Published Summer 2013
Following on from our last Commercial Write, where we gave a positive outlook for the current year and beyond, we have seen continued activity and remain just as confident, if not more, in our outlook.
The total value of corporate, commercial and banking/funding deals that we have been involved in during the last 12 months were in the region of £100m and we expect deal activity in the next 12 months to be in excess of those figures.
The Corporate team has continued to be busy since the start of the year, following the deals completed at the back end of 2012.
Deals are, however, taking slightly longer as buyers and sellers are understandably being cautious. Such approach leads to deals having post-completion adjustments to the price paid (upwards and downwards), as buyers are keen to ensure that they do not overpay and sellers look to secure the full value of the business sold. This takes the form of deferred consideration, earn-outs and completion balance sheet adjustments. More time is also being spent on due diligence, especially where bank/third party funding is involved.
The types of deals we have seen:
- National and cross border transactions involving disposals to foreign/global trade buyers;
- Sales to and refinancing with private equity houses;
- Business angel funding and commercial property funding by high net worth individuals who seek opportunities where banks have left a void.
- We have seen a strong concentration of deals in the IT and professional services sectors.
In amongst all of this, we continue to provide specialist advice in other areas such as business asset protection (shareholder agreements, partnership agreements and joint ventures), reorganisations and restructuring of groups and advising in specialist sectors (for example, we act for a number of solicitors, accountants and other professionals in the health-care industry).
The Commercial team continues to grow from strength to strength in all aspects of commercial law (for example, terms of business and agency and distributorship agreements), and especially with regard to the specialist sectors of IT and IP. The IT sector itself was one of the few sectors which weathered the recent financial crisis better than others as such businesses were able to drive their skills and expertise in an efficient and profitable manner.
The requirements of businesses in such sectors are well catered for by our Commercial team. The service we provide is akin to having “in-house” counsel, especially for large IT companies. However, we also thrive on assisting younger companies making their way and helping them structuring their IT/IP licensing and exploitation models.
- Some of the exciting work we have been involved in includes:
- Negotiating multi-million pound commercial contracts in the insurance, procurement and fashion sectors;
- The delivery of IT systems into the NHS;
- Assisting start-up companies in commercialising their software/IT products and helping them with their suite of documentation to implement the same;
- Advising a trade body in relation to its joint venture project to purchase and operate a recycling plant which offers a specific recycling service, being a first for England and Wales.
Employee owner status
As an aside to our main article on EMI share option schemes, you may also be aware of the Chancellor’s proposal for a new “employee owner” status.
This is where individuals give up certain employment rights in exchange for capital gains tax (CGT) exempt shares in their employer, and is targeted at small and medium sized companies. The Government has recently published the response to the consultation by BIS and, despite the negative response, the proposals are due to come into force on 1 September 2013.
The detail of this proposal is beyond the scope of this roundup (more detail appears in our July 2013 Employment Newsletter) but briefly, the rights given up by an employee include the right to claim for unfair dismissal and the right to a statutory redundancy payment. There are also restrictions on the value of those shares that may be offered with the tax benefits (up to £50,000 of gains will be free of CGT). There are also procedural requirements to satisfy such as:
- Employees having a 7-day “cooling off” period;
- The employer must give information setting out the rights attaching to the shares and the rights the employee is giving up;
- Employees must be given independent legal advice on this (reasonable costs being paid by the employer).
Other issues that should be considered are the administrative costs and the need to consider whether changes are required to the constitutional documents of the employer company. As you will have seen, EMI share options do give substantial incentives to employees (and employers) and we do look sceptically at the potential uptake of this proposed “employee owner” status.
Buy-back of shares
From 30 April 2013, there have been a number of small changes to the buy-back regime (which prevents a company buying back its own shares unless a statutory procedure is followed).
The main changes to the regime introduced by the Companies Act 2006 (Amendment of Part 18) Regulations 2013 include:
- Private companies are now entitled to buy back shares using small amounts of cash (not exceeding the lower of £15,000 or 5% of the share capital in any financial year) where the cash is not identified as distributable reserves provided that the articles of the company permit; and
- A private company can pass an ordinary resolution to permit multiple buy-backs for the purposes of or pursuant to an employee share scheme (previously, each buyback needed to be approved). There are a number of other relaxations in respect of an employee share scheme.
Consumer law update
Each successive Government has promised, but failed to deliver, reform of the UK consumer law regime.
There is however a draft bill (the Consumer Rights Bill) looking to reform, simplify and consolidate the different pieces of legislation currently providing protection to consumers and imposing obligations on suppliers of B2C goods/services.
On 12 June 2013 the Government published the draft bill which includes reforms on:
- Rights and remedies for the supply of goods, services and digital content;
- Unfair terms; and
- Investigatory powers, additional remedies and private actions in competition law.
The aim of the draft bill is to ensure that it is understandable by both consumers and businesses with very little use of legalese. The Government is seeking comments by September 2013 with a view to implementing the bill by 14 June 2014.