Corporate finance update - September 2011

Deal News

Taylor & Emmet’s corporate team recently advised on the acquisition of certain shares in GRIP-UK Limited.

Peter Crawford led the transaction.  He explained that: “The deal came about after a breakdown in relations between shareholders.  Despite a very difficult situation, a negotiated solution was achieved and the prospect of litigation averted.  By doing this deal, I have every confidence that the future will be bright for what is a very exciting and vibrant young company.”

GRIP-UK Limited runs Liverpool’s Climbing Hangar, which is the UK’s largest dedicated bouldering facility.

Briefcase News

Enforceability of side letter considered

In the case of Barbudev v Eurocom Cable Management Bulgaria EOOD & Others the High Court was asked to consider whether a side letter constituted a legally binding document or was merely an agreement to agree.

In reaching its decision, the court was asked to consider 3 questions;

1. Whether there had been sufficient intention to create a legally binding agreement;

2. Whether there was an agreement to agree; and

3. Whether there was sufficient certainty of the terms included.

A contract cannot be created unless it is made with the intention to create a legally binding document. In circumstances where the intentions are difficult to establish, case law provides for an objective test to be applied whereby the reasonable man would decide whether there was sufficient intention to create a contract.

The judge agreed that the inclusion of generic legal terms supported Mr Barbudev’s argument that he had sought to create legal relations.  However, the terms did not detract from the fact that the side letter was dependent upon the main agreement being executed and therefore it could only have been construed to have been subject to negotiation and therefore not binding.
 
Essentially the court held that the side letter was an agreement to agree due to lack of certainty over the price, percentages and the proposed investment.

Phrases relating to figures such as, “not less than”, implied scope for negotiation of an amount above a threshold and would therefore require additional clarity as to how those figures would be calculated.

The court held that the side letter was not an enforceable contract and that due to its construction  it remained an agreement to agree. It was clear that the agreement contained terms that were not final and in fact were dependent upon future events or the results of negotiations between the parties.

Even the inclusion of standard (boilerplate) contract terms within the side letter did not save the document from being unenforceable.

Companies House - New Digital Era

March 2013 is expected to bring the dawn of an entirely digital service from Companies House.   Plans to rid itself of the current paper-based system are well underway.  This will bring about a mandatory requirement to file annual returns and accounts alongside other standard company forms online.

In line with its plans, Companies House recently launched a new web-based incorporation service at a cost of just £18 for a company incorporation.

The improvements don’t stop there... the e-reminder service also offers users the chance to register up to 4 names and email addresses with the intention that each user receives a reminder via email when accounts documents need to be filed, rather than a letter going to the registered address.  The ‘Monitor’ service will be free to use and keep companies up to date and notified when documents have been filed. 

The current services offered through the Companies House website will be merged to form one coherent portal for all electronic searches and downloads.