The EU Trade Mark Regulation, (EU) 2015/2424, (‘the Regulation’) came into force on 23 March 2016. These reforms are intended to make the EU trade mark registration system faster, more cost-effective and more predictable for users.

The key changes are set out below:

• OHIM (the Office of Harmonisation of the Internal Market) will now be known as the European Union Intellectual Property Office (‘EUIPO’) and the Community trade mark (which offers a single application to potentially obtain protection across all EU member states) will be renamed the European Union trade mark (‘EUTM’). All trade marks registered or applied for as of 23 March 2016 will be known as EUTMs and EUTM applications respectively.
• Revision of associated fees payable to the EUIPO. The European Commission anticipates that this new fee structure will save businesses up to 37% on marks held longer than 10 years. Fees payable for opposition, invalidity or revocation proceedings and filing an appeal have all likewise been reduced. Up to date fees are now shown on the EUIPO website.
• The EUIPO’s interpretation of descriptions of goods and services has changed. The wording of trade mark class specifications are to be interpreted literally. For CTMs filed before 22 June 2012, the EUIPO are offering owners the opportunity, within 6 months of implementation, to clarify the scope of their specification and declare that their intention at the date of filing was to seek protection in respect of goods or services beyond those covered within the literal meaning of the relevant class heading. These must be identified clearly and precisely. Going forward, trade mark owners should be careful to ensure that all goods and services in respect of which the mark is/will be used are included within the class specifications filed to ensure adequate protection is obtained.
• Unless there is a clear agreement to the contrary, a business’s trade marks will now automatically be included in a transfer of that business.
• Defences to infringement now apply in relation to the use of a trade mark for reference purposes. The ‘own name’ defence is now only available to individuals and not businesses – the latter must therefore carry out appropriate searches prior to using their business name. Claimants in infringement proceedings can now require the owners of EUTMs to show prior use (or reasons for non-use) during the 5 year period prior to the commencement of proceedings.
• The rights of licensees across the EU have been harmonised. Licensees can only bring trade mark infringement proceedings if the trade mark owner consents although an exclusive licensee can bring an action if the owner fails to do so within an appropriate period after receiving notice from the licensee.
• The absolute ground for refusal/invalidity in relation to the nature of goods, technical result or substantial value has been extended to include “other characteristics” beyond shape. Additional grounds have also been included as absolute grounds for refusal, for example designations of origin.
• Use of a registered trade mark as a trading or company name is now a specific infringement.
• The transit or storage of goods through the EU, although not intended for the EU market, could now be an infringement of a EUTM if the goods or their packaging bear marks identical to or undistinguishable from the EUTM, registered for the same goods. However, if the trade mark owner is not entitled to prevent sale of the goods in the country where they are to be ultimately sold, the right to pursue the third party for trade mark infringement on this ground is likely to be lost.
• Trade mark owners can bring a claim of infringement to prohibit preparatory acts in relation to packaging and labelling where it is likely that the application of a trade mark will amount to an infringement of the trade mark owner’s rights.

Clearly the success in practice of the amendments implemented by the Regulation will be determined in time. However, the introduction of a more user-friendly, effective and cost-sensitive system is no doubt to be welcomed by both new and existing EUTM owners across Europe.

For more information please contact Charlotte Bolton, Solicitor in the Intellectual Property team at charlotte.bolton@michelmores.com

The Court of Appeal has given a nationally significant judgment on the correct interpretation of paragraph 49 of the National Planning Policy Framework (NPPF) in the case of Suffolk Coastal District Council –v- Hopkins Homes Limited and The Secretary of State for Communities and Local Government [2016] EWCA Civ 168.

As a reminder paragraph 49 states:

“Housing Applications should be considered in the context of the presumption in favour of sustainable development. Relevant policies for the supply of housing should not be considered up-to-date if the local planning authority cannot demonstrate a five-year supply of deliverable housing sites.”

The correct interpretation of paragraph 49, and in particular what constitutes a “relevant policy” is a matter that has been put before the Court a number of times with mixed results. In granting permission to appeal the Judge at the first instance recognised that this was an area that required clarification from the Court in order to assist planning authorities and other interested parties in how the framework should be applied.

