Name

Chris Daniel

Your current title / role

Business Development Manager for South Dartmoor Multi Academy Trust

Brief career background

I Studied Education Studies at Durham University, and always wanted to work in education, but not as a classroom teacher.  I came into South Dartmoor Community College as a Project Manager of sorts leading on a transfer of ownership and operation of a Local Authority Sports Centre to the College.  From there, I have led on generating new income and creating new opportunities and partnerships, before moving into a Trust-wide role to take a wider operational view.  I now look after operations and compliance across the MAT.

What does a typical working day look like?

No two days are ever the same.  I like to try and get some office time each day to touch base with the team around me and my CEO, but with 8 schools to support I’m often heading out for site visits, meetings and catch ups or delivering training and monitoring compliance.  In my role I come across pretty much everyone with any interest in education – from teachers, directors and parents to architects, contractors, salespeople – and of course solicitors!

What did you have for dinner last night?

Last night was a late one, so it was just Pasta Bolognese from a pre-made weekend batch!

What was the last piece of music you listened to?

I have a very random Spotify playlist in the car that has a huge range of songs I’ve enjoyed over the last 15 years or so – Craig David features on it a few times.

What was your favourite and most hated subject when you were at school?

The best were definitely History and PE – I had good teachers who weren’t afraid from deviate from the curriculum to go further and spend more time on things I was interested in and that’s had a lasting impression on me.  I did the absolute minimum I could in Science.

What is the best thing about your job?

I like every day being different and the vibrancy of working in schools with so much going on constantly.  It is rewarding knowing I am making a difference, and I’m working in a role where every decision I make has the intention of improving something for children.

If you could change one thing about the current education system what would it be?

Obvious funding issues aside, the level of scrutiny on schools from all angles is intense.  It would be nice to feel the outside world wanted to see positives rather than negatives sometimes and a little more belief that everyone within education has chosen that career because they want to try and improve the lives of other peoples children!

If you’re interested in taking part in our Head to Head feature please get in touch.

We may not have expected the last pre-Brexit budget to focus on housing, but there were several elements which underline the government’s continuing commitment to the housing industry.

Outlined below are the key points:

Help to Buy scheme extended

The Help to Buy equity loan scheme, which offers a 20% government loan (40% in London) to buyers of new-build properties, has been extended to 2023. The extended scheme will be restricted to first time buyers and new regional price caps for a property to be eligible will be introduced. The price cap for a property in the South West to be eligible for the scheme is £349,000 from April 2021 to March 2023. This is 1.5 times the current regional average first time buyer price. It is recognised that no industry should be reliant on government assistance indefinitely and it is positive that we now have some clarity on the term of this scheme.

Review of build out rates

Alongside the budget, Sir Oliver Letwin has published his independent Report on how the government can raise build out rates and why there is gap between housing completions and the amount of land allocated or having planning permission. The Report found no evidence that speculative land banking is part of the business model for the major housebuilders, nor that this is a driver for slow build out rates. It found that greater diversity in the types and tenures of housing on large sites would increase the market absorption of new homes into the market and that developers should be required to build a wider range of properties so as to increase sales and accordingly build out rates.

In addition, the Report recommends that the government adopt primary legislation to enable local authorities to purchase land compulsorily at prices which reflect the value of the sites once they have planning permission. Guidance is proposed limiting land value uplift to a fixed multiple of circa ten times existing use value through new large site ‘diversity planning’ rules.

The government will respond to the review in full in February 2019. If implemented these recommendations could instigate a significant intervention into the housing and land market.

Homes England launch five-year plan

Homes England is the government’s housing accelerator. It is responsible for increasing the number of new homes that are built in England, including affordable homes and homes for market, sale or rent, increasing the supply of public land and speeding up the rate that it can be built on.

Alongside the budget, Homes England has set out how it will improve housing affordability through a new five-year Strategic Plan. The plan, which runs to 2022/23, outlines Homes England’s ambitious new mission and the steps the national housing agency will take to respond to the long-term housing challenges facing the country – in partnership with all parts of the housing industry sector.

The new plan sets out far-reaching delivery objectives including to:

• unlock public and private land where the market will not, to get more homes built where they are needed
• ensure a range of investment products are available to support housebuilding and infrastructure, including more affordable housing and homes for rent, where the market is not acting
• improve construction productivity.

Housing Revenue Account cap abolished

The Housing Revenue Account (HRA) cap which controls local authority borrowing for house building in England has been abolished, enabling councils to increase house building to around 10,000 homes per year.

Many local authorities have already pledged to build thousands of new homes in anticipation of this move.

New development rights for high street homes

A consultation has been launched to breathe new life into the high street by proposed new permitted development rights to allow upward extensions above commercial and residential properties, and to allow commercial properties to be demolished and replaced with homes. Developers have reacted with some caution over the use of such rights which have in the past created pockets of poor quality private rental homes.

Land value uplift payments simplified

The government will introduce a simpler system of land value uplift payments that provides more certainty to developers and local authorities, while enabling local areas to capture a greater share of uplift in land values for infrastructure and affordable housing. The proposals include simplifying the process for setting a higher zonal Community Infrastructure Levy rate in areas of high land value uplift and removing all restrictions on s 106 pooling towards a single item of infrastructure. The government will also introduce a Strategic Infrastructure Tariff for Combined Authorities and joint planning committees with strategic planning powers.

The detail of these proposals will be eagerly awaited.

Support to the SME housebuilding sector

The government has earmarked £1bn of guarantee capacity to support lending to the SME housebuilding sector, via the British Business Bank working with Homes England.

This confirms the government’s long standing commitment to help the smallest scale builders.

SDLT relief for shared equity properties

A welcome correction is that first time buyer’s relief from SDLT has been extended so that first time buyers of shared-ownership homes priced up to £500,000 will be exempt from SDLT,  whether or not a market value election has been made.

