New £1.4bn Regional Growth Fund goes live

Deputy Prime Minister, Nick Clegg, has today declared the Government’s £1.4bn Regional Growth Fund open for business. The fund will support communities currently over dependent on the public sector. Businesses and local communities will now be able to bid for financial help to boost private sector growth and create jobs in their area.
Lord Heseltine will Chair the Independent Advisory Panel, which will consider all bids submitted to the fund. Lord Heseltine will be supported by Deputy Chair, Sir Ian Wrigglesworth and a panel of academics, business and civic leaders.
Speaking on a visit to Manchester to promote local growth, Deputy Prime Minister, Nick Clegg said:
“For too long growth in the economy has been pinned on a few sectors, like financial services, while other great British industries have been ignored. Prosperity has been confined to certain postcodes while huge swathes of the country have suffered serial neglect.
“The Coalition Government is determined not to repeat these mistakes. We will support growth across the whole country, rewarding hard work and innovation in all of our industries. We understand that areas which rely on the public sector for jobs will need special help.
“Millions of people across Britain are being asked to bear their share of the difficult decisions needed to get the public finances in order. It’s only fair that everybody benefits from future growth too.
"Crucially, spreading prosperity across the country also means giving local communities a greater say over how their money is raised and spent. That is why this Government is looking closely at ways of allowing local authorities to keep the business rates they collect."

Time to Pay: Restrictions Getting Tighter?

This article summarises the HMRC: Business Payment Support Service statistics released this month. It is clear that the Time to Pay entry requirements are either becoming tighter or being employed more strictly. If you are in the Time to Pay Scheme you should not be taking it for granted that you will continue into another period.
In summary the report states
Between the launch of the BPSS in November 2008 and the end of September 2010:
  • 371,200 arrangements were granted which were worth £6.38 billion
  • £5.41 billion has already been paid to HMRC from mature arrangements
  • 13,900 TTP requests, worth a total of £810 million, have been declined by HMRC
  • 46% of the total number of arrangements were for VAT, equating to 50% of the total value of all
  • 60% of the total number of arrangements were for a period of 3 or fewer months, equating to 63% of the total value of all arrangements
  • 61% of the total number of arrangements were for requests under £10,000, equating to 15% of the total value of all arrangements
  • 37% of the total number of arrangements were for requests between £10,000 and £100,000, equating to 60% of the total value of all arrangements
Since inception of the service 371,200 TTP arrangements worth £6.38 billion have been granted. Payments to HMRC against arrangements granted through the BPSS are made according to the individual payment schedules.
Instalments have therefore been paid since the first month following the start of the service (December 2008) up to the present day. Based only on those arrangements mature enough for at least one monthly instalment to have been paid before the end of September 2010, it is estimated that £5.41 billion has already been paid to HMRC.
Arrangements granted in September 2010 are not yet mature enough for payments to be made against their individual schedules which are beyond September 2010. However, future payments on these arrangements would be expected as they become due.
The following sections provide a more detailed examination of the underlying information from the BPSS, including the main characteristics of the TTP arrangements, trends over time for each tax regime as well as year-on-year comparisons of the demand for the service.

