Birmingham law firm supports acquisition of pirate deterrent group

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Pirate deterrent product makers Guardian Maritime and Guardian Barriers will be acquired by cash shell Nu-Oil and Gas – following support from Shakespeare Martineau’s Birmingham office.

Nu-Oil and Gas have also confirmed it intends to re-list on the main market of the London Stock Exchange once the acquisition has been completed, which is expected in January 2022 – allowing public market investors to gain exposure to maritime security companies and the global fight against piracy.

Following admission, the company will change its name to Guardian Global Security plc.

Full service law firm Shakespeare Martineau acted on behalf of the majority shareholders of Guardian Maritime and Guardian Barriers on their sale.

Corporate partner Keith Spedding, who led the deal, said: “We are delighted to have assisted Guardian’s shareholders during this deal. Following the acquisition and subsequent admission, the newly-formed Guardian Global Security plc will have unparalleled market-leading knowledge, experience and contacts in the maritime sector and unique access to expansion opportunities.

The patent-protected Guardian system is used to visually deter pirates from maritime vessels. As far as the company is aware, no vessel fitted technology has been breached, including five that have been subjected to attempted attacks.

David Stevens, co-founder of the companies, said: “We were delighted with the support provided by Keith Spedding and Gweni Rees-Evans. With their experience, they were able to guide us through a complex process.

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Keith advises companies (both public and private), partnerships and their owners on all aspects of corporate and partnership law.

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Why business owners should have an up-to-date will

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Making sure you have an up-to-date will

Having an up-to-date will in place is the only way that you can guarantee that your wishes are carried out on your death.  Dying without a will means your estate will pass in accordance with the intestacy rules. And iyou are a business owner and this happens it could have massive implications for your business and your family.   

What having a will in place means for your family

There are several scenarios to consider: 

  • What happens if your business assets are inherited by your spouse, civil partner, or other family members who are not “in the business” and know nothing about it or, worse perhaps, do not have the knowledge or skills to run it. Your business which you have spent years building could be damaged following your death and it may no longer be able to continue providing for your family into the future. 
  • Consider whether your business partners could work with your spouse, civil partner or other family members. Would they be prepared to bring them up to speed with the business or would they have the means to buy them out? 
  • If your business is run as a partnership, the death of a partner who has no will in place could lead to the business being dissolved automatically if there is no partnership agreement drawn up either. Regardless of the surviving partners’ wishes, they would need to sell off the business and its underlying assets. 

Having an appropriately drafted will in place could mean that the most suitable people can continue to run the business and family can still benefit from the value of the business. 

If your family have no desire to inherit the business, your will can stipulate that your business partners inherit the same and the cash value is inherited by family instead. 

It is important that, where possible, Business Property Relief (BPR) is available to your personal representatives in order to exempt the business assets from Inheritance Tax (IHT) and crystallise this relief as soon as possible ideally having had the position agreed by HMRC following your death. 

To do this, it may be necessary to pass your business assets into a trust structure. A trust, unlike a surviving spouse or civil partner, is a non-exempt beneficiary for IHT purposes and as such, BPR would be claimed by your Personal Representatives to ensure that no IHT is payable still. 

Other options for your will

Your surviving spouse, civil partner or family can benefit from the business assets while they remain in the trust but the value of the business assets is outside of their own estates. Alternatively, your family could purchase the business assets from the trust using assets they have inherited from your estate swapping BPR assets in the trust for cash (which then falls out of their estate). Once they have owned the business assets for two years they will then again potentially qualify for BPR on their own deaths.  

Be aware, however, that even if you have a will that deals with business assets, there should still be a shareholders agreement or partnership agreement in place and all business partners should be aware of what happens when one of them dies. 

Consider putting in place a cross option agreement if you leave your business assets to anyone other than your business partners as this will enable the surviving business partners to purchase the business assets from your family under the terms of a shareholders agreement or partnership agreement. 

There is a lot to consider and many options available and it is essential that you get the right advice to ensure the survival of your business, and the best outcome for your employees and your family.

 

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ICO consults on new way forward for international data transfers

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International Data Transfers

The ICO’s consultation process on international data transfers is currently underway, as part of the UK’s first post-Brexit step to legitimise international transfers of personal data out of the UK.  

The consultation is important for education institutions and particularly relevant to any university or college that transfers personal data outside the UK, EEA or those countries which the UK has confirmed provide adequate protection for personal data.  

Scope of the ICO consultation

The ICO’s consultation is split into the following three sections: 

  1. International Data Transfer Agreement (“IDTA”) 

    The IDTA is the ICO’s draft document which UK education institutions will need to implement when transferring personal data outside of the UK (available here). 

    The IDTA, which will replace the current set of Standard Contractual Clauses (“SCCs”) for transfers of personal data from the UK, consolidates the full range of SCCs that may be required into one document. The IDTA caters for controller-processor, controller-controller and processor-processor; but notably it does not provide for processor-controller scenarios in the same manner as the new EU SCCs. The IDTA includes four parts: 

    • template tables to be populated for each relevant transfer, capturing specific information about the parties, for example the names of the parties, the details of the personal data transferred and any security requirements; 
    • optional extra protection clauses, such as additional technical security protections, organisational protections or contractual protections; 
    • optional commercial clauses agreed between the parties, provided that these do not contradict the IDTA; and 
    • a set of mandatory clauses, which must be adopted in their entirety except only to remove sections that the parties explicitly agree to omit, adapt cross-referencing and add more parties to the IDTA. 
  2. A UK Addendum

    The ICO has produced a UK addendum for inclusion to the European Commission’s standard contractual clauses (available here). The UK Addendum can be used as an alternative to the IDTA and substitutes references to the EU GDPR with UK GDPR and addresses issues such as governing law and choice of forum and jurisdiction for disputesThis will be invaluable for institutions that are routinely making data transfers to international campuses or partnersthe UK Addendum allows you to use just one set of SCCs (the EC SCCs along with the UK Addendum) to cover both transfers, avoiding the need to use both the EC SCCs and the UK IDTAthereby simplifying the contractual process. The inclusion of the UK Addendum undoubtedly shows the ICO’s willingness to integrate with global privacy positions. 

  3. Risk Assessment Guidance

    The ICO’s guidance on international data transfers has been produced in response to Schrems II, in order to assist organisations with carrying out a transfer risk assessment. The guidance includes a practical and user-friendly draft TRA tool (available here). It is designed to be used alongside the IDTA to evaluate risks associated with personal data transfers to third countries, with clear examples of the criteria to take into account, decision trees, risk factors, and mitigations that institutions can apply when undertaking a risk assessment.  

    The draft risk assessment tool takes into account three steps to evaluate the risk: 

    • appraise the transfer itself (e.g. consider the purpose of the transfer, types of personal data and categories of data subjects); 
    • assess if the IDTA is likely to be enforceable in the destination country; and 
    • consider whether there is appropriate protection for the data from third-party access.  

What does this mean for education institutions?

The new IDTA and risk assessment guidance is welcome news for UK-based institutions, particularly those that have international campuses or partners and act as both controllers and processors. The consultation provides some certainty on the approach to data transfers from the UK post-Brexit and supports planning around refreshing the SCCs. 

For the time being, the trans risk assessment and IDTA are in draft form pending completion of the consultation; following which proposals will be laid before parliament 

Institutions should continue to review international data flows, transfers under the existing SCCs and current practices and consider the changes that may be required. 

For further information on this consultation and the impact it could have for institutions, contact Isabelle Hugh-Jones or another member of the education team. 

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Isabelle has recently qualified as a solicitor in the Commercial and IP team and advises clients on a wide variety of commercial matters including commercial contracts, intellectual property, IT and data protection.

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Working with higher and further education institutions, independent providers, academies, and schools, our full-service team can advise on any legal issue that an education institution may have.

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Do employees still need to go to work if there’s a fuel shortage?

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Fuel shortage in the UK

There has been a perceived fuel shortage across the country, leading to panic at the petrol stations. Long queues have been building outside petrol stations across the UK over the past week amid fears that fuel supplies could run out – leaving many motorists unable to fill up their vehicles.

Matt McDonald, partner and expert employment solicitor, explains how employers can best support their employees during the fuel crisis.

Can I ask my staff to use alternative transport, even if it costs more?

“If it’s feasible for employees to commute using alternative transport, you can ask them to do so.

“If this fuel shortage results in the employee incurring additional costs or having to travel for longer, technically, this isn’t an employer’s problem as it is up to staff how they commute to and from work. That said, some employers may choose to cover any extra costs incurred by employees.

“It is also worth bearing in mind that those employees who can work from home – and presumably have done to a large extent over the past 18 months – will probably expect to be allowed to do so, at least in the short-term, if the alternative is a more difficult or expensive commute.

“Employers should consider taking a pragmatic approach in this regard to ensure harmonious employee relations.”

Can my employees raise a complaint if they have to find alternative modes of getting to work?

“They might well do so, but it is ultimately up to the employee how they get to and from work.

“As such, where an alternative mode of transport is feasible, employees who complain are unlikely to be in a strong position.

“Employers who choose to cover extra travel costs will largely be doing so to maintain goodwill rather than because of any legal obligation because of the fuel shortage.

“The position is different for those employees driving for work, for example visiting customers or clients.

“For travel of this nature, the employer is much more involved and can’t simply ask an employee to use alternative forms of transport and expect them to accept any extra cost.

“At the very least, the employer would be expected to cover the costs of trains or taxis, for example, and it’s important to communicate with employees clearly on this front so they understand what is required of them.”

What action should I take if I think my employee is using the fuel shortage as an excuse not to come into work?

“If an employee fails to attend work without good reason, this will generally be a disciplinary matter. However, it’s important not to jump to conclusions and to investigate any incident thoroughly.

“Many employees simply won’t be able to attend work other than by car and it may be viewed as harsh to expect employees in this situation to pay for taxis, particularly if there are feasible alternatives, such as working from home in the short-term.

“Hopefully, the fuel shortage will only be a temporary problem. However, there are suggestions it could become a longer-term issue, so employers would be wise to think through the impact this will have on their various different employees and to plan and communicate with staff accordingly.”

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Recruitment challenges lie ahead for the social care sector

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Recruitment and the social care sector

Recruitment and retention have been ongoing challenges for the social care sector for many years, and the end of free movement means they’re unlikely to improve any time soon.

Historically, workers from the European Economic Area (EEA) have been a lifeline for the sector but with further barriers created for those living abroad, this may be about to change. As well as causing difficulties for applicants, the new immigration scheme has significantly increased the amount of administration involved for care homes.

Obtaining a sponsor licence

It is now essential for applicants to be sponsored by their employer, in order to gain a work visa.

This is an additional responsibility for care homes, which will be tasked with applying for and maintaining a sponsor licence, which can be renewed every four years. Having a licence will require additional compliance for employers and failure to meet their responsibilities may result in scrutiny, UK Visa and Immigration sponsor team.