Previously, the initial purchaser of a shared ownership lease had the choice of how to pay SDLT. It could elect to pay SDLT on the market value of the whole of the property at the outset (known as the ‘market value election’), in which case no further SDLT would be due on staircasing transactions. Alternatively, the initial purchaser could elect to pay SDLT on each separate share as it was purchased. A market value election could only be made on grant of the lease and could not be withdrawn. This change has also unusually been implemented retrospectively for any shared-ownership buyers since November 2017.

Discounted sales to local residents

The government wants to support parishes and communities to provide more affordable homes for local people to buy. The government will provide £8.5m of resource support so that up to 500 parishes “can allocate or permission land for homes sold at a discount”. Neighbourhood plans and orders are approved by local referendums.

The government will update planning guidance to ensure that neighbourhood plans and orders approved by local referendums cannot be unfairly overruled by local planning authorities. The government will also explore how it can empower neighbourhood groups to offer these homes first to people with a direct connection to the local area.

Housing Infrastructure Fund increased

The Housing Infrastructure Fund (HIF) will increase by £500m to a total of £5.5bn, which is expected to unlock up to £650,000 new homes. The HIF is a capital grant programme for new physical infrastructure under which funding is awarded to local authorities on a competitive basis. The fund provides Marginal Viability Funding where the costs of putting in the infrastructure are unviable, and Forward Funding aimed at providing initial funding for large strategic schemes which will then give the market confidence to provide further investment.

The housing crisis will not be solved by this budget alone. However, the Autumn Budget 2018 is building on the foundations laid in the 2017 Budget – and these measures show that the government is following through in a very positive way.

Ian Holyoak considers HM Government’s technical notice setting out the potential impact on low-carbon electricity generation in the event that the UK leaves the EU without an agreement. In this article we outline the content of the notice and the impact for renewable energy market participants.

What does the notice cover?

The notice itself is very specific – the areas covered are those which interact or have a direct connection with the EU’s Renewable Energy Directive 2009/28/EC, which, following Brexit, will have no direct application in the UK.

Given the narrow focus, unlike notices issued in other sectors, this technical notice gives little insight into the government’s view on the impact of Brexit on business in the renewable energy sector, and the energy market generally, or indeed the wider questions relating to energy pricing and security of supply.

These broader questions are likely to remain unanswered until much further down the line in the Brexit negotiations and deal (or no-deal) implementation.

Impact on electricity suppliers, traders and small-scale renewable energy installers

The note touches on certain points of relevance to electricity suppliers, traders and small-scale renewable energy installers.

Guarantees of Origin and REGOs

One of the key areas covered by the notice is the potential impact of a no-deal Brexit on accreditation on Guarantees of Origin (GoOs) under the Renewables Obligation, which includes Renewable Energy Guarantees of Origin (REGOs).

REGOs are primarily used by electricity suppliers to comply with their fuel mix disclosure obligations, which form part of the standard licence conditions for suppliers. These were introduced in 2009 to ensure compliance with the EU’s directive on renewable energy generation and to stimulate growth in renewable energy generation.

In short, the guidance confirms that in the event of a no-deal Brexit:

• GoOs issued in the EU and Northern Ireland will continue to be recognised in Great Britain. Currently, this occurs via an OFGEM-regulated process whereby the GoO is audited, cancelled in the issuing country, and then re-issued in Great Britain.
• GoOs issued in Great Britain and Northern Ireland will no longer be recognised in the EU. As pointed out by the guidance document, this will mean electricity suppliers or traders may be compromised if their contract terms require the transfer of GoOs recognised by the EU. The above is most likely to affect the fifteen or so energy suppliers and traders who currently utilise OFGEM’s overseas-issued GoOs certification process.

Contractual arrangements should be revisited in the event parties are under any binding obligations to utilise either of the above mechanisms. It may be the case that relief can be sought through supervening events or change in law provisions in contracts.

Renewable Electricity Support Schemes

The notice also considers the impact of a no-deal Brexit on UK Renewable Energy Support Schemes. The potential impact described in the notice is again limited in scope and of a technical nature.

Currently, to receive support under the Renewables Obligation scheme generators must demonstrate that bioliquids used in those generation activities comply with certain sustainability requirements. Separately, GoOs interact with the Feed-in Tariff (FIT) scheme and the Contracts for Difference (CfD) scheme, as the cost of these schemes is levied on electricity suppliers in proportion to their market share. A supplier can reduce its exposure to this levy through the use of overseas GoOs that confirm a relevant proportion of electricity was generated by renewable energy sources.

On these two separate issues, the guidance confirms that:

• The current sustainability requirements under the Renewables Obligation will continue to apply for bioliquids, solid and gaseous biomass.
• GoOs will still be accepted for the purpose of calculating the applicable levy under the FIT and CfD schemes.

We would not expect the above to be of much concern to entities operating in this market. It should be noted however, that this notice does not bind the government in relation to future legislative change. The key point to note is that while the above confirms that the status quo will be maintained in the immediate term, given the decoupling of UK and EU energy policy, there could well be regulatory divergence in the not-too-distant future.

Installers of microgeneration technologies

Microgeneration technologies are small-scale generation technologies used to produce power from renewable energy sources, primarily in domestic and light industrial contexts. Biomass boilers, heat pumps and solar PV are all examples of microgeneration technologies.

Currently, the UK is required to recognise the certifications of installers of these microgeneration technologies issued by states in the European Economic Area (EEA). Similarly, installers accredited in the UK have been provided with recognition of accreditation in the EEA. In the event of a no-deal Brexit, this recognition is at risk.

The guidance confirms that:

• The UK will continue to recognise installer certificates issued by the EEA.
• Installers certified in the UK may need certification in the EEA to continue to install microgeneration technologies.

