8,100 hectares of forest sold in £113 million deal

Deal | Corporate

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27 forests from across England, Scotland and Wales have been sold by the Foresight Inheritance Tax Fund to Foresight Sustainable Forestry Company Plc (FSFC) as part of an investment fund portfolio disposal, worth £113.4 million.

The sale, supported by law firm Shakespeare Martineau, saw FSFC acquire 11 afforestation sites, 15 forestry sites and one site which is both afforestation and forestry, extending across a total 8,117 hectares. The transaction marks a significant milestone for FSFC, following its listing last November.

Peter Mayhew, legal director at Shakespeare Martineau who advised Foresight Inheritance Tax Fund on the deal, said: “We’ve been working with Foresight for more than 20 years, supporting on billions of pounds worth of deals. This was a relatively complex deal including extensive negotiation and a pre-sale restructuring of the relevant assets presented for sale to FSFC. It’s great to be involved in such an important transaction for Foresight that is going to directly contribute to the afforestation targets of governments across the UK.

As well as the production of sustainable home-grown UK timber, acquiring afforestation sites, which drive return through capital appreciation and access to voluntary carbon credits is a core part of FSFC’s strategy and it continues to actively seek further investment opportunities.

Foresight Inheritance Tax Fund invests in infrastructure businesses and other related trades that offer a combination of stable and predictable cash flows, low correlation to economic, business and market cycles and relatively low default rates.

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Peter leads on a wide range of corporate transactions, from fund structuring and launches to private equity investments, disposals and restructurings, and general corporate governance.

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Director liable for fraudulent trading for not investigating VAT fraud - ignore HMRC at your peril

Blog | Banking & Financial Services

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A recent High Court decision (JD Group Ltd [2022] EWHC 202 (Ch)) has found a director liable for fraudulent trading when he was aware that the company was participating in VAT fraud and deliberately failed to investigate.   This decision has ramifications for directors and companies.

Background to the case

The company started trading in baby clothes, and later in mobile phones. When HMRC assessed its 2005/2006 tax return it declined its claim for tax relief in respect of a series of related import and export transactions, the effect of which was VAT fraud. HMRC suggested that the company undertake various steps to avoid this, such as investigating counterparties.

The liquidator subsequently brought a claim against the director for fraudulent trading (sec. 213 Insolvency Act 1986). The liquidator relied on HMRC’s analysis of the VAT fraud.

The court confirmed that the liquidator had to satisfy a two-stage test. First, to demonstrate the director's subjective state of knowledge; and then to show that the director's conduct was dishonest based on the objective standards of ordinary decent people (Bilta (UK) Ltd (In Liquidation) v Natwest Markets Plc [2020] EWHC 546 (Ch)).

The director argued that he did not know the company was participating in a VAT fraud. He claimed the company had robust pre-transaction due diligence processes and, as a result, he believed the transactions were genuine.

The outcome

The court held that the director's defence was not credible. There was no evidence that due diligence was being carried out, the transactions were back-to-back and often entered into before payment was received. The evidence showed that the transactions were uncommercial.

The court concluded that the director was, therefore, aware that the company was participating in a fraud, and that the director deliberately decided not to carry out due diligence and other steps suggested by HMRC. The director's conduct was dishonest by the objective standards of ordinary decent people and he was, therefore, liable for fraudulent trading.

The court ordered the director to contribute an amount equal to HMRC's claims in the liquidation for unpaid VAT to the company’s assets, plus a misdirection penalty (for misdeclaration in the company's 2005/2006 tax return). This was on the basis that, had the VAT fraud not occurred, the company would not have been liable to HMRC.

Our advice?

Our advice to directors facing a similar situation would be to implement (and never ignore) measures suggested by HMRC to mitigate the risks of companies being implicated in tax fraud, and consequently mitigate a director's risk of finding themselves subject to a similar claim.

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Frank specialise in providing managed solutions in financially distressed scenarios to assist OMBs, companies, directors, lenders, investors and other stakeholders, as well as insolvency office holders.

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Our corporate team supports company’s interest in inflammatory disease treatment

Deal | Corporate

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Listed UK diagnostics developer Cizzle Biotechnology has acquired a 5% economic interest in treatments for inflammatory pulmonary and cardiovascular disease – with support from Shakespeare Martineau’s Birmingham office.

