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Master Class in English Law

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1 Master Class in English Law
Seminar No. 4 Master Class in English Law Jeremy Lederman Julian Mathews Edward Craft Wedlake Bell LLP 7 June 2013 #

2 About Wedlake Bell LLP Long-established mid market law firm Operating from central London Full service UK and international work Founding member of Telfa

3 Structure of the morning
Fundamentals of English Law – Jeremy Lederman How to structure a joint venture agreement in the context of a hotel joint venture - Julian Mathews An initial public offering of securities in London – Edward Craft

4 Fundamentals of English Law
TELFA CONFERENCE AND GLOBAL LAW FORUM IN CONJUNCTION WITH USLAW MOSCOW 7 June 2013 – 9:30am to 12 noon Jeremy Lederman Wedlake Bell LLP London

5 Your speaker Jeremy is head of commercial litigation at Wedlake Bell.   Jeremy acts and advises on a wide range of international and UK litigation, arbitration, mediation and alternative dispute resolution. His work includes acting for creditors and lenders regarding debt recovery, contractual disputes, disputes arising from mergers and acquisitions, shareholders and partnership disputes, professional negligence, fraud, insolvency, IT disputes, regulatory matters and judicial review, charity disputes and aviation. Jeremy represents listed multinationals, national and other businesses of all sizes, religious institutions, charities and individuals. Jeremy has substantial experience of litigation involving an international element. He has recently been acting in multinational litigation brought by a Russian bank against a guarantor with a freezing order against assets worldwide. Jeremy Lederman

6 1. Scope of Presentation 2. Sources of English Law and court system 3
1. Scope of Presentation 2. Sources of English Law and court system   3. Key forms of legal personality   4. Law of Contract   5. Law of Trusts

7 Scope of Presentation Large subject in little time Necessarily brief summaries English law only Focus on civil claims and in particular :- Sources of English Law and court system Key forms of legal personality Law of Contract Law of Trusts

8 Sources of English law Statutes – Specific laws European Union Regulations Directives UK statutes and other legislation

9 2. Sources of English law continued
Case Precedents Judge made law "the common law “. System of precedent by which Judges follow decisions in past cases. As at 2007 estimated over 1000 volumes of law reports containing approximately 400,000 cases. Will have increased significantly since then.

10 2. Sources of English law continued
Court of Justice of European Union provides interpretation of EU treaties and legislation which bind all courts below (but not itself). Supreme Court (formerly the House of Lords -judicial committee) binds lower courts but not itself. Court of Appeal binds lower courts and itself. High Court binds lower courts (County and Magistrates courts) but not itself.

11 2. Sources of English law continued
Specialist Courts (for example Chancery, Commercial, Technology and Construction - 60% of cases in Commercial Courts have Russian element). In certain cases Judges can find ways around precedents from previous cases but it is not usual to do so. Custom. Reports of Law Commission or authoritative articles or text books may be persuasive.

12 3. Key forms of legal personality
Natural person - i.e. an individual Companies Separate legal personality from shareholders/members or those who control it and continues to exist regardless of what happens to them. Main statute Companies Act 2006 largely consolidation but new provisions as well. Main types :- Companies limited by shares Companies limited by guarantee Unlimited companies

13 3. Key forms of legal personality continued
Unincorporated Associations Partnerships Definition - a relationship between two or more persons carrying on business in common with a view to making a profit. No separate legal personality and all partners liable for all debts save as agreed. Limited Liability Partnerships (LLPs) Came into force in Kind of hybrid of partnerships and limited companies except much more in common with limited company. No shareholders, directors or shares, but do have members. Separate legal personality.

14 3. Key forms of legal personality continued
LLPs very popular with professionals who could not incorporate also as vehicles for holding real estate. It has been said they offer more flexibility than limited companies. Whilst LLPs have been very popular they not widely understood and we are experiencing the first few cases on what happens when things go wrong. Trusts Entities that operate through trustees (see later). No minimum number but need two to hold real estate.

