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Corporate news

 

The European Commission (EC) has recently published proposals to revise the Markets in Financial Instruments Directive (MiFID), referred to as MiFID II. The original Directive came into force in November 2007 and the new proposals aim to make financial markets more resilient and efficient.

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The decision of the Supreme Court in Farstad Supply v. Enviroco Limited is interesting for a couple of reasons.
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The European Commission in 2010, with a view to aid legal certainty and reduce the often burdensome administrative requirements imposed on companies looking to raise additional equity capital, published amendments to the Prospectus Directive 2003/71/EC.

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O’Neill v. Phillips established the principle that where a majority shareholder offered to purchase a minority shareholding at a fair value determined by a competent expert, any petition alleging unfair prejudice would be negated and was likely to be struck out as an abuse of process.

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The FSA has had its decision to ban and fine hedge fund managers Michiel Visser and Oluwole Modupe Fagbulu upheld.

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A former director of a waste disposal and treatment company accepted a personal loan of plant and equipment without charge from a customer for the period 2003 to 2008. The director did not tell the rest of the board of directors about the loan. He returned the equipment after customer sent the company an invoice for the hire.

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UK Fund management group Gartmore has been fined $1.35 million (approximately £852,000) by the Securities and Exchange Commission in the USA for acting in breach of its rules on short-selling.
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Following a period of consultation, the FSA has decided to remove the current exemption which applies to mobile phones and other handheld electronic communication devices from the taping rules.
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The Financial Reporting Council (“FRC”) published the new “UK Corporate Governance Code” (the “Code”) earlier on in the year, which replaced the Combined Code for accounting periods beginning on or after 29 June 2010.
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The Companies Act (the “Act”) saw the introduction of a new rule relating to directors. All companies are now required to have at least one natural person (in other words a director who is an individual rather than a corporate director such as a partnership or a corporate entity). The rationale behind this change is to ensure that there is at least one person who can be held responsible and accountable for the company’s actions.
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The recent Court of Appeal decision in the case of Investec Bank(UK) Limited has illustrated again that the inclusion or the exclusion of an express “subject to contract” provision is not necessarily conclusive when the question arises of whether a binding contract has come into existence.

Key facts

In Investec Bank (UK) Ltd v. Zulman & Zulman, Investec (the “Bank”) lent £2 million to the defendants confectionary business (“Ashbury Confectionary Limited”), £1 million of which was secured by a cash deposit from the respondents. A further loan of £500,000 was agreed which was to be secured by a guarantee (the “Guarantee”) from the defendants. The Guarantee included a limitation clause which provided that the defendants would only be liable to the extent that the liability to the bank at the time of the Bank making a demand for repayment exceeded £2 million, with the Guarantee stipulating that the maximum liability under it would be £500,000 plus interest.
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In light of the recent hostile takeover of the British household name Cadbury plc (Cadbury) by US Company Kraft Foods Inc (Kraft), the subject of hostile takeovers and how companies can fend an unwanted bidder off has become a much discussed topic of conversation. The hostile takeover of Cadbury has been widely publicised, especially the initial resistance by Cadbury shareholders to the takeover. Critics have argued that Kraft was able to string the takeover process out long enough so that Cadbury’s shareholder register became filled with short-term investors, such as hedge funds, who would be willing to accept any bid to make a quick profit, with arguably no regard to the business’s long term prospects or value. It has also raised a number of issues regarding the UK takeover regime generally. In the end, a sufficient percentage of Cadbury shareholders accepted the offer and “squeezed out” the remaining minority shareholders, allowing the takeover bid to complete.
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A significant principle in relation to a party’s capacity to enter into a contract was recently decided in the Court of Appeal. Specificially, the decision related to (1) the approach in interpreting the English conflicts rule relating to a corporation’s capacity to enter into a contract, and (2) how English courts should deal with a public policy defence to a restitutionary claim based on a foreign statute.