Installers should ensure all certifications are up-to-date, noting that any EEA-based operations of UK companies will require a review and refresh in the event of a no-deal Brexit.

Wider considerations

It should be noted that HM Government’s notice covers only a narrow area, and there are a number of wider considerations not addressed in it that may affect those operating or investing in the renewables market when looking at Brexit-related scenarios.

Foreign exchange risk is high on the list of potential concerns. At the very least, we would expect a no-deal Brexit to lead to more volatility in the GBP/EUR currency pair, if not outright devaluation of the GBP.

European supply chain and technology costs are likely to be of particular concern to UK-based developers and investors in projects reliant on components commonly manufactured in Europe: e.g. Combined Heat & Power (CHP), anaerobic digestion, gas peaking, wind. Developers and financiers in such projects should consider their contractual and commercial options if and when a no-deal Brexit becomes more likely.

A no-deal Brexit also puts Britain’s access to the EU’s Internal Energy Market (IEM) at risk. Market commentators expect that Britain losing access to the IEM would result in higher and more variable wholesale energy costs. Although this may in fact stimulate investment in generation projects, higher energy costs are unlikely to dampen calls for regulatory and legislative change in the market.

While we do not expect such changes to threaten revenue streams for those projects already locked in to receiving legislative support (e.g. CfD, Renewable Heat Incentive (RHI)), they could very well alter the revenue landscape fundamentally for projects in the pipeline. Ultimately, losing access to the IEM is likely to add to the difficulty of making robust investment decisions in the GB energy market.

If you would like more information on this topic, please contact Ian Holyoak.

Douglas Hawthorn, Partner in Michelmores’ Banking Restructuring & Insolvency team, has contributed an article to the October issue of Corporate Rescue & Insolvency journal, describing the outcome in Videology Ltd [2018] EWHC (CH).

In a nutshell, the case concerned a company incorporated in England and subject to Chapter 11 proceedings in the United States applying for recognition of those proceedings in Great Britain under the Cross-Border Insolvency Regulations 2006. Click the link below to view the article in full, reposted with kind permission of LexisNexis.

View article

Anna Thompson considers whether the consequences of the Brexit vote have contributed to the recent trend of insolvencies in the hospitality and retail sectors.

Throughout 2018 the news has carried a continuing stream of stories about high-profile retailers and restaurant businesses that have faced financial difficulty. Michelmores’ Restructuring & Insolvency team has advised a number of struggling businesses (and their creditors and other counterparties) within these sectors. Can the blame be laid at Brexit’s door?

A common theme in matters reported in the press and those in which we have been directly involved is that the effects of Brexit are increasingly being cited as a factor in why these businesses have failed.

While the UK remains a member of the EU more cynical observers may remark that Brexit is simply a convenient excuse to cover other failings of those businesses (see for example recent comments made by Dominic Raab MP concerning John Lewis and Bernard Jenkin MP concerning Jaguar Land Rover), encouraged by the media fanfare on the topic. However, Brexit has been linked to the falling value of the pound and lower consumer confidence, both of which have caused difficult trading conditions for retail and hospitality businesses.

Hospitality

A large number of high-profile hospitality businesses have been reported to be under pressure or failing, including:

• Byron Burgers, which announced the closure of up to 20 sites following approval of a CVA (Company Voluntary Arrangement) in January.
• Barbecoa, which appointed administrators and, in the same group, Jamie’s Italian, which announced the closure of 12 sites following approval of a CVA, both in February.
• Prezzo, which announced the closure of almost 100 restaurants following approval of a CVA in March.
• Carluccio’s, which was reported to have sought advice from restructuring experts in March.
• Casual Dining Group, owner of chains including Café Rouge and Bella Italia, reported a £60m loss, despite a small rise in sales.

Michelmores’ Restructuring & Insolvency team has acted in relation to a number of insolvency-related matters in this sector, including the sale of a local restaurant and bar business via a pre-pack administration deal. We have also advised a multi-site operator on how it might capitalise on the failure of stressed restaurant businesses to acquire new sites.

The ‘casual dining crunch’ is not just a 2018 phenomenon. According to accountancy firm Moore Stephens, 984 restaurant businesses entered insolvency proceedings in the year to September 2017, a 20% rise on the same period a year earlier.

Commonly cited reasons for financial difficulties in these cases include falling revenue due to poor consumer confidence, and the rising price of imports due to the weakened pound. Both can be linked back to Brexit. The cost of imports has hit mid-market Italian chains particularly hard as, in search of authenticity, ingredients are often purchased from Italy in Euros.

Staffing is another key issue. The rising minimum wage may not be attributable to Brexit, but Brexit is a factor in the shortage of staff due to high levels of employment and the decreasing numbers of economic migrants from the EU. The falling number of EU workers has been widely blamed on the outcome of the Brexit vote and has also been cited as causing significant difficulties in the agriculture sector.

Other important factors in the poor health of the hospitality sector include rising business rate liabilities and over-competition for sites (driving up rents). The saturation of the casual dining market is now also being hit by the increasing popularity of takeaway and delivery food services.

Retail

Within the retail sector notable businesses battling financial difficulties have included:

• Toys “R” Us, and Maplin, which both entered into administration in March
• New Look, which announced 980 job cuts and 60 store closures following confirmation of a CVA in March
• House of Fraser, whose creditors approved a CVA in June, only for the chain to appoint administrators in August
• Mothercare and Early Learning Centre, whose creditors approved CVAs and their fellow group company, Childrens World, entered administration
• Debenhams was reported to have called in KPMG to help the retail chain to assess how best to adapt to a changing and challenging market place
• Moss Bros, B&Q, Homebase and Laura Ashley, all of whom have been reported to be wrestling with falling profitability.