15 4. Contract law Clearest definition :-  "An agreement between two or more parties intended to have legally enforceable consequences" . Key requirements for a valid contract :-  a) there is an offer by one party. b) the offer is accepted by the other(s). c) the parties intend to create a legal relationship (intention to create legal relations). d) there is consideration, i.e. a price is paid for the performance of the contract. e) where required, formalities are complied with. f) the parties have legal capacity to enter into the contract. g) the wish to enter into the contract is genuine i.e. there has been no mistake, fraud or duress. h) the purpose of the contract is legal.

16 Offer An offer can be verbal, in writing or by conduct. Example of making offer by conduct would be taking goods from shelf in a supermarket to a cashier and asking to pay. An offer ends :- - when it is not accepted within the time specified or within a reasonable time (more arguable). - it is withdrawn before acceptance. - it is rejected by the person to whom the offer was made ("the offeree"). Rejection can be a simple rejection or by making of a counter offer or setting a condition.

17 b) Acceptance Can be written, oral or by conduct. If a method of acceptance is stipulated one should follow that. Must be complete, unqualified and unconditional. Offer or acceptance "Subject to contract" or Subject to Formal Agreement" means the parties are not bound until a formal contract is entered into. Such wording is often used at the beginning of a transaction where the parties want to put forward an offer but it is intended a fuller agreement is entered into. Tenders An invitation to tender is for parties to offer to supply goods or services on specific terms. A party who submits a tender is making the offer and once accepted a contract is formed.

18 c) Intention to create legal relations
Not always easy to ascertain. Not usually for social or domestic purposes, for example an offer to take someone out to dinner would not normally be viewed as intending to create a contract. In a commercial and business context it will be assumed there is an intention to create legal relations unless it can be shown otherwise for example by use of the wording subject to contract or other wording.

19 d) Consideration Any benefit or detriment. Money or foregoing an opportunity. Must be :- - Real  - Legal  - Possible It need not be a good bargain. Usually consideration cannot be in the past, except for bills of exchange and in some circumstances for services provided in the past. Another exception to the need for consideration is where a party has in reliance on the promise of a person acted to their detriment, known as promissory estoppel.

20 e) Formalities  Many contracts do not have to be in writing. People put them in writing because:  i) There are some types of contracts that must be in writing to be valid or enforceable; or  ii) it is easier to prove the terms rather than rely on parties' memories of what was said and done.   Culture of English courts is to give greater weight to documents than oral accounts . Documents do not have memories that can fade or be mistaken.  Contracts with specific formalities :-  Contracts that must be signed and made by deed (a special type of contract) :-  - certain real estate transactions. - contracts where there is no payment or consideration e.g. a gift. - transfers of British ships or shares in them.

21 e) Formalities continued
Certain contracts must be in writing for example :- - transfer of shares in a UK company - bills of exchange, cheques and promissory notes - assignment of copyright - marine insurance Certain contracts must have written evidence they have been made (by a note or otherwise) examples of which are :- - guarantees (Statute of Frauds 1677) - contracts for sale of land - contracts of employment To avoid any difficulty those contracts are usually made in writing.

22 f) Capacity to enter into contracts
The parties must have capacity to enter into a contract. Contracts with those under the age of 18 or insane or drunk/intoxicated might be unenforceable. In large contracts with corporate bodies it is worth checking that there is proper authority to enter into the contracts.

23 Terms of a Contract The terms set out the parties rights and obligations Two types of terms Express Implied

24 Terms of a Contract continued
Express terms Terms that are set out in the contract. If the terms are not certain the contract will not be enforceable. So generally one cannot have a contract to enter into another contract ("an agreement to agree"). This is different from at least some US jurisdictions. The contract must have terms which if not certain, must be capable of being ascertained without further agreement of the parties. In a number of agreements there is a mechanism or procedure by which the terms become definite for example a valuer, expert or arbitrator makes a decision which binds the parties.