Financial implications

It should be noted that a sponsor licence isn’t free. Alongside the Government visa fees, the total cost for a single applicant working for a medium to large organisation could cost and employer a minimum of £5,500.

There is also the issue of the minimum salary threshold for work visas, which is currently set at £25,600. Many of the roles in the social care sector would fall below this figure, meaning care homes would need to increase salaries to fill the gaps.

These significant financial considerations now raise the question of whether sponsoring someone from outside the UK is financially viable for organizations. Especially when it cannot be guaranteed how long a worker will stay in the role.

The Government’s stance

In 2020, the Government did introduce a specific Health and Care Worker visa to reduce the issues affecting the sector, but this is largely targeted towards those working for the NHS and many care workers will not be eligible.

However, the Shortage Occupation List may provide some much-needed support if difficulties continue. Once a job role is placed on the list, applicants can trade points against a salary that is up to 20% below the minimum salary threshold, preventing the need for increased salaries. The Home Office has commissioned Migration Advisory Committee (MAC) to undertake an independent review of the impact of the immigration changes on the adult social care workforce that closes on 29 October 2021. Over the next few months it is vital for employers and representative organisations, who are facing extreme recruitment difficulties to engage with MAC to ensure their voice is heard.

Mandatory vaccination

Despite a social care recruitment drive recently being launched, there are many issues still deterring people from working in the sector, such as low pay and high stress. The introduction of mandatory COVID-19 vaccinations from 11 November 2021 is also unlikely to help.

Although the reason behind making the vaccine mandatory is reasonable, it does run the risk of putting more people off the care sector. While employers are able to rely on a legislative basis for dismissing staff who refuse to have the vaccine, it would still leave them in a tricky situation.

Mandatory vaccines will also result in further administrative tasks for care home operators, with robust policies needed to clearly define the requirements of both workers and visitors.

This could be even more complicated for foreign workers, as every country has its own vaccination process. While there is the potential for Home Office-approved clinics being set up in each country, which would allow visa applicants to get a certificate to confirm that they’ve been vaccinated, this would come as an additional cost to the employer.

The social care sector faces some considerable recruitment challenges moving forward, and gaps will need to be filled. Having an understanding of the new immigration system is vital, helping to avoid any further difficulties later down the line.

Get in touch with our  healthcare or business immigration team to find out how they can help.

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Commercial real estate: is the office market getting 'back to business'?

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Commercial real estate

In earlier blogs we considered the impact of Lockdown 2.0 and Lockdown 3.0 on the commercial real estate market. 

One of the trends anticipated was expecting businesses to adapt by further trimming back their space requirements which were likely to be matched by a greater move to businesses taking short term flexible agreements, and a shift to serviced office space which can often be handed back at short notice. We expect these trends to continue well into 2021 and beyond.   

There is no doubt that this year has seen, various flexible alternative types of space being made available by savvy landlords and taken up by increasingly agile tenants. Tenants renting hot desks, private offices, serviced offices, and even taking space at so-called managed offices is also on the rise.  

So will the office market soon be back to “business as usual”?

As we emerge from restrictions, with more employees starting to return to the office, our city centres will become busier, but there is no doubt that the hybrid working model is here to stay.

Many businesses have seen the benefits of allowing staff to work from home both in financial terms and work / life balance. This means that there will likely not be such demand for traditional office space and the trends noted above will continue as the market consolidates.

This can only mean that there are many opportunities for both landlords and tenants to overhaul and continue to modernise their working spaces and there is real merit in exploring the market and seeking to seize those opportunities. 

What else can we expect?

We can also expect further disruption in the market following the Government’s announcement that it will bring in a binding arbitration scheme concerning arrears built up in the pandemic.

Essentially, this which will force landlords and tenants impacted by closures during the pandemic to agree terms on outstanding rental arrears, or have terms imposed by an arbitrator. It remains unclear as to whether this will be sector specific or have wider applicability.

We await further detail on how this is intended to work in practice and principles which will underpin the arbitration scheme. What it does mean is that the effect of the pandemic on landlord and tenant relationships will continue to reverberate well into next year. 

Innovative use of space is the future

It is not just traditional landlords and tenants who are seeking to leverage their property interests more effectively.  

The John Lewis Partnership, for example, has confirmed it is set to enter the landlord market by, in large part, making innovative use of its existing land. We understand that it is set to build circa 10,000 new houses / flats. They are in particular looking at sites above Waitrose supermarkets and land next to their distribution centres. By building upwards in this way, we can see that value of the foot print ought to increase, without having to buy additional land. 

We can expect other businesses to follow this lead and look harder at their existing property interests to see if they can be put to more profitable uses. 

For further information on issues discussed here, contact James Fownes or another member of the real estate disputes team in your local office. 

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James specialises in advising on and resolving all aspects of commercial landlord and tenant disputes, regularly involving dilapidations, forfeiture, the contentious aspects of lease renewals, service charge issues and the operation of break clauses.

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We work with landlords and tenants to help resolve commercial rent disputes.

To ensure commercial landlords and tenants are as prepared as they can be and work towards a sustainable enterprise we have put together a guide on everything they need to know.

Our property litigation specialists are also on hand to work with you to provide legal advice and support during negotiations.

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Personal data can now flow freely from the EU to the UK

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How the change in personal data flow impacts education institutions

In June of this year, the EU adopted two adequacy decisions confirming that personal data can now flow freely from the EU to the UK.

These decisions are hugely important for education institutions and will no doubt come as a relief to many who will have been taking measures such as putting in place standard contractual clauses as the end of the post-Brexit extension loomed.

 

What were the adequacy decisions?

The adequacy decisions from the European Commission, which have been a long time coming, confirm that the UK is considered to have laws equivalent to those that safeguard personal data inside the European Union as well as those countries in the European Economic Area.

Since Brexit there has been a bridging mechanism that gave the European Commission another six months (until 30 June 2021) to put in place a decision, so it really did come at the eleventh hour!

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This stimulating and highly practical discussion will look at what institutions need to consider when managing change in an Education sector environment.

How will they affect education institutions?

These decisions will help education institutions that have campuses which span the UK and the EU, particularly if this is achieved by collaborations with other institutions. There will be less GDPR paperwork to fill in, as student data (and other personal data) will be able to pass freely, as it did when the UK was a member of the EU.

In a note of caution however, the European Parliament, the Member States and the European Data Protection Board expressed concerns about the possibility of future divergence from EU standards in the UK's privacy framework. In order to provide strong safeguards against dilution of privacy rights, which are considered fundamental to EU citizens, these adequacy decisions contain a 'sunset' clause. For the first time this limits the duration of adequacy to four years (previous decisions have been perpetual).

As such, and while we can all breathe a sigh of relief for a moment, education institutions will need to be mindful of the sunset clause and the potential for the UK to be without any adequacy decision in four years' time.

Consideration should be given to relationships and contracts that will go beyond this period. This is imperative to ensure that continued compliance with relevant data protection legislation and contractual provisions is possible at that time if no subsequent adequacy decision is granted.

For expert advice and support on GDPR and other commercial law, please contact our commercial team.

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Joanna works exclusively for higher and further education clients and has over 20 years’ experience of advising on a wide variety of student-related issues including policies and procedures, discipline, complaints and appeals, equality and immigration.

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Renewal of Telecoms Leases: New Case from the Upper Tribunal

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New Telecoms Leases Tribunal Case

 

EE Ltd & H3G UK Ltd v Stephenson & AP Wireless (II) UK Ltd [2021] UKUT 167 (LC)

Just in time for Summer, we have another telecoms ruling in relation to the New Telecoms Code from the Upper Tribunal. This time, its primary consideration was whether Telecoms Operators can seek to replace existing agreements with an entirely new agreement upon renewal.

Background to the Telecoms case

The Operators, EE and H3G, applied for the termination of its Telecoms agreement following its contractual expiry, and requested that the Tribunal replaces the existing Code agreement with a new agreement on its standard terms.

The proposed new agreement included wider sharing provisions, an unfettered ability to upgrade and a substantially lower annual rent of £250 per annum.

The Tribunal was required to consider the following as preliminary issues:

  • Whether the Operators could, in principle, seek a complete replacement of the current telecoms agreement in circumstances where a site-specific requirement for such a change was not put forward; and
  • If the Operators’ application for a replacement agreement failed, the Operators were unable to then seek an alternative remedy, such as varying an existing agreement (to change or add new terms).

The landowner Respondents’ main defence was that the Operators were not entitled to replace the current telecoms agreement with the operator-friendly standard agreement without first seeking to justify a departure from the terms of the current agreement.

The landowners sought to rely on the decision handed down by the Lands Tribunal for Scotland in the case of EE Limited and Hutchison 3G Limited v Duncan (“the Duncan Case”) made on 23 September 2020. In this case the Lands Tribunal inserted a “high bar” where a telecoms operator would be required to show there is a site specific need to replace or modify an agreement in the first place.

What the Tribunal Decided

The Tribunal decided in favour of the Operators and accepted that there is no requirement for telecoms operators to put forward any site specific need or business justification to terminate a current agreement and replace it with a new agreement.

The Tribunal followed the judgment handed down in the appeal of the Duncan Case on 7 May 2021 which removed the “high bar” imposed by the previous decision of the Scottish Lands Tribunal.

The Tribunal also reviewed its approach when considering a renewal of a telecoms agreement and confirmed that the general presumption against a change to the terms of an existing agreement does not apply under the New Telecoms Code (commonly known as the “O’May Principle”).

It was also determined that where an Operator has served a notice seeking a termination of an existing agreement, it would not then be able to request the Tribunal to order an alternative remedy. In other words, an Operator could not then seek a variation of the current agreement.

An Operator would therefore be required to start the renewal process again. However, the Tribunal did state that it would have the discretion to make an alternative order if requested by the Respondent.

 Takeaway points from the ruling

Whilst this ruling may generally favour Operators, there are some important key points that landowners can take away from this case:

  • This determination related to preliminary issues only – the Trial is yet to take place and this does not mean that the Telecoms Operators will succeed fully in their application for more preferential terms such as unfettered upgrading or the reduced rent sought.

     

  • Whilst it was held that the “O’May Principle” would not apply to the renewal of telecoms agreements under the New Code, such a principle would apply to the renewal of telecoms agreements under the Landlord and Tenant Act 1954 (”the 54 Act”). As such, if an Operator sought a departure from the terms of a 54 Act Telecoms Lease upon renewal, arguably they would be required to justify the same pursuant to the O’May Principles.

     

  • Whilst it was held that the “O’May Principle” would not apply to the renewal of telecoms agreements under the New Code, such a principle would apply to the renewal of telecoms agreements under the Landlord and Tenant Act 1954 (”the 54 Act”). As such, if an Operator sought a departure from the terms of a 54 Act Telecoms Lease upon renewal, arguably they would be required to justify the same pursuant to the O’May Principles.