The Court directed itself that the true meaning of paragraph 49 should be “Faithful to the words of the policy, read in their full context and not in isolation from it”. On that basis, the meaning of “Relevant Policies” could be given three interpretations:

• narrow – to mean only policies that directly and positively concern housing provision;
• intermediate – meaning that some restrictive policies would qualify as relevant policies but others would not;
• wide – which would include both policies providing positively for the supply of new housing and other counterpart policies whose effect is to restrain the supply by restricting development in certain parts of the authority’s area.

After deliberation the Court settled upon applying the wider interpretation to the meaning of “relevant policies”.  This means that all relevant policies regarding the supply of housing contained in a planning authority’s policies will also be deemed to be out of date unless the local authority is able to demonstrate a five year supply of deliverable housing sites.

Examples of policies which could be determined to be out of date include policies for greenbelt land, policies for the general protection of countryside, policies for conserving landscape of Areas of Outstanding Natural Beauty and National Parks and policies for the conservation of wildlife or cultural heritage.

This planning decision is significant. It is likely to make a local planning authority’s task in protecting land more onerous unless it maintains a five year housing supply plan although it must be stressed this will always be tempered with the requirement for development to be sustainable.

For more information please contact Lucy Smallwood on lucy.smallwood@michelmores.com or 01392 687555

This article was first published in Private Client Adviser on 26 February 2016 and is reproduced by kind permission.

A civil partnership for heterosexual couples will not undermine the institution of marriage. It will stop people who do not believe in it from entering into one and developing a tick-box marriage.

A recent High Court decision has confirmed that heterosexual couples cannot enter into a civil partnership, unlike same-sex couples who have the option to either enter into a civil marriage or a civil partnership.

Rebecca Steinfield and Charles Kiedan’s argument, that this disparity between same-sex and opposite-sex couples was discriminatory, was rejected by the High Court. The court found that heterosexual couples were ‘not disadvantaged’ by the legal position as they were able to marry, affording them the same legal rights as a civil partnership.

Notwithstanding this decision and reasoning behind it, it is interesting to examine why it is such an issue for either side of the debate. Why is it so important for heterosexual couples to be able to form civil partnerships and equally, why has the government been so reluctant to make them available in this way?

The argument ‘for’ legislative change in this area is seemingly underpinned by the fact that many people do not want to associate themselves with the sexist or religious overtones associated with being married. Conversely, the main argument ‘against’ to date has been that it will in some way undermine the sacred institution of marriage, by creating something that could be seen to entail a lesser degree of commitment in comparison.

Leaving aside any exploration of whether civil partnerships are viewed as being or are actually somehow more flimsy and fragile than marriage, this supposed infallibility of marriage’s strength is fairly questionable. With an estimated 42 per cent of marriages ending in divorce, can it really be argued that it has an inherent stability we must preserve?

The law should reflect our society

Ultimately, a degree of relationship breakdown can be seen as an inevitable occurrence, no matter how much we wish it wasn’t. Making sure people have legal protection for when it does happen is therefore the crucial issue. If making civil partnerships an option available to heterosexual couples would encourage some of those people to afford themselves that protection, then it is a legislative change that should be adopted.

Furthermore, and as I have said before, I believe that people should be encouraged to take their commitment to a life together seriously, and arguably part of that is being able to give people the flexibility to choose how their commitment towards one another looks.

This surely will encourage people to consider the choice they are making, as opposed to seeing the progression of a relationship as a tick-box exercise; something I strongly feel is prevalent and intrinsically engrained within our society.

Undoubtedly, reform seems a perfect solution to those couples (gay or straight) who for ideological reasons or otherwise, wish to have their relationship legally recognised, but do not wish to be married.

As opposed to somehow undermining the institution of marriage, such change would arguably provide legal recognition of the fact that marriage is no longer viewed in the same way, society has moved on and as such, marriage has in a way undermined itself through the perpetuation of increasingly outdated notions many people simply do not buy into.

Civil partnerships do reflect and embody the notion of equality much more than marriage does. As such, legislative change would recognise a reality of modern day and specifically modern family life – something the law often struggles to do.

For more information please contact Pippa Allsop, Solicitor in the Family team on pippa.allsop@michelmores.com or 01392 687747.

The Government’s high profile Starter Homes programme is under scrutiny, and there are aspects which have been called into question.