25 Terms of a Contract continued
Implied terms Parties are free to agree whatever they wish (save for example illegal matters) In some cases the court may imply terms into a contract :-  - to give the contract business efficacy (to achieve the purpose of the contract) - example - where anticipated that use of port facilities would be provided but they could not and party making offer had not checked they could be  - to reflect custom of a particular geographical area or trade - on grounds of public policy e.g. sale of goods for example that goods are of satisfactory quality

26 Terms of a Contract continued
Clauses limiting or excluding liability Parties free to include such clauses in contracts but this is subject to public policy. For example clauses excluding or limiting liability for death and personal injury and as regards consumers are heavily restricted. Note where dealing on a party's standard terms they might be challenged as not being "reasonable" (Unfair Contract Terms Act 1977). Must do all that is reasonably necessary to bring such clauses to attention of other party. If in signed agreement likely to satisfy this test. Clauses will need to be clear and will be interpreted against the party seeking to rely on exclusion or limitation of liability.

27 Terms of a Contract continued  
Further distinction between two types of terms - conditions and warranties. Condition - a term that is so important to the contract that if breached, the other party can treat the contract as at an end. The innocent party does not then have to do anything further under the contract. Example sale of a car - the car does not work at all or is not provided by the seller - clearly that is a condition and the purchaser is entitled to treat contract at end. Warranty - a term that is not central to the to the main purpose of the contract. Breach of warranty only entitles the other party to damages and he cannot treat the contract as at an end. Example the sale of the car - there is a small fault in the paintwork of a car or the wrong kind of music system is installed. Buyer is entitled to damages only and the contract continues. The damages would be the difference between what the buyer intended and what was received. Thus hard to calculate for smaller faults.

28 Genuine consent to enter into a contract.
A requirement for a valid contract. A contract can be attacked on grounds of :- - Mistake - Misrepresentation - Duress - Undue influence - Illegality

29 Mistake Where nature of contract is not what was intended, including identity of parties, terms, and subject matter. One asks the Court to either correct the contract or treat it as unenforceable. General rule, mistake as to quality does not affect validity of contract. Example sale of a piece of land by me to you for £1million. If I did not know that land was in fact worth £20 million because of development potential, the contract is still binding.

30 Misrepresentation  A material false statement of fact that induces the other party to enter into the contract. Example - on sale of residential land, when the seller was asked whether he had notice of any applications to develop neighbouring land and he answered “no” when he did. Buyer relied on that and refused to perform contract when found out true position. Misrepresentation must be made by party or his agent. Innocent party must have relied on the representation. Statement can be made dishonestly or negligently. Remedies are damages and/or rescission (cancellation) of the contract. General rule that silence does not amount to a misrepresentation. A key exception to that rule is contracts of utmost good faith where failure to disclose material facts whether asked for them or not, give other party option to treat the contract as void. Example - contracts of insurance - although steps started to limit this rule as regards individual consumers.

31 Duress  Duress means violence or threatened violence or imprisonment - unusual. Undue influence Where influence is applied preventing a party from making an independent judgment for example where special relationship, for example husband and wife or lawyer and client or an elderly or otherwise vulnerable person. Illegality Where the purpose of the contract is in breach of the civil or criminal law. Examples Bribery and corruption. Penalties. Contracts in restraint of trade and restrictive covenants following sale of business or following termination of employment needing to be reasonable.

32 Remedies Refusing to perform the contract. Damages to restore claimant to position would have been if contract had been performed. Claim for quantum meruit ( reasonable fee for work done). Order for performance of contract (injunction for specific performance).

33 Privity of contract  General rule has been that only parties to a contract can sue on it. However since the Contracts (Rights of Third Parties) Act 1999 a contract can impose an obligation on someone who is not party to a contract (a non- party) and give a benefit to a non-party. In both cases the non-party can sue/be sued. This is frequently excluded in agreements but could be potentially useful. Example Collateral Warranties for non parties to contracts in construction still sought by lenders. There are other exceptions to the general rule of privity of contract including :- Actions by beneficiaries under trusts. Certain insurance contracts to confer benefit on non-parties (eg motor insurance). Negotiable instruments e.g. cheques/ bills of exchange. Where a contract has been assigned or novated.

