Drafting: A pedantic article about commas
March 2016 Years ago, legal documents didn’t have much punctuation, and they didn’t use commas and stops, let alone colons, to draft things. I’ve no idea how they managed. More recently (like, in the last century or so) things have changed and punctuation has become important. So, how important are commas? Some commas aren’t really needed and are just a matter of style and you can do without them (like when I wrote ‘like, in the last century or so’, above, (or when I wrote ‘century or so’, above’ above…), or when I wrote ‘so, how important are commas’ above) (brackets can be quite important too). Others are rather important. There are rules as to how to read commas (and the lack of them), but they can be rather grey. Confusion over commas (and the lack of them) is now probably the biggest cause of dispute over the interpretation of contracts. A recent case is a good example...
Penalty clauses – English penalties will be missed
Nov 2015 Apparently for the last 100 years we have been getting a law wrong. This law says that a clause in a contract which sets out in advance the consequences of a breach of contract will be unenforceable if it is extravagant, exorbitant or unconscionable. It is one of the few exceptions in UK law to the principle of freedom of contract...
Retention accounts – what’s the point?
June 2015 In some acquisitions the buyer will not want to pay all the money up front. It may be worried about some potential liability of the seller arising under an indemnity or warranty in the purchase agreement. It won’t want to take the risk of the seller going bust before any claim is finally resolved, which could be many years after completion. So it will want to hold some money back until this risk goes away. But...
Completion Accounts in acquisitions – what does ‘Accounting policies adopted in the Accounts’ mean? (Accountants out there may be surprised at this)
April 2015 Many share and asset sale deals require a price adjustment to be made based on a set of completion accounts which needs to be drawn up. As everyone knows, a set of accounts will usually tell you what the company and its accountants want to tell you. So it’s important for both sides to set out as clearly as possible in the sale agreement how the completion accounts should be prepared and how any adjustments to the price should be worked out...
Anti-embarrassment clauses – what is the meaning of the purpose?
Aug 2014 No, really, what is the meaning of ‘the purpose’? This isn’t a deep philosophical question. It is an important question if it appears in an elephant clause in a non-embarrassment agreement, as in this recent case. Does ‘the purpose’ mean the sole purpose? The most important purpose? Any one of the purposes? Or something else?...
Seller’s members voluntary liquidation can bugger up buyer’s chance of recovery under indemnity: recent case
Sept 2013 A buyer will always be concerned about the risks of a seller going bust, because warranties and indemnities are only worth what the seller is eventually able to pay. But in this recent case the buyer was put at risk of not recovering under a tax indemnity even though the seller was meant to be solvent...
Share sales: what’s the difference between a warranty and a representation?
May 2013 Most share sale agreements contain a raft of warranties (statements relating to the company and the business that the sellers promise are correct) and then say that if a warranty proves to be incorrect the buyer can only make a claim for breach of contract and cannot make a claim for the tort of misrepresentation. What’s the difference?...
Knowledge and warranties – and how warranty negotiations can pan out
May 2013 A share sale agreement had a clause which said that the sellers wouldn’t be liable under the warranties to the extent that the buyer, having made due enquiries of certain members of the MBO team, was actually aware at completion of facts which would give it a claim for breach of warranty. Some of the MBO team members who became directors of the buyer did know of facts which would give the buyer a claim. So, the question was, did the knowledge of those MBO team members constitute ‘actual knowledge’ of the buyer, so that the buyer couldn’t bring a claim?...
One of several sellers giving warranties? Be careful!
May 2013 This case has a cautionary message for minority shareholders who sign up to agreements by all shareholders to sell their company...
Entrepreneurs’ relief
Dec 2012 I was asked to promote more awareness of various incentives which make the UK a very attractive place for entrepreneurs, and specifically the attractive tax incentives such as relatively low tax rates, Entrepreneurs’ Relief, the Enterprise Management Incentive Scheme, the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme all of which are designed to encourage investment in SMEs, on which the resurrection of our economy depends. To oblige I am writing a series of short (for me) articles which will hopefully help to enlighten some of you on some of these schemes. Starting with this one about Entrepreneurs' Relief...