The Wealth Finance Brief - September 2017
In this quarter's edition of The Wealth Finance Brief, we focus on the art world and the long awaited proposals for reform of the security law following the announcement of the Goods Mortgages Bill.
Another topical subject in the private banking world is the changes to the taxation of non-UK domiciliaries owning residential property in the UK, which are expected to receive Royal Assent imminently and which will necessarily affect the structure of lending transactions in this area. Our tax team provides an update and briefing on this subject. We also outline the Government's proposals to establish a register of beneficial ownership information for overseas legal entities that own or are purchasing UK property.
In our next article, we recommend the steps for banks to follow when lending to and taking security from a director of a UK listed company.
Finally, we analyse the recent case of Thomas and another v Triodos Bank which has provided further guidance on the nature of a bank's duty to inform or advise its customers.
Briefing Papers: Security Over Art and The Goods Mortgage Bill
Lending against – and therefore taking security over – works of art is currently a hot topic. We have updated our briefing paper on the subject to provide an in-depth guide on the types of security and other requirements that lenders and borrowers alike will need to take into account when delving into this sector. In a separate briefing paper, we also consider the Good Mortgages Bill which it is hoped will be enacted in Parliament early next year. The new legislation is intended to modify the existing Victorian-era Bills of Sale Acts and to bring the regime nearer to the US Uniform Commercial Code and allow individual borrowers to keep art on their walls.
UK residential property owned by non-domiciliaries; IHT charges for lenders and borrowers
We previously reported on the Government's announcement of a package of reforms to the taxation of non-UK domiciliaries. Following the temporary withdrawal of these proposed changes before the general election, the Government has confirmed that they are to be reintroduced and will take effect retrospectively from 6 April 2017:
Our tax and private client team have produced this briefing setting out the implications of the reforms for non-domiciled individuals who own UK property and in particular focussing on the operation of CGT, IHT and SDLT both before and after the introduction of the new tax regime.
Beneficial Ownership Register for Overseas Companies owning UK Property
The Government has signalled its intention to establish a register of beneficial ownership information for overseas legal entities (OLEs) that own or are purchasing UK property (or participating in UK Government procurement). UK inward investors using offshore vehicles to own UK property should familiarise themselves with the proposals.
Points to watch when lending to Directors of Listed Companies
Where a lender is contemplating taking security over the shares or debt instruments in a UK listed company from one of its directors (or other persons discharging managerial responsibilities in the issuer ("PDMRs")), it needs to be aware of certain provisions of the EU Market Abuse Regulation (Regulation 596/2014) ("MAR"). MAR came into force in July 2016 and, amongst other things, repealed and replaced the Model Code and provisions in the Disclosure Guidance and Transparency Rules of the UK Listing Authority (the "DTRs") concerning dealings by PDMRs.
Banker's duty to inform customers inferred by voluntary adoption of Business Banking Code
In October 2016 we reported on a case that apparently heralded a new approach by the courts to the traditional duty of care imposed on financial advisers when advising their clients (the "Bolam test"), placing more responsibility on a properly informed investor to accept the consequences of the investment risks they have voluntarily assumed.
However, in a judgment handed down in March this year the Queen's Bench Division held that where retail customers of a bank had switched their borrowing from a variable rate to a fixed rate over a 10 year term, the bank was liable for misrepresentation in respect of redemption penalties and in breaching its duty to inform how early repayment clauses would operate under the loan agreements. So what does this say about the nature of a bank's duty to inform or advise its customers?