The initiative

The Starter Homes initiative was launched in early 2015. Initially it took the form of an exception site planning policy that house builders should be able to develop under-used or unviable brownfield land as Starter Homes, provided the homes were offered at a 20% discount to first time buyers under the age of 40.

The introduction in the Housing and Planning Bill 2015-2016 of a general duty on all local planning authorities (LPAs) in England to promote the supply of Starter Homes means that the initiative is now far more significant.  It has switched from being a way of re-using redundant or problematic industrial and commercial sites, to becoming a product that will make its way onto every significant housing site in the country.

This has been followed by the Government’s key proposal, currently under consultation, to expand the National Planning Policy Framework (NPPF) definition of affordable housing, to encompass more options for renters and buyers, including products such as discount market sales or “innovative rent to buy housing”. Some of the new products may not be restricted by an “in perpetuity” or recycled subsidy requirement. The effect of these changes to the NPPF would be to bring Starter Homes within the planning definition of affordable housing.

Elements under scrutiny

A controversial element of the current proposals is that Starter Homes, which are required to be available at a 20% discount to first time buyers under 40, are proposed to be capable of being sold on at full market rates after five years. The Local Government Association (LGA), which represents local councils, is calling for the discounts to benefit future owners, rather than handing one group of current buyers a windfall at the expense of future generations.

Another key concern is that Starter Homes may be out of reach and unaffordable for a large proportion of those who are classified as needing affordable housing. The discounted prices will be capped at £450,000 in London and £250,000 elsewhere. In this regard analysis by Savills for the LGA indicates that discounted Starter Homes prices will be out of reach for all people in need of affordable housing in 220 council areas (67 per cent).

The 20% discount for new buyers would be funded by exempting developers from paying section 106 contributions towards affordable rented housing and Community Infrastructure Levy contributions. In its own analysis, the Government has suggested that should 100,000 Starter Homes be built through the planning system, between 56,000 and 71,000 social and affordable rented homes would not be built.

The LGA is urging the House of Lords to back amendments to the forthcoming Housing and Planning Bill allowing councils to have a mix of affordable homes based on local need, given that millions of people remain on the lists for social housing.

Going forward and impact on acquisition arrangements

The consultation process is ongoing and the scale and impact of these proposed changes is therefore under review. For sure, these changes would introduce a further unknown into the world of development risk, and unknowns are often addressed in price adjustment provisions. We are used to seeing price adjustments in land acquisition contracts linked to the overall level of affordable housing. Going forward developers and landowners may have to consider price arrangements which are potentially linked to the relative proportions of Starter Homes and affordable rented housing.

For more information please contact Lucy Smallwood on lucy.smallwood@michelmores.com or 01392 687555

Michelmores and The Education and Employers Taskforce have joined together to celebrate International Women’s Day by hosting ‘What’s my Line’ assemblies at Exeter’s Montgomery Primary School and Holy Trinity CE Primary School, London.

The events, which took place on 8 March 2016, saw pupils ask a series of ‘yes’ or ‘no’ questions to a panel of four women to try and guess their occupations.

Job roles included a Firearms & Explosives Licensing Manager with the Police, a Solicitor, a Picture Editor, a Lecturer in Clinical Linguistics and a Director of Communications.

The Education and Employers programme ‘Inspiring the Future’ aims to provide young people with the inspiration, motivation, knowledge, skills and opportunities they need to help them achieve their potential.  The charity also works to connect state schools and colleges to employers and people from the world of work through its secure matchmaking website.

Volunteers − from apprentices to CEOs, are encouraged to sign-up and pledge just one hour a year to attend an event or workshop at a state school or college in their local area.

Alice Thompson, Deputy Head at Montgomery Primary School said:

“The assembly was a great success – the children thoroughly enjoyed the experience and gained a huge amount in terms of broadening their understanding of how the work they do in school now can help them in the future, as well as combating gender stereotyping in job roles.”

“It was a fantastic and inspiring way to mark International Women’s Day.”

The event was coordinated by Michelmores’ Diversity & Inclusivity Committee alongside The Education and Employers Taskforce, with the aim of raising awareness of gender bias in the workplace.

To sign up to be a volunteer at a school or college near you please visit the Inspiring the Future website.

Background

Civil partnerships, having been part of domestic life for some time, are now a familiar concept in our society. Indeed, within the last year, marriage between same sex partners has also now become legally possible.