Clearing up the case for redundancy during maternity leave

Many employers believe that it is unlawful to make a woman redundant during maternity leave but the outcome of a recent Employment Tribunal case has clarified the circumstances in which this may be allowed.
A tribunal has ruled that redundancy during maternity leave does not automatically mean unfair dismissal, but employers have been warned that this is not a green light for change.
Many employers assume that they cannot make an employee redundant during maternity leave, but the recent case of Simpson v Endsleigh Insurance Services Ltd has thrown new light on the interpretation of the regulations.
The case has clarified the employer’s duties under Regulation 10 of the Maternity and Parental Leave Regulations 1999. This states that if the job of a woman who is on maternity leave becomes redundant, the employer must offer the employee a suitable alternative vacancy, provided that the work in the alternative job is suitable and appropriate for the woman. Also, the terms and conditions of the new job, including the status and place of employment, must not be substantially less favourable to the employee.
The employer, Endsleigh, had closed down several branch offices while Ms Simpson was on maternity leave. They invited her to apply for a job in the Cheltenham branch but she did not do so. She later argued before the Employment Appeals Tribunal (EAT) that she should have been offered the job in Cheltenham, not just invited to apply. Endlseigh argued that the job in Cheltenham would have meant relocation or commuting for Ms Simpson and therefore it was substantially less favourable to her. Therefore, the company argued, as both conditions in Regulation 10 had not been fulfilled, the duty to offer the alternative job did not apply.
In this case, the Tribunal agreed with Endsleigh and also said that it was for the employer, not the employee, to decide whether the alternative job was less favourable to the employee.
“Whilst this is a useful clarification of the law, it’s not a green light for anything that will undermine the rights of women on maternity leave. Employers need to be very careful in considering whether the terms of alternative employment are suitable to the employee and whether terms are more or less favourable,” said employment law expert Jane Dismore of Breeze & Wyles Solicitors LLP in Hertford.
“They must make sure they act objectively and in good faith in reaching their decision and record their reasons carefully, as they may well be open to scrutiny if there is subsequent action by the employee.”

Reference: Simpson v Endsleigh Insurance Services and others (UKEAT / 0544/09/DA)

Web site content note:

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Landlords: what to do (or not to do) if your tenant abandons the premises?

