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21 July 2016

House of Commons Justice Committee reports on court and tribunal fees

The House of Commons Justice Committee has recently published its critical review of Court and Tribunal Fees. The review covers the impact of Employment Tribunal Fees and notes there has been a steep decline (a drop of 70%) in the number of claims being brought. The report states that ET fees have had a significant adverse impact on access to justice for meritorious claims.

 The report sets out four main recommendations:

21 July 2016

The Small Business, Enterprise and Employment Act 2015 (SBEE) introduces several significant changes to the Companies Act 2006 (CA 2006) including a prohibition on corporate directors (namely, a director who is not an actual person).

The prohibition is expected to come into force in October 2016 (although, like many other provisions of SBEE, this is subject to change). Once in force, it will be a criminal offence to appoint a corporate director and any such appointments will be void.

According to Companies House Data from 2013, when the Department for Business, Skills and Innovation (BIS) initially proposed increased transparency for UK companies, only 1.2% of UK companies used corporate directors.  However, this still equated to about 38,000 companies that would be affected by the ban.

Fortunately the changes to CA 2006 also allow the government to introduce further regulations allowing for exceptions to the ban. 

Although no such regulations have yet been published, the Department of Business, Innovation and Skills (BIS) has canvassed the possibility of corporate directors in limited circumstances and provided certain conditions are met (e.g. in March 2015, the current consideration was that corporate directors may be permissible where all the directors of the corporate director are actual people (or natural persons) and details of those natural persons are held in a publicly maintained and accessible register). 

As no further guidance or regulations have yet been published, it is a case of waiting to see how the legislation will be implemented. However, it is safe to say that even if an exception is introduced, all companies will still have to have at least one director who is an actual person, as is currently the case.

So what does this mean for UK companies?

Assuming the changes to CA 2006 come into force in October 2016, it will be an offence to appoint a corporate director after this date unless exempt under further regulations published by the Secretary of State. 

For any companies with corporate directors appointed before October 2016, there will be a transitional 12 month grace period.  If by October 2017 it appears that the corporate director will not be exempt under further regulations, it will automatically cease to be a director.  Companies should update their registers at this point and notify Companies House accordingly.

 

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21 July 2016

Joining the growing ranks of musical crowdfunders, it has emerged that the five-time Grammy award winning girl group TLC are crowdfunding their next (and very last) album. Going live with their Kickstarter campaign on 19 January 2015, TLC are looking to raise $150,000 to fund “great music that touches everyone”. We have seen crowdfunding fast became the financing arsenal of choice for many non-mainstream / “indie” artists and the take up (and go) of this financing option by the more mainstream pop culture is very much indicative of the wider crowdfunding trends whereby crowdfunding as a concept has moved on from being an ‘alternative’ funding option to a ‘mainstream’ option for all. 

TLC, like many crowdfunding musicians, are relying on a form of crowdfunding known as ‘reward based’ (or ‘donation based’) crowdfunding. After determining the amount of money that needs to be raised for the project, the crowdfunder sets up suggested donation amounts, attached to which will be a specific reward or incentive. The rewards and incentives are ‘perked up’ as donations escalate and top the various set donation thresholds. It has been reported that TLC are offering (amongst other perks) cinema visits and photo shoots (with the band of course). Given that it has emerged that the band have so far raised over a third of their target in a matter of days, it would appear that they are ‘creeping’ healthily towards their very last musical bequest.

Reward based crowdfunding is not the only option for fundraisers, equity crowdfunding and debt crowdfunding (or peer to peer lending) can also be considered. Equity crowdfunding involves people investing in an opportunity in exchange for equity (shares) in a company, or a small stake in a business / project or venture. Debt crowdfunding / peer to peer lending allows for the lending of money via platforms, with investors receiving their money back with interest. Like reward based crowdfunding, equity and debt crowdfunding are shaking off an image of being a lender of last resort and are fast becoming normalised financing options in the business world; an option which, particularly for new start ups or people wanting to fund ad hoc projects, may enable the chasing of those ‘waterfalls’ which the banks (and other more traditional funding lines) refuse.       

 

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21 July 2016

With the imminent kick start to Euro 2016 and the Summer Olympics and Paralympics just around the corner, many companies may be tempted to seek to capitalise on the popularity of this summer’s sporting events. While this may seem like a lucrative advertising strategy, it’s important to do this carefully so that you don’t fall foul (sorry for the pun) of advertising regulations or the intellectual property rights of the tournaments (or individual players).

Tournament organisers are keen to enforce the rights that they hold to protect the value of their tournament, not least due to pressure from major sponsors who have paid significant sums to be associated with the tournament.  If tournament organisers don’t protect their rights, then next time when they come to sell-off sponsorship rights, they may find that their value is lower.

