2008 City Law News
Click here to see the 2008 City Law News archive
14/03/2008 - Gambling addict loses final bet with bookmaker
The High Court has ruled that a man with a self-confessed gambling problem is not able to claim over £2m damages against William Hill bookmakers.
... read more 
14/03/2008 - UK Businessman wins US Extradition Appeal
The House of Lords have allowed the appeal of UK businessman Ian Norris against a judge's decision that he should be extradited to the USA to face charges of price-fixing.
... read more
11/03/2008 - Companies Act 2006 - auditors' liability limitation agreements
A significant protection for the audit profession will very soon be introduced into company law when further provisions of the Companies Act 2006 are implemented. From 6 April 2008, an auditor will be able to limit its liability by way of agreement with a company. Previously, a company could not exempt its auditors from liability for negligence, default, breach of duty or breach of trust. Calls for auditors to be permitted to limit their liability grew following the demise of Arthur Anderson in 2002 in the Enron affair.
It will be possible for an auditor to limit its liability for negligence, default or breach of duty or trust in relation to the audit of the accounts but only to the extent that is fair and reasonable in all the circumstances of the case, having regard to (i) the auditor's responsibilities, (ii) the audtior's contractual obligations; and (iii) the standards expected of the auditor. If a liability limitation agreement purports to limit the audtior's liability to an excessive degree, the agreement will nevertheless have effect as if it limited liability to an amount that the court determines is fair and reasonable. (Note that the "reasonableness" test under the Unfair Contract Terms Act 1977 (UCTA) is specifically excluded.)
A liability limitation agreement must be approved by shareholders by way of ordinary resolution (unless the company's articles require a special resolution), although shareholders in a private company can resolve to waive the need for approval. The resolution approving the principal terms of the agreement can be passed either before or after the agreement is signed. The agreement must be limited to one financial year's audit, specifying the financial year to which it applies.
A company will need to disclose the existence and principal terms of any liability limitation agreement entered into with its auditors by way of note to the company's annual accounts. The date of the resolution approving it (or waiving the need for approval) must also be disclosed.
It will be interesting to see how such agreements develop, the form the agreements take and the manner in which liability is limited. An independent working group was established by the Financial Reporting Council (FRC) in 2007 to provide guidance on the use of liability limitation agreements. The group published draft guidance for consultation in December 2007 and expects to publish final guidance in the first half of 2008. Further information can be found on the FRC's website www.frc.org.uk.
... read more
04/03/2008 - Corporate Practice point - concert parties
A private company seeking a listing on a public exchange will often insert a public company above it, its shareholders carrying out a share for share exchange. The Takeover Panel has a working assumption that where all shareholders in the limited company exchange their shares for shares in the plc, a concert party is present for the purposes of the City Code on Takeovers and Mergers (the "Takeover Code"). The existence of the concert party must be disclosed in the prospectus or admission document (whichever is applicable), together with an explanation of the Takeover Code implications.
On a small fundraising, for example, where the members of the concert party will hold more than 50% of the company's shares following admission to the public exchange, such a group would be able to increase their aggregate interest in shares without incurring any further obligations under Rule 9 of the Code to make a general offer to the other shareholders to acquire the balance of shares. (Individual members of the concert party would not, however, be able to increase their percentage shareholding through or between a Rule 9 threshold without carrying out a "whitewash procedure" and obtaining Panel consent.)
... read more
16/01/2008 - Court refuses to wind up company where possibility of recovering stripped assets
A company which was trading whilst insolvent avoided a winding up order where there was a prospect of success in proceedings against one of its directors which would return the company to the black.
... read more
16/01/2008 - Agreement to part pay a debt is not binding but there is some hope for the part-payer
The Court of Appeal recently found that a creditor, who may have agreed to limit a debtor's liability to one third of a joint debt, could not be bound by any such agreement as there was no consideration. Six years previously, the creditor obtained judgment jointly against three partners, including Mr Collier, for the sum of £46,800. The partners agreed to jointly pay the debt off by way of £600 monthly instalments.
... read more
16/01/2008 - Gambling news: Tasmania "white listed"
Following the government's announcement in August 2007 that Alderney and the Isle of Man were allowed to advertise remote gambling in the UK, the Department of Culture, Media and Sport ("DCMS") recently announced that Tasmania will also be joining the gambling "white list", with effect from 31 January 2008.
... read more