Nevertheless, there are many civil partners who, for a variety of reasons, do not wish to convert their civil partnerships into marriages − or prefer to enter a civil partnership rather than a marriage. Sadly, civil partnerships can break down, just as they can with marriages.

In this article we will look in more detail at the legal status of civil partnerships and the consequences for the partners if there is a breakdown in the relationship.

Status of civil partnerships

A civil partnership is a formal legal recognition of a relationship between partners of the same sex. Once a civil partnership has been legally formed, each of the parties is treated in law as having rights, and owes to his or her partner certain responsibilities and obligations. These rights and obligations apply both whilst the civil partnership exists and to the arrangements which have to be made if it breaks down. The legal position of the parties is very similar to those, either of the same or opposite sex, who are married.

Formation of civil partnerships

A civil partnership comes into being once the formalities set out in the Civil Partnership Act 2004 have been complied with. Those formalities, both prior to the ceremony and during it, are very similar to those which apply to marriage. The ceremony is conducted by the Registrar (of Marriages and Civil Partnerships) and can only take place in premises which are licensed for that purpose.

Children

It is increasingly common for civil partners to have children. The children of civil partners may be adopted or, in the case of female civil partners, have been born to one of the partners. It is  also possible for civil partners to have a child by a surrogate mother.

Once civil partners have legal responsibility for children, then they have parental and financial obligations towards those children, which continue even if the civil partnership ends. Further, depending on what arrangements are felt to be in the best interests of the children, they will have the right to see the parent with whom they are not living and, usually, to spend time with that other parent.

Civil partners, as with spouses from a failed marriage, are encouraged to try to make appropriate arrangements for their children without the intervention of the courts. If a case does have to go to court, there is no discrimination against one or other of the partners on account of gender. The arrangements which will be made are those which best suit the interests of the children, irrespective of the sex of either parent.

Finances

Civil partners are in the same legal position as married couples in most areas  including:

• pensions
• social security
• wills and inheritance
• property rights
• life insurance
• inheritance tax

Breakdown of civil partnerships

If a civil partnership breaks down, an application can be made to the court for the partnership to be brought to a legal end. This is a formal process rather like a divorce at the end of a marriage. The ground on which the partnership is said to have broken down must be stated.

If the circumstances are appropriate, one party can claim financial support from the other or a share of any assets. Similarly, support can be claimed for a child or children.

As with married couples, it is possible for civil partners to enter into an agreement regarding, for example, what assets were brought into the partnership and how they accept things should be settled if the partnership ends. Whether that agreement would be upheld by the court in the event of a dispute depends largely on whether the way in which the agreement was made and its effects are regarded by the court as being fair to both parties.

The legal process for ending a civil partnership

If your civil partnership has irretrievably broken down, it is perfectly possible for parties to deal with the legal formalities of dissolving the partnership themselves. The real issue is whether all the necessary details will be considered and resolved. If an important factor, for example, an appropriate sharing of possessions, finances, including pensions is not finalised, then there is a risk that later, possibly even years later, the case may be opened again. It is, of course, far preferable that everything is completed so that both partners know where they stand.

If you are contemplating entering a civil partnership, or your civil partnership has or looks as though it may come to an end, there are legal considerations that you ought to take into account. We are experienced in dealing with these issues. Please contact us and one of our experts in this area will be pleased to help.

For more information or some preliminary, confidential advice, please contact Pippa Allsop from our Family Team by telephone +44 (0)1392 687747 or email pippa.allsop@michelmores.com.  

Further to our earlier article regarding Stamp Duty Land Tax (SDLT), HMRC have put out a consultation paper on the proposed higher rates of SDLT in relation to additional residential properties. The consultation period ended on 1 February 2016 and ‘the lines are now closed’.

We now have to wait until Budget day on 16 March 2016, to see the first draft of the legislation – although it is possible that clues will appear beforehand from north of the border, if the parallel Scottish provisions are released a week earlier.

As the consultation document shares more of the HMRC thinking, and indeed examples from them on as to how the legislations work, it is clear that there would be both intended and unintended consequences. If HMRC take on board the views of various groups within the industry by instructing the Parliamentary Counsel appropriately a number of unwanted results can be avoided.