     

Get in contact

If you have been approached by an Operator to renew your telecoms agreement, we can advise you on your legal position, as well as the best strategy and approach for you taking into account the type of agreement you have in relation to your land.

For expert support or advice, get in touch with our property litigation team today.

Property Litigation

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Blog

CCTV and GDPR: what employers need to know

Health Secretary Matt Hancock was recently forced to resign after his affair was leaked via CCTV footage. Following the very public scandal, concerns have now been raised around the GDPR and privacy issues associated with CCTV in the workplace.

So, what do employers need to know when implementing this technology?

Identifying and mitigating risks

Before installing CCTV, employers should carry out a data protection impact assessment (DPIA), that will identify the risks of handling the footage and potential mitigation routes.

Employers should consider minimising the impact on people’s privacy, for example by keeping cameras restricted to communal areas only and not recording sound.

The DPIA should also identify the legal basis that the employer has for using the CCTV. If this relies on “legitimate interests” then these must not prejudice individual interests, rights and freedoms.

Informing the workforce

Even with a DPIA on record, employers are still required to speak to all relevant stakeholders in the business, including employees. All affected parties should be made aware that their data is being captured, this includes visitors to the building.

Consent cannot be relied upon as a lawful basis for processing this data, so employees will need to be able to access a privacy policy that includes how the data will be used, how it will be stored and how long for, and who can access it.

Covert cameras

Should an employer have specific concerns about an individual employee, there is no law against the use of covert cameras. However, they will still be required to demonstrate that there is a lawful basis for planting one and carry out a DPIA to cover the circumstances.

Failure to do so, could result in a claim for breach of privacy.

Right to object

Even when fully informed about CCTV, employees are still within their right to object. If a member of staff shares concerns about the way their data is being processed, the employer should firstly offer to provide a more in-depth reasoning for the monitoring. If the worker remains unhappy, then the employer will need to consider how best to move forward.

If one particular camera is of concern, the solution may be to remove it. However, if it is the concept of the CCTV itself, the employer should consider whether the employee’s individual rights are likely to override the legitimate interests they seek to protect. If they believe this isn’t the case, the cameras can remain.

Should the concerns continue, then the business may be faced with a claim for breach of data protection legislation and right to privacy. The employee also has the option to escalate the complaint to the Information Commissioner’s Office (ICO), which has the power to investigate and issue fines for GDPR breaches.

As the technology becomes more affordable, the interest in CCTV across businesses of all sizes increases. Seeking legal advice before implementation, can help employers ensure that they are following the correct GDPR processes and avoid costly fines down the line.

Get in touch to find out how our GDPR team can help.

We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. VisitSHMA® ON DEMAND.

 

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Getting investment-ready: 7 tips for start-ups

Tech companies have recently skyrocketed in value, and with plenty of cash looking for a suitable home, start-ups need to know how to land the best investor.

  1. Scope out interest

Reaching out to professional networks is a great first port of call for start-ups. From bankers to accountants, many existing connections will have established relationships with potential investors that could be beneficial. All it takes is an introduction and a good first impression.

  1. Take a deep dive into the sector

Knowing the sector and its trends inside and out is a great way to target the right investors. By exploring which investors are currently buying up similar companies, through speaking to successful counterparts or simply reading trade magazines, a selection of targets can be drawn up.

  1. Know what type of investor to target

There are two major types of investors: venture capital investors, who prefer more mature businesses, and business angels, who are willing to take risks and support new businesses with big ideas. There are also a range of alternative funding options such as crowdfunding, pension funds and venture capital trusts (VCTs).

  1. Remember that the business is more than just tech

Innovative tech alone is not enough to guarantee great investment. Choosing to invest in operations such as talent acquisition and IP protection, gives the business a stronger backbone, adding security for investors.

  1. Establish other sources of revenue

Having a diverse and long-term source of income can not only provide extra protection in the form of financial cushioning, but can also demonstrate to potential investors that the business is moving towards healthy growth.

  1. Prove what makes the business unique

In a saturated market it’s important to stand out. Positive publicity, including industry-focused awards and press features can cast a spotlight on the business and attract more investment.

  1. Carry out an internal review

Completing due diligence checks shows investors that the business is fully aware of the risks and opportunities that it holds. By undertaking a thorough internal review early on, start-ups can prepare themselves for any questions or requests from potential investors, keeping them on side and maximising value.

Specialist legal advice can help with this process, giving start-ups the peace of mind that they are investment ready.

Emerging tech start-ups have plenty of investment opportunities to pursue but finding and retaining the right one can be challenging. Robust preparation and future-proofed plans are essential when it comes to securing the perfect investor.

Get in touch to find out how our corporate team can help your start-up take the next steps on its business journey.

We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

 

 

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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Your summer guide to recovery and resilience in COVID-19

Your updated summer guide to recovery and resilience

As the UK takes its first steps to ease the current national restrictions and looks forward to an increase in economic activity and recovery it is vital that businesses are prepared in every aspect.

To support businesses and people navigate their way out of the last year and the current national restrictions, unlock their potential and drive for a brighter future, we have updated our guide to recovery and resilience.

From financial considerations, employees, leadership and premises, to supply chain implications, health and safety and protecting your private wealth, our guide highlights what organisations and individuals should consider when moving from survival to recovery to thrive.

Financial considerations

Whether a large corporate with a highly structured board, an SME or an owner-managed business, the financial viability of a business is key to its future success.   However, as the thoughts turn to the roadmap out of lockdown once again, and what the future may look like, businesses that have got through the last year should consider a range of measures to enable them to cope with what is likely be a recession for some industry sectors of the UK. Prudent business owners will be well aware of the predictions and while there will be a bounce back it may take some time for confidence and stability to return from customers and suppliers.

Your employees

Managing a workforce of any size can have its challenges, let alone one that is recovering from a global crisis. Many businesses will have furloughed employees or made the difficult decision to make a number of their workforce redundant. For those businesses that haven’t, it’s highly likely they will still face having to make difficult choices, albeit further down the line.

The knock-on effects of the COVID-19 outbreak have changed the way employers engage with and effectively manage, their employees. The processes, policies and guidelines that worked previously may no longer be fit for purpose for your business, or for your workforce, in the new working landscape. With the rollout of the COVID vaccine facilitating the gradual return of employees back into the physical workplace, this in itself will bring a host of new opportunities and challenges.

Buildings, workspaces and leases

As the world and economy move forward out of lockdown, owners and investors of real estate as well as occupying tenants will have to consider the adjustments they now need to make whilst the restrictions around social distancing continue.
They will need to find new ways of working and inevitably different ways to use their space over the coming months and, at the same time, consider how to manage the cost of premises in these changed circumstances.

Suppliers and supply chain

Many businesses have struggled to comply with their contractual obligations as a result of the COVID-19 pandemic and may have been forced to rethink their supply chains. A focus in recent years on minimising costs, reducing inventories and maximising asset utilisation has often resulted in a reduced ability to cope with disruption. Whilst the impact of the COVID-19 pandemic is unprecedented in modern times, disruption to the global economy is an increasing risk, whether due to political events such as Brexit, US-China trade tensions, or climate change.

Private wealth, family businesses and family

The effects of COVID-19 will undoubtedly have a huge impact on our economy for years to come, with many businesses collapsing under the strain and the level of unemployment set to rise significantly. However, what is less widely reported on is the effect it is having and will continue to have, on families and personal wealth. We’ve already seen that the pandemic has led to an increase in people looking at how they may pass on their wealth to the next generation –and even more so for those that own family businesses.

Compliance – Health and safety

Employers have clear duties under existing health and safety legislation. Obligations to comply with health and safety at work, and to manage and control workplace risks, includes protecting workers and others from the risk of COVID-19 infection in the workplace. That duty is to do everything “reasonably practicable” to manage these risks. The onus of demonstrating that everything reasonably practicable has been done falls to the employer. The best way to demonstrate compliance with the law is usually to follow government and industry-led guidance wherever possible.

Leadership

Strong leadership is a cocktail of authenticity, collaboration, passion, compassion, and a great deal of bravery. We all know the best results occur when we are pushed out of our comfort zones and the ingredients are shaken up, and COVID-19 has done exactly that. With government guidance signalling the UK’s route out of current national restrictions, the time for positive leadership is now. It’s time to take control of what we can and create an environment with enough certainty where people can feel safe enough to flourish centre stage.

We are here to help

The team here at Shakespeare Martineau remain committed to supporting our clients and our communities throughout these challenging times, with

the depth of experience, collaborative ethos and the creative know-how to lead positively to the future.  We are able to offer advice and solutions on a range of subjects for life and business - from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes to issues affecting family businesses, personal wealth planning and family law. Do contact us on 03300 240 333

 

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Guides & Advice

Construction | disputes, document retention policy and limitation periods

Document retention (or record keeping) is a key part of any business, particularly for those operating in the construction industry where claims can be common. Having those relevant documents to hand is vital if a claim needs to be made or defended. 

In our experience, businesses operating in the construction industry tend to retain documents in line with the contractual limitation period for each project, which is understandable given that the vast majority of construction projects are procured based on written contracts which expressly provide for a set limitation period.  

However, it is worth being aware that the contractual limitation period can be only half the story. The limitation period in respect of tort (i.e. negligence) claims is different – and potentially quite a bit longer and as such, it is important that documentation retention policies take this into account. 

Claims in tort 

We have recently seen an increase in the number of claims being pursued in tort, rather than contract. This is often more common in the context of historic construction projects where latent defects have come to light after the contractual limitation period has expired.  

The problem we often find is that relevant documents have been destroyed or deleted shortly after the contractual limitation period has expired, despite the fact that it is still possible for a claim to be pursued for a longer period in tort. Businesses are therefore jeopardising their ability to effectively defend (or pursue) claims due a lack of supporting documentation or evidence being available.   

Put simply, if you have no paperwork to prove your position in a claim brought against you, you are putting your ability to mount an effective defence in jeopardy.  

Limitation periods – what do we mean? 

When we talk about ‘limitation periods’, we mean the time in which a claiming party must bring a claim before it is out of time. Limitation periods vary depending on the basis of the claim i.e. whether it is a claim in contract or tort.  

We provide a summary of the position below. 

Contract  

The general position is that limitation runs from the date on which the cause of action accrues, typically the date of practical completion of the works.  

A simple contract allows a claim to be brought up to six years after practical completion of the works.  A contract executed as a deed (common in construction contracts) allows a claim to be brought up to 12 years after practical completion of the works. 

It is worth noting that the parties to a contract can agree to alter the limitation period i.e. so that it is different to the general six or 12 year position.  

Tort  

The time limit for a claim in the tort of negligence is six years from the date on which the cause of action accrues. Whereas in contract the cause of action accrues at the date of breach, in tort the cause of action does not accrue until the claiming party suffers damage, which might be at a much later date.  

The “damage” necessary for an action in negligence is normally actual physical injury to a person or damage to property, so there is normally no difficulty in determining when “damage” was suffered.  