In the current economic climate, an increasing number of landlords are faced with tenants who vacate premises and stop paying rent with little or no warning.
How a landlord should react in this situation depends on what they hope to achieve. From the moment a landlord realises that the premises have been abandoned, their actions can have important, and sometimes costly, consequences for that landlord.
These consequences will depend on whether the landlord (whether intentionally or inadvertently) behaves in such a way that could be deemed by a court to either:
(a) End the lease, and thus effect a surrender by operation of law, or;
(b) Be consistent with the continuance of the lease.
Consequences of surrender of a lease by operation of law
The consequences of a surrender by operation of law include the following:
The tenant is released from its obligation to pay future rent.
Many leases provide for the payment of a service charge estimate by the tenant, to be followed by a ‘balancing’ payment at the end of each service charge year should the actual service charge due be higher. The landlord will not be able to recover a balancing payment that falls due after the date of surrender, unless the lease provides otherwise.
The parties remain liable for any breach of covenant and arrears prior to the surrender date.
How a surrender by operation of law comes about
A surrender by operation of law will take place only if the tenant and the landlord both behave in a way towards each other that is clearly and unequivocally inconsistent with the continuation of a lease. A surrender by operation of law cannot be one sided. The tenant must be seen to have surrendered the lease, and the landlord to have accepted the surrender. After such behaviour either party would be ‘estopped’ from then arguing that the lease continues.
By abandoning premises, taking their fixtures and fittings and handing or posting the keys back to the landlord, the tenant could, depending on the overall circumstances, be deemed to have behaved in a way that is inconsistent with the continuance of their lease. This is especially so if, for example, the tenant writes to the landlord confirming that it can no longer pay rent and no longer wishes to remain at the premises. However, this is not enough by itself to result in a surrender by operation of law.
It is what the landlord does in response to this that is critical.
It is the parties’ behaviour that is important, not their intent. A surrender by operation of law can occur irrespective of, or even despite, the intention of the parties. So landlords must be especially careful not to inadvertently accept a surrender where they have no intention of doing so.
Does it matter?
The landlord should consider at the outset what it wants to achieve, and what it is realistic to expect to achieve.
The landlord may want the tenant’s liability to continue, and so he can sue the tenant for future rents. This is more likely where the lettings market is weak and the prospect of finding a new tenant quickly and at the same rent is poor. This can matter more where the tenant vacates early in the lease term.
The landlord may have committed to carrying out extensive maintenance and repair works to the building or estate containing the premises. Therefore, it will want to be able to recover the balance of the service charge due from the tenant for the remaining part of the service charge year.
However, the most practical point to consider is whether the tenant is worth pursuing for any arrears in rent, service charge and any other monies due under the lease. They may have become insolvent, or have applied to the court for an administration order which would automatically restrict the landlord’s ability to bring a claim. Or a corporate tenant may simply have been dissolved. In these cases the landlord may decide that the loss of entitlement to make a claim is irrelevant, and that it is preferable to accept the surrender, regain possession of the property and deal with it freely.
If, on the other hand, the landlord does wish to preserve its claim against the tenant for future rents and liability for other obligations under the lease, it should take care not to act in a way which would constitute acceptance of a surrender.
How easy is it to prove surrender by operation of law?
Case law has confirmed that the threshold for confirming that the landlord has accepted a surrender by operation of law is high. In other words, the fact that his behaviour in this respect must be unequivocable means that usually it is not easy for a party to prove a surrender has been accepted.
This has been highlighted in a case heard by the Court of Appeal case in June this year. The landlords let a builders yard to a company (Co 1) that became insolvent and ceased operating from the yard. Another company (Co 2) took occupation, started paying rent and began negotiating a new lease with the landlord. Negotiations broke down and the administrative receivers for Co 1 agreed to assign their lease to Co 2. The landlord argued that Co 1’s lease had been surrendered by operation of law, Co 2 occupied under a tenancy at will and that the tenancy at will was now terminated. The Court of Appeal ruled that Co 1’s conduct was not “unequivocally inconsistent with the continuance of the lease” and that there was no surrender by operation of law. This was despite Co 1 making it clear that they wanted nothing more to do with the lease, ceasing to pay rent and knowing a third party was negotiating a new lease, and despite the landlord acknowledging this by negotiating a new lease with Co 2.
Even though this and other cases have shown that the test for surrender by operation of law is a difficult one to prove, landlords still need to be careful. They would do well to have in mind the distinction between actions which are likely to constitute acceptance of surrender and those which are not. Examples of behaviour which could apply in either case are set out below.
Actions which are likely to amount to an acceptance of a surrender
Taking possession of the premises. A landlord can do this by moving into the property and occupying it for the landlord’s own purposes.
Redecorating the property to its own taste and allowing family members or friends to occupy the premises for their own purposes.
Moving items into the property for storage.
Re-letting to someone else with the tenant’s consent.
Actions which when TAKEN ALONE in each case are unlikely to amount to an acceptance of a surrender
Receiving the keys back without demanding them, for example, where delivered in the post or by hand through a letter box.
Entering the premises to inspect and repair. This is consistent with the rights the landlord would already have during the lease term.
Carrying out repairs and taking security measures to protect the property against intruders and to preserve the value of the landlord’s interest.
Failing to demand rent and service charge when the landlord knew the tenant no longer wants the lease. Mere inaction alone is usually not enough to constitute unequivocal acceptance of a surrender.
Case law suggests that the landlord could reasonably be entitled to mitigate his losses by , in addition to any of the above actions, preparing to relet the property without this necessarily amounting to an acceptance of a surrender. However, it is not clear to what extent remarketing and finding a new tenant would jeopardise the landlord’s claim against the tenant. A court would consider each case on its facts, and advice should be sought before reletting as to whether this may affect the landlord’s claim for future rents.
A court will consider all of the landlord’s actions taken together in deciding whether the landlord has accepted the surrender. The landlord should therefore try to do only what is necessary to secure, repair and protect the property and then, subject to seeking appropriate advice, to try to find a new tenant if needs be. The key thing is not to be seen to be taking back possession of the property.
An example of this risk is illustrated by a 2009 case where the Court of Appeal confirmed a surrender by operation of law had occurred when after a tenant had abandoned premises, the landlord took back the keys, redecorated and occupied the property for six weeks.
Merely writing to the tenant asserting that the lease continues and that rent remains due, is not enough to prevent a surrender by operation of law, especially if accompanied by an action which is likely to constitute an unequivocal acceptance of surrender.
One point that does not appear in its own right to have been clearly settled in case law, but which is in our view could matter, is the timing of a landlord’s claim in tandem with other action it takes. If the landlord makes a claim against the errant tenant for future rent and service charge or other breach, whilst or before taking steps to protect the property, it may be easier for him to argue that he has not accepted a surrender than if he waits until after taking those steps.
However, this is not guaranteed, and any case argued in court will be taken on its own facts.
Hannah Collins
Commercial Property group
Business Services Department

