Interpretation of “goodwill” leads to a reduction to the purchase price of company by USD5.7 million

Interpretation of “goodwill” leads to a reduction to the purchase price of company by USD5.7 million

What is the meaning of “goodwill” in the context of a share purchase?  Ask an accountant and you may be told that it relates to the difference in value between a company’s assets and liabilities and the price paid for that company.  Whereas a lawyer may explain that “goodwill” means the good name, reputation and business connections of a company.

What is important, however, as illustrated in the Court of Appeal case (upholding the decision in the High Court) Primus International Holding Company v Triumph Controls – UK Limited [2020] EWCA Civ 1228, is to ensure that terms are clearly defined.

In Primus the buyer, Triumph, had brought a claim against the seller, Primus, for breach of a warranty.  Primus contended that the warranty claim was subject to a limitation of liability clause which excluded loss where the claim related to “lost goodwill”.  “Goodwill” was not defined in the limitation clause, and when Triumph claimed breach of contract, Primus defended that claim (among other grounds) based on its claimed interpretation of “goodwill”.

The judge found in favour of Triumph and determined that the purchase price be reduced by USD5.7 million.

The case is a reminder of the significance of clearly defining terms when drafting or advising on Share Purchase Agreements and ensuring that clauses purporting to limit liability are precise.

We regularly assist clients in drafting legal documents and ensure that the terms used are clear and precise to avoid issues around interpretation from arising.

Should you have any questions about selling or buying a company, please contact Harry Dronfield (harry.dronfield@colmancoyle.com / +44 (0)20 7704 3421).

Simon Tennant

Harry Dronfield

Senior Associate

Overseas companies – new Companies House filing requirements

Overseas companies – new Companies House filing requirements

Companies House has brought in new filing requirements for certain overseas companies which coincide with the end of the transition period to the UK leaving the European Union on 31 December 2020.

Overseas companies are entities which are based outside of the UK but have registered as an “overseas company” at Companies House having opened an “establishment” in the UK.

The new rules apply to overseas companies which are based in the European Economic Area (EEA) and brings the obligations on those companies into line with overseas companies based outside the EEA.

Starting at the end of 2020, EEA based overseas companies will need to file additional information about the company at Companies House.  That includes:

  • Confirmation of the law under which the company is registered.
  • The address of the company’s registered office or principal place of business.
  • The company’s purpose or “objects”.
  • Details of the issued share capital.
  • Where companies are obliged to prepare audited accountants, the accounting period.

Overseas companies will also need to update their websites and letterheaded paper with certain additional information regarding the company.

Overseas companies have three months from 31 December 2020 to file the relevant information with Companies House although the forms and procedures are available for use now.

For help with filing documentation in respect of overseas companies at Companies House do not hesitate to contact Harry Dronfield (+44(0)20 7704 3421 / harry.dronfield@colmancoyle.com).

 

Simon Tennant

Harry Dronfield

Senior Associate

We are due to hold our AGM; how can we hold it and comply with social distancing?

We are due to hold our AGM; how can we hold it and comply with social distancing?

On 26th June 2020 the Corporate Insolvency and Governance Act 2020 (the “Act”) came into law.  Part of the Act is designed to assist companies in complying with their legal requirements such as holding AGMs and other general meetings while being mindful of current guidance in respect of social distancing.

The Act seeks to enable companies whose articles of association require the company to hold in person general meetings or restrict the manner in which members can attend or vote at general meetings, to hold general meetings.

The Act provides that AGMs and other general meetings held to and including 30th September 2020 may, notwithstanding anything to the contrary in that company’s articles of association, be held by electronic or any other means.  Members may attend and vote by electronic or other means.  In practical terms, this means that for the duration of the relevant sections within the Act, companies can arrange meetings in a way that allows members to validly attend and vote remotely utilising a variety of technologies.

Curiously, the period during which a company may hold a general meeting remotely via electronic means starts, according to the Act, from 26th March 2020 which is before the Act came into law.  That would suggest that a general meeting held by a company between 26th March and 26th June 2020 which was held electronically in contravention of its articles would be valid.

Although the measures are currently in place until 30th September 2020, this period may be extended by the Secretary of State.

If you have any questions about calling and holding a general meeting in the current circumstances or would like to discuss any matters in relation to it, please contact Harry Dronfield (harry.dronfield@colmancoyle.com) and Raluca Sterian (raluca.sterian@colmancoyle.com).

Harry

Harry Dronfield

Senior Associate
Raluca

Raluca Sterian

Trainee Solicitor
Coping with the new challenges

Coping with the new challenges

Our clients have been repeatedly asking us to assist them with some of the issues their businesses are now facing as a result of the global coronavirus pandemic.