Facts:

Depfa ACS Bank, an Irish bank (the “Bank”) and two Norwegian local authorities (the “Authorities”) entered into swap contracts which were governed by English law (the “Contracts”). The Bank was advised by Norwegian lawyers that the Authorities were not restricted under Section 50 of the Norwegian Local Government Act 1992 (the “Act”) to enter into the Contracts, i.e. the Authorities had power and authority to enter into the same. The Act restricts the purposes for which the Authorities can enter into loan agreements.
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The High Court recently dismissed an application by Nylon Capital LLP (“Nylon”) to stay legal proceedings initiated by Barclays Bank Plc (“Barclays”).
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On 22 April 2010, market makers Winterflood Securities Limited (Winterflood) and two of its traders Stephan Sotiriou and Jason Robins (together, the Appellants) lost their appeal against the Financial Services Authority (FSA) in the Court of Appeal and were fined £ 4,000,000, £200,000 and £50,000 respectively. They were also made to pay FSA’s costs of the appeal of £52,500.
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Kaupthing Capital Partners II Master LP Inc (Master) was a limited partnership established in Guernsey. Master was a special purpose vehicle that, alongside other group companies and its ultimate parent company (together, the Group), formed part of an investment fund administrated by an English registered limited partnership.
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The National Association of Pension Funds (the “NAPF”) has recently recommended a small number of amendments to its corporate governance policy. It is intended that these amendments should apply during the 2010 AGM voting season.
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In the much litigated area of contract law relating to the creation of contracts and intention to create legal relations, the Supreme Court recently held that a legally binding contract existed between parties even though there was no formal executed written agreement and the letter of intent incorporated a ‘subject to contract’ provision.

Facts
In January 2005, RTS Flexible Systems Limited (“RTS”), a supplier of automated machines for the food industry won a tender to manufacture and deliver an automated system for packaging yoghurt pots to Molkrti Sloid Muller Gmbh & Co Kg (“Muller”), a renowned supplier of dairy products. Parties signed a four week letter of intent (“LOI”) with the terms of a final contract to be agreed so as to allow RTS commence work and meet the project time scales. The LOI stated that the final contract would incorporate, inter alia, the “MF/1″ terms and conditions which were model form terms of the Institute of Electrical Engineers. The MF/1 terms and conditions included a ‘subject to contract’ provision which provided that the agreement was not effective until it was signed.
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The Court of Appeal had to decide whether a contract providing an indemnity clause had been validly assigned to the purchaser of a business under a business sale agreement, and if so, whether the purchaser could claim repayment by way of indemnity from the other party to the contract.

Facts

Shaw, the appellant, was an independent financial adviser (an “IFA”). Prior to 1999 he had a standard form contract in place (an Appointed Representative Contract, “ARC”) with a partnership, Berkeley Wodehouse Associates, BWA, which operated through a network of IFAs.
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The Law Society has recently published a practice note relating to the execution of documents at virtual signings or closings: “Execution of documents by virtual means”.
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All five former directors of Worldwide International UK Limited have been disqualified following an investigation by the CIB of the Insolvency Service. The company marketed timeshare accomodation, timeshare re-sales, shared ownership of canal boats and holiday club memberships and operated in the UK, Goa, Cyprus and Spain. Its tradings names were “Worldwide International”, “Travelwise”, “Travelwise Sales”, “Majestic Leisure”, “Majestic Holidays”, “Phoenix Promotions” and other like names.
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Companies often overlook the importance of their standard terms of sale (“Terms”) and assume that the Terms are accepted by their customers. Whilst Terms are commonplace, large retailers today often have their own standard terms of purchase. Consequently, without proper procedures in place, a supplier may inadvertently enter into a contract on a purchaser’s terms.
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The Court of Appeal has overturned a High Court decision, ruling that a subsidiary ceased to be a subsidiary of a holding company as a result of the holding company granting a pledge over the subsidiary’s shares and registration of the shares in the name of the bank’s nominee by way of security.
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