HMRC: Time to pay: "This is not a bank overdraft or a loan"

In an excellent featured article by the Insolvency Today magazine in October / November 2010 issue the interviewee Nick Lodge, Director of HM Revenue and Customs Debt Management and Banking Directorate has repeated a line put forward by this blog that 'Time to Pay' should not be viewed as merely a bank loan or overdraft. However, Mr Lodge states that he is not enamoured by comments by IPs and the media that corporate insolvencies are being kept in check by the ability to get 'Time to Pay' easily. He goes on to state that the basis for creating and implementing 'Time to Pay' is to collect the taxes more effectively. Surely this is pure semantics with the outcome being the same.
Irrespective of how the HMRC come at this, 'Time to Pay' has the effect of delaying the onward rush of corporate insolvencies. It gives the business owner an incorrect impression of their financial position.

Breeze & Wyles Solicitors LLP joins the Conveyancing Association

This week Breeze & Wyles Solicitors LLP joined the Conveyancing Association, an industry group focused on creating and delivering best practice in the Conveyancing market.
Murray Fraser, Volume Legal Services Director said:
"The general process of conveyancing in the market is outdated and in need of urgent modernisation. Only through the coming together of the larger conveyancing practices in the country will the changes be capable of taking place to modernise it. We expect to play a significant part in the process due to our technology platform that delivers market leading automation and decision making processes.
We are proud to be part of the revolution that the Conveyancing Association will deliver in the forthcoming months and years."

Residential landlords face rent threshold rise for assured shorthold tenancies

Residential landlords are being urged to check their position, following a change in law that has seen the maximum rent level for assured shorthold tenancies quadruple to £100,000.
Previously, only tenants with annual rents of up to £25,000 had security of tenure. The change came in this month and applies to existing tenancies as well as to new ones, giving some tenants security of tenure for the first time. Tenants will be granted assured shorthold tenancy security if their agreement dates from March 1997 and here the landlord can recover possession once the fixed period of the tenancy has expired by giving the tenant at least two months’ notice.
More controversially, a tenancy that was granted before 1st March 1997 at a rent between £25000 and £100,000 will now become an assured tenancy, which may hit some landlords as they can only recover possession if they can establish that certain grounds apply.
The changes, which apply only in England, came in on 1st October, and any new residential tenancy of premises in England granted to an individual at a rent of up to £99,999 will be an assured shorthold tenancy by default.
Said property expert Brendan O’Brien of Breeze & Wyles Solicitors in Bishop’s Stortford: “The original threshold of £25,000 was set in 1990 so if this figure had been raised in line with inflation, the threshold would now be around £52,000. The £100,000 threshold shows how keen the government is to bring all residential tenancies under the umbrella of security of tenure, especially in London.”
He added: “The retrospective effect will be detrimental for landlords who have been letting their property to the same tenant for many years, but it seems to be seen as minor collateral damage”.
New tenancies and tenancy renewals will also be subject to the statutory deposit protection scheme. Whilst this only applies to deposits paid after 1st October 2010, or on tenancies renewed after that date, landlords are being recommended to adopt the scheme as good practice for all deposits held.

Pre-nuptial, or ante-nuptial, agreements - Analysis and comment on the decision of the Supreme Court in the case of Radmacher v Granatino, published o