There is a potential extension to the six year limitation period, if at the time the cause of action accrued, the claiming party didn’t know certain key facts about their claim. When the claiming party has (or should reasonably have acquired) knowledge of the relevant facts, then the 'starting date' occurs and it is from this date that the alternative three year period runs.  

However, a claim in negligence is subject to an overall long-stop date of 15 years. This long-stop runs from the date on which the negligent acts or omissions which caused or contributed to the damage took place.  

So, the 15 year long-stop date runs from the date of the negligent acts, rather than from the date on which the claiming party suffered damage. It is important to note that in the context of a construction project, this does not mean 15 years from the date of practical completion, it means 15 years from the date of the negligent act. This is a key difference between the contractual limitation period and the tort limitation period.  

Retaining documents – defending claims 

We have dealt with a number of claims recently pursued in tort – some approaching a decade and a half after our client was involved which brings a number of challenges.  

The main challenges relate to fact-finding and evidence collating. So long after the fact, memories have often faded and key members of staff may have moved on. What’s key therefore is the ability to retrieve the documentation relating to the matter. That will tend to be the ‘make or break’ as to whether the claim can be effectively defended. 

The problem we’ve come across on a number of occasions is that many businesses are operating on the basis that any potential liability ends when the contractual liability ends (i.e. a backstop of 12 years from practical completion).  

This is where the challenge can arise. Just because the contractual limitation has expired doesn’t mean there is no further liability - there is still the potential for a claim to be brought in tort.  

This is why it is important that relevant documentation is retained well beyond the 12 year contractual limitation period for a minimum of 15 years. That way, if a claim is pursued in tort, it’s possible to fully consider the merits and in turn, decide on how best to defend the claim. It goes without saying that, if there are no documents available, it can be a tricky predicament as to how best to deal with the claim. 

Latent defect claims

These claims can arise in the context of any construction works, however, an ongoing focus area is cladding / fire protection. Opening up works are being carried out across hundreds of sites across the UK and while the primary focus / objective is (and rightly so) to ensure that the cladding / fire protection measures are safe, the secondary focus is often to explore whether there are any latent defects that could be the subject of a claim. Getting document retention right is important for all construction companies but  those involved in cladding / fire protection projects will want to be doubly sure that they are doing all they sensibly can on this front.  

How should your document retention policy work?  

It is sensible to retain relevant documents relating to projects for a period of at least 15 years following practical completion.   

Gone are the days when documents needed to be stored in endless boxes and sent to costly storage facilities. These days, the vast majority of (if not all) documents can be stored electronically, at minimal cost on a: 

  • domestic computer system; 
  • cloud based platform; or 
  • combination of both. 

Ideally, if documents are stored on your own domestic computer systems, there should be a separate back up elsewhere so that if there is a systems failure and documents are destroyed, there is a copy.  

It is best practice to ensure that all staff working on projects adhere to a document retention policy and consistently save documents (of whatever type: emails, letters, memos, drawings etc). However, as a minimum, the documents retained in relation to each project should include: 

  • The building contract; 
  • Any key correspondence (i.e. around the materials used, specifications etc.); 
  • Meeting minutes; 
  • Cost reports; 
  • Survey, inspection and testing documentation; 
  • Material delivery and use; 
  • Insurance certificates and policy documents; 
  • All finalised drawings, plans and specifications; 
  • Invoices/ Time sheets; and 
  • All building contract, planning and practical completion sign-off documents.  

Not every project is the same and the extent of document retention that is required will very much depend on the type of project.  A balance must be maintained between keeping adequate records in preparation for a dispute arising, and attempting to record everything. Developing a document retention policy and ensuring staff are fully on-boarded and adhere to the same is at least half the battle.  

GDPR and document retention policies 

The UK General Data Protection Regulation (UK GDPR) governs the processing of the personal data of people in the UK.  Among the UK GDPR data processing principles is the principle of “data minimisation”, which means (among other things) that personal data should be kept only for so long as is necessary for the purpose for which it was collected.  Keeping personal data for longer than this needs to be justified.  

Given that construction companies can be exposed to claims for up to 15 years, the retention of documents for potential litigation is a justifiable reason to hold onto the relevant documents for the entire 15 year period.  

However, there are important steps that companies must take to minimise the risk of UK GDPR breaches. Because the UK GDPR’s “accountability” principle means companies must not just comply with the UK GDPR, but must also be able to demonstrate how they comply, all construction companies should maintain and enforce a date retention schedule. This means a written record must be kept that lists each relevant category of document retained (i.e. building contract), the time period that it will be retained for (for example 15 years) and an explanation on the reasons why (for example for any potential litigation proceedings).  

How can you limit the risk of a GDPR breach? 

In addition to keeping a written record, there are a number of other crucial ways to limit the risk of UK GDPR breaches, such as:  

  • Where possible, remove any personal data (i.e. phone numbers, email addresses etc.) from the relevant documents; 
  • Store all documents in a secure and safe place; 
  • Ensure controlled access is implemented with access only given to those authorised for the justified reason (such as if required for litigation); and 
  • Ensure there is an effective process for destroying or deleting the documents once the applicable retention period has expired. 

Complying with the UK GDPR is vital; we advise our clients to hold the above listed documents in secure storage for the entire 15 year limitation period which will protect their position for a potential future defects claim. Once the limitation or other stated retention period has expired the documents should be destroyed if they include personal data. 

We’re here to help 

For further information on any aspect of construction contract disputes contact Kate Onions or another member of our construction team for advice and support. 

Our construction team is ranked as a Top Tier Firm in the Legal 500 2021 edition. 

Our updated guide to recovery and resilience covers everything you need to navigate your way out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.   

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

SHMA® ON DEMAND

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Technical

Evaluating Price in Tenders – new guidance on new practices

The detailed technical methodology of evaluating bids is one of this overlooked areas of procurement for procurement lawyers. The Public Contracts Regulations 2015 (“PCRs”) do not detail any specific methodologies and only provide that the contracting authority must ensure that the methodology and weightings must be fair and transparent. This means that the authority has a degree of flexibility in its price/quality evaluation model. The PCRs provide that the contract must be awarded on the basis of the most economically advantageous ender (the "MEAT"). The MEAT may be identified on the basis of:

1. price or cost alone, using a cost-effectiveness approach;

2. a price-quality ratio; or

3. fixed price or cost so that bidders compete on quality only.

In evaluating price, as part of assessing the MEAT, contracting authorities invariably use a relative price-scoring methodology. This common “cheapest bid/ other bid” methodology, as set out on the Crown Commercial Service’s Digital Marketplace. The lowest price gets the highest score, and each of the other prices are marked relative to the lowest priced bid as follows:

Fixed quotes

To score fixed price quotes, you must divide the cheapest quote by each supplier’s quote.

Example:

  • supplier A’s quote is £15,000
  • supplier B’s quote is £10,000
  • supplier C’s quote is £30,000

To calculate a score for supplier A, divide 10,000 by 15,000. Supplier A scores 0.667.

To calculate a score for supplier B, divide 10,000 by 10,000. Supplier B scores 1.

To calculate a score for supplier C, divide 10,000 by 30,000. Supplier A scores 0.333.”

The issue of relative price-scoring has been considered and subject to public debate in the procurement-nerd community for some time. But as long as this was normal market practice and was endorsed by the UK government guidance and approach, then it was probably fair to say that there was relatively little risk that this would be challenged - this was acceptable market practice and therefore, not unreasonable. In addition, the mathematics was pretty simple and, therefore an attractive solution for everyone involved, including, especially, the lawyers.

However, the UK Government published guidance last year which means that this approach is no longer acceptable. The guidance provides:

Relative price scoring should be treated with caution and not be used unless there is a specific business reason which has been approved by the commercial lead and the project SRO.” (para. 7.2.1)

The Government Commercial Function has proposed, instead, benchmark scoring and scoring on the basis of value for money ratios. Using ratios certainly makes sense from a regulatory compliance perspective: the PCRs refer to the pretty much overlooked “best quality-price ratio”, rather than, for instance, best quality-price score.

There is some quite interesting mathematics around using ratios, as against relative price scoring. Assuming the following five example bid scores, where the quality/cost weighting ratio is 50: 50:

Bidder Quality Cost

Using the relative price-scoring methodology, Bid C is the lowest price, as set out in the table below. Bid C scores 30% (i.e. 15 points) on quality and scores maximum of 50 points on price, and therefore wins (i.e. 50 points on price, 15 points on quality):

Bidder Ranking

By contrast, under a quality-price ratio model, Bid A wins. This is much more logical, based on the weightings, and intuitively correct. That is to say, that the quality is twice as good and the price is less than twice as much more than Bid C:

Bidder VfM ratio

In summary, since June 2020, at the latest, it is no longer acceptable market practice to apply relative-scoring as part of the price evaluation where you are awarding contracts on the basis of best “price-quality ratio”. In the light of that it is interesting to note that central government departments and agencies, including the OGC and MoD have, almost a year later still not changed their bid evaluation methodologies to reflect government guidance. You can find out more here.

Contact us

To discuss any of the above or to consider more general commercial assistance please contact Uddalak Datta or another member of the commercial team.

Our updated guide to recovery and resilience covers everything you need to navigate your business out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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Blog

The UK’s new subsidy control regime

One of the most contentious points of negotiation between the UK and EU for a trade deal between was the UK’s regulation of state aid, or governmental subsidies for companies. This was always a bit puzzling as, while it was in the EU, the UK was one of the least generous donors of state aid, typically providing less than half the EU average when adjusted for GDP.

This was less an impact of the regulatory control over state aid - France and Germany provided much greater state support to their industry within the same legal and regulatory framework - but a political decision as to whether, and to what extent, government should intervene in the market.

The disagreements were of course settled on Christmas Eve, when the UK-EU Trade and Cooperation Agreement (TCA) containing a framework regulating government subsidies was agreed.

 

Government consultation on designing a new approach for subsidy control

The UK government has repealed the EU rules on state aid and is now looking to formulate its own legal framework for controlling state subsidies. Consequently, the Department for Business has published a consultation paper on subsidy control.

What is the purpose of the consultation?

The government is looking to establish a new subsidy control regime that reflects the UK’s strategic interests, with the aim of delivering a regime that:

  • facilitates strategic interventions to support government priorities, including supporting the economy’s recovery from COVID-19;
  • takes account of the economic needs of the UK’s individual nations and strengthens the economic bonds of the Union;
  • protects the UK’s competitive and dynamic market economy; and
  • ensures that subsidies in the UK are given in line with our international commitments including those in the UK-EU Trade and Cooperation Agreement (TCA).

Read more about the subsidy control consultation paper on the gov.uk website.

Change in terminology

So where are we starting from? The first difference is a terminological one, with “state aid” now referred to as “subsidy”. The definition broadly follows the definition of state aid in the Treaty on the Functioning of the European Union.