Whilst pure or predominately ‘bricks and mortar’ retailers have struggled to keep up with online and more forward-thinking multi-channel retailers, a number of retail businesses and commentators have cited Brexit-related factors such as the cost of importing goods and falling consumer confidence as leading to ever tougher trading conditions.

Some fashion retailers have also reported stock shortages as a result of changes made to the way clothes are now being sourced by retailers looking to off-set Brexit-driven inflation costs. There has been discussion in the media of the ‘just in time’ principles under which many businesses now operate. This practice is not just employed by car manufacturers, but also by fast fashion retailers such as Zara.

Our Restructuring & Insolvency team has advised insolvency professionals, major landlords, creditors and group companies in relation to a number of recent retail insolvencies, including some of those mentioned above.

Our involvement has been not just with businesses who are struggling in a difficult market. We have advised a number of key suppliers to House of Fraser in relation to their negotiations with Mike Ashley’s successor business, for example in relation to retention of title, concessionaire staffing and brand reputation management issues.

Conclusion

It is clear that the sole blame for the failure of these businesses cannot be laid at Brexit’s door. However, the consequences of the Brexit vote appear to have compounded the problems of many businesses within the hospitality and retail sectors.

Earlier in the year the EU and the UK agreed the main terms of a transition deal, which will largely keep the current status quo until the end of 2020. It is not yet clear whether this will help to allay consumers’ concerns and assist businesses which rely on European imports. It seems more probable that the current uncertain trading conditions will continue until the terms of the final Brexit deal are known, and possibly for some time thereafter.

Our Restructuring & Insolvency team regularly assists businesses and individuals affected by a company’s insolvency. This includes struggling companies themselves, their creditors, their insolvency advisers or other interested parties. Should you require any advice in relation to a business which is struggling and/or at risk of insolvency, if you have been appointed an office-holder of an insolvent business, or if you are concerned with the solvency of your own business, please do not hesitate to get in touch with the team.

If you would like more information on this topic, please contact Michelmores’ Restructuring & Insolvency team.

Battery installations behind-the-meter can help business minimise energy costs and boost green credentials. Big headlines in the industry have attracted attention towards batteries, but what is a behind-the-meter battery solution and can it help your business manage its energy needs?

The price and provenance of energy is more than ever a source of concern for businesses. Getting your energy arrangements right can have considerable implications for the price you pay, and there is an increased focus (and, indeed, pressure) for energy users to increase efficiency, reduce usage and boost their green credentials.

One solution is to look at “behind-the-meter” arrangements.  “Behind-the-meter” means anything on the customer side of their electricity meter. The purpose of all behind-the-meter solutions is to reduce the amount of power that runs from the electricity grid through that meter to the customer, thereby reducing power supply costs.  This can include steps taken to reduce energy usage – insulation, energy efficient lighting etc – or generation of their own electricity, for example with rooftop solar PV panels.

Battery storage is one such solution. These installations are larger versions of familiar technologies such as lithium-ion or lead-acid batteries, and can be charged by power from the grid – the electricity can then be used later. Batteries at this scale can potentially store enough electricity to power a whole building for a significant period.

Battery installations have received significant attention from the media over the past 12 months, with high-profile market participants making big strides – examples include the Tesla Gigafactory South Australia Mega-Battery or the San Diego Gas & Electric Escondido installation. This raised profile has helped forward-thinking businesses become aware of the advantages of utilising behind-the-meter battery technology.

Examples of some of the advantages of using a battery are:

Arbitrage – time-shifting the energy taken from the electricity grid to coincide with cheaper periods in the charging cycle – for example, charging up the battery overnight (when electricity prices are lower) to use that power when the energy prices are at their highest the following day.

Resilience – utilising the battery alongside other energy resilience solutions (such as a generator) to maintain an ‘uninterruptible’ power supply, drawing power from the battery if the power from the grid is disrupted.

Utilising Green Energy – where a business has its own solar or wind power (which may not be generating when the power from them is needed most) the battery can help shift the use of that power to a more useful time, minimising the need to import electricity from external suppliers at more expensive rates.

Triad avoidance and other benefits may also be available, allowing a business to further minimise its costs or potentially even earn a supplementary income stream from their behind-the-meter battery.

Manufacturers, hospitality providers, health care services, leisure centers and other users of large amounts of power – for whom energy is both business critical and a major expense – are well placed to obtain significant benefits from installing a behind-the-meter battery solution. Predictable patterns of high demand for energy (usually coinciding with high-cost peak times) mean that arbitrage can have a considerable impact on costs. If you are looking at a behind-the-meter battery solution some initial considerations are as follows:

Ownership vs Benefit Sharing models

There are several models for delivering behind-the-meter battery solutions, including a business owning its own battery or granting a lease of part of their site to a battery operator to install a battery and sharing the benefits.  The shared benefits model means that the business can either benefit solely from reduced energy bills, or can agree to share other benefits with the battery operator. Both models have advantages (and disadvantages) which will be explored in more detail in a forthcoming article.

Planning

A business will need to consider whether there are appropriate planning consents in place for a battery. This will include the use class of the proposed site, as well as permissions for constructing the installation. If the proposed site is already in Use Class B2 (General Industrial), a battery may be a ‘Permitted Development’ (although this position is not entirely clear-cut). However, you (or the battery operator) may wish to apply for a Certificate of Lawful Development to satisfy any funders, or future buyers.

Limitations of Liability

Ensuring that the limitations of liability in the contractual documents appropriately reflect the risk of any downtime and losses caused by failure of the technology or installation is essential.  For major energy consumers, the losses to the business for an interrupted power supply may far exceed the monetary benefits or savings from the battery itself.

Michelmores’ Energy Team has extensive experience advising on energy projects including behind-the-meter batteries, and understand the drivers and needs of businesses with high energy use when considering behind-the-meter solutions.

Greater involvement of the workforce and other likely effects of the imminent FRC reforms to the UK Corporate Governance Code

How did we get to this point?

