1 December 2015
Gateley (Holdings) Plc
Gateley opens Reading office
Gateley (Holdings) Plc, (AIM:GTLY) a leading national commercial law firm, announces its intention to open a new office in Reading, in the heart of the UK’s Thames Valley. The office will be led by one of the area’s best known lawyers, Christopher Avery, who joins the firm from local law firm, Pitmans where he was managing partner for 25 years.
The opening of a Reading office will expand Gateley’s national network of offices to seven in England, as well as an operation in Dubai, and fits with its strategy of becoming a leading national law firm whilst still retaining a strong regional emphasis.
This will be the firm’s first new office opening since it established a presence in Leeds in January 2012. Gateley’s Leeds office started with two partners, has since grown to a nine partner practice with more than 40 staff and is well on its way to becoming a full- service offering.
Christopher Avery started his legal career as a commercial property lawyer and soon became the managing partner of Pitmans at the age of 31. During his 36 years with the firm the business grew from 25 to over 200 staff with a fee income in excess of £20m.
Commenting on Christopher’s appointment, Michael Ward, Gateley Plc’s CEO said: “Christopher has been appointed to help us develop a full-service commercial practice in the highly strategic Thames Valley/M4 corridor which is a large and growing centre for legal services. He is well known in the Thames Valley and has the right combination of experience and entrepreneurial spirit to help us deliver our objectives.
“We indicated at the time of IPO that whilst we had a fully invested UK network of offices we would consider opportunities in one or two other geographical locations if the right opportunity presented itself and Reading is such an opportunity.”
Christopher Avery added: “I am delighted to be joining Gateley Plc at such an exciting time in the firm’s development. I have lived and worked in the area for all of my professional career and know the Thames Valley market well. I have been impressed with the attitude, ambition and professionalism of the Gateley team and believe together the prospects for this new venture are extremely promising.”
Gateley (Holdings) Plc
Nick Smith, Acquisitions Director and Head of Investor Relations
+44 207 653 1665
Cara Zachariou, Head of Communications
+44 121 234 0074 or
+44 7703 684 946
Cantor Fitzgerald Europe – Nominated adviser and broker
+44 207 894 7000
David Foreman, Michael Reynolds, Phil Davies (Corporate Finance)
David Banks, Tessa Sillars (Corporate Broking)
Buchanan – Financial PR adviser
+44 207 466 5000
Mark Edwards, Helen Chan, Jane Glover
North West Private Equity backed deals on the rise reports Gateley Plc
27th November 2015
National law firm, Gateley Plc is reporting an increase in Private Equity backed deals in 2015 compared to the same period last year. Deal volume across the UK is up by more than 11 per cent with the North West stealing a march at just over 15 per cent, according to recent figures from Experian Corpfin.
Gateley Plc has been particularly active in the North West’s private equity surge including recently acting for software development and integration services company Mobica in relation to Inflexion’s investment in the company. Mobica has offices in Europe and North America, as well as being headquartered in Wilmslow.
Gateley Plc currently leads the way for deal volume, occupying first place nationally and is ranked second in the North West for the number of private equity deals delivered in the region.
The strong and long standing relationship between Gateley and Manchester-based Palatine Private Equity was one of the reasons for the strong ranking by Gateley in the North West. In addition to the MBO of Vernacare, the firm advised Palatine on its £37m exit from Electranet and its exit from Playnation, which it sold to the NOVOMATIC group.
In addition, the firm advised Mattioli Woods Plc, the wealth management and employee benefit services providers, on its acquisitions of Preston-based Taylor Patterson and the pension administration business of Altrincham-based financial services firm, Lindley Group.
This growth comes at a time when the firm has recently appointed Manchester-based Corporate partner, Paul Jefferson, as national Head of Private Equity. Appointing a national head in Manchester reflects the level of work coming out of the region.
Commenting on the trend towards more private equity backed transactions this year, Paul Jefferson, said: “Private equity investors continue to play a vitally important role in developing businesses as the economy improves and we expect to see a further increase in this type of activity as we move into a new year, albeit PE houses remain cautious about Q1-Q2 and are predicting increased activity levels from mid-2016.
“The Private Equity team at Gateley has experienced an encouraging 12 months for deal-making in this sector, advising on all stages of private equity funded deals. The team has a very strong track record in private equity transactions and maintains very good institutional relationships both locally and nationally.
“However, the enduring relationship enjoyed by Gateley with Palatine Private Equity, in particular via Corporate Partner Rebecca Grisewood, has been a key factor underpinning the strong performance of our Manchester team”.
This year also saw the firm make history by becoming the first UK commercial law firm to float on the AIM market of the London Stock Exchange. The company raised £30 million as part of its listing and was valued at £100 million on first day of dealing.
Posted on 27/11/2015
When a company is granting a guarantee (or, indeed, any third party security), the guarantee must serve the guarantor company’s own commercial interests. This is something that has long been the case and since the Companies Act 2006 (the Act) the need for directors to consider commercial benefit when entering into transactions has been a statutory duty. The Act states that it is the duty of each director to “act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole”. You can understand why the term commercial benefit is still used as short-hand!