A landmark decision of the Supreme Court (20th October) over the validity of a pre-nuptial agreement, has seen a German heiress win the battle to keep her £100m fortune, in a move which lawyers say could open the door to such agreements taking their place in English law.
It has taken the Supreme Court seven months to reach the eagerly awaited decision, reflecting the controversial nature of the case and difficult issues involved.
In the case, Mr Granatino, a French banker, and Ms Radmacher, a German heiress, married in London in 1998. They had two children but, by 2006 their marriage had broken down and they got divorced in London, by which time Mr Granatino had become disenchanted with banking and was studying for a PhD at Oxford on a salary of £30,000.
Some weeks before the wedding, Mr Granatino and Ms Radmacher had signed a prenuptial agreement in Germany in which each agreed that, in the event of divorce, neither would make any financial claims upon the other.
A pre-nuptial agreement setting out how property is to be divided between a husband and wife in the event of their divorcing has long been regarded as void under English law because such agreements were considered to be contrary to public policy.
However many lawyers and politicians have been coming round to the view that this reflects an outdated view of marriage and that ante-nuptial agreements should be upheld by the courts. In 1998 the Law Commission recommended that such agreements should be treated as legally binding provided certain conditions were fulfilled, for example that both sides received legal advice, that the agreement would not be enforced if it was clearly unfair or if it failed to provide for children, and that there was full financial disclosure by both parties. However, the recommendations of the Law Commission have not been translated into law by the Government.
After the marriage breakdown, Mr Granatino applied for an order for financial provision. When it reached the High Court, Ms Radmacher argued that he was not entitled to make any claim because of the pre-nuptial agreement. But the judge in that court held that the agreement was unenforceable on the grounds that Mr Granatino had not had independent legal advice; that Ms Radmacher had not made any disclosure as to her assets; that the agreement made no provision for any children; and that the agreement was unfair in making no provision for the possibility of Mr Granatino or Ms Radmacher being in a situation of real need. The judge did, however, think that some weight should be given to the agreement because it was acknowledged by Mr Granatino that the agreement would be enforceable in Germany or in France and therefore made an order based upon Mr Granatino’s financial needs, rather than one based upon a division of capital. The upshot was that Mr Granatino was awarded about £5.5 million, which would have provided him with a house and an income for life.
Ms Radmacher appealed on the ground that the judge had not given sufficient weight to the prenuptial agreement, and the Court of Appeal agreed with her. They held that Mr Granatino could have had independent advice and he could have asked for full disclosure, but he declined to do so. He may not have known exactly how wealthy his prospective wife was, but he knew she was wealthy. The agreement was therefore not unfair and the court should not interfere with any agreement freely entered into by adults. The agreement, they said should be given “decisive weight”.
As a result, the Court of Appeal reduced the award so as to give Mr Granatino financial support as a parent rather than as a former husband, so, for example, the element of the award for housing needs should be limited to the period until the younger child reached 22.
This time Mr Granatino appealed, on the basis that to give decisive weight to the prenuptial agreement was contrary to English law. However the Supreme Court upheld the Court of Appeal’s decision by a majority, Baroness Hale dissenting.
The decision is controversial. Many commentators have been saying that England has become the divorce capital of the world due to the generous awards made, generally to wives, and that England is out of step with the rest of Europe on this issue. They say that recognising pre-nuptial agreements would lead to certainty and reduce wasteful litigation.
Other commentators say that in reality pre-nuptial agreements are simply a way for wealthy people to ensure that the less well off party to a marriage will not get the financial settlement they would be entitled to in the courts. They argue that since it is usually the husband who is the financially stronger party to a marriage, pre-nuptial agreements are detrimental to women.
The true effect will emerge over the next few years, as we see how the courts interpret and apply this judgement. Whilst they will be reluctant to interfere with agreements freely entered into, it may be that they continue to ignore pre-nuptial agreements in purely domestic cases, where both parties are UK residents, unlike Radmacher and Granatino, who were both from countries that would have recognised and enforced the agreement.
That’s likely to happen where they feel that adopting the terms of a pre-nuptial agreement is likely to result in an unfair decision. Even if they become the norm, no pre-nuptial agreement will have the power to replace the court’s jurisdiction, so it will be open to the court to over-rule a pre-nup where its effect might be unfair.
If anything, this case highlights the need for legislation to clarify where these agreements stand in law, as called for by the Law Commission.

Web site content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues.

Lehmans Adminstrations costs revealed! how many zeroes?