Company directors are already legally required to consider the interests of their company’s employees and the need to foster the company’s business relationships with suppliers, customers and others when considering how to promote the success of the company[1].

An increasing awareness of the need for strong and effective corporate governance, not just from our largest companies but also across the wider business community, led to the publication by the Government of a Green Paper in 2016 looking at corporate governance.

Following the consultation period for the Green Paper, a response was issued which outlined proposals for reform to corporate governance in the UK. The responses received highlighted the need for a greater awareness to be raised of directors’ duties under the Companies Act. The government’s response set out nine proposals for reform, across three specific aspects of corporate governance;

1. executive pay;
2. strengthening the employee/customer/supplier voice; and
3. corporate governance in large private companies

The FRC was invited to consider various proposals following this consultation and, as a result, has in turn been consulting on proposed changes to the UK Corporate Governance Code.

When does the revised code come into force?

The revised UK Corporate Governance Code, which is applicable to all premium listed companies, is due to be published on 16 July 2018 and applies to accounting periods beginning on or after 1 January 2019.

How is the workforce/stakeholder voice being strengthened?

Premium listed companies will need to adopt, on a ‘comply or explain’ basis, one of three mechanisms for engaging their workforce:

• designate a non-executive director;
• introduce a formal employee advisory council; or
• appoint a director from the workforce.

This is likely to be seen by staff and wider stakeholders in principle as a positive step towards greater engagement. However, companies will need to ensure that (particularly with the appointment of a director from the workforce and the appointment of a non-executive director), the wider workforce is represented and not just one part. Also, there is a risk of a charge of tokenism and it remains to be seen whether the statutory and fiduciary duties of a director may conflict with the individual’s views as an employee, and may limit the employee/director’s ability to communicate back to the workforce he/she represents.

Employee advisory councils are already used elsewhere in the EU. UK companies will need to ensure that views communicated by these councils are actually noted and taken heed of.

Compliance with the spirit of good governance

The drive to require large companies to engage with their workforces is aimed at encouraging good practice in the wider business community and marks a noticeable shift towards involving and listening to the voice of the employees and wider stakeholders. It will no doubt take time to see how this plays out in practice. However, care will need to be taken by companies in implementing the principles of the revised UK Corporate Governance Code, to ensure that the whole concept of employee/stakeholder engagement is understood and embraced by those at a senior level, and practical steps taken now to ensure that it is not just seen as a box-ticking exercise.

Is this backed up by any legislation?

In addition to the proposed reforms to the UK Corporate Governance Code, draft secondary legislation[2] has introduced the following:

1. Larger companies to publish a statement regarding compliance with their directors’ duties (known as a ‘section 172 statement’)

All large (private and public) companies will need to include in their Strategic Report a section 172(1) statement to explain how their directors have had regard to the matters in section 172(1)(a) to (f) Companies Act 2006 when performing their directors’ duties.  Unquoted companies must publish this statement on a website (quoted companies are already required to make their annual accounts and reports available on their websites).

2. Statement of employee engagement to be included in Directors’ Report (or Strategic Report)

All companies with an average number of more than 250 employees (regardless of whether the company is listed) must include in their Directors’ Report (or, if they so choose, their Strategic Report) a statement describing the company’s actions taken during the financial year to introduce, maintain or develop arrangements aimed at:

• Informing – providing employees with information of concern to them as employees;
• Consulting – consulting employees or their representatives regularly to take account of their view in making decisions likely to affect their interests;
• Involvement in company performance – encouraging employee involvement in the company’s performance through employee share schemes or other means;
• Educating – achieving a common awareness of all employees of financial and economic factors affecting the company’s performance.

Do AIM companies need to think about anything else?

New AIM applicants are required to state in their Admission Document and on their websites details of the recognised corporate governance code that the board of directors has decided to apply[3].

In addition, from 28 September 2018, all AIM companies must give details on their websites of the corporate governance code their directors have decided to apply, how the company complies with that code and, if it departs from the chosen code, an explanation of reasons for departing from the chosen code.

This is a new consideration for both new and existing AIM companies, who should now start to:

1. Identify an appropriate corporate governance code (e.g. the QCA Corporate Governance Code or the UK Corporate Governance Code);
2. Carefully consider how the AIM company complies with the relevant code; and
3. Prepare a ‘meaningful explanation’ of any departure from the relevant code (as required by AIM Notice 50).

How can we help?

Michelmores’ Corporate team in Exeter, London and Bristol can provide assistance and advice on this topic. Please contact Ian Binnie on ian.binnie@michelmores.com.

The Financial Reporting Council (FRC) has recently published a consultation paper on a new set of corporate governance principles aimed at large private companies following the Government’s Green Paper Consultation on Corporate Governance Reform in 2016 and the BEIS Select Committee’s corporate governance report in 2017. in support for action to “encourage high standards of corporate governance in the UK’s largest private companies” and the need to boost trust, fairness, accountability, responsibility and transparency for the benefit of stakeholders (such as shareholders, lenders, customers, suppliers, employees and the general public).

The publication of the consultation paper also coincided with the new legislation laid before Parliament on 11 June 2018, which will place new reporting obligations on large private companies.

Which companies do the new corporate governance rules apply to?

‘Large’ private companies, which must report on their corporate governance arrangements, are those with:

• over 2,000 employees, and/or
• a turnover of over £200 million and a balance sheet total of over £2 billion.

Certain companies will be exempt from reporting on stakeholder considerations.  These are companies which meet two of the following three criteria:

• a turnover below £36 million;
• a balance sheet total of below £18 million; or
• fewer than 250 employees.

However, as we will explore below, corporate governance is an increasingly important consideration for private companies of all sizes, with further changes anticipated in the near future.

What are the new corporate governance principles?

