In this third edition of The Finance Brief we consider a diverse range of topical issues. With the state of the Eurozone at the forefront of everyone's mind, we list the main provisions of loan agreements that lenders should be re-evaluating when working on deals in this climate. We have recently seen a number of enquiries in respect of lending to LLP's and we provide a guide to this, as well as a general overview of insolvency procedures under English law. Two cases have caught our eye since the last edition – that of Gains-Cooper which is highly relevant when assessing UK tax residence status, and Bibby which further confirms the importance of due process when executing deeds.
The contributors to this edition are listed below (with their contact details). Each of them would be more than happy to respond to any further queries you may have arising out of these articles on their topics of expertise.
Hannah Salton, Editor
The Eurozone Crisis and Loan Agreements
The financial crisis in the Eurozone shows no sign of easing, and is causing lenders to review their documentation for euro-denominated facilities. There is as yet no market consensus on what changes are appropriate. The Loan Market Association has advised that documentation should be reviewed, but has not yet changed its standard forms. We remain of the view that the issues need to be looked at on a case by case basis holds good, but the following are among the main provisions to be reviewed
Lending to Limited Liability Partnerships
With the advent of the Legal Services Act 2007 (which came into force last October) and the SRA's new handbook, new multi-disciplinary entities ("Alternate Business Structures") will be entering into the legal market. It is likely that these Alternative Business Structures will be established as LLP's and this article describes how a lender can take security from an LLP.
Gains-Cooper – the final decision on establishing tax residence status
The long running saga of Robert Gains-Cooper ended with the decision of the Supreme Court given on 19 October 2011. The Court confirmed that taxpayers do not have a legitimate expectation, based either on HMRC published guidance, or any previous practice by HMRC, to be treated by HMRC as non-UK resident for tax purposes. Pending the issue of a statutory test of residence, expected to be enacted with effect from April 2013, taxpayers should consider seeking an express ruling on their residence status from HMRC and seeking careful professional examination of that ruling.
An Overview of UK Insolvency Procedures and the Considerations for Banks with an Insolvent Customer
In this article we provide a guide to the main features of the insolvency procedures that exist under English law, namely (i) liquidation, (ii) administrative receivership, (iii) administration and (iv) company voluntary arrangement. It will be vital for a bank to accurately determine at what stage a customer has become insolvent and we set out the possible grounds of challenge which a liquidator of administrator may have in respect of the transactions which a bank's customer has entered into with it prior to the start of any insolvency procedure.
Delivery of Deeds(Bibby Financial Services Ltd and others v Magson and others)
Unlike simple contracts, deeds do not take effect on execution, but on delivery. Identifying if and when delivery has taken place is therefore essential, as it is the date from which the party giving the deed is bound, if at all. The question of whether individuals were bound by guarantees and warranties in the form of deeds was recently addressed by the High Court in Bibby Financial Services Ltd v Magson . It was held that the individuals had not delivered the deeds in question, despite these having been physically handed over to the other side after signature. Bibby therefore serves as a useful reminder of the English law on the delivery of deeds, and as a stark warning to anyone seeking to rely on deeds in the absence of proper delivery.
Contributors to this edition: Andrew Evans, Robert Cooke, Oliver Abel Smith, Hannah Salton, and Anthony Warner.
The Finance Brief will be back next quarter when, amongst other items, we will be providing a refresher on the Banking Code, looking at the legal issues surrounding "shadow yachts" and considering a novel method of claiming CGT relief for works of art.
As well as letting us know if there are any topics which you would like us to discuss in future editions, we are also very keen to hear your feedback on The Finance Brief – are you finding this bulletin useful and relevant? If not, please tell us why not.
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