34 Assignments (transfers) and novation
Rights under a contract can normally be assigned unless where personal service is essential to a performance and then consent of the other party will be required. Liabilities under a contract can only be assigned with agreement of the other party. So this means that will often be a new contract with transferee who takes over the liabilities – a novation agreement. Notice of assignment should be given in writing. If not there are risks :- that defences relating to the party transferring can be raised; of loss of priority over a later transferee who was not aware of the earlier assignment.

35 Trusts Extremely brief review Concepts of trusts and beneficial ownership are in the process of development in Russian law. A party ("the trustee") holds assets for the benefit of some other party or parties ("the beneficiaries") or other lawful purpose, so that the benefit of the asset is for the beneficiaries or object of the trust. Two kinds of owner. The Trustee is the legal owner and holds the property in their name. The beneficiary is equitable or beneficial owner. The settlor is the person providing the assets which are to be held on trust. Several categories of trusts :- - Express - Implied - Constructive

36 Express Trusts Where terms of the trust expressly set out Can be written or oral Requirements :- Certainty of intention - must be clear there is to be a trust. Certainty of subject matter – both assets and how to be held. Certainty of object of the trust – i.e. can the beneficiaries be ascertained.

37 Implied Trusts The Court will imply a trust in certain situations based on the intention of the Settlor. For example if the trusts are void or there is a defect the trustees will hold the assets on (resulting) trust for the settlor. Constructive Trusts The Court will impose a trust without taking account of the parties' intentions. For example if in breach of the trust, the Trustee (T) transfers assets to another party (X) who is aware of the breach of trust. X holds the assets on constructive trust for the proper beneficiary (B). Following on from this a claim could be made for the assets themselves directly against X. This has advantages in certain insolvency situations so as to claim that the assets do not form part of X's assets. Further B could also take advantage of any increase in value of the assets. ©  Wedlake Bell LLP 2013.  All rights reserved. This document is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law.  Specific advice should always be sought for individual cases. This reflects the law as at June 2013.

38 Thank you for your attention
Any Questions?

39 How to structure a joint venture agreement in
How to structure a joint venture agreement in the context of a hotel joint venture Julian Mathews – Wedlake Bell LLP 7 June 2013

40 Your Speaker Julian is a corporate lawyer who specialises in private company M&A, private equity and joint ventures. He has a particular focus on the hotel and hospitality sector, as well as extensive experience in acting on corporate real estate transactions. Julian has acted for both mid-market private equity institutions and also for management teams. He has also acted on various cross border joint venture transactions for real estate institutions and real estate private equity firms. Julian leads the hospitality and leisure sector at Wedlake Bell and has in the past lectured on the legal process of private equity transactions at the executive MBA class of London Business School. . Julian Mathews

41 To Cover Introduction Discussion on nature of the JV entity Touch on tax The operative documents Discussion of the structure of a hotel JV Questions

42 Context of presentation
Introduction Context of presentation Focus is on UK law implications for joint ventures Context of deal is a hotel acquisition Assumptions Assumes a general understanding of JV’s Assumes little understanding of hotel transactions Local or cross border Well, let’s cover both Hotel specific factors

43 Basic Principles – Why a joint venture?
Varies, and depends on the circumstances of the parties and the subject of the business. But can be due to: Sharing costs? Pooling of expertise? Cross border penetration? Main point is to ensure = 3

44 Preliminary thoughts on structuring – nature of JV vehicle
Likely to be determined by: Nature and size of the subject business  Identity and location of the proposed JV parties Commercial and financial objectives of the proposed JV parties Tax considerations Funding Extraction of profits Potential structures for the JV vehicle are: Limited liability company Limited liability partnership (LLP) A partnership or limited partnership A contractual arrangement with no JV vehicle

45 Limited liability company
Generally, for most business joint ventures, a limited liability company is most appropriate. In the UK, that company will be incorporated under the provisions of the Companies Act 2006. As a separate legal entity, a JVCo can: Own and deal in its own assets Contract in its own right Sue and be sued in its own right Benefits from a participant’s perspective include: Veil of incorporation Limitation of liability

46 Limited liability company
But note: Requirement to file accounts Duties of directors, especially conflicts of interest (s.175 of the Companies Act 2006) Accounting issues – is it deemed a subsidiary under: The Companies Act provisions? IAS 28 and 31 – significant control?