In January 2018, the Government appointed James Wates CBE to chair an industry group to develop the corporate governance principles in relation to large private companies.

The consultation paper sets out the following draft six voluntary principles (the Wates Principles):

1. Purpose – an effective board should promote the purpose of the company and ensure that its values, strategy and culture align with that purpose;
2. Composition – effective board composition should comprise of an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution;
3. Responsibilities – a board should have a clear understanding of its accountability and terms of reference;
4. Opportunity and Risk – a board should promote the long-term success of the company by identifying opportunities to create and preserve value, and establishing oversight for the identification and mitigation of risks;
5. Remuneration – a board should promote executive remuneration structures aligned to the sustainable long-term success of a company, taking into account pay and conditions elsewhere in the company; and
6. Stakeholders – a board has a responsibility to oversee meaningful engagement with material stakeholders, including the workforce, and have regard to that discussion when taking decisions.

Whilst the Wates Principles may be attractive in their simplicity, private companies will be free to choose other governance codes to apply (such as the UK Corporate Governance Code or the QCA Corporate Governance Code) if they are deemed more suitable.

‘Apply and Explain’

The Wates Principles function on an ‘apply and explain’ basis. Large private companies should explain how they have applied the principles to achieve their desired outcomes.  This is where the reporting requirements (see below) come into play.

The purpose of the reporting requirements is for stakeholders in the company to be able to make an informed decision as to whether the company is achieving good governance outcomes. The explanation also helps encourage company directors to see corporate governance not as a set of prescriptive list of actions or a box ticking exercise but as being ‘about fundamental aspects of business leadership and performance, which every company must interpret and apply for itself‘ (J Wates CBE).

The principles are accompanied by guidance which aims to help large private companies put the principles into practice.  In reality, different companies will apply the Wates Principles in different ways because there is recognition that outcomes are not the same for every company.

How to report your corporate governance arrangements

The Government have tabled new secondary legislation which, from 1 January 2019, will oblige large private companies to state in their directors’ report and on their website:

1. which corporate governance code the company follows, if any;
2. how precisely that corporate governance code is followed and applied; and
3. whether the company has departed from that corporate governance code in any way and, if so, how and why.

Most UK companies will also be required to state how their directors comply with their statutory duty to consider stakeholder interests. All UK companies with at least 250 employees in their UK group must also report on employee engagement.

In this way, many private companies will be bound by minimum reporting standards in a similar way to public limited companies whose shares are traded on a major stock market.

What about the cost?

In applying the ‘best practice’ standard of the Wates Principles, some private companies might take certain actions which may attract additional costs.

For example, the guidance recommends amending policies and constitutional documents to set out “policies and procedures that govern the internal affairs of the company“. Such amendments, which may include amending the company’s articles of association or introducing a shareholders’ agreement, may require companies to seek professional advice and guidance.

Companies may also wish to appoint a director-representative for key stakeholders, such as an employee-director.  This may lead to additional costs in the appointment process, or fees payable under any new service contracts.

What about corporate governance for smaller private companies?

The consultation paper states that it wants the new principles to serve as a demonstration of ‘good practice’ to all private companies. Smaller private companies, particularly those looking to grow in the future or those considering listing on a major stock market may therefore consider adopting the Wates Principles, despite not being obliged to under the new law. This would help the company to prepare for such growth and also to demonstrate that it is operating within the standard requirements of good corporate governance.

What happens next?

The consultation will end on 7 September and the draft Principles will be finalised by December 2018 in time for implementation by January 2019. This is subject to Parliamentary approval of the secondary legislation, which the Government intends to implement around the same time, but it is clear that corporate governance is becoming an increasingly important focus for all private companies.

If you would like some more information on changes to the corporate governance rules, please contact Caroline Lavis on caroline.lavis@michelmores.com or tel. 01392 687641.

An attempt by a seller of property to avoid liability for misrepresentation by seeking to rely on an exclusion clause failed in the Court of Appeal on 19 June 2018: First Tower Trustees Limited & Intertrust Trustees Limited v CDS (Superstores International) Limited [2018] EWCA Civ 1396.

Buyer’s due diligence

Caveat emptor (buyer beware) should be a familiar principle to all those involved in property transactions. Consequently, a buyer of property usually goes to some effort with his due diligence to discover everything he can which might affect his decision to buy a property. If the buyer makes enquiries of the seller, the law requires the seller to supply the buyer with accurate information to the best of his ability. However, the process has developed into an almost contentious process, with sellers frequently stonewalling buyers and telling them that they must satisfy themselves in relation to a particular enquiry. Not only that, but contractual terms designed to protect sellers from liability for misrepresentation have become common place. Such attempts often appear as ‘entire agreement’ or ‘non-reliance’ clauses in contracts. Often these clauses are included in contracts by the parties’ lawyers without the parties themselves realising or truly understanding their effect. Lawyers frequently include them in contracts as a matter of course or (it has to be said) sometimes without thinking, simply because they are a common feature of precedent documents.

Attempted exclusion by the seller

In First Tower Trustees the Court of Appeal found that a landlord of business premises had misrepresented the position about environmental contamination (the presence of asbestos) during its tenant’s enquiries before contract. The agreement for lease contained a ‘non-reliance’ clause which provided that the tenant agreed that it had not entered into the contract ‘in reliance on any statement or representation made by or on behalf of the Landlord other than those made in writing by the Landlord’s solicitors in response to the Tenant’s solicitor’s written enquiries’.

In addition, the lease itself provided that ‘the tenant acknowledges that this lease has not been entered into in reliance wholly or partly on any statement or representation made by or on behalf of the Landlord’.

Statutory limitations

In property transactions, it is conventional for the buyer’s solicitor to make written enquiries of the seller’s solicitors, who are in turn expected to give written replies. As a matter of law, it is accepted that the parties to a transaction may agree to confine themselves to a particular process which may have the effect of limiting the liability of one party to the other. Lawyers refer to this as ‘contractual estoppel’.