It is relatively easy to say that if someone purchases a ‘buy to let’ property after 1 April 2016 that they will have to pay an extra 3% of the total price in SDLT; however, a number of different permutations are expected to arise depending on who is buying the property and whether the property in question is their main residence.

Joint Purchasers

The current proposal includes a provision that if a property is purchased jointly, then if any of the joint purchasers are buying an additional residential property and not merely replacing their main residence, the 3% surcharge applies to the entire transaction.  To be fair to HMRC, they themselves have questioned the fairness of such a measure.  Those in the industry have pointed to one of the few SDLT cases we have had so far where a charity purchased jointly with a non-charity was allowed to claim relief from SDLT to the extent it was purchased on the property, even where the non-charity was not.  It seems that it would be entirely possible to have a parallel system for the 3% surcharge.

Main Residence

An important element of the new regime concerns main residences.  The surcharge applies if at the end of a transaction a person owns more than one property.  At the moment the proposal is that if a new main residence is purchased without the old one being sold then 3% charge will apply, although if the old residence is disposed of within an 18 month period, a reclaim can be made.

Further, if a person owns a main residence and a buy to let property, if they sell the main residence and purchase a new main residence, (even though this would leave them the two properties after 1 April 2016), as this was merely a replacement of an old main residence, again 3% surcharge will not apply.

What is fine in theory may not be always helpful in practice.  If an individual (B) who has no intention of letting any property contracts to sell his main residence and purchase a new one, but his buyer (A) fails to complete, if he completes on his new purchase he will have two properties; while he can sell to someone else within 18 months and make a reclaim, he will initially have to find the 3% extra SDLT.

The obvious way to protect against this, however, is to insist that on exchange the deposit paid is large enough to fund the 3% surcharge which would arise if A pulls out.  Therefore the threat/fear of the 3% surcharge is on a very practical level likely to be enough to raise the deposits needed to enter a transaction – which is likely to be bad news for first time buyers or those with little equity and the opposite of what the Government intended.

There could be a relatively easy fix here, where if contracts had been exchanged and then one party pulls out, the 3% surcharge should not apply until the old main residence was not sold within the 18 month period.  On this basis the B would not have to find the 3% or risk losing his deposit.

The relief from the surcharge for those ‘replacing a main residence’ means just that.  If the old main residence is kept to rent out, and a new main residence is purchased, the old main residence has not been replaced.  Therefore the 3% surcharge must be paid in relation to the new residence.  It is likely that this will come as a surprise to some, who are not looking at the purchase in the round, but rather the fact that they are buying a new main residence.

Multiple Purchases

Where two or more properties are being purchased at the same time, it is possible to claim Multiple Dwellings Relief (MDR).  The 3% surcharge will still apply to the prices calculated pursuant to the MDR rules.

By a quirk of the legislation, if six or more properties are being purchased at the same time, the purchaser has the option to treat these as commercial rather than residential such that the rate for consideration of £500,000 or more will be 4% and the 3% on residential property will not apply.  The calculation between choosing MDR and treating the properties as commercial is often finely balanced, but adding in the surcharge will tilt the balance towards claiming the commercial rate of 4%.

Large Scale Investments

The Government’s current dilemmas in relation to the housing market are highlighted by their thoughts on the treatment of large scale investors.  It wants the effects of the 3% surcharge to apply to most situations where rental properties are purchased as this can impact other people’s ability to get onto the housing ladder as owner occupier.

At the same time, larger scale investments can actually facilitate development and have a positive effect so there needs to be exemption from the higher rates of SDLT given in a very targeted way.  The Government originally thought that an exemption should be given to funds/corporates which already have an existing residential portfolio of at least 15 properties at the time of the transaction.

Its thoughts have potentially evolved in two directions, first to include individuals as well as corporates and funds.  Secondly to consider whether no regard should be had to the existing portfolio but rather if there were bulk purchase of say at least 15 residential properties as this is likely to provide a significant source of finance and add uncertainty to any particular project.  Owner/occupiers cannot usually borrow for an off-plan purchase more than six months in advance of practical completion since the mortgage offer will not last more than this.  Therefore, the initial finance which small developers need is therefore more likely to come from buy to let investors.

The issue remains as to whether any fund would purchase more than 15 properties in any particular development rather than spreading purchases across a number of developments; if it did, it is likely that if the choice is still available at the time, the fund/individual will claim the commercial rate which is likely to be 4%.