47 Limited liability partnership (LLP)
An LLP formed under Limited Liability Partnerships Act 2000 can most be applicable for ventures between individuals such as professional partnerships. An LLP is a body corporate with legal personality separate from its members. An LLP: Must publish accounts like a limited liability company Have at least two members Is generally taxed as a partnership despite being a separate legal entity But note: No transferable shareholding Each member is an agent of the LLP

48 A partnership or limited partnership
If a separate legal entity is not chosen, then distinction under UK law is whether the vehicle is a “legal partnership” or not. If a partnership, then the Partnership Act 1890 applies. S.1 of Partnership Act 1890 defines a partnership as the “relationship which subsists between persons carrying on a business in common with a view of profit” – see s. 2 for rules of determination. Characteristics of a partnership under the Act: Each partner deemed to be the agent of the other partners. As such, each partner jointly liable without limit for debts and obligations of the partnership. Further, each partner jointly and severally liable for wrongful acts and omissions of his co-partners.

49 A partnership or limited partnership
Also possible to form a limited partnership under the Limited Partnerships Act 1907. At least one member must be a general partner with unlimited liability, but the GP can be a company. Note that limited partners cannot participate in the management of the partnership without losing the right to limited liability. Consequently limited partnerships most suitable for a business where the majority of participants are passive investors, such as a private equity fund.

50 A contractual arrangement with no JV vehicle
Generally where parties agree to operate as independent contractors in their own right, rather than shareholders or partners. The form of the agreement often known as a consortium or co-operation agreement. Note: Each party will not have a statutory responsibility for: the liabilities and obligations of the venture The acts or omissions of the other parties But each party has potentially unlimited liability for: own actions Other parties, if expressly assumed responsibility or deemed to be vicariously liable under the agreement.

51 Tax Considerations s

52 Overview of key documents
Main documents for a corporate JVCo are: joint venture or shareholders agreement Articles of association of the joint venture Ancillary documents may include: An asset or business purchase agreement A management agreement Loan note instrument Service or secondment agreements Licence agreements such as for IPR For an LLP or LP, then the partnership agreement will be the main operative document.

53 Joint venture agreement
The purpose of the JV agreement is to establish: Rights and obligations of the parties To establish the corporate entity To provide how the JVCo will be operated To provide what happens if there are difficulties To provide methodology for exit, or termination, once venture aims achieved.

54 JVCo articles of association

55 General Structure of a basic Corporate JV for a hotel venture
JV Agreement (Loan Agreement?) Loan Agreement Party A (Land/Hotel Owner Party B (Operator) Management Agreement JVCo Sale Agreement Franchise Agreement Hotel Brand Co? (Hotel HoldCo?) Hotel


57 Thank you for your attention Any Questions?
© Wedlake Bell LLP All rights reserved. This document is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases. This reflects the law as at June 2013. Julian Mathews

58 How to structure a joint venture agreement in the
How to structure a joint venture agreement in the context of a hotel joint venture Julian Mathews – Wedlake Bell LLP 7 June 2013

59 An initial public offering of securities in London
Edward Craft – Wedlake Bell LLP 7 June 2013 #

60 Your Speaker Edward is a specialist in corporate governance for both private and public companies. Edward had advised on many debt and equity capital markets transactions. Edward is Chairman of the Corporate Governance Expert Group of the Quoted Companies Alliance, the independent membership organisation that champions the interests of small to mid-size quoted companies. Edward has recently been responsible for the new Corporate Governance Code for Small and Mid-Size Quoted Companies. Edward is a member of the corporate governance group of European Issuers. Edward Craft