But despite the ingenuity of lawyers in seeking to protect their clients from liability, the law still seeks to protect a buyer from things which a seller may very well know, or ought to know, yet is reluctant to disclose. Historically, the law was that a buyer would have to show that a seller’s provision of incorrect information (his misrepresentation) was fraudulent, i.e. dishonest. The Misrepresentation Act 1967 removed that requirement and only permitted the maker of a false statement to escape liability if he could prove that he had reasonable grounds to believe, and did believe up to the time of the contract was made, that the facts represented were true.

Further, the Misrepresentation Act limits the effect of exclusion clauses, particularly the form of non-reliance clause seen in the First Tower Trustees case. It makes any attempt at exclusion subject to the test of reasonableness found in the Unfair Contract Terms Act 1977, section 11(1), which in turn places the burden of proving reasonableness on the maker of the statement, i.e. the seller.

In the First Tower Trustees case, both the trial judge and the Court of Appeal found that the landlord was aware of potential asbestos contamination. The Court accepted that the parties had agreed in the contract to limit the tenant’s reliance on statements to those given in the written replies to enquiries, because that was their contractual right. However, the Court found that the landlord’s knowledge of the true situation and its attempt to avoid liability by way of the ‘non-reliance’ clause in the lease, was unreasonable within the meaning of the Unfair Contract Terms Act.  The landlord was therefore liable for the tenant’s loss as a result of discovering the asbestos contamination.

Liability of trustees

This case is also a rich mine on the law relating to the liability of trustees and the procedural rules of litigation. It illustrates the potential liability of trustees, even though trustees themselves may not be directly involved in a transaction, or may not themselves have any knowledge of the matters about which a buyer enquires.

The lessons are clear: Whilst the principle of ‘buyer beware’ still applies, a seller must be aware that if he has knowledge of anything which might contradict the information given to a buyer he should consider the position carefully. The First Tower Trustees case makes it plain that the law may not protect a seller from liability for a misrepresentation, despite the best attempts of his lawyers.

For more information please contact Andrew Baines, Partner and Head of the Property Litigation team on Andrew.Baines@michelmores.com or +44(0)117 906 9336.

It is important to have a crisis management policy to deal with negative material published against you or your company. You can never be too prepared when it comes to crisis management as it is in the first few hours that a well-planned response can have the best impact.

1. In the first instance you should speak to a defamation specialist for advice and potentially a PR agent if there is going to be significant fall-out. PR agents can be really helpful because they can give practical advice about what the newspapers might just do.
2. Ask journalists for any questions in writing and push back on unrealistic deadlines. Don’t be bullied to provide a verbal comment.
3. Assume that what you say to journalists may well be published. In the absence of a contract (and in some cases even then) the phrase ‘off   the record’ is unlikely to be a guarantee that the information will not be published in some form, albeit anonymised.
4. Most publications provide specific contact details for complaints and it is advisable to use them to ensure a complaint is directed to the right person. We often liaise with legal departments of larger publications when seeking the removal of, or corrections to, defamatory material both before and after publication. Again PR agents can be helpful to try to limit creating a sense that there is more to the story.
5. Seek legal advice. We have prevented, removed or limited the damage of a number of articles published online, and in the national and international press.
6. If you are accused of defamation, don’t panic. There are many defences which may be open to you and actions which will limit the extent of any claim against you. Again, seek legal advice and remember that truth is a defence to defamation.
7. Have social media policies in place in the workplace. These may well give you and your company further protection to deal with employees who publish defamatory and/or malicious statements both inside and outside work. A well-worded policy could save considerable time and legal fees.

For an overview of how to protect your reputation, take a look at our tools and tactics you can deploy if defamatory information is published about you or your company.

For more information about how to control and protect your brand and reputation across a range of issues, please contact Jayne Clemens on +44 (0)1392 687724 or email jayne.clemens@michelmores.com.

If a tenant agrees with the landlord to restructure rent payments, whether in arrears or not, the agreement must be documented properly. The judgement of the Supreme Court in Rock Advertising Limited v MWB Business Exchange Centres Limited on 16 May 2018 is a salutary lesson to the former occupier of serviced offices. The landlord, in effect, forfeited the licence for occupation when the occupier fell into arrears of monthly payments and did not accept (as the occupier believed it had) a proposal to restructure the arrears and ongoing payments.

The case

The case concerned an occupational licence.  This is a less secure form of occupation than a lease or tenancy, but the consequences are the same in the case of business premises. This is because a landlord will invariably retain the ability to forfeit or ‘peaceably re-enter’ in the event of a breach of agreement by the tenant. This is typically done by changing the locks when the tenant is absent.

The Rock Advertising case involved a licence in which one of the terms was a “no oral modification” (“NOM“) clause:

“This Licence sets out all of the terms agreed between MWB and the Licensee.  No other representation or term shall apply or form part of this Licence.  All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.”

The problem for Rock Advertising was that their restructuring proposal was not set out in writing. Representatives of Rock Advertising believed that they had agreed a restructuring with a representative of MWB and this gave rise to a number of arguments, which are commonly deployed in situations where one party wants to try and circumvent a written contract, or achieve some other objective in the absence of any written contract. These strategies usually include (in typical descending order of prospects of success): misrepresentation, an implied term, a collateral contract, and estoppel.

These disputes often occur because parties sign standard form written agreements without one or both parties truly understanding what the written agreement says. The common complaint when events depart from those imagined by the written agreement is that one party alleges that the other assured it of an alternative agreement. Sometimes such claims are successful, but they almost invariably require considerable analysis of the facts; an expensive legal process in which to become involved.

