Business Briefing Update - June 2012

Corporate

Closure of the Plus Markets Stock Exchange

On 14 May 2012, PLUS Markets Group plc (PLUS) announced that it would commence an orderly closure process. Following that announcement, PLUS further announced that it has reached an agreement with ICAP Holdings Limited (ICAP), whereby ICAP has conditionally agreed to buy from PLUS, for the sum of £1. PLUS Stock Exchange plc (PLUS-SX), the cash equities, recognised investment exchange.

The agreement to sell PLUS-SX is subject to approval from both shareholders and the Financial Services Authority.  Until approval is obtained and the sale has been completed, PLUS will continue the orderly closure process and, if the sale is unsuccessful, "PLUS-SX will be wound down".

PLUS still has two other subsidiaries'; the PLUS Derivatives Exchange and the PLUS Trading Solutions. PLUS has stated that it is in talks that may lead to sale of one or both of these subsidiaries but "[t]here can be no certainty of any additional transaction being completed".

Beware of the Cookie Monster!
The Information Commissioner's Office (ICO) will now enforce the new so-called Cookie Law. The ICO is developing a cookie reporting tool and has written to Apple, Google and Facebook urging them to ensure compliance.

All websites accessed by European users will need to comply with the new requirements. The first step for any business is to complete a cookie audit. The International Chamber of Commerce suggests cookies are categorised into one of four categories; (1) strictly necessary; (2) performance cookies; (3) functionality cookies; and (4) targeting or advertising cookies. Step two is to implement a consent solution. This could be in the form of a pop up window, message bar or icon. Whichever you choose, it needs to bring the use of cookies to the user's attention and provide prominent, clear and concise information on the cookies in use and how user preferences can be changed. Finally, step three is to keep the use of cookies under review. As a website evolves and content is updated it is likely that new cookies may be added. Cookie requirements must be remembered and it may even be advantageous to consider putting in place an internal 'Cookie Policy' document.

TUPE and Early Retirement Benefits
The High Court has recently clarified the position regarding the transfer of early retirement benefits under the TUPE regulations.

Usually occupational pension schemes that concern old age, invalidity or survivors' benefits do not transfer to the acquiring company under TUPE. An exception to this is the transfer of early retirement benefits. The discretionary power to provide early retirement benefits transfer to the new company that takes on the employees from the purchased company.

Recent case law has found that only liability in respect of the enhancement until normal retirement age transfers under the TUPE regulations. If the transferred employees were to claim the full early retirement benefits from the new company, this would mean duplication of those rights where there are deferred pension benefits from the old company.

The impact on businesses means that when acquiring employees under TUPE, who have early retirement benefits, the new company is only obliged to meet the enhancement until normal retirement age and not thereafter. In order to assess the costs and risks incurred with acquiring employees under TUPE, rigorous due diligence should be carried out as early as possible in order to limit liability.

Reforms to Civil Litigation Costs and Funding: The Legal Aid, Sentencing and Punishment of Offenders Act 2012
The Legal Aid, Sentencing and Punishment of Offenders Act was passed on 1 May 2012.  Some of the key changes brought in by the Act are:

• Changes to Conditional Fee Agreements (CFAs) so that, if a CFA-funded party wins, they pay the success fee instead of the losing party;
• Changes to After the Event (ATE) insurance so premiums are no longer recoverable from the losing party;
• Changes to CPR Part 36 so that, where a defendant rejects a claimant's offer but fails to do better at trial, the defendant has to pay the claimant an additional sum - likely to be 10% of the damages awarded; and
  

The introduction of Damages-Based Agreements (DBAs) - a contingency fee model currently used in the USA and Canada.  Under DBAs solicitors are paid a percentage of their client's compensation or settlement funds.

There may be a rush by claimants to put traditional CFAs in place before the new law comes into force in April 2013.  The changes to CFAs are particularly likely to hit lower value claims, where insurance premiums are higher in proportion to the recovery.

Property

Keeping Your Eyes on the Distant Horizon
The latest survey of commercial property tenancies by the British Property Federation shows average lease lengths have fallen to a record low of 4.8 years.  For SMEs the average lease is even shorter at 4.1 years.  Despite this, incentives are common with approximately 1/3rd of leases with a duration of less than 5 years granting Rent Free Periods.
This is unsurprising in an uncertain market, however landlords and tenants should ensure that they do not lose sight of longer term objectives. These objectives include:

• Longer leases are key to funding property development and improvement.  Another survey finding was increased polarisation, with prime property securing longer deals; and
• In the rush to secure commitment, good practice should not be sacrificed.  Two Court of Appeal cases reported this month illustrate consequences of incomplete drafting: 
• In Scottish Widows Fund v BGC International  an assigning tenant was unable to escape their obligation to fund the gap in the rent from the assignee.
• In Rail Safety Standards Board v British Telecommunications an agreement to underlet was terminated by the proposed under-tenant for lack of the Superior Landlord's consent despite that consent having been substantially granted.

Rent due before Administration is not an Expense
A recent decision in the High Court has held that unpaid rent which falls due prior to the appointment of an administrator/liquidator amounts to an unsecured claim for the Landlord against the insolvent tenant.  The decision will no doubt influence the timing of future administrations; administrators will be keen to secure the additional 'rent free' period, thus it is likely we will see more appointments closely following rent payment dates.

Landlords may be keen to limit their exposure and reduce the period between rent payment dates.  We may see a shift towards monthly rent instalments so that Landlords can limit the period administrators/liquidators can trade without paying rent as an expense of the administration/liquidation.

Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances. Links to other sites and resources provided by third parties are included for your information only. We have no control over the content and accept no responsibility for them.