Presentation on theme: "Master Class in English Law"— Presentation transcript:
1 Master Class in English Law Seminar No. 4Master Class in English LawJeremy LedermanJulian MathewsEdward CraftWedlake Bell LLP7 June 2013#
2 About Wedlake Bell LLPLong-established mid market law firmOperating from central LondonFull serviceUK and international workFounding member of Telfa
3 Structure of the morning Fundamentals of English Law – Jeremy LedermanHow to structure a joint venture agreement in the context of a hotel joint venture - Julian MathewsAn initial public offering of securities in London – Edward Craft
4 Fundamentals of English Law TELFA CONFERENCE AND GLOBAL LAW FORUM IN CONJUNCTION WITH USLAWMOSCOW7 June 2013 – 9:30am to 12 noonJeremy LedermanWedlake Bell LLPLondon
5 Your speakerJeremy 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 PresentationLarge subject in little timeNecessarily brief summariesEnglish law onlyFocus on civil claims and in particular :-Sources of English Law and court systemKey forms of legal personalityLaw of ContractLaw of Trusts
8 Sources of English lawStatutes – Specific lawsEuropean UnionRegulationsDirectivesUK statutes and other legislation
9 2. Sources of English law continued Case PrecedentsJudge 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 individualCompaniesSeparate 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 sharesCompanies limited by guaranteeUnlimited companies
13 3. Key forms of legal personality continued Unincorporated AssociationsPartnershipsDefinition - 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.TrustsEntities that operate through trustees (see later). No minimum number but need two to hold real estate.
15 4. Contract lawClearest 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 OfferAn 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) AcceptanceCan 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.TendersAn 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) ConsiderationAny benefit or detriment. Money or foregoing an opportunity.Must be :-- Real - Legal - PossibleIt 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 insuranceCertain 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 employmentTo 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 ContractThe terms set out the parties rights and obligationsTwo types of termsExpressImplied
24 Terms of a Contract continued Express termsTerms 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 termsParties 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 liabilityParties 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 MistakeWhere 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 influenceWhere 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.IllegalityWhere the purpose of the contract is in breach of the civil or criminal law.ExamplesBribery 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 RemediesRefusing 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 TrustsExtremely brief reviewConcepts 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 TrustsWhere terms of the trust expressly set outCan be written or oralRequirements :-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.
39 How to structure a joint venture agreement in How to structure a joint venture agreement in the context of a hotel joint ventureJulian Mathews – Wedlake Bell LLP7 June 2013
40 Your SpeakerJulian 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 CoverIntroductionDiscussion on nature of the JV entityTouch on taxThe operative documentsDiscussion of the structure of a hotel JVQuestions
42 Context of presentation IntroductionContext of presentationFocus is on UK law implications for joint venturesContext of deal is a hotel acquisitionAssumptionsAssumes a general understanding of JV’sAssumes little understanding of hotel transactionsLocal or cross borderWell, let’s cover bothHotel 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 partiesCommercial and financial objectives of the proposed JV partiesTax considerationsFundingExtraction of profitsPotential structures for the JV vehicle are:Limited liability companyLimited liability partnership (LLP)A partnership or limited partnershipA 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 assetsContract in its own rightSue and be sued in its own rightBenefits from a participant’s perspective include:Veil of incorporationLimitation of liability
46 Limited liability company But note:Requirement to file accountsDuties 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 companyHave at least two membersIs generally taxed as a partnership despite being aseparate legal entityBut note:No transferable shareholdingEach 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 fordebts and obligations of the partnership.Further, each partner jointly and severallyliable for wrongful acts and omissions of hisco-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 arepassive 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 ventureThe acts or omissions of the other partiesBut each party has potentially unlimited liability for:own actionsOther parties, if expressly assumedresponsibility or deemed to be vicariouslyliable under the agreement.
52 Overview of key documents Main documents for a corporate JVCo are:joint venture or shareholders agreementArticles of association of the joint ventureAncillary documents may include:An asset or business purchase agreementA management agreementLoan note instrumentService or secondment agreementsLicence agreements such as for IPRFor an LLP or LP, then the partnership agreementwill be the main operative document.