HMRC have informally confirmed that if a company purchases a property other than for rental it will continue to pay the existing rate of 15%, rather than the surcharge applying to this, giving a total of 18%.

In other news, the effects of the increases in SDLT generally are starting to be felt. Certainly in London the statistics reported seem to show that as high value transactions have decreased, the total tax take has decreased despite the rise in rates. George Osborne is not having the last “laffer” now!

The government has said that tackling the gender pay gap is an absolute priority, and last year a consultation, Closing the Gender Pay Gap, was launched. The government has now published the draft The Equality Act (Gender Pay Gap Information) Regulations 2016, which set out the framework for the new gender pay reporting requirements.

Key dates: The new rules are expected to come into force in October 2016, with the first reports to be published in April 2017.

Which employers are affected? Those with over 250 employees

What to publish? Relevant employers must publish:

• Overall mean and median pay gaps gleaned from the whole workforce.
• The difference between the mean bonus payments paid to men and women (and the % of male and female employees that received a bonus).
• How many men and women appear in each quartile of pay in the workforce.

Where to publish? The full pay report information must be published on the employer’s website in April every year, and left there for at least three years. The employer must also upload the information to a government-sponsored website.

Penalties? The government intends for employers who do not comply to be ‘named and shamed’. It will review whether civil or criminal penalties for non-compliance should be introduced in due course.

The draft Regulations are open for consultation until 11 March 2016.

The IT educational initiative has already been implemented into schools with key stage 1 children learning about coding and algorithms. On 10 February 2016 ministers announced a new educational initiative to promote “vital” IP education to GCSE / key stage 4 students.

The UK Intellectual Property Office and Baroness Neville-Rolfe DBE CMG have produced lesson plans for teachers labeled ‘Think Kit‘ which are designed to enable both students and teachers to understand what Intellectual Property (IP) is, how to get the most from your ideas and how innovation plays a vital part in our economy.

The UK Intellectual Property Office also has other resources from key stage 1 upwards and it is exciting to see that children will be learning about innovation from an early age.

As IP has and is being recognised by government ministers as vital to our economy, it seems to makes sense to introduce this concept at school level.

Baroness Neville-Rolfe, Minister for Intellectual Property said:

“It’s important for tech-savvy young people to learn about the principles of intellectual property. The UK creative sector is worth over £76 billion, which makes education even more important.

Providing access to relevant, curriculum linked education resources is a huge step towards creating an IP literate generation to help us secure the UK’s continued global competitiveness.”

For more information on Intellectual Property generally please contact Emily Timmins, Partner.

There are going to be a significant number of changes to company law which will affect all companies registered at Companies House in the UK. The Small Business, Enterprise and Employment Act 2015 (the Act) brought about a number of fundamental changes to UK company law and one of the confirmed changes, which is perhaps the most controversial, is the introduction of a central public registry of those individuals who hold significant control of UK companies – referred to in the Act as “People with Significant Control” or “PSC“.

Who constitutes a Person with Significant Control (PSC)?

A PSC is anyone in the company who meets one or more of the conditions listed in the Act.  This is a person who:

• owns more than 25% of the company’s shares
• owns more than 25% of the company’s voting rights
• has the right to appoint or remove a majority of the board of directors
• has significant influence or control over the company
• has significant influence or control over a trust or firm (in the case of shares held by trustees or a trust or by members of a partnership)

Companies and other entities may also be considered to be PSCs in certain circumstances.

What has not yet been made completely clear is what circumstances or behaviour will constitute significant influence or control.  Draft guidance from the Secretary of State says that, for example, a person has “control” of a company or of the activities of a trust or firm if they have the power to direct its policies and activities and a person exercises “significant influence” if he can ensure that the company or trust adopts those policies or activities which are desired by the holder of the significant influence.  The “control” or “significant influence” need not be directed towards the financial and operating policies of the company and does not have to be exercised by a person with a view to gaining economic benefits from the policies or activities of the company.

There will no doubt be more commentary available on the question of what circumstances or behaviour will constitute significant influence or control as the practice of holding PSC registers develops.

What information must the PSC Register Contain?

There is a duty on companies to investigate, update and obtain information in relation to their PSC Registers. There is also a duty on potential PSC’s to provide information to the company.