These are some of the matters we have been recently advising on our company clients and business owners to help them with the new challenges posed by COVID-19:

  • Contractual liability on commercial contracts and leases
  • Termination of commercial contracts, leases and other contractual agreements
  • Advising restaurants, pubs, bars and coffee shops following the lockdown imposed by the Government
  • Providing  practical tips on how to deal with employees issues and advising on options to consider, including: lay-offs, redundancies, short-term working and the UK Government bail-out measures to assist with retaining staff
  • Re-negotiation of commercial contracts and force majeure clauses
  • Advising foreign businesses who operate in the UK on the UK Government bail-out plan, fiscal and financial assistance
  • Compliance with corporate governance
  • Providing practical alternative options to withdrawing from transactions
  • Corporate restructuring and other potential insolvency issues to help distressed businesses

If we can help you with any issues, to reduce the impact of COVID-19 on your business, please contact oksana.howard@colmancoyle.com or harry.dronfield@colmancoyle.com from our Corporate and Commercial Department for an initial chat.

Colman Coyle successfully resolve an alleged property fraud and discharge a freezing injunction

Colman Coyle successfully resolve an alleged property fraud and discharge a freezing injunction

A freezing injunction is an interim order that prohibits a party from disposing of, or dealing with, assets. Such an order can be made before a claim is issued, provided that a cause of action is established. Assets that can be frozen include bank accounts, shares, motor vehicles and land.

Increasingly, the Courts are being asked to make such orders in cases involving alleged frauds relating to a property purchase.

A cross service team at Colman Coyle recently acted on a successful settlement of a substantial multi-party claim involving an intricate factual matrix, complex allegations of fraud and a broad freezing injunction.

Navneet Jhawar, Senior Associate in our Property Disputes Team and Harry Dronfield, Senior Associate in our Corporate Team, advised on and negotiated a settlement which involved the lifting of a freezing injunction as well as a transfer of the shares in a company and associated restructuring of the company’s lending.

The successful settlement demonstrates the value of our specialist services in a number of areas, including property related disputes and corporate restructuring, and the benefits of those specialisms coming together.

If you require any advice regarding corporate restructuring or property related disputes, please contact Harry Dronfield or Navneet Jhawar respectively on +44 (0)20 7354 3000 or enquiries@colmancoyle.com for information on how we can assist.

Six key features to consider when registering an overseas company in the UK

Six key features to consider when registering an overseas company in the UK

Registering a UK establishment as an overseas company is a useful tool for overseas businesses which trade in the UK and wish to establish a UK presence but do not want to set up a UK company. 

We have identified six key points which you should consider when registering an overseas company in the UK.

1. Do I have to register?  
You must register if you have a physical presence in the UK, such as a place of business or branch. 
2. Can I register?  
Only certain overseas entities are able to register in the UK, primarily incorporated companies.  Unincorporated entities, such as partnerships and limited partnerships are not registrable.  You will need to check whether or not unusual overseas companies with no direct UK equivalent can register in the UK. 
3. What information do I need to provide to Companies House?  
Some of that information is straightforward, such as the identity and details of the directors, but certain information can slightly trickier to ascertain, such as the objects and issued share capital of the company.  You can choose an alternate name to the company’s name to do business in the UK.  If you decide to do so, you will need to comply with the relevant UK requirements for company names.
4. Do I need to send any supporting documentation?
With each application, you will need to provide:

  • the company’s constitutional documents such as the company’s articles of association
  • the most up-to-date accounts for the company if it is required to file accounts under its parent law.

All documents will need to be filed both is the original form, and if they are not in English, as a certified translation.  It is worth checking the requirements for certified translations before making the application and filing the documents.  Also, all personal details (personal ID numbers, dates of birth etc) will need to be redacted on both the original documents and certified translations. 

5. What do I need to do post-registration?  
You will need to notify Companies House of any changes to the details contained in the original application, such as new directors or constitutional changes.  You will also generally need to file accounting documents.  For all documents which are not in English, you will need to file certified translations.  Note, there are time limits and penalties. 
6. Do I need to let others know that I have registered?
You will generally need to display certain information about the company at every physical location at which the company carries on business. You will also need to include the company’s name in all business correspondence and documentation used for carrying on business in the UK.  You must also include certain details about the company on the company’s website if it is being used to trade in the UK.
If you require any advice regarding registering and overseas company in the UK please contact Harry Dronfield (020 7354 3000 / harry.dronfield@colmancoyle.com) for information on how we can assist.
Simon Tennant

Harry Dronfield

Senior Associate

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