After the fanfare of disclosure that the adminstration of Lehman Brothers has netted assets of £11.9bn to date for creditors it may have been too much to read further into the information being revealed. It is assessed that the adminstrations costs for the professionals has exceeded £262m.

With the arguments in the market at present, notably led by BBC Radio 4, that 'icon of accuracy' one has to say the Insolvency Profession continues to shoot itself in the foot. John Tribe's blog on the accuracy? of the programme is very clear. It can be found at and is well worth a read. But the media feed the public perception and when information of the kind above is revealed we can argue as much as we like about the accuracy or otherwise of reporting but when the author of this column viewed the number the zeroes did not stop.

Suggest removal of firearms from all IPs or that it is a professional obligation for them to wear iron clad shoes.

An introduction to Mergers and Acquisitions

An Introduction to Mergers and Acquisitions
I have been asked by some of my clients and contacts to present a number of articles as an overview of mergers and acquisitions. In this blog I will introduce a number of the terms applying to Mergers and Acquisitions and explain why M&As happen. In the last section, I will explain the process and the methodology to make it pay.
Mergers & Acquisitions: Any Difference?
Many people think they are the same but there is a theoretical difference.
Acquisition: this occurs where one company takes over another and established itself as the new owner.
Merger: this occurs when two companies agree to amalgamate as a single new company.
In merger transactions, one party more often than not is the dominant force in the end result or through the transaction. Most onlookers see that this control has passed from a junior organisation to a senior one and accordingly from the outside world most mergers are seen as ‘acquisitions’ by reaching a conclusion based on this control. However, perhaps this is not the right question. The only real question is whether the transaction gives rise to a stronger entity post transaction.
What are the types of Mergers and Acquisitions
Horizontal – means acquisitions in the same industry between companies having the same or similar products, technologies and markets. This type of acquisition leads to a concentration of assets in the same industry and is a faster method (and potentially cheaper) to increase market share rather than the longer process of organic growth.

Vertical – means acquisitions between companies involved in different parts of the supply chain enabling among other examples for manufacturers to deliver straight to market or where the manufacturer wishes to take control of the raw material production for its processes.

Conglomerate – acquisitions between companies with different products and markets together with no special technology relationships. This is a type of transaction that occurred more frequently in the 1960s in the US when Profit/Earnings ratios were a key driver to the transaction.

Until the 1980s transactions were invariably ‘Friendly’ with the Boards of both companies being broadly in agreement with each other as to the terms of the agreement for acquisition. In these terms the process would be better prepared since the basis of the agreement presented would be more detailed and the shareholders of both companies would have the opportunity to approve the eventual outcome.
In the 1980s with increased competition between Investment Banks for M&A transactions and the related fees a number of the Banks agreed to advise on hostile transactions. This is where the Board of the target company (the company being purchased) does not agree to the terms. The Investment Banks make more money from these transactions because of the risks and advice involved.
Why merge or acquire?
The process of acquisition is expensive and takes a lot of resources from both companies whether the acquisition is successful or not. As a result it is important that the key drivers for the acquisition are achieved whilst giving the exiting shareholders, where cash is to be paid the appropriate value for the shares.
Evidence from history suggests that only 40% of transaction add value to the acquiring company with 60% reducing the value of the final product. This is a serious issue because the amounts spent both in cash and resources to achieve the outcome more often than not deteriorate the value of the amalgamation. Hostile takeovers tend to have an inflating impact on the price paid prejudicing the benefit of the key drivers. Post each recession business managers have stated that they will not make the same mistakes as previously but because of pressures to grow, the mistake of continuing a transaction where the price required to conclude a transaction has exceeded the benefit, the managers continue to proceed. An example of which is the recent Royal Bank of Scotland purchase of ABN Amro.
The key drivers for acquisition are:
Economies of scale.
Increased revenue and market share.
Acquiring unique capabilities and resources.
International Expansion..
It must be remembered that in 40% of acquisitions the above drivers add value to the acquisitive company. By way of caution M&A work is here to stay but a prudent approach to it must be the focus to the transaction.