Once identified, certain information must be recorded, including:

• in the case of an individual, his name, service address, country or state of usual residence, nationality, date of birth and usual residential address.  Usual residential addresses are protected and won’t be placed on any public register;
• the date on which a person became a registrable person or registrable relevant legal entity and the nature of his or its control.

The government has stated that it intends to issue regulations that require companies to include the following on the PSC Register:

• which one or more of the specified conditions for being a PSC (as set out above) the PSC meets; and
• the level of interest (such as between 25-50%, more than 50% to 75% or 75% or more) that the PSC holds.

This is the approach taken in the draft PSC regulations.

The consequences of failing to comply

A company can impose sanctions if its PSCs do not comply with their disclosure obligations (e.g. loss of voting rights and transfer restrictions). Criminal penalties may also apply to those that breach the rules (e.g the company, its directors, company secretaryand PSCs), including in some circumstances imprisonment.

What action should you take?

The company must obtain and update the necessary information about PSCs both on implementation of the new rules and on an ongoing basis.  This will mean that companies will need to be constantly vigilant for signs of changes in control among their shareholders and take prompt investigatory steps as necessary.  You need to consider and address the following:

• whether your PSC register should be held at your registered office or at Companies House;
• the identity of your current PSCs;
• what checks you should have in place to ensure all PSCs are identified, recorded and contactable, now and in the future.

There is no doubt that these new requirements are onerous and will substantially increase the burden and costs of compliance on UK companies.  However, it is important to keep registers up to date; not only to avoid sanctions, but also from a practical perspective. A prospective buyer of your company or a security provider will insist upon inspecting the register and any inaccuracies or omissions are likely to cause unnecessary delay to the transaction in question.  Ensuring that you have compliant registers now should avoid an increased administrative burden later down the line at what may be a critical time for the business.

Other changes

There are other company compliance changes introduced by the Act and all companies will be affected in some way, as the measures change legal requirements on companies, including what they file with Companies House.   The changes were being phased over a period of 12 months and some of the changes have already been implemented – please see attached Summary of Key Changes for more details.

If you require further guidance on your obligations in relation to the changes in company filing requirements, the PSC Register or wider business administration, please contact any member of the Company Secretarial team of Michelmores or email cosec@michelmores.com.

Since publishing this article the Department for Education has updated their guidance to explain that this grant (which is available to Primary schools creating a new academy chain to help support its development) is now available until 30 April 2016.  

Primary schools creating a new academy chain, known as a Multi-Academy Trust (MAT), will be able to claim a grant in order to help support its development. The Primary Academy Chain Development Grant has been agreed by the Secretary of State in order to provide financial support to more primary schools to build their partnership and encourage the benefits of being part of an academy chain.

The grant is available until 31 March 2016 and is for £75,000, plus up to £5,000 per additional primary school, up to a maximum of £100,000. Only new MATs can claim this grant if they fit either of the eligibility criteria:

• 3 schools creating a new MAT, where the majority are primary schools
• Stand-alone open academies and schools converting into academies can claim if they are setting up a minimum 3 school MAT with at least 2 primaries applying to convert

If groups of two or more primary schools are joining an existing MAT at the same time, the MAT can apply for a grant of £20,000 per primary school (up to a maximum of £80,000).

A Small School Supplement is available for primary schools with less than 210 pupils who are joining a MAT to help meet the expenses associated with the conversion process. Those with 100 pupils or less can apply for £5,000, whilst those with between 100-210 pupils can apply for £2,000.

The grant can be used flexibly, providing that it is used for the establishment and advancement of the MAT as a whole. Within a year of receiving the grant, a case study must be provided for the Department for Education website, and there is a requirement for the MAT to use their experience to help others either through academy sponsorship, for example applying for teaching school status or providing mentoring for another group of primary schools interested in conversion.

Encryption and cybersecurity has been in the news a lot recently, particularly following high profile data breaches from Talk Talk, the NHS and Sony, as well as David Cameron’s statement last year that terrorists should have no safe space to communicate online.

The law has a strange relationship with encryption. UK regulators criticise companies where they have suffered a data breach and failed to encrypt their customer data, but this approach doesn’t exactly coalesce with the political rhetoric around government access to communications (encryption being a significant barrier to this access) or the current plans contained in the draft Investigatory Powers Bill.