61 Outline IPO Options and the London Markets Preparing for IPO Documentation Fundraising Corporate Governance On-going Obligations

62 1. IPO Options and the London Markets
Why issue securities to the public at all? Decision to IPO is one of the most important a board can ever make Admission to trading distinct from Listing Presumption that the securities being offered are ordinary shares or depositary interests/receipts Can also have other securities listed/admitted to trading, including: Non-voting ordinary shares Preference shares Debt securities

63 A security in its own right
Depositary Interests A security in its own right Need to have appointed a depositary (and possibly a custodian) Depositary/custodian regulated under UK financial services legislation capable of electronic settlement through CREST Additional documentation: Trust Deed Depositary Agreement Legal Opinions

64 Other traded securities
The London markets Officially Listed Securities (UK Listing Authority as the EU Authority) Other traded securities Main Board Growth Market Standard Listing – ESMA compliant Premium Listing - super equivalent

65 Equity Capital Markets: the global context

66 The Rules Rule Responsibility Listing Rules EU with FCA as UKLA
DTRs under Transparency Directive AIM Rules London Stock Exchange High Growth Segment Rules ISDX Growth Market Rules ICAP Securities and Derivatives Exchange Company Law EU and UK parliament Securities Law UK Corporate Governance Code Financial Reporting Council Stewardship Code Corporate Governance Code for Small and Mid-Size Quoted Companies Quoted Companies Alliance Takeover Code Panel on Take-Overs and Mergers/UK parliament Prospectus Directive EU Market Abuse Directive MiFID/MiFID II

67 Q: Why move to a public market at all?
2. Preparing for IPO Q: Why move to a public market at all? liquidity/ extended base of shareholders trading/kudos/ staff incentives/ stock for acq.fin. exit/ valuation to raise funds for growth businesses

68 Directors – executive and NEDs
Internal Matters Directors – executive and NEDs Structure Board Independence

69 Independence: directors
Independence from both the issuer and major shareholders Independence criteria set out in provision B.1.1 of the UK Code Independence in character and judgement, as well as circumstances or relationships Risk of impairing (or appearing to impair) the judgement of the director Where independence likely to be compromised:  former employee material business relationship with the issuer, whether direct or indirect receives additional remuneration from the issuer apart from a director’s fee participates in the issuer’s share option or a performance-related pay scheme, or is a member of the issuer’s pension scheme close familial ties with any of the issuer’s advisers, directors or senior employees holds cross-directorships or has significant links with other directors represents a significant shareholder has served on the board for more than nine years 

70 Independence: major shareholders
Links between directors with major shareholders represents a significant issue, particularly preparing for IPO Issue linked with marketability of issuer’s stock: free float There may be an alignment of interests between long term institutional investors and well managed, significant and stable family holdings Boards should clearly and regularly explain the position to shareholders May be need for relationship agreements

71 Shares/Depositary Interests
Structure for listing Major shareholders – founders, dilution and relationship agreements Shares Reorganisation

72 Need to put in place the correct share structure
Marketability Free transfer to comply with listing requirements Authority to allot shares/ability to raise new funds Is the proposed issuer a vehicle capable of admission: must be able to issue shares to the public in place of incorporation Ltd. to PLC conversion problems

73 retained Advisory Team Corporate finance advisor:
sponsor (Listed) – transaction specific nominated advisor (AIM) ISDX corporate advisor Broker Depositary (and Custodian if UCITS or AIF) Reporting Accountant Lawyers Registrar Financial PR Security Printer retained

74 3. Documentation: Three Stages
…but before you start Will the issuer be suitable for a listing? Major board decisions: when to IPO what to IPO which market where to fundraise, from and through whom price indicators where the equity growth will come from Risk of markets lots of moving pieces volatility of markets investor appetite may evaporate through the process multiple parties generally more risky that exiting to private equity

75 Engagement terms of advisors Market assessment Pre-preparation
Stage One: commencing the process Key Message: write your equity growth story Strategy Board evaluation Business Plan Engagement terms of advisors Market assessment Pre-preparation Share structure and constitutional matters Checking of contractual model etc.