Cizzle Biotechnology – which was originally a spin-out from the University of York – has entered into a definitive agreement with Conduit Pharmaceuticals Limited and medical charity St George Street Capital Limited in association with the development of AZD 1656 or other similar treatments developed by the two companies.

In a clinical trial, data showed there was a significant increase in the migration of the regulatory T cells – which potentially reduce serious cardiovascular and lung diseases that are causative in the development of lung cancer, which Cizzle is developing a diagnostic test to identify – from the patients who had taken the drugs compared to those who had not.

Keith Spedding, corporate partner at full service law firm Shakespeare Martineau, who led the deal, said: “The biotech industry is absolutely fascinating – we are seeing huge movements and rapid growth in this market as clinical need increases and technology and innovation races to keep up.

“It has been great to get this deal over the line, which will allow Cizzle to develop treatments and continue developing its blood test for the early detection of lung cancer.”

The agreement is in addition to Cizzle’s existing interest in AZD 1656, which was announced on 20 September 2021. It supports the company’s ambitions to expand its target customer base into the pharmaceutical industry and is in line with its strategy of building a portfolio of early cancer detection tests, companion diagnostics and royalty bearing stakes in significant drug assets.

Executive chairman Allan Syms said: “The agreement represents an important extension to our close relationship with Conduit Pharmaceuticals Limited and St George Street Capital Limited.

“On 20 September 2021, we announced we had acquired a stake in St George Street Capital Limited’s AZD 1656 asset and we are now pleased to have the opportunity to increase our stake by an additional 5%.

“This new agreement supports our ambitions and is in line with our growth strategy. Keith and his team were able to react quickly to get this deal over the line.”

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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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How to get your start-up investment-ready

Blog | Fast growth & Start-Ups

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With the pandemic creating a wave of entrepreneurialism, many new businesses may now be seeking cash injections. But what do start-ups need to do to make sure they’re ready for investment?

Product innovation, market size and strong financial forecasts will all peak an investor’s interest in your business. However, when ploughing money into a company, investors will want to know their outlay is a safe bet.

With this in mind, there are multiple steps start-ups can take to make sure they have the best chance of securing the cash they need on their scale-up journey after they’ve attracted an investor through their doors.

Corporate structure

It’s very unlikely an investor will give money to an individual, so it’s important to have a corporate structure in place. Having a good idea is a great place to start, but most growing business are operated through a corporate vehicle that enables you to contract with other people – as well as eliminate personal liability for damages. Limited companies or limited liability partnerships (LLPs) are often used.

Contractual arrangements

Investors will need to see that you’ve got proper contractual arrangements established, so that everything you think applies to that relationship is agreed in writing. Supplier and customer arrangements should be governed by some sort of contract that covers important things like limitation of liability, termination, price and deliverables, for example.

Confidential information – which is protected when someone owes an obligation of confidence to someone else – is also something that needs to be thought about. While an obligation may sometimes be owed under common law, it is better if it arises formally under a contractual arrangement with a non-disclosure agreement in place.

Ownership of intellectual property

Intellectual property (IP) – which might be, for example, copyright that exists in source code for software, patents that protect inventions or trade marks to safeguard brands – is a really important factor that people miss all the time. IP is usually the most valuable asset of a start-up business, so it is crucial to get advice on what rights may be registered to get the best protection, particularly as investors will want to see this.  Investors will also want to make sure that any IP is owned by the corporate vehicle into which they are investing, and that third parties do not have conflicting rights.

Employment contracts

While not all start-ups employ people, if you do, make sure there are contracts in place so employees know the scope of their roles, their obligations to the company and that anything they create belongs to the business.

Regulatory

Even if you’re only holding customer or employee details, almost all companies will need to comply with data protection law, so it’s important to make sure you know your obligations. Depending on which sector you’re in, there will be other regulations you need to be aware of.

The financial penalties for non-compliance can be significant. If an investor discovers your business is not complying with the necessary regulations during their due diligence checks, they may back out of the deal as the risk of severe fines is simply too large.

Consequences

While an investor is unlikely to pull their cash straight away if none of the above actions are in place, it may negatively affect the investment in some way as the risk profile will have changed. Therefore, carrying out your due diligence checks upfront is key to ensuring you secure the investment you need for future growth.

