5 min read
Welcome to the latest edition of Corporate Update, our fortnightly bulletin offering a five-minute read of the latest developments which we consider relevant to corporate counsel. Please get in touch with your usual contact if you want to explore any of the topics covered in more detail. If you would like to subscribe to this bulletin as a regular email, please click here.
In this issue:
News
QCA publishes overview on 2024 election manifestos
The Quoted Companies Alliance has published an overview of the 2024 manifestos of the three main political parties, focusing on the areas relevant to UK business and capital markets. The overview highlights the following:
- Labour: The Labour Party Manifesto’s key proposals relate to capping corporation tax, establishing a National Wealth Fund and positioning the UK as a leader in green finance.
- Conservative: The Conservative Party Manifesto features initiatives including improving access to finance for SMEs, building on the policies set out in the Edinburgh Reforms and building on the so-called “Mansion House Compact”, which include proposals to consolidate the defined contribution and defined benefit pensions sectors, as well as encourage greater investment by pension funds in UK companies.
- Liberal Democrats: The Liberal Democratic Manifesto focuses on the NHS, while its economic initiatives are aimed at incentivising productive investment and enhancing employee share ownership.
Case Law
Wright & Ors v Chappell & Ors [2024] EWHC 1417 (Ch)
Court finds directors liable for wrongful trading and misfeasant trading
In this case, the Court found two former directors of companies in the BHS group liable for wrongful trading, ‘misfeasant trading’ and a number of other breaches of duty, which relate to the period leading up to the companies’ entry into administration.
The two former directors have each been ordered to contribute £6.5 million for wrongfully trading over a period of approximately 7 months before the companies entered administration; this is thought to be the largest award since the introduction of the wrongful trading provision in section 214 of the Insolvency Act 1986. Liability for wrongful trading arises if:
- at some time before the commencement of insolvent liquidation or insolvent administration;
- a director knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation or insolvent administration; and
- they did not take every step with a view to minimising the potential loss to the company’s creditors that they ought to have taken.
This is also the first reported case in which directors have been found liable for so-called ‘misfeasant trading’. In broad summary, the judge found that by approving entry into certain transactions, the directors failed to comply with their duty to promote the success of the companies because they did not consider the interests of creditors (at a time when the duty to do so had arisen, given the companies’ financial condition). The judge found that if the directors had complied with their duties, the companies would have entered into administration approximately 10 months earlier than they did. A further judgment is expected to decide the appropriate measure of damages for the misfeasant trading claim (which could be up to £133.5 million), among other issues.
While much of the lengthy judgment is concerned with findings of fact, the judgment does consider the legal bases of these causes of action (and other breach of duty claims) in some considerable detail, including, for example: the standard expected of directors; attempts by directors to limit the scope of their responsibilities; the relevance of directors’ reliance on professional advice; and the interrelationship between the causes of action (it is noteworthy that liability for misfeasant trading was found to have arisen several months before liability for wrongful trading arose). The judge also considered the weight to be attached to the directors’ records, including board minutes prepared in advance of board meetings.
Re UKCloud Ltd (in liquidation) [2024] EWHC 1259 (Ch)
Court considers characterisation of IP addresses as fixed or floating charge
The case concerned a company which provided cloud computing services, involving the use of internet protocol (“IP”) addresses. The question for the Court was whether the effect of a debenture granted by the company to a lending company is to give the lender the benefit of a fixed or floating charge over the IP addresses in question.
The debenture purported to create a fixed charge over “all licences, consents and authorisations (statutory or otherwise) held or required in connection with the company's business or the use of any Secured Asset, and all rights in connection with them". The Court said that the natural and ordinary meaning of the language used here evidenced an intention to create a fixed charge.
However, the Court held that the charge was a floating charge. In coming to this decision, the Court considered the issue of control, finding that despite the debenture providing for control, control was not exercised in relation to the IP addresses. Therefore, the control provisions in the debenture were a “sham” in the sense used in Re Avanti Communications Ltd [2023] EWHC 940 (Ch), and the charge a floating charge.
Publications
Manifesto commitments: Potential impact on UK energy and infrastructure
Slaughter and May has published a briefing which considers the potential impact on UK energy and infrastructure of the manifesto commitments, ahead of the upcoming UK General Election. The briefing considers the manifestos of the Conservative party and the Labour party, exploring what they might mean for energy markets and energy infrastructure; renewables; carbon markets and carbon border taxes; nuclear; and the North Sea transition.