Supreme Court decision

The outcome in Rock Advertising might seem unsurprising given that the alleged agreed variation was not put in writing, but that did not stop the parties arguing vigorously.  The majority of the Supreme Court agreed that there was no implied term that the NOM clause could not be overridden by an oral agreement to do so, or that there was a collateral agreement to that effect.  It was possible that an estoppel (detrimental reliance on an alternative assurance) might have saved them, but there was insufficient evidence to support the criteria for such a plea.

Lessons from this case

This case applies not just to the situation in which rent arrears are restructured; it could equally apply to any other variation of the contract agreed between the parties, where a NOM clause is included.

The lesson, as ever, is to read the lease or contract at the outset and where possible renegotiate any unacceptable terms before the contract is completed. If this is not possible, or if it becomes necessary to renegotiate terms during the term of the lease or licence, the deal struck or any amended conditions should be properly documented and the original contract varied, so that they form part of an enforceable legal agreement between the parties.

For more information please contact Andrew Baines, Partner and Head of the Property Litigation team on Andrew.Baines@michelmores.com or +44(0)117 906 9336.

The winners of the 16th annual Michelmores Property Awards have been announced, celebrating outstanding property and construction projects in Devon, Somerset, Bristol, Dorset and Cornwall, across ten categories.

Tate St Ives was awarded the accolade of Building of the Year, after undergoing a complete refurbishment of the existing galleries and a four storey extension providing a new gallery, conservation and learning spaces and office accommodation. It reopened to the public in October 2017 and now accommodates a quarter of a million visitors each year which is a fantastic economic boost for Cornwall.

Another Cornish success was winning Education Project of the Year for the development of Callywith College. A landmark campus for Bodmin and the whole of Cornwall, this state-of-the-art further educational facility includes recreational areas, such as a 3G sports pitch, and which is accessible to the local community.

In Plymouth two projects stood out for their regeneration of previously derelict and deprived areas. The judges were particularly impressed with the Nelson Project which won the Alternative Property Investment Project of the Year. This Plymouth City Council flagship ‘Plan for Homes’ development comprises of 24 high quality homes, 12 dedicated to military veterans, six to people with learning difficulties and six as general need affordable accommodation. The most outstanding element was the rehabilitation programme of military veterans who built the development and have now gained construction skills.

Winner of the Residential Project of the Year (36 Units and Over), was formerly a fortified MOD estate which was closed to the public. Mountwise is now a thriving community of 250 high quality homes with a further 59 apartments, surrounding a cricket pitch and has an on-site café, retail space and several office spaces in the centre of Plymouth.

Bristol benefitted from two exceptional, though very different, developments. Winning Leisure & Hospitality Project of the Year, Aerospace Bristol, the nine-acre site on Filton Airfield, covers over 100 years of aviation history and combines two First World War Grade II listed hangars with a fantastic new building that houses the last flown Concorde. This has become a great visitor attraction to the area.

Meanwhile, the restoration of a Grade II listed terrace and the repurposing of a 1970’s extension overlooking the floating harbour in the Redcliffe Conservation Area in Bristol took home the award for Residential Project of the Year (35 Units and Under). The restored facade is now a significant landmark in Bristol.

National College for Nuclear, Southern Hub, Cannington was awarded Project of the Year (over £5m). This cutting edge nuclear training facility based in Cannington, includes a virtual reality environment, a reactor simulator and training rooms, sports facilities and student accommodation. The new facilities will develop the UK’s nuclear curriculum while creating career opportunities and delivering economic growth in the South.

The John Laurence Special Contribution Award, which spotlights outstanding property and construction professionals in the region, was awarded to Plymouth-based Ian Potts of Architects Design Group for his significant contribution to the property landscape of the South West.

Other winning projects for 2018 include,

Lloyd’s Lounge in Exeter awarded Project of the Year (under £5m), and Higher Mill at Buckfast Abbey, awarded Heritage Project of the Year.

Emma Honey, Head of Real Estate at Michelmores, said: “Once again, the standard of entries we received for this year’s Property Awards was outstanding. From a cutting edge nuclear training facility in Somerset to a residential development that rehabilitated military veterans through a self-build training programme in construction skills, the range and breadth of projects has been fantastic and has demonstrated the excellence of the property and construction sector in our region. My congratulations go to all of our winners and to all those shortlisted.”

The winners were announced at an Awards Dinner on Thursday 7 June at the University of Exeter, hosted by comedian and actor Josh Widdecombe.

The 2018 Michelmores Property Awards winning projects in full:

Project of the Year (under £5m), supported by Grenadier Estates

Lloyd’s Lounge, Exeter – submitted by Morgan Sindall

Project of the Year (over £5m), sponsored by LHC Architecture + Urbanism

National College for Nuclear, Southern Hub, Cannington – submitted by Midas Group

Education Project of the Year, sponsored by TClarke

Callywith College, submitted by Kier Construction

Leisure & Tourism Project of the Year, sponsored by JLL

Aerospace Bristol, submitted by Kier Construction and Hydrock

Heritage Project of the Year, sponsored by Attention Media

Higher Mill, Buckfast Abbey, submitted by Form Design Group

Alternative Property Investment Project of the Year, sponsored by Midas Group

The Nelson Project, Plymouth, submitted by Form Design Group

Residential Project of the Year (36 Units and Over), sponsored by Kier Construction

Mount Wise, Plymouth, submitted by Ward Williams Associates

Residential Project of the Year (35 Units and Under), sponsored by Natwest

Redcliffe Parade, Bristol, submitted by Alec French Architects

Building of the Year, sponsored by Girling Jones

Tate St Ives, submitted by BAM Construct UK

The John Laurence Special Contribution Award, supported by The Michelmores Charity of the Year, The Amber Foundation, who help homeless, unemployed young people move on to positive, independent futures.

Ian Potts, Architects Design Group

Click here to view the shortlist in full