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Kerry specialises in intellectual property infringement disputes, non-contentious intellectual property exploitation and advertising law, working with both private and public sector clients.

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Corporate team complete £369m AUM transfer for Mobeus Venture Capital Trusts

Deal

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New deal with Mobeus Venture Capital Trusts

After an extensive due diligence process led by Shakespeare Martineau, the boards of the four Mobeus advised venture capital trusts (Mobeus VCTs) have unanimously approved the transfer of their management contracts – relating to combined assets under management (AUM) of £369m – from Mobeus Equity Partners (Mobeus) to Gresham House as part of the £36.1m acquisition by Gresham House of Mobeus’ VCT business.

Following completion of the acquisition, which is expected to take place at the end of September, the Mobeus VCT team – comprising 16 full-time employees, including two partners, plus three consultants – will transfer to Gresham House, a specialist alternative asset manager offering funds, direct investments and tailored investment opportunities, which includes managing the existing £486m AUM Baronsmead VCTs.

Corporate partner and head of investment funds Kavita Patel and corporate legal director Peter Mayhew, both of Shakespeare Martineau, acted on behalf of the four Mobeus VCTs as part of the transaction.

Kavita said: “We have acted for the Mobeus VCTs for the past 20 years, so we’re delighted to have supported them in the transfer of their management contracts to Gresham House. This represents a new step in the evolution of both the Mobeus and Gresham House VCT businesses, with increased prospects for shareholders flowing from the combined capability.”

Peter added: “The boards have taken their responsibilities very seriously and we have assisted them in undertaking significant due diligence, in particular, to ensure that the transaction is in the interests of shareholders.”

Following completion of the acquisition of Mobeus’ VCT business and transfer of the Mobeus VCTs’ contracts, the enlarged Gresham House strategic equity division will have six VCTs under management with more than £850m AUM – creating a leading player in the VCT market.

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Kavita specialises in a broad range of corporate finance transactions, both for public and private companies, including acquisitions, disposals, joint ventures, funding arrangements, restructurings and cross-border transactions.

With the push towards trust, transparency and compliance, your legal partner will quickly become one of the most powerful tools in your arsenal. With robust commercial processes, well-managed operations and a determined approach to business leadership and growth, there is no reason why businesses won’t just survive, but truly thrive.

Our corporate team has had an outstanding start to the year, totalling more than £4 billion in deals - a new record for the firm.

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Protecting the vulnerable investor

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Protecting investors

As the marketplace continues to evolve at a rapid speed, investing is becoming easier than ever, particularly for younger people. However, this increasing simplicity when it comes to making gains and losses has led to experts asking whether more needs to be done to protect this ‘vulnerable’ demographic.

Recognising a vulnerable investor

The Financial Conduct Authority (FCA) defines a vulnerable investor as ‘someone who, due to their personal circumstances, is particularly susceptible to harm, particularly when a firm is not acting with appropriate levels of care’.

While this has previously been regarded as older people, the rise in young investors is prompting the question of whether this definition needs to be expanded further.

The role of the FCA

Cryptocurrency and trading success stories are often covered widely by the press, so it is no surprise that young people are lured into the world of investing. However, with less financial resilience, making a loss could have significant consequences for them.

While the FCA is taking measures to provide greater protection, due to only regulating specific sections of the wider investment market, it is somewhat limited in terms of what it can control. Many of the cryptocurrency trading platforms that are popular with younger people, fall outside of the FCA’s control.

Protecting young investors

Protecting a younger demographic of investors is an industry wide issue. FCA-regulated or not, it should fall to the society to protect the most vulnerable by raising awareness of the risks involved with investing. Rather than introducing new regulation, which could stifle innovation within the industry, the FCA should be more focused on promoting awareness.

Regulated providers should continue to assess who they regard as vulnerable and focus on producing products that take that risk into account, as well as offering advice on how best to protect new investors.

To help reach the wider market, it would be wise to get larger, well-known advisers on board to help protect and inform younger, more vulnerable investors. As influential voices in the market, sharing their approaches and advice is highly likely to get noticed by smaller businesses.

Unregulated investment product providers could consider crafting a set of principle-based rules. These could offer advice around what should and shouldn’t be said when promoting the product. Although these rules would only be advisory, the more involved they are in promoting them, the greater the impact they would have.