53 Joint venture agreement The purpose of the JV agreement is to establish:Rights and obligations of the partiesTo establish the corporate entityTo provide how the JVCo will be operatedTo provide what happens if there are difficultiesTo provide methodology for exit, or termination, once venture aims achieved.
55 General Structure of a basic Corporate JV for a hotel venture JV Agreement(Loan Agreement?)Loan AgreementParty A(Land/Hotel OwnerParty B (Operator)Management AgreementJVCoSale AgreementFranchise AgreementHotel Brand Co?(Hotel HoldCo?)Hotel
58 How to structure a joint venture agreement in the How to structure a joint venture agreement in the context of a hotel joint ventureJulian Mathews – Wedlake Bell LLP7 June 2013
59 An initial public offering of securities in London Edward Craft – Wedlake Bell LLP7 June 2013#
60 Your SpeakerEdward 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 OutlineIPO Options and the London MarketsPreparing for IPODocumentationFundraisingCorporate GovernanceOn-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 makeAdmission to trading distinct from ListingPresumption that the securities being offered are ordinary shares or depositary interests/receiptsCan also have other securities listed/admitted to trading, including:Non-voting ordinary sharesPreference sharesDebt securities
63 A security in its own right Depositary InterestsA security in its own rightNeed to have appointed a depositary (and possibly a custodian)Depositary/custodian regulated under UK financial services legislationcapable of electronic settlement through CRESTAdditional documentation:Trust DeedDepositary AgreementLegal Opinions
64 Other traded securities The London marketsOfficially Listed Securities (UK Listing Authority as the EU Authority)Other traded securitiesMain BoardGrowth MarketStandard Listing – ESMA compliantPremium Listing - super equivalent
66 The Rules Rule Responsibility Listing Rules EU with FCA as UKLA DTRs under Transparency DirectiveAIM RulesLondon Stock ExchangeHigh Growth Segment RulesISDX Growth Market RulesICAP Securities and Derivatives ExchangeCompany LawEU and UK parliamentSecurities LawUK Corporate Governance CodeFinancial Reporting CouncilStewardship CodeCorporate Governance Code for Small and Mid-Size Quoted CompaniesQuoted Companies AllianceTakeover CodePanel on Take-Overs and Mergers/UK parliamentProspectus DirectiveEUMarket Abuse DirectiveMiFID/MiFID II
67 Q: Why move to a public market at all? 2. Preparing for IPOQ: Why move to a public market at all?liquidity/ extended base of shareholderstrading/kudos/staff incentives/stock for acq.fin.exit/valuationto raise funds for growth businesses
68 Directors – executive and NEDs Internal MattersDirectors – executive and NEDsStructureBoardIndependence
69 Independence: directors Independence from both the issuer and major shareholdersIndependence criteria set out in provision B.1.1 of the UK CodeIndependence in character and judgement, as well as circumstances or relationshipsRisk of impairing (or appearing to impair) the judgement of the directorWhere independence likely to be compromised: former employeematerial business relationship with the issuer, whether direct or indirectreceives additional remuneration from the issuer apart from a director’s feeparticipates in the issuer’s share option or a performance-related pay scheme, or is a member of the issuer’s pension schemeclose familial ties with any of the issuer’s advisers, directors or senior employeesholds cross-directorships or has significant links with other directorsrepresents a significant shareholderhas 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 IPOIssue linked with marketability of issuer’s stock: free floatThere may be an alignment of interests between long term institutional investors and well managed, significant and stable family holdingsBoards should clearly and regularly explain the position to shareholdersMay be need for relationship agreements
71 Shares/Depositary Interests Structure for listingMajor shareholders – founders, dilution and relationship agreementsSharesReorganisation
72 Need to put in place the correct share structure MarketabilityFree transfer to comply with listing requirementsAuthority to allot shares/ability to raise new fundsIs the proposed issuer a vehicle capable of admission:must be able to issue shares to the public in place of incorporationLtd. to PLC conversion problems
73 retained Advisory Team Corporate finance advisor: sponsor (Listed) – transaction specificnominated advisor (AIM)ISDX corporate advisorBrokerDepositary (and Custodian if UCITS or AIF)Reporting AccountantLawyersRegistrarFinancial PRSecurity Printerretained
74 3. Documentation: Three Stages …but before you startWill the issuer be suitable for a listing?Major board decisions:when to IPOwhat to IPOwhich marketwhere to fundraise, from and through whomprice indicatorswhere the equity growth will come fromRisk of marketslots of moving piecesvolatility of marketsinvestor appetite may evaporate through the processmultiple partiesgenerally 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 storyStrategyBoard evaluationBusiness PlanEngagement terms of advisorsMarket assessmentPre-preparationShare structure and constitutional mattersChecking of contractual model etc.