Subsidies include any “specific financial assistance that comes from a state resource” if it gives an advantages to a business and could affect UK-EU trade. This definition (along with much of the other law relating to subsidy control) will be familiar to anyone who has dealt with the old EU regime. For instance, it will include, fiscal measures as well as subsidies strictu senso.

Although the wording of the UK’s subsidy laws has not changed substantially, there is potential for their application to be significantly different. Subsidies can be permitted where justified by a specific public policy objective, and these objectives can now diverge significantly.

Use of funding

The consultation is concerned with more than just the TCA obligations however. Devolution has given different authorities significant sums that they can spend with limited restrictions. This can allow funds to be more targeted to where they are needed, but also risks regions competing with each other to attract investment from canny companies that will play them off against each other.

For this reason, the government is proposing that public authorities will be able to design and award subsidies that serve public policy objectives, as long as they “minimise any harmful or distortive effects on competition within the UK internal market".

What are the risks of subsidies?

The risks associated with subsidies are just as real on a domestic level as they are at an international one. The commitments in the TCA are exclusively concerned with ‘material effects’ on trade, or investment flowing between the EU and the UK. However, the consultation is asking whether we should bolster the TCA’s restrictions for the UK internal market to ensure companies are not being unfairly subsidised, and the market not unduly distorted.

How will the new subsidy control regime support the economy’s recovery?

The foreword to the consultation paper emphasises the need for government spending and subsidy control as being key in enabling the country to ‘Build Back Better’.

For this reason, the consultation paper is looking for responses to help determine the best shape and form of those subsidies. This will have an impact on key sectors in particular energy and education, through the R&D framework.

In addition, the consultation paper considers whether certain types of subsidies will be exempt from any new subsidy control regime. The government intends to exclude subsidies that “are required for the purpose of defence or safe-guarding national security" from subsidy control.

The consultation paper invites responses as to whether fisheries and farmers should be exempt from the new subsidy control regime, as well as the audio-visual sector.

Minimum threshold

The consultation paper proposes a minimum threshold, similar to the “de minimis” threshold under the EU regime, but at a significantly higher value.

Where subsidies fall within the scope of the new regime, and are above the set minimum values, public authorities will have to make a series of disclosures in relation to the subsidies awarded. These include:

  • details of the subsidy instrument (how it is being delivered);
  • the amount, the date granted;
  • the granting authority; and
  • the purpose of the subsidy.

The Department for Business, Energy & Industrial Strategy (BEIS) has also indicated that "where a subsidy is provided under the terms of a scheme, rather than as a one-off subsidy, public authorities will need to provide information about the categories of beneficiary, the terms and conditions of eligibility for subsidy and the basis for the calculation of the subsidy (including any relevant conditions relating to subsidy ratios or amounts)."

BEIS recognises that this is a lot of bureaucratic effort, and some industries, or smaller subsidies would become unviable because of it. BEIS is considering reducing the administrative burden for 'low-risk' or ‘low value’ subsidies. This is another element that is being consulted on.

Establishing an operationally independent authority

The TCA requires the UK to establish an operationally independent authority that keeps an eye on how subsidies are applied, as well as giving courts powers to review subsidies independently, and to review the decisions of the authority. Unlike the EU Commission’s role in both setting policy objectives, and ensuring compliance, the consultation proposes that this is an independent policing authority only and the does not set pre-approved policy objectives.

This role would seem to naturally sit with the Competition and Markets Authority (CMA). The CMA has significant in-house expertise and, under the UK Internal Market Act 2020, the CMA is responsible for monitoring the effectiveness of the internal market, and appears to already be recruiting state aid advisers. Whoever is responsible for this role, it is important that public authorities and businesses are clear on:

  • the authority’s role and responsibilities;
  • what kind of guidance it will issue; and
  • and whether it will be able to give binding approval to a subsidy.

This last point is particularly significant where businesses are waiting for legal certainty before committing to a project.

This is linked to the key topic of judicial enforcement and remedies for non-compliance.

 

When will the new subsidy control regime take effect?

BEIS have confirmed that any changes to the subsidy control regime would only take effect when new legislation providing for them comes into force. They’ve also confirmed that it will not apply retrospectively to subsidies awarded in the interim.

 

We can support your business

If you need support with any matters relating to the new subsidy control regime, get in touch today or visit our commercial lawyers page to learn more.

Our updated guide to recovery and resilience covers everything you need to navigate your business out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

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How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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2021: a year of potential

Keeping positive can be a challenge during a pandemic, but it’s vital that businesses look ahead to the future and the opportunities that 2021 holds.

Although the economy is flirting with a second recession and some sectors are struggling under nationwide restrictions, the area of mergers and acquisitions is looking promising.

An ideal opening

For businesses that are well-prepared and unafraid to take the leap, the current economic situation means there are plenty of M&A opportunities available.

If the deal market continues to move, British businesses will remain attractive to overseas investors. Making strategic or opportunistic acquisitions while prices stay low, could even accelerate growth plans.

Which sectors are performing well?

Certain sectors that lend themselves to our current climate, such as pharmaceuticals, technology, PPE and MedTech, have all been performing well over the last year, even with the uncertainty caused by Brexit.

Due to this uncertainty, some international buyers may be waiting to see what the post-Brexit landscape looks like before making a move, but many others are still showing an interest in UK acquisitions.

Read our 2021 predictions for the education and construction sectors.

Strategising for the future

Whilst the present remains unstable, it might be difficult to think about future strategies, but it is important to do so.

Industries hit hardest by the pandemic should continue to use the financial support available to them, including the furlough scheme, CBILS and Future Fund. However, they must keep on top of any changes to the current schemes and be aware of when they are set to end.

For those facing less challenges, they should consider whether they are in a position to expand and invest. Many companies are in need of a buyer or strategic partner, and with valuations being difficult to carry out accurately at present, a host of potential investment opportunities have been opened up.

With the changes to Capital Gains Tax (CGT) still looking likely, a short-term deal rush may be on the horizon. As such, businesses and business owners should also be assessing whether they can take advantage of this.

In any market there are always investment opportunities to be had. So, although it may be some time before confidence returns, there’s much to be gained from businesses taking a positive approach to 2021 and readying themselves for growth. 

Contact us

2021 holds plenty of unknowns, but it is also a year for potential and there are many reasons to remain positive. If you have any questions or concerns about issues that may be affecting your business, get in touch and the relevant team will aim to reply to your query within two hours.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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Guides & Advice

The new trading arrangements with the EU | Brexit

After eight months of negotiation, and some four and a half years after the referendum vote to leave the EU, the EU-UK Trade and Co-operation Agreement signed on 30 December came into force provisionally at 11 pm (UK time) on 31 December 2020, and the UK finally left the EU customs union and single market.

The Agreement, which is one of a package of agreements reached with the EU, was approved by Parliament in the UK on 30 December but has yet to be ratified by the European Parliament and the Council of the European Union. This is expected to take place early this year.

Whilst the Trade and Co-operation Agreement offers some significant free trade benefits, it represents a profound change for British businesses and their trading arrangements. As a member of the EU customs union and single market, the UK was part of a single customs territory with the same standards, rules and supervision and enforcement systems. As a result, trade between the UK and other EU member states was seamless. This is no longer the case.

Many businesses will have been planning for Brexit for some time, implementing Brexit related reviews and addressing issues identified by, for example, amending standard contract documents, or addressing issues specifically when negotiating bespoke contracts. None of this preparation will have been wasted and if you still have work to do, it is important to act now.

The EU-UK Trade and Co-operation Agreement focusses on the arrangements for trading goods; the Agreement has very little to say about services. The key headline benefit of the Agreement is that goods imported and exported between the UK and the EU will be free from tariffs and quotas. However, it is clear that, at least in the short term, business exporting to, or importing from, the EU face significant change and some important challenges:

• To qualify for the preferential tariff arrangements, goods must comply with the applicable rules of origin set out in the Agreement. These are designed to determine the economic nationality of a product where that product includes materials or components made in more than one country. In some cases, compliance may not be straight forward. Marks & Spencer’s chief executive Steve Rowe, using the example of the company’s Percy Pig sweets which are manufactured in Germany, imported into the UK and then exported to the Irish Republic, France and the Czech Republic, noted that “About a third of the products in our food business is subject to complex rules of origin around componentry and how much has been altered in the UK.”

• Goods traded between the EU and the UK will now be subject to customs formalities and, in particular, all imports into the EU will need to meet EU standards and will be subject to regulatory checks and controls. In practice, as cross border traffic starts to return to normal levels after the Christmas and New Year period, this may mean delays and additional cost. Businesses which rely on the speed of delivery may be particularly vulnerable. Already, there have been a number of press reports of UK exporters having difficulties in getting fresh fish and seafood to EU markets and facing order cancellations as a result.

• The UK and EU are now separate regulatory systems, which means that most businesses serving both the UK and EU markets need to comply with two separate regulatory regimes. There is no mutual recognition of conformity assessments, which means that UK manufacturers will need to have their products assessed for compliance with an EU notified body. However, the Agreement does contain measures designed to simplify compliance requirements and facilitate trade.

• It is important to remember that under the Northern Ireland Protocol, agreed as part of the UK-EU Withdrawal Agreement, Northern Ireland effectively remains part of the EU single market. This means that goods entering Northern Ireland from Great Britain will need to comply with EU rules and will be subject to regulatory checks and controls.

Whether the disruption currently being experienced by some businesses is simply the consequence of teething problems, or symptomatic of more permanent regulatory friction, business will need to adapt quickly, and a clear understanding of responsibilities, both contractual and regulatory, and how they are impacted by the new arrangements will be crucial.

Contact us

For further advice and help with any aspect of your trading arrangements with the EU and beyond, please contact Matthew Sutton on a member of the commercial team in your local office.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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Guides & Advice

Consumer contracts – as a supplier, do I have to give a refund? | Lockdown 3.0

The Competition & Markets Authority (CMA) were quick to advise suppliers of goods and services what their obligations are when it comes to cancellations and refunds in light of the UK lockdown in March. Now the UK is in its third national lockdown it is likely the CMA guidance will continue to be revised.

We’ve provided some guidance on how suppliers should deal with consumer’s advance payments, refunds and cancellations during this uncertain period.

When do suppliers have to offer a full refund?

The CMA’s view is that a full refund will usually need to be given when services/goods cannot be provided in response to lockdown laws, even where the business’ terms and conditions state that part of the payment is a non-refundable deposit or advance payments are made.

This is bad news for suppliers in the time where “cash flow is king”, – the principle applies that it would be considered unfair that monies are retained for services/goods which cannot be provided.

Under what circumstances can suppliers retain monies paid by consumers?

1. If the contract cannot go ahead at all due to lockdown laws.

A full refund will usually need to be given in this scenario. Where lockdown laws prevent you from providing a service, businesses may deduct a contribution to costs already incurred in relation to a specific contract (where it cannot be recovered elsewhere). This will depend on the sector and nature of the service being provided. CMA has provided specific guidance for some industries on when this will apply.