Working together

While there will always be some reckless businesses that expose their customers to greater risk, the vast majority of those operating outside of regulation intend no harm.

With a high appetite for risk and a lack of resilience, the industry must work together to raise awareness and offer advice in a bid to protect young investors.

Get in touch with our  investment funds  team to find out how they can help.

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Kavita is Regional Head for our South region and also Head of our Investment Funds sector. She has a formidable reputation amongst her clients for technical excellence.

She specialises in a broad range of corporate finance transactions, both for public and private companies, including acquisitions, disposals, joint ventures, funding arrangements, restructurings and cross-border transactions.

Our depth and breadth of expertise in the investment funds marketplace means we can help you navigate through what can be a complex arena. Whether you’re a fund manager or an investor, we can advise you how and where to invest, how to establish and structure a new fund, build a portfolio and ultimately, realise value from your investments.

 

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Guides and Advice

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.

 

 

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Blog

The future of state aid in a post-Brexit economy

Now that the UK has officially left the European Union, there are a number of mechanisms within the business world that will gradually begin to change, including the way in which the UK regulates state aid.

However, with a complex system still in place and change on the horizon, can the UK use the opportunity to refine state aid subsidies to its advantage?

What is state aid?

State aid – or subsidy control as it is referred to post-Brexit – is an umbrella term given to various forms of financial assistance provided by a public body to a private business, which carry the risk of distorting competition in the marketplace. Financial support mechanisms that fall under the banner of state aid include:

 

  • Subsidies and grants; and
  • Tax-advantaged venture capital schemes such as venture capital trust (VCT), enterprise investment scheme (EIS) and seed enterprise investment scheme (SEIS).

Prior to Brexit, state aid subsidies were governed by a number of EU laws, including the General Block Exemption Regulation (GBER), which aimed to monitor and control Member States when giving aid. Now the UK is no longer required to so closely abide to those regulations, there is an opportunity to formulate a new system that benefits UK businesses and the potential to re-visit some of the rules applicable to the venture capital schemes.

What needs to change?

Past EU Commission audits revealed that the UK was administering the venture capital schemes in a manner which wasn’t fully-compliant with, or in the spirit of, GBER. This led to the introduction of stricter rules, some of which although seeking to ensure greater compliance with EU requirements, are arguably too tightly drawn and fail to take into account the realities of business practice, in particular the very start-up businesses that the schemes seek to support.

One such rule which would merit being looked at as a potential area for change is the company age test.

Company age test

This test was designed to ensure that schemes were more appropriately targeted at young and innovative companiesHowever, this has proven to be regularly problematic. Even for the newest and most novel of businesses, acquisitions of intellectual property or assets from the founder’s prior endeavours, no matter how nominal or incidental, can prejudice the outcome of the test. As a result, companies that should have been eligible for the schemes have been excluded in the past.

Unfortunately, this outcome is a product of legislation which, although rightly designed to avoid artificial structuring and abuse in compliance with the EU state aid rules, fails to provide for any ‘de minimis’ exception. Although the UK must still have a subsidy control mechanism in place which aligns with EU regulation in the new system, there is room for the UK to relax certain parameters, ensuring eligible businesses do not miss out.

How does this benefit the UK?

Whilst it is likely that the current setup of the venture capital schemes will remain largely unchanged, certain tweaks and refinements could smooth out some of the snagging points currently created by the EU’s rules. In this case, refining the company age test would be a good place to start.

The venture capital schemes are one of the most important finance mechanisms we have. They promote investment and provide support to ambitious companies, ensuring a healthy flow of capital through the market and it is essential that these continue, regardless of the changes the UK decides to embrace in future.

Contact us

To find out more about what our investment funds team can do for you, contact Peter Mayhew.

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.

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Deal

Shakespeare Martineau supports multimillion-pound acquisition of financial coaching business

The East Midlands corporate team at law firm Shakespeare Martineau supported Adam Price, the founder of financial planning firm Hatch Financial Planning, throughout a multimillion-pound acquisition by Octopus Group.