The Committee of Advertising Practice (which is a body associated with the Advertising Standards Agency) has issued guidance on how you can avoid being caught offside (sorry again…) of the CAP Code which regulates advertising in the UK (whether this is published in papers, magazines on your website or anywhere else) or the BCAP Code, which regulates adverts broadcast on television or radio. Whilst the CAP Code is a self-regulatory regime and the ASA cannot impose fines, they can (and do) often end up with businesses getting bad publicity and coverage in the press (together with increased scrutiny for future adverts). The guidance can be found here

As well as considering the CAP Code, businesses looking to tap into the popularity of these events should also consider whether such campaigns could fall cause issues in relation to intellectual property, including trade mark and copyright infringement. Most international tournaments will look to obtain trademarks around their logos (for example, “Rio 2016” is a Community Trade Mark protected across the EU in a number of categories of goods and services).

In relation to the Olympics, there is legislation in the UK (the Olympic Symbol etc Protection Act 1995) which protects the word “Olympics” (and similar words), the Olympic logo (the 5 rings) and the Olympic Motto and makes it an offence to use any of these in relation to trade or advertisements without permission.   

Even if trade mark or copyright infringement cannot be proven, an advertiser can still find themselves facing a red card (last one, I promise) if they are seen to be implying an association between them and the event or participants.

In short, there are likely to be intellectual property rights existing in event names, logos, mascots, photographs, event footage and much more. If a campaign uses the rights or creates an association without the consent of the owner or licensee, the campaign could come up against infringement actions – and rights owners have been keen historically to protect the value of their rights. Therefore, businesses should carefully consider their position before seeking to jump aboard the bandwagon.

 

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20 July 2016

When parties approach the end of the term in a lease or wish to terminate the lease early, there are numerous considerations in mind.

Primarily, there are many valid reasons as to why a Tenant is terminating its lease, such as the need to find alternative premises to improve the location for trading purposes and expansion of the business or potential downsizing or, from the Landlord’s perspective. they may wish to occupy or redevelop. This blog considers specifically key considerations on a dilapidations position.

What are dilapidations?

Dilapidations is the term given to damages that a Landlord may be entitled to recover on the expiry of the lease for breaches of the Tenant’s repairing covenant.

What dilapidations should be considered?

Breaches of the following types of covenant should be considered when assessing the dilapidations position;

  • covenant to repair,
  • covenant to decorate,
  • covenant to comply with statute and yielding up covenant; and
  • if applicable, any reinstatement obligations linked to the obligation to yield up.

The majority of leases contain an obligation to keep premises in good and substantial repair and condition and return them in the same state of repair at the end of the term.  The reality is that most Tenants will not often fully comply with that obligation – and therein lies the shrewd dilapidations in a negotiation between the parties.

In the last decade Tenants have sought to qualify the repairing covenant by having the repairing obligation refer to a schedule of condition which shows the specific state of the property at a state of time (invariably when the Tenant entered into the lease) and the obligation to repair is qualified so that they are in obligation to repair the property and return the property in no worse a state as evidenced by the schedule of condition.

In practice we and our property litigation colleagues often come across scenarios where the Tenant has either been poorly advised at the outset or has not sought legal advice and is therefore bound in by a draconian repair covenant.

It is also worth adding that case law has demonstrated that the obligation to keep the premises in good repair is the same as an obligation to put and keep.  Any Tenant entering into a lease should be very wary thereof of these obligations, particularly if they are taking on premises that are not in a great state of repair.

At the end of the term there will inevitably be a battle over dilapidations (in relation to the cost to the Landlord to putting the premises in the condition required by the lease). The Landlord may not always be proactive in seeking to agree a figure, tending to rely on the right under the lease to claim dilapidations after a lease has come to an end.  In practice this creates some certainty for the Tenants, particularly where they may be significant costs involved in to move to new premises.

A Tenant’s perspective

If you are considering the position from the Tenant’s side there are some proactive stops that can be taken:

  • invite the Landlord to submit a dilapidations assessment at least six months before the end of the lease;
  • if not forthcoming, instruct a surveyor to assess the dilapidations on your behalf;
  • submit that assessment to the Landlord inviting them to agree the position and setting out the proposed timetable of works;
  • if still not response is received confirm to the Landlord that you will carry out the works and want to complete them, then invite the Landlord to approve them.

If the above steps are followed the Landlord arguably is in a much weaker position should it wish to submit a dilapidations claim after the end of the term.

As mentioned earlier in this article, we come across clients who are not fully advised in advance on signing their lease or chose simply to deal with the matter themselves on expiry and has come unstuck. Dilapidations are certainly a point where parties should consider open and frank discussions between themselves in the hope of reaching mutual agreement and it is always advisable to take advise on the specific provisions relating to dilapidations contained within your lease before entering into negotiations.

 

Contact Oratto on 0845 3883765 to speak with an adviser or use our contact form to arrange a call-back.

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