2. If the contract is ongoing and will resume once lockdown laws are lifted.

Consumers will normally be entitled to withhold payment for the period that the services that are not provided. The CMA do accept in practice, businesses and consumers can reach an informal agreement to continue to provide payments so long that it is mutually acceptable and that consumers are not left in a worse position.

Businesses may require consumers to make a small contribution to its costs until the provision of the service is resumed. The CMA states businesses can only rely on this where the contract terms or their terms and conditions set this out clearly and fairly, and the consumer is free to end the contract if they do not wish to pay these fees.

3. Accepting advance payments for performance of future contracts.

As it it currently unknown when we will come out of lockdown, it is advised that suppliers should not seek payment for a service in advance when they do not know if they are able to provide the service.

4. If businesses can provide services/goods, but the consumer cannot go ahead.

This very much depends on the circumstances. If a consumer cannot go ahead due to following government guidance that contain legal restrictions, it could be found that consumers would be entitled to a refund.If the contract could go ahead, but a consumer decides simply not to go ahead, suppliers can refer to their terms and conditions on cancellation and refunds. i.e. cancellation fees will apply as long as they are fair and accurately reflect the losses a supplier will incur as a result of the cancellation. Again, the cancellation clause will have to be reflective of the costs loss as a result of the cancellation.

How can suppliers survive lockdown 3.0?

1. Check your terms and conditions – what options do you have available when it comes to cancellation/termination/rearrangement of contracts? What services/goods have you provided (if any) and consider what costs have been incurred so far? If your terms and conditions are not favourable and require amendment, do they contain variation clauses to allow you to do this?

2. Check your business interruption insurance policies – what losses can be claimed as a result of lockdown laws? Read our guide on making a claim on your business interruption insurance policy.

3. What steps can you take to mitigate any further losses in the event of future lockdowns? Do your terms and conditions need amending to help? Do you need to take out further insurance policies?

4. Have conversations with your customers – Whether consumer customers have to pre-pay for services i.e. electricity meters, school fees etc. the CMA does not object to a small contribution being paid by consumers to the costs of upkeep of a service until the service can be resumed. See whether customers are willing to do this.

5. Offer alternatives to refunds in your terms and conditions: credits, vouchers, re-booking or re-scheduling as an alternative to a refund. Whilst it is imperative that consumers are given the right to a refund, by clearly listing alternatives this may help retain future services and maintain cash flow.

The important theme running throughout consumer law generally and the CMA guidance is consumer rights must be fair and they must not be misled about their rights.

Whilst the CMA only provide their views on how the law operates, suppliers should take these views seriously, not only for management of their contracts through the pandemic but because their views on how the law operates is relevant.

The consumer laws are favourable to the consumer, but the important points for suppliers to take away is to ensure they have conversations and work with their consumer customer base to ensure whether cancellation of contracts is due to lockdown laws or other reasons.

If there is no lockdown law/government regulation preventing contracts going ahead, suppliers should be able to negotiate cancellation fees and retention of deposits on their own terms and conditions, so long as these are fair and reasonable.

Read more about how we can help you to minimise your risks and maximise the value of your commercial contracts.

We’re here to support you

If you’re a supplier and need advice on your consumer contracts we can help. Our support offering is tailored to suit you and your business needs, working with you to create a strategy to ensure you are fully informed on your position, as well as seeking to better manage your cash flow and supply chains during difficult circumstances.

Our specialist commercial team can review contracts/terms/policies and assess the options available to you, including providing notices and amendments to contracts that are sent out to your customer base.

For advice, guidance and legal support contact Martin Noble or Charlotte Cassells.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

SHMA® ON DEMAND

Listen to our SHMA® ON DEMAND content covering a broad range of topics to help support you and your business.

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Personal data after Brexit – what has changed and how it affects you and your business

It’s just over two and a half years since major changes were introduced to the data protection legal landscape in the UK with the coming into force of the GDPR.

But with the Brexit transition period now at an end, the GDPR, as an EU Regulation, is no longer automatically part of UK law.  The UK is, however, adopting it into UK national law, meaning that from 1 January 2021 the UK GDPR and the EU GDPR will co-exist separately. However further major changes now affect every business in the UK.

This guide looks at the steps you should take to make sure your business is ready to manage its personal data in a post brexit world.

Which data protection laws apply from 1 January 2021?

The European Commission has been considering whether the UK’s laws are adequate to protect the privacy and data protection rights of EU citizens.  It had not issued such a decision (known as an Adequacy Decision) by 1 January 2021 and so from that date there have been three overlapping regimes:

The UK GDPR

A slightly expanded version of the GDPR which will apply for data processed in the UK or by an EU (or other international) business targeting customers in the UK. It will include aspects not covered by the basic GDPR, such as processing for law enforcement purposes.

The EU GDPR

This will apply, for example, if a business targets EU customers or has a base in the EU.

The Withdrawal Agreement version of the GDPR

A ‘frozen version’ of the EU GDP which will apply as a safety net for EU citizens to personal data processed by UK businesses as at the last day of the transition period (31 December 2020). This version will last until an Adequacy Decision is issued.

Some UK businesses will potentially be subject to all three of the data protection regimes. These include UK businesses which:

  • have operations in the EU
  • sell to customers in the EU
  • or monitor EU citizens through their website browsing activities.

Will there be much difference between the regimes?

Not to start with. But it’s very possible that over time the EU GDPR and the UK GDPR will diverge. Particularly since the UK courts are no longer obliged to follow European Court of Justice decisions after the end of the transition period.

What do you need to do?

Arrange your processing of data so that you can, if necessary, distinguish between the various categories of data (UK citizens, EU citizens, and pre-transition period EU citizens’ data) – in case in the future you need to treat them differently under EU and UK GDPR.

For example, if you target customers in the EU or if you have non-UK data in your database, check whether your database can be set up to tag the different sets of data. If it can, that’s something you should be doing.

Will there be any effect on cross-border data transfers?

Yes.  Another consequence of not being granted an Adequacy Decision.

Under the EU GDPR, transfers of data around the EU can be done freely but transfers to so-called ‘third countries’ can only take place if appropriate safeguards are put in place.

The UK would have become a “third country” on 1 January 2021.  A grace period was however agreed in the EU-UK trade deal concluded on Christmas Eve 2020 so that has not (yet) happened (see below). If the UK becomes a “third country” then, from that point, without an Adequacy Decision personal data can’t be transferred from the European Economic Area (the EU plus Iceland, Liechtenstein and Norway) to the UK without appropriate safeguards.

Normally, this will be done by the exporting company and the importing company putting the EU Standard Contractual Clauses (SCCs) in place between them.

And traditionally, this has been straightforward.

But things have been made a little more complicated by a recent decision of the ECJ, which, as well as invalidating the Privacy Shield, made clear that if you want to rely on the SCCs you need to make sure they’re adequate to protect individuals’ data under the laws of the third country.

How do you do that? By supplementing the SCCs to cover off any concerns. Because whilst you can supplement the clauses, you’re not allowed to amend them.

Remember also that data being accessed via a computer outside the UK counts as a cross-border transfer – even if the data is sitting on a server in the UK.

Fortunately, the EU-UK trade deal signed on Christmas Eve 2020 spared UK businesses from the need to have the necessary safeguards in place from 1 January 2021.  A term of the deal postponed by up to six months (four plus a possible two more) the point at which the EU will regard the UK as a third country, subject to certain conditions. Although nothing is certain, it is possible that the breathing space has been agreed because the European Commission believes it will be able to issue the UK with an Adequacy Decision in the next few months before the grace period expires.

If you want to transfer personal data from the UK to the EEA, the UK Government has already confirmed it will treat the EEA as having adequate protection laws, though it will be keeping that position under review.

How to ensure you are ready for the cross-border transfer changes?

While we wait to discover whether an Adequacy Decision will be granted, you should:

  1. Review your key international data flows and record them in your Article 30 records of processing.
  2. Prioritise them, in terms of volume or key data or sensitive special category data that’s flowing, and tackle the most important first.
  3. Prepare ready-to-use versions of the SCCs so that cross-border data transfers are not disrupted if the grace period ends at the end of April (or June if it is extended) without an Adequacy Decision for the UK. Don’t forget that SCCs will be needed even for transfers from an EEA company to a group company in the UK.
  4. Identify your processors in the EU (e.g. cloud, HR, payroll, database service providers). And ask them what appropriate safeguards they propose to use.
  5. Consider how to deal with transfers by your EU processors to you as controller in the UK.
    • Because as things stand at the beginning of 2021, the only approved SCCs which currently exist are:
      • from controllers to processors, or
      • from controllers to another controller.

Not the other way round.

However, on 12 November 2020 the European Data Protection Board published some brand new SCCs which, if adopted, will include clauses that can be used for processor-to-controller and processor-to-processor transfers.

The six months breathing space will pass quickly. Be ready to put the new SCCs in place (once they’re adopted) to cover any transfers of personal data from the EEA to the UK after the end of the grace period if no Adequacy Decision has been issued to the UK by then. An Adequacy Decision is not a foregone conclusion: the European Commission has previously expressed reservations about whether some of the UK Government’s legal powers to require access to personal data for national security reasons are compatible with EU rights to data protection, and also whether the UK’s participation in the Five Eyes Intelligence Network could mean EU data finds its way to the USA.

Remember that you will still also need SCCs (or another adequate safeguard) for transfers of personal data from the UK to non-EEA countries which do not have an Adequacy Decision (such as the US).

It’s expected that the previous SCCs will be repealed with a one-year transition period. So be prepared for a major contract-updating exercise for any SCCs in the old format.

Related services

What other practical steps should you be undertaking going forward?

  • Identify whether you need to appoint an EU Representative:
    • If you don’t have any establishment or permanent base in the EU but you offer goods or services to individuals in the EU or monitor them, then you’ll need to appoint an EU Representative in an EU Member state where you target customers.
    • You appoint the EU Representative in writing and their job will be to liaise with the local supervisory authority, for example if there is a data breach.
    • You don’t need to appoint a Representative, however, if your processing is only occasional or low risk and if it doesn’t include special category data.

     

  • If you do need an EU Representative, Shakespeare Martineau’s membership of the PrivacyRules network means we can help you find the right one.
  •  

  • If you trade in multiple EU countries, work out which EU Supervisory Authority will be your lead Supervisory Authority for all places in the EU. That will allow all your bases in the EU to benefit from the EU’s ‘one-stop shop’ in terms of supervisory purposes under the EU GDPR.
  •  

  • If, however, you don’t have any bases in the EU but you do business there, you probably won’t be able to benefit from the EU’s one-stop shop and will need to think carefully about the implications of the ICO ceasing to be the Supervisory Authority for EU GDPR purposes.
    • If, for example, there’s a data breach affecting the data of EU individuals in multiple EU jurisdictions, you may well need to make notifications to the ICO as well as to every one of those EU Supervisory Authorities where customers’ data has been affected.
    • So, update your data breach notification processes to take this into account.

