure the company can operate this way. If the company did also operate historically as a single director company then it should also seek advice on whether any decision made by the sole director is void.

For further advice and assistance please contact our Business Services Team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Justin Wilson joined Franklins in December 2021 as newly qualified solicitor within the Business Services Division. Here he shares what a typical day involves, how the team work together to meet the needs of their clients and why networking plays an important part of the role…Justin Wilson from Franklins Solicitors

Life as a newly qualified solicitor at a law firm is a great and has its benefits, but like with any job it has its tough moments. You have just completed your training contract and the worry in making that next step, being a fully qualified solicitor can be daunting, as the level of responsibility increases. This was one of my main concerns when becoming newly qualified, especially as I was moving firms and joining Franklins. Pressures and nerves come naturally to anyone starting a new job, especially when your responsibility increases.

These feelings soon passed when I joined the team here at Franklins. From the very first day I felt warmly welcomed and it made my start and easy one. Starting during the midst of Covid-19 left me feeling slightly anxious, like anyone else, due to the unknown. However after the training I received and getting used to the system, I felt more at ease.

In terms of the work that a newly qualified solicitor deals with, it varies day to day. The types of clients that you deal with are varied also, which makes the job role interesting and does make you have to think on your feet. You could be drafting documentation, which can include a Share Purchase Agreement and bespoke purchase price adjustments, you could be in client meetings (mainly virtually due to Covid-19), or you could be reviewing documentation as part of the due diligence process.

The benefit of working in corporate is that you work with so many different and unique businesses and individuals. You can be working on a company acquisition in the manufacturing sector and the next day you will be working on the sale of a clothing retail company. This does mean that the drafting of the documents needs to be bespoke and tailored for the specific industry involved. In dealing with such transactions, it really does benefit any junior solicitor in cementing your skills, in drafting and in communicating with clients, as well as getting a broader knowledge of different industries.

As a newly qualified solicitor the responsibility of course increases, however since I have joined Franklins, the transition has been made a lot easier with the support of the team I work alongside. I work with an Associate Partner, a trainee solicitor and a paralegal that each assist in their own way. I work closely with the Associate Partner when it comes to drafting, the trainee I work alongside, will help with drafting certain documentation like ancillary documentation and reporting to the client, and the paralegal will assist when it comes to the formality processes. These are all very important elements to every transaction, as with the help of the team it really does assist in ensuring you satisfy the client’s needs and ensuring the client is happy with the outcome of the deal.

Another part of the job is networking. Networking, if it is done correctly can be a very useful tool in growing workload in most areas of law, not just corporate. Networking can include a host of activities. Some of my personal favourites are sport based networking events. It could be that you invite clients/referrers to a professional football or rugby match and you have a formal meal and watch the match in the corporate box (if your firm does this) or it could even be a golf day. Not only sporting events take place, it can simply be a quick coffee and cake, where you have a catch up with whoever you are networking with. Networking is something that is expected to ensure that you help your business continue developing the existing relationships they have and also to help develop new relationships. Networking can come in so many forms and I have mentioned a select few, however there is a wide variety of events that you can do to network and the more you do it, the easier it becomes, and the better you become the more work you will see coming your way.

In terms of the work/life balance, some would think that as a solicitor you put in long hours and it takes over your life. This is not true. If there is a transaction that requires an urgent completion, then you will put in the hours to ensure the client is satisfied and so that the target completion date is met, or if you have a large workload, you will of course work harder to get the work done and if that means staying later to finish a task, you will do that. However this is not the case in most instances, I still manage to go to the gym several times a week and play sport often, and get to spend time with my family and friends. Overall, being a newly qualified solicitor is a great experience, and if you work hard it is very rewarding.

To contact Justin or a member of the Business Services team please call 01604 828282 or 01908 660966 or email info@franklins-sols.co.uk .