76 Stage Two: getting you there Key Message: refine your equity growth story Financial DD:long formshort formIFRS integration issuesLegal DDCommercialtax structuringconsider where your investors are going to be drawn fromCorporate Governance:ReviewCommittee terms of referenceAudit 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 appropriateCompetent 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 storyProspectus/Admission DocumentInvestor PresentationPlacing AgreementPlacing LetterPlacing ListLock-In AgreementsIrrevocable UndertakingsBoard MinutesRegulatory AnnouncementsUnderwriting Agreements
78 Timeline 9 months from a standing start: Stage 1 – 4-5 months strategic reviewfocus on equity growth storylargely internal, but with corporate finance advicedetermining points of reference and terms of engagementStage 2 – 3 monthsdetailed due diligence and preparationsignificant advisory inputStage 3 – Road Show to Impact – 1 month“all hands to the pump”directors will be busy on road shows with brokeradvisory 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 clientsrole of researchConsider both the IPO and the medium to long term investor base a n issuer wants to developSelling shareholders at IPO or shortly thereafterCreation of investor and consumer demand for both stock and productBalancing interest of long term investment with ensuring there is sufficient “product” in the market to allow for a healthy level of share tradingPricing negotiations between broker and issuer/corporate finance advisorMy advice: buy good advice and follow it!
80 Financial Promotion Issuer must issue a prospectus where: issuer is seeking approval to a regulated marketand/oran offer is being made to the publicno prospectus required where seeking admission to AIM/ISDX Growth Market without public offerNeed to always consider where funds are being raised and comply with local law on financial promotionA 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 stateUK use of exemptions under Financial Promotion Order 2005US use of Securities Act exemptions such as 144A/Regulation S
81 5. Corporate Governance Originally developed by the market Coming of ageNow greater regulatory footingEU action plan
84 The UK Corporate Governance Code: FTSE 350 The UK Corporate Governance Code is published by the Financial Reporting CouncilBegan with the 1992 Cadbury Report on Financial Aspects of Corporate GovernanceIt is a Listing rule that all companies within the FTSE 350 apply to the UK Code on a comply or explain basisFive principles around which the detailed provisions are then set out, being:A – LeadershipB – EffectivenessC – AccountabilityD – RemunerationE – Relations with ShareholdersParallel document: the UK Stewardship Codesets out standards of behaviours within the investment chainmost importantly fund managers
85 Small and Mid-Size Quoted Companies The needs of the SME sector are differentSMEs are vital in delivering growth post financial crisisGovernance should not inhibit growthGood governance lowers the cost of capitalOne size does not fit allThe Quoted Companies Alliance Code bridges the gap between FTSE 350 structures and the rest of the marketSupporting the ambitions of growth of companies encouraging:proportionate governancewithin an entrepreneurial environment
89 6. On-going ObligationsA requirement of the relevant Listing Rules, DTRs, AIM Rules, ISDX RulesAlso need to consider securities laws and compliance with company law more generallyNeed to keep the market informed “without delay” of all material developmentsAnnouncements through a regulatory information serviceShareholder approval of certain arrangementsclass testsrelated party transactionsreverse takeoverTiming for announcement of financial informationTakeover Code compliance: 30% mandatory bid thresholdExtended Takeover Code application from 1 September 2013