     

  • Review and update your privacy notice, contracts and other documentation.
    • Refer to the correct version of the GDPR. And you’ll probably need to update the terminology. For example, references to transfers outside of the EEA will need to be changed to transfer out of the UK.
    • Adjust what’s said about national data transfers. Remove references to the Privacy Shield and put in the right wording about SCCs and how you use them.
    • Change references to transfers outside of the EEA to transfers out of the UK.
    • And identify your EU Representative, if you’re required to have one. If you have establishments in the EU, you’ll probably need to list the relevant Supervisory Authorities that apply.
  •  

  • Finally, consider refreshing the training for your staff so they understand how the new regime works.

We can help

For further guidance on how you can prepare for the personal data changes post-Brexit, contact Kim Walker or another member of the Commercial & IP team.

Our Brexit & Beyond hub contains the latest news, articles, briefings, commentary and webinars concerning the legal implications of Brexit, ensuring you have all the information to drive your strategic thinking. Now and in the future.

And our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am–12pm Monday to Friday, call 0800 689 4064.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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Brexit: Commercial Contracts and Supply Chains

Time is Running Out – Act Now

The UK leaves the EU customs union and single market on 31 December. This will have profound implications for British businesses and their trading arrangements. Trade negotiations are continuing, but there is no guarantee that a deal will be reached before the end of the year. Even if the UK can secure the “Canada style” deal with the EU it is seeking, it is important to recognise that this does not represent the status quo. Deal or no deal, customs controls will apply to trade with the EU from 1 January and frictionless trade will end.

Many businesses will have been planning for this outcome for some time, implementing Brexit related reviews and addressing issues identified by, for example, amending standard contract documents, or addressing issues specifically when negotiating bespoke contracts.

However, if this is not you, then it is still not too late to act.

What issues do I need to consider when reviewing contractual arrangements or negotiating new contracts?

Brexit clauses

  • Consider including a clause in contracts that triggers some change in the rights and obligations of the parties as a result of the UK leaving the EU customs union and single market. This might give relief from delays caused by the introduction of customs controls, and/or the ability to pass on additional costs incurred.

Force Majeure

  • It is unlikely that a standard force majeure provision will apply to a Brexit related matter. However, the wording of the provision should be checked.

Termination rights

  • Consider including a right to terminate at the end of the current transition period, or a general right to terminate at any time for convenience by giving a reasonably short period of notice.

Prices and delivery responsibilities

  • Check the pricing provisions in the contract. Where selling or buying cross border, are prices inclusive or exclusive of duties and tariffs? Is the position clear?
  • If selling goods to another UK business which incorporates imported components or materials, can any cost increase or additional duties incurred be passed on to the customer?
  • Where buying or selling cross border, which party is responsible for dealing with customs procedures on leaving and entering a country and the associated costs?
  • Review the use of INCOTERMS. Will using the same INCOTERM be appropriate after 31 December?

Time for delivery

  • If you are supplying goods, allow for the possibility of delays arising from customs procedures. This may also be relevant when supplying goods to other UK businesses, where those goods incorporate imported parts or materials.

Personal data transfers

  • If transferring personal data between the UK and EEA member states, consider whether new or updated agreements will be required after 31 December.

Personnel

  • Consider whether the end of freedom of movement will impact on your ability to deliver against contracted timescales.

Contractual references to the EU

  • Check references to the EU and the EEA in contracts. Should these references continue to include the UK after 31 December? Is the position clear? This is likely to be particularly important in licences and distribution agreements, where rights are typically granted in relation to defined territories.
  • As an additional precaution, consider the possibility of Brexit leading to future changes to the composition of the UK. Should a contractual reference to the UK include a future independent Scotland?

Changes in law

  • Is there any legislation which is crucial to the operation of the contract which may be affected following the end of the transition period? Consider what effect a change of law might have in these circumstances and the potential for incurring additional costs.

Dispute Resolution

  • It may become more difficult to enforce English court judgments in EU member states after 31 December. This may result in more complexity, more cost and delay. Consider whether it would be beneficial to include a requirement in contracts to use arbitration.

 

Remember, time is running out. Whatever the outcome of trade negotiations, the UK’s trading relationship with the EU will change fundamentally on 1 January.  It is important to act now.

Contact us

For any advice and guidance on reviewing and amending your contracts in the lead up to 1 January 2021 and beyond, please contact Matthew Sutton on 0121 237 3064, or another member of the commercial team in your local office.
For advice or guidance on any other commercial or legal issue, a member of our team can walk you through everything. Click here to discuss.

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Marston’s job cuts: last orders for hospitality?

Marston’s announcement that it is set to cut up to 2,150 jobs has shown that even industry giants aren’t safe from the new Government restrictions.

Coping with restrictions

With the 10pm curfew already having impacted the profits of many businesses in hospitality, the new tier system was always going to hit the sector hard, causing a host of new limitations for pubs, bars and restaurants to contend with.

Confusion caused by this system will likely only exacerbate hardships faced by hospitality venues, with the uncertainty surrounding when things will return to normal making it a challenge to plan for the months ahead.

Will localised support bring some relief?

Although the new localised furlough scheme provides some relief for hospitality and leisure businesses that are forced to close, job cuts are still being made, showing just how close to the edge many pubs, bars and restaurants are.

For those which are able to stay open, and teetering on the brink, redundancies may be the only way forward if they are to survive, with some in hospitality stating they’d be better off if they were made to close temporarily, allowing them to take advantage of the job retention scheme.

How can the hospitality move forward during COVID-19?

The constant balancing act that the sector has had to battle in recent months has drained many businesses, and sector leaders are likely to try and challenge these increased restrictions. However, in the meantime, they should review their business models, assessing what changes can be made and what help is available.

By making the most of Government support and seeking professional guidance regarding the best steps to take next, these latest restrictions don’t have to mean certain death for hospitality.

We’re here to help

If you’re experiencing financial difficulties and would like some advice and support, then speak to a member of our corporate insolvency and restructuring team.

Our guide to recovery and resilience, helps to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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Gavin Williamson’s letter to Vice Chancellors on the IHRA definition of antisemitism

There is a reason why it is a legal maxim that hard cases make bad law. Bad law sets dangerous precedents, however worthy its initial aims. To be clear, this is not a blog about whether or not universities should do all they can to tackle antisemitism on campus; of course they should. Nor is it a blog about whether the International Holocaust Remembrance Alliance definition of antisemitism should be adopted by universities.  We have advised many universities where there is an absolute commitment to tackling antisemitism, but where adoption of this particular definition has had to be carefully considered against other duties such as academic freedom and freedom of speech.

This is instead a blog about whether the Secretary of State has or should have the power to force universities to adopt such a definition.

There is no legal obligation on universities to adopt the definition. The Secretary of State’s recent letter to Vice Chancellors exhorting them to adopt the definition makes no claim to the contrary; instead it explicitly asserts that adopting the definition is in the view of the Secretary of State morally the right thing to do.  He goes on, however, to explain that he is asking officials to explore options for enforcing this moral obligation, including “directing” the OfS to impose a registration condition or suspending funding streams. There are obvious reasons why alarm bells should ring when politicians seek to enforce what they see as moral obligations through indirect legal routes such as this.

Does the Secretary of State have the power to direct the OfS to impose a registration condition?

Not as such, not directly. Under the Higher Education and Research Act, in exercising its functions, the OfS must have regard to guidance or directions issued by the Secretary of State. In giving such guidance, the Secretary of State must have regard to the need to protect institutional autonomy, defined as including academic freedom.

The formulation “have regard to” is a legally permissive one, in that it leaves it to the relevant decision-maker to decide what weight to attach to the relevant factor, when balanced against other relevant factors. So the Secretary of State can decide what weight to attach to institutional autonomy when deciding whether to guide the OfS towards a registration condition on adopting the definition. But, equally, the OfS has the discretion not to follow the Secretary of State’s guidance.

In both cases, the law requires the relevant power to be exercised for its proper purpose and the decision-maker to be able to explain their reasons for, respectively, issuing the guidance or imposing a registration condition, and the OfS has to consider consulting on the need for a condition. However, provided the way that the condition is introduced is procedurally correct, the courts will generally only intervene to strike out a condition if it is “irrational” to impose it. This is a very high legal threshold to cross and would require a finding, effectively, that no reasonable regulator, properly directing itself on the information available to it could possibly have imposed such a condition.

The aim of the guidance

The decisions to issue the guidance and to impose the condition would need therefore to address what legitimate aim it was seeking to address - in this case, the need to ensure that Jewish students were able to access and thrive in higher education would obviously be a legitimate aim. The decision would also need to address the various well-publicised challenges to the definition, for example that it is ambiguous and unworkable, or that it conflicts with other duties the Government is simultaneously promoting such as academic freedom and freedom of speech. It would also have to address why a requirement to adopt the definition, rather than, say, a broader requirement to take reasonable steps to address antisemitism on campus, is a necessary and proportionate step.  The OfS might itself face challenges for breach of its public sector equality duty if it takes action to introduce a condition in relation to antisemitism, but not in relation to other forms of discrimination.  Nevertheless, if the Secretary of State and the OfS address these issues in a reasonable way, a court is likely to defer to their judgment.

What about restricting access to funding streams?

This is straight out of Trump’s playbook, who last year signed an executive order to require federal agencies to tie access to funding to a commitment by universities to ensuring freedom of speech.  In the UK, similar principles to those set out above apply to any restrictions on direct funding. There may be an added complication for the regulator in that it would have to show why taking enforcement action for breach of any registration condition, including the sanction of a fine, was not sufficient,

Restricting access to student loan funding would most likely require an ability to restrict what individual providers could charge by way of fees, perhaps using the model developed under the abortive student number controls that were introduced and then revoked earlier this year.

So, there are hurdles to overcome in introducing a registration condition or restricting access to funding, but they are not insurmountable.  In the past, the fact that there are so many question marks over the legal appropriateness of taking a step, combined with appropriate deference for conventions such as the need for universities and arms-length regulatory bodies to be independent of the state, might have been sufficient to deter political intervention.

However, once those conventions are regarded as dispensable where political or moral expediency requires it,  resisting the steps threatened by the Secretary of State requires a preparedness to take legal action far greater than the sector has to date shown willingness to do, and is, in any event, an especially unattractive prospect given the subject-matter in this case. Hence, in the face of deliberate and determined political interference, the safeguards of institutional autonomy and regulatory independence now appear fragile indeed. Hard cases do indeed make bad law.

Susan Lapworth, Director of Regulation at the Office for Students has helpfully pointed out that if the Secretary of State issues a formal direction (rather than guidance) the OfS must not merely have regard to it, it must follow it. A direction under the Higher Education and Research Act must be made through regulations.
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For further advice on this or another subject affecting institutions do contact Smita Jamdar or another member of the education team.