The effect is that a director must consider the commercial benefit to the company when considering whether or not to enter into transactions. One thing that is often forgotten when guarantees are being taken from group companies is that for the purposes of the Act, it is not enough for the guarantee to benefit the group, there should be benefit to each individual company granting a guarantee. Sometimes this can be more obvious than other times.
The term downstream guarantee is used where a parent company guarantees the obligations of its subsidiary. It is usually fairly clear where the benefit is to the parent in doing this as ultimately, the success of the subsidiary will usually benefit the parent. For example, through an increase in the subsidiary’s value or improved performance resulting in better dividends. But the situation can become less obvious with upstream guarantees (that is where a subsidiary grants a guarantee for the debts of its parent or holding company) and more so across groups, where guarantees are being granted by sister companies of the borrower.
Where matters can get particularly tricky is when a guarantee is being granted by a company that is not even in the same group as the borrower. But this doesn’t mean that the benefit does not exist, just that it can be less obvious to an outsider. This makes it increasingly useful to have a record of the directors’ reasoning.
In a minute
It is a good idea when taking a guarantee to ensure that the board minutes state what exactly the commercial benefit was to the guarantor company. If the minutes just have a statement that the directors considered that granting the guarantee was for the benefit of the company and its shareholders then it can be very difficult for anyone to remember what that benefit was if this has to be reviewed at a later date. Banks and their lawyers however need to be careful not to define the benefit for the directors. The directors have knowledge of the company that other people may not have and they are in a unique position to determine where the benefit may lie in granting a guarantee. It is still useful however to think about where benefit might be (or not appear to be) when structuring a transaction.
The effect of no benefit
So far as the shareholders are concerned, getting a written resolution before the guarantee is entered into can usually prevent those shareholders from taking action against the guarantee. In addition, lenders can take comfort that under the Act, if they have acted in good faith they may be able to rely on the ability of directors to bind the relevant company anyway, even if they are acting outside their powers. See our previous blog on capacity for more on this.
But benefit is also important if there are solvency issues. A guarantee can be set-aside by the court as a transaction at undervalue under insolvency legislation. This can occur if the guarantee is given within a certain time period of the guarantor’s insolvency. The time periods differ depending on a number of factors and are generally referred to by lawyers as the ‘hardening period‘. It is worth bearing in mind that a company can be trading with no apparent cash flow problems but still be balance sheet insolvent. Issues that make a guarantee at risk of being a transaction at undervalue are:
where the guarantor was insolvent when it gave the guarantee (or became insolvent as a result of granting the guarantee);
the value the guarantor received from granting the guarantee was significantly less than the value it gave; and
if the directors did not enter into the guarantee in good faith with reasonable grounds for believing that granting the guarantee would benefit the company giving it.
The top 4 tips
So what are the top 4 tips to remember about commercial benefit for guarantors? We’ve come up with the following:
it’s a director’s duty to consider benefit;
benefit must be for the actual company granting the guarantee;
board minutes can help focus directors on considering benefit and are also useful evidence of where the benefit was thought to lie; and
shareholder resolutions and relying on good faith provisions in the Act can offer some protection but they are not a cure for all lack of benefit issues as transaction at undervalue risks remain.
For more information, email email@example.com.
Posted on 26/11/2015
Insolvency Office Holder (IOH) remuneration has caused recent controversy following reports to the Insolvency Service that fees charged did not represent value for money and service lacked quality and efficiency. As explored in a previous post, this led in part to the introduction of The Insolvency (Amendment) Rules 2015 (the 2015 Rules) which proposed changes to insolvency guidelines aimed at giving creditors, and other interested parties such as shareholders (‘Interested Parties’), a clearer understanding of fee calculation.
But what are these changes, and is there any evidence of them improving the IOH fee system?
Revisiting SIP 9:
The implementation of the 2015 Rules in October this year necessitated the revision of the Statement of Insolvency Practice (SIP) 9 with a view to achieving a principles-based regulation of remuneration rather than the existing more prescriptive format.
This means that Interested Parties are advised to better scrutinise IOH proposed fees; demanding more information from IOHs before authorising their proposed remuneration. This revised approach invites greater flexibility and accountability towards insolvency remuneration to take a step closer to the goal of transparent fee strategy.
According to SIP 9, payments must be ‘appropriate, reasonable and commensurate reflections of the work necessarily and properly undertaken’. The Interested Parties, particularly creditors, decide whether proposed fees are reasonable reflecting on whether the suggested remuneration is proportionate to the proposed work.
Requests for additional information relating to IOH remuneration by Interested Parties must be respected by IOHs, with information presented in a consistent format, providing detailed reports with figures for both the relevant period and on a cumulative basis.
IOHs must also abide by disclosure requirements including:
disclosure of payments, remuneration and expenses arising from an insolvency appointment;
disclosure of any conflicts of interest arising from business or personal relationships with parties responsible for approving remuneration;
informing Interested Parties of their rights under the relevant legislation;
disclosure of any sub-contracted work to third parties.
The previous SIP 9 did not cater for the provision of estimates but these are now required following implementation of the 2015 Rules. Interested Parties are now concerned with what work is anticipated, the anticipated cost/expenses, the time to complete such work and any financial benefit to creditors. These points form the basis of the fee estimate.
In addition, IOHs may need to offer a further explanation of