Hatch, which works with the likes of MoneySuperMarket, Sony Interactive Entertainment, Epson, and Experian in offering affordable expert financial coaching, will shortly rebrand to Octopus Moneycoach. Ambitious plans are in place to grow the business from 30 to 200 employees over the next two years and to bring financial coaching to the mass market, with both AI and human advice services available to customers.

As one of the UK’s fastest growing financial services companies, Octopus’s acquisition of Hatch will enable the business to reach a wider audience, helping even more people to access vital financial services. Partnering with other established financial advice businesses already housed within the Octopus Group, Octopus Moneycoach will focus on offering financial coaching and planning to the employees of businesses who are looking to further support their workforce.

Led by Lincoln-based corporate partner Michael Squirrell, the Shakespeare Martineau team supported Adam Price, the founder and CEO of Hatch, on all legal aspects of the transaction.

Of the transaction, Michael Squirrell, said: “Octopus Group is one of the UK’s fastest-growing companies, unafraid to invest in other entrepreneurially-minded businesses.  With Hatch being a leading player in the financial coaching market, the synergies between the businesses are clear and the sale of Hatch proves that there remain plenty of great investment opportunities out there.

“It was a pleasure to act for Adam on the sale, playing our small part in this important step forward on Hatch’s mission. The creation of Octopus Moneycoach to complement Octopus’s existing financial services businesses is the perfect next stage for Hatch.

Adam Price, founder and CEO of London-based Hatch, said: “There is a misconception that financial services are only for corporate giants and multi-millionaires. Hatch’s goal has always been to change attitudes towards financial planning, making it a simple and affordable process for everyone. Octopus Group shares this vision, having consistently championed financial advice, making it a natural partner for Hatch.

“I am hugely grateful to Michael and the rest of the corporate team at Shakespeare Martineau, whose expertise and guidance made the acquisition as smooth as possible.

The Shakespeare Martineau team involved in the acquisition comprised Michael Squirrell, Oliver Gutman, Sam Naunton, Oscar Ciaurro and Tait Grundy.

Contact us

For any further information contact Michael Squirrell or another member of our corporate team.

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Deal

Shakespeare Martineau raises more than £2m in two days with deal duo

Law firm Shakespeare Martineau helped raise more than £2.1 million in just two days by advising a pair of businesses on placings and subscriptions on the Standard List and AIM.

Clients of the firm; Crossword Cybersecurity Plc and One Heritage Group Plc announced the share issues on the 10th and 11th February 2021. Both had high demand from new and existing investors.

Property developers One Heritage Group undertake development and re-development of new and existing buildings, as well as facilities management and managing the letting of the properties. The new shares generated an additional £548,500 investment in the business in order to expand its property portfolio.

Cybersecurity and risk management experts Crossword Cybersecurity Plc undertook an oversubscribed fundraising of more than £1.6 million. The technology commercialisation company will invest the funds into sales and marketing resource, for product development and support for general working capital purposes.

Hybridan LLP acted as broker to both companies in connection with the placings.

Keith Spedding, partner and business transaction and growth specialist at Shakespeare Martineau, who advised on both deals, said: “These deals go to show that money is out there and available for good companies with good stories, and there is no sign of it drying up. Property and technology sectors are seeing a huge amount of investment, with other sectors such as MedTech and fashion also making stock market headlines. We are very pleased to have helped these two excellent companies on their growth plans.”

Experts in fast-growing businesses Shakespeare Martineau is reporting high levels of transactions in the Midlands and nationally – with the corporate team having supported several multi-million pound sales and mergers across property, biotech and finance sectors as well as advising the founding family of Dr Martens in its recent admission to the market as well as One Heritage Group’s original submission in December 2020.

Contact us

For further information please contact Keith Spedding or another member of the corporate team.

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

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

Agriculture: diversifying or leasing your land to create habitat banks

6 Jul

Peter Snodgrass, Partner & Head of Agriculture
Agriculture: diversifying or leasing your land to create habitat banks

We know that biodiversity net gains provide a significant opportunity for landowners to diversify […]

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Esther Maxwell, Legal Director | Emma Glazzard, Solicitor
Teachers’ Pension Scheme – strategic issues independent schools need to think about

Webinar Teachers’ Pension Scheme – strategic issues independent schools need to think about In […]

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Michael Hibbs, Partner
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Jody Webb, Partner
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Our Latest Thoughts

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