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Guides & Advice

Update: Coronavirus – Temporary Relief for publicly traded companies

Update: Coronavirus – Temporary Relief for publicly traded companies

UPDATE – 25 September 2020: The government has given businesses some additional much-needed breathing space by extending measures from the Corporate Insolvency and Governance Act, including the deadline for holding AGMs.

The obligation for companies and other qualifying bodies to hold their AGMs virtually has further been extended from 30 September 2020 to 30 December 2020 (if they haven’t held them held it already), allowing shareholders to continue to examine company papers and vote on important issues remotely.

Updated: June 26 2020, the legislation goes live and becomes law.

Key measures are:

  • The Act is now in force and a company has until 30 September 2020 to hold its AGM (if it hasn’t already held it).
  • The Government may extend the date if there are further lockdowns.
  • Any general meeting (whether and AGM or otherwise) may be held virtually regardless of articles to the contrary in a company’s constitution.

 

Previous update 8 June 2020: Following the announcement in March 2020 that the government would introduce new legislation to assist companies struggling to hold effective AGMs as a result of the pandemic, the Financial Reporting Council (FRC) as of 8 June 2020, has issued additional guidance on best practices for AGMs updating the earlier Q&As it had agreed with the Department for Business, Energy & Strategy (BEIS) and answered questions about how companies should carry out business at such time until the Corporate Insolvency and Governance Bill (Bill) is approved by Parliament.

What are the proposed measures introduced by the Bill?

The purpose of the Bill is to provide temporary measures that aim to relax the company filing obligations and requirements from companies to hold AGMs and other meetings.  The Bill provides workarounds to enable companies to hold AGMs safely and more flexibly in order to remain compliant with the restrictions imposed by the government during the pandemic.

The Bill will allow companies to determine:

  • who is permitted to attend a meeting in person;
  • that a quorate meeting can be formed by members situated in different locations; and
  • that a quorate meeting can be formed by members communicating by electronic media.

The relevant changes relating to AGMs are found in Sections 36, 37, 38 and Schedule 14 of the Bill.

What are the key points to have come out of the FRC’s latest update?

  • New measures introduced by the Bill relating to AGMs and General Meetings (GMs) and other meetings will apply retrospectively from 26 March 2020 and will apply until 30 September 2020 (or until such later date as decided by Parliament).
  • Companies that are required to hold an AGM (whether by legislation or constitutional rules) will be permitted to postpone an AGM and will have until 30 September 2020 to hold it.
  • Companies are encouraged to keep members adequately informed of their plans to hold or delay AGMs even if they plan to use the measures provided for in the Bill (e.g. extension of period to hold an AGM) once it has been approved.
  • The FRC has warned that companies that wish to hold an AGM in accordance with the Bill (e.g. virtually), and are concerned whether the votes taken at the meeting will be valid, prior to its approval will need to take their own view on how to proceed with their advisers. Approval of the Bill is not guaranteed and companies must proceed on their own judgment to ensure that the business of the meeting is valid.
  • The Bill will enable companies to hold meetings electronically even where a company’s Articles of Association (AoA) require a physical AGM.
  • The FRC advises that companies and directors should provide members with the opportunity to engage and challenge the board in advance of an AGM. Companies are also encouraged to make use of electronic communication facilities in order to communicate with its members and should endeavour to hold a meeting once the social distancing measures have been lifted.
  • Members retain their right to vote, but are advised that they may have to exercise those voting rights in ways other than by voting in person. The BEIS has stated that the measures proposed in the Bill are to protect the safety of the company, its employees and its members.
  • In determining whether authorisations obtained at the previous year’s AGM are still valid, Companies are advised to consider the requirements in their AoA or constitutional rules and the resolutions passed at their previous AGMs.

Best practice advice on holding an effective AGM

  • Ensure that your members have a clear understanding of how they can participate and vote at an AGM if your company chooses to make use of the measures provided for in the Bill.
  • If you do choose to hold a wholly virtual AGM, be sure to host an additional meeting or event to enable members to express concerns or raise questions about the company’s activities.
  • Keep your members regularly informed about how your company plans to hold its AGM especially if the format will be different to previous AGMs.
  • Consider updating your company’s Articles of Association to provide for the ability to postpone an AGM and hold virtual meetings to future proof the company against similar issues that have arisen as a result of the COVID-19 pandemic.  

AIM update on temporary measures:

Following the temporary measures announced by AIM in March 2020 to support AIM companies and nominated advisers in relation to the COVID-19 pandemic, AIM announced further temporary measures concerning the publication of annual audited accounts for AIM listed companies.

In light of the uncertainty and disruption cause by the COVID-19 pandemic, London Stock Exchange plc (LSE) has recognised that there may be circumstances where an AIM company is unable to publish its annual audited accounts under the normal legal and regulatory reporting deadlines.

Currently, under the AIM Rules for Companies (AIM Rules), an AIM company has six months after the end of its financial year to publish its annual audited accounts. In March a joint initiative of the Department of Business, Energy & Industrial Strategy and Companies House was announced, allowing UK companies to apply to Companies House for a three-month extension of the legal filing deadline for accounts.

In line with this announcement, LSE also confirmed that from 26 March 2020, an AIM company could also be able to apply to AIM Regulation for a three-month extension to the reporting deadline for the publication of its annual audited accounts, pursuant to AIM Rule 19.  The extension will be available to AIM companies with a financial year ending between 30 September 2019 and 30 June 2020. An AIM company wishing to utilise this extension must make a request to the AIM Regulation via the nominated advisor, prior to the AIM Rules reporting deadline.

From 9 June 2020, AIM Regulation has confirmed that AIM companies will be given an additional month by which to prepare their half-yearly reports under AIM Rule 18.  AIM companies wishing to take advantage of this temporary measure must notify via an RIS prior to the AIM company’s reporting deadline and the company’s nominated adviser must separately inform AIM Regulation.

LSE has confirmed that the operation of the AIM Rules will be kept under review.

FCA, FRC and PRA co-ordinated response:

In response to COVID-19, the FCA, FRC and PRA have joined forces to announce a series of temporary actions to ensure that information continues to flow to investors and to ensure that this supports the continued functioning of the UK’s capital markets.

1. The FCA has allowed listed companies an extra two months to publish their audited financial reports, reminder not to draw adverse inferences by reporting delays and the temporary halt to the publication of prelims removed

Currently, under the Transparency Directive, companies have four months from their financial year-end in which to publish audited financial statements. This two month relief will mean that listed companies will not face suspension if they publish their financial statements within six months of their year-end.

The FCA was clear in its update that the Market Abuse Regulation remains in force and that companies are still required to fulfil their obligations in relation to inside information. The FCA also implored market participants not to draw undue adverse inferences if companies choose to make use of the additional two months. The FCA also strongly encouraged listed companies to reconsider their financial timelines in order to ensure that disclosures are prepared accurately and carefully, and from the perspective that “the global pandemic and policy responses to it may alter the nature of information that is material to a businesses’ prospects”.

The FCA reminded companies that as companies of all types significantly adjust their business and operations to respond to the challenges and disruption caused by Covid-19, they take advantage of the regulatory deadlines, and their temporary extensions, rather than rushing to publish preliminary statements.  The market as a whole was reminded that it should not draw adverse inferences as a result of the changing timetable for announcements.

The temporary moratorium on publication of preliminary announcements announced on 21 March 2020 by the FCA will end on 5 April 2020 and the FCA noted that it believed “that pressure can abate as companies react to the need to rethink and re-plan financial calendars in light of the coronavirus pandemic and the package of measures the three regulators announced recently.”

2. FRC guidance for companies preparing financial statements in this uncertain environment

The FRC highlighted key areas of focus for boards in maintaining strong corporate governance and provided high-level guidance on some of the most pervasive issues when preparing their annual report and other corporate reporting issues.

In relation to corporate governance, the key messages were:

  • implement mitigating actions and processes to ensure you can continue to operate an effective control environment;
  • consider how to secure reliable and relevant information to manage future operations; and
  • pay due attention to capital maintenance, ensuring that sufficient reserves are available when the dividend is paid, not just proposed; and sufficient resources remain, after payment of any dividends, to continue to meet the company’s needs.

In relation to corporate reporting, the guidance covers:

  • the need for narrative reporting to provide forward-looking information that is specific, and that provides an insight into the consideration process of the board;
  • going concern and any associated material uncertainties, the basis of any significant judgements and the matters to consider when confirming the preparation of the financial statements on a going concern basis;
  • the increased importance of providing information on significant judgements applied in the preparation of the financial statements; and
  • the judgement required in determining the appropriate reporting response to events after the reporting date and the extent to which disclosures may be appropriate.

The FRC guidance highlighted the importance of keeping investors’ understanding of the issues faced by companies currently through effective disclosure, and ensuring that they have the key information in order to be able to assess the liquidity, viability and solvency of companies. The FRC noted that it is reasonable for investors to expect companies to be capable of articulating how they anticipate the specific business will be affected in different scenarios.

The FRC guidance was also complemented by PRA guidance, regarding the approach that should be taken by banks, building societies and PRA-designated investment firms. The guidance focused on:

  • consistent and robust IFRS 9 accounting and the regulatory definition of default;
  • the treatment of borrowers who breach covenants because of COVID-19; and
  • the regulatory capital treatment of IFRS 9.

3. FRC guidance for auditors

The guidance provided a non-exhaustive list of factors auditors should consider when carrying out audit engagements in the current circumstances. The aim of the guidance is to temporarily help auditors deal with the emerging situation and seek to overcome the challenges in obtaining audit evidence.

The joint statement details further measures which will allow for companies and auditors to focus on the delivery of information to investors and the capital markets:

  • Postponement of audit tenders

Companies are encouraged to consider delaying planned tenders for new auditors, even when mandatory rotation is due.  The statement refers to the power of the FRC to extend certain mandates by up to two years in exceptional circumstances.

  • Postponement of audit partner rotation

Key audit partners are required to rotate every five years. The FRC intimates that this could be extended to no more than seven years if a good reason is cited. It is suggested that the need to maintain audit quality, particularly in the current climate, could be considered a good reason for these purposes. This would need to be agreed with the audit committee of the affected entity, but does not need to be approved by the FRC.

  • Reduction of FRC demands on companies and audit firms

The statement refers to several ways in which the FRC is attempting to reduce its demands on companies and audit firms. For example, the FRC has paused for at least one month writing new letters to companies following its review of their annual reports and accounts.

In summary, the temporary, yet comprehensive, measures and guidance provided jointly by AIM, the FCA, FRA and PRA recently will come as a welcome relief to companies in the current period of global uncertainty and will hopefully go some way to providing the flexibility needed to navigate the unprecedented waters of the COVID-19 pandemic.   It is a complex and fluid situation for many companies and if you would like to chat through any concerns or questions you have in relation to the information here or any other issues affecting your business please do contact Catherine MossBen HarberHannah Maxwell or another member of our corporate finance and company secretarial teams.

Contact us

We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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