The proliferation of encryption

Encryption has never been something used only by organisations to protect their customer data and those looking to cause trouble. It is used, and protects us, almost every time we make a purchase over the internet or check our bank balance online. Some websites, such as Facebook, now use encrypted browsing by default. It is also now more common than ever for individuals to encrypt their own internet traffic, hiding their activities from their internet service provider and potentially law enforcement agencies, via Virtual Private Networks and other services (all of which can be purchased using anonymous, digital currencies).

Despite this, perhaps encryption doesn’t go far enough.

The recent surge in the “internet of things” (think wearable technology and so-called smart homes), drones and self-driving cars also present a challenge for encryption. Consumer drone manufacturers have been criticised for failing to implement adequate encryption methods, enabling the drone to be controlled by unknown individuals and potentially causing harm to anyone in the immediate area. Worryingly, similar criticism has also been levied at military drones. This is not the end of the story, however, as recent developments in self-driving cars also presents a problem – what if the controls were hackable? Reports are already surfacing that the systems used by self-driving cars to navigate can be confused by a properly configured £20 micro-computer, and encryption will no doubt form part of the toolkit used to secure the systems in emerging technologies such as self-driving cars and delivery drones.

The UK regulator’s position

The Information Commissioner’s Office, the body responsible for the enforcement of data protection legislation in the UK, takes a dim view when it transpires that organisations have lost unencrypted data. Where hackers, or opportunists who steal a civil servant’s laptop on the train, for example, acquire data which is encrypted, the information received is unintelligible unless the decryption “key” can be worked out or otherwise obtained. There appear to be no cases in which the theft of encrypted data ultimately resulted in the corresponding decrypted data being made available online (if you are aware of any examples, please comment below or contact me).

Such is the power of encryption that the ICO advises data controllers that when hackers gain access to encrypted data, they do not need to tell their customers that a breach has taken place. Encryption is also something which can be implemented at relatively low cost and, given the protection it offers, it is understandable that the failure to encrypt customer data is seen as an aggravating factor by the ICO when determining any appropriate sanction on the organisation which suffered the data breach.

A change in the market

For encryption to be useful, individuals and organisations ultimately have to be able to decrypt, or make use of, the encrypted information. Generally speaking, “keys” are used to decrypt information, and much of the recent controversy focusses on a shift in the technology market around who holds these all-important keys.

With this in mind, one area of particular interest is the recent shift in the role encryption plays in online messaging. Previously, sending an online message (for example via WhatsApp) did not involve any kind of encryption, or if it did, the message operator would hold the keys to the encrypted messages. This potentially enabled the messaging operator, government security agencies and others connected to the same wireless network as you to intercept and eavesdrop on your messages.

From late 2014, however, WhatsApp implemented “end-to-end” encryption. This means that all messages sent over WhatsApp are now encrypted, and crucially, only the sender and receiver hold the necessary keys to decrypt the message. The result is the transmission of an unintelligible mess over the internet until it reaches the App on your smartphone, at which point its conversion into a message (possibly also with an accompanying emoji, if you’re lucky) appears on your screen.

WhatsApp is not the only messaging provider implementing this kind of encryption and this approach can, in my view, now be described as a growing trend across the consumer technology market.

Why does this matter?

The shift towards end-to-end encryption matters because it makes it significantly more difficult for messages to be intercepted by anyone, including the organisation providing the messaging service (unless that organisation manages the keys centrally) and government security agencies. Many messaging service providers no longer have the keys to decrypt individuals’ messages, and essentially now provide a platform for the transmission of secure, encrypted data. It seems then, that this shift in the technology market has precipitated vague government statements to the effect that encryption should be banned (which statements were subsequently retracted, and we are now left with the less clear claim that there should be ‘no safe place’ for terrorists).

This discussion is all well and good – but more clarity is needed around exactly what technical measures we can expect to be implemented in order to achieve this ‘no safe place’ for terrorists. The government seems particularly aggrieved at the recent trend towards end-to-end encryption in which only the users hold the keys, but this represents a natural evolution in data security. If it is actually the case that the correct balance in the politician’s views is for communications operators to ‘hold the keys’, and in doing so erode personal privacy to an extent, they should be bold enough to say so.