76 Stage Two: getting you there Key Message: refine your equity growth story
Financial DD: long form short form IFRS integration issues Legal DD Commercial tax structuring consider where your investors are going to be drawn from Corporate Governance: Review Committee terms of reference Audit function (risk controls) What will issuer “look and feel” like with a diversified investor base? Start to behave like a PLC as soon as is appropriate Competent person’s report/valuation report/IP report/specialist reports

77 Prospectus/Admission Document Investor Presentation Placing Agreement
Stage Three: Road Show to Impact Key Message: tell your equity growth story Prospectus/Admission Document Investor Presentation Placing Agreement Placing Letter Placing List Lock-In Agreements Irrevocable Undertakings Board Minutes Regulatory Announcements Underwriting Agreements

78 Timeline 9 months from a standing start: Stage 1 – 4-5 months
strategic review focus on equity growth story largely internal, but with corporate finance advice determining points of reference and terms of engagement Stage 2 – 3 months detailed due diligence and preparation significant advisory input Stage 3 – Road Show to Impact – 1 month “all hands to the pump” directors will be busy on road shows with broker advisory team will be beavering away on the documents and funding calls

79 4. Fundraising Key reason for going public Key role of the broker
opening up own book of clients role of research Consider both the IPO and the medium to long term investor base a n issuer wants to develop Selling shareholders at IPO or shortly thereafter Creation of investor and consumer demand for both stock and product Balancing interest of long term investment with ensuring there is sufficient “product” in the market to allow for a healthy level of share trading Pricing negotiations between broker and issuer/corporate finance advisor My advice: buy good advice and follow it!

80 Financial Promotion Issuer must issue a prospectus where:
issuer is seeking approval to a regulated market and/or an offer is being made to the public no prospectus required where seeking admission to AIM/ISDX Growth Market without public offer Need to always consider where funds are being raised and comply with local law on financial promotion A lot of advice revolves around ensuring that a fundraising transaction does not require a prospectus/is not an offer to the public: EU prospectus exemptions now very useful as can offer to up to 200 persons in each EU member state UK use of exemptions under Financial Promotion Order 2005 US use of Securities Act exemptions such as 144A/Regulation S

81 5. Corporate Governance Originally developed by the market
Coming of age Now greater regulatory footing EU action plan



84 The UK Corporate Governance Code: FTSE 350
The UK Corporate Governance Code is published by the Financial Reporting Council Began with the 1992 Cadbury Report on Financial Aspects of Corporate Governance It is a Listing rule that all companies within the FTSE 350 apply to the UK Code on a comply or explain basis Five principles around which the detailed provisions are then set out, being: A – Leadership B – Effectiveness C – Accountability D – Remuneration E – Relations with Shareholders Parallel document: the UK Stewardship Code sets out standards of behaviours within the investment chain most importantly fund managers

85 Small and Mid-Size Quoted Companies
The needs of the SME sector are different SMEs are vital in delivering growth post financial crisis Governance should not inhibit growth Good governance lowers the cost of capital One size does not fit all The Quoted Companies Alliance Code bridges the gap between FTSE 350 structures and the rest of the market Supporting the ambitions of growth of companies encouraging: proportionate governance within an entrepreneurial environment



88 The Corporate Governance Relationship

89 6. On-going Obligations A requirement of the relevant Listing Rules, DTRs, AIM Rules, ISDX Rules Also need to consider securities laws and compliance with company law more generally Need to keep the market informed “without delay” of all material developments Announcements through a regulatory information service Shareholder approval of certain arrangements class tests related party transactions reverse takeover Timing for announcement of financial information Takeover Code compliance: 30% mandatory bid threshold Extended Takeover Code application from 1 September 2013

90 An initial public offering of securities in London
Edward Craft – Wedlake Bell LLP 7 June 2013 # ©  Wedlake Bell LLP 2013.  All rights reserved. This document is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law.  Specific advice should always be sought for individual cases. This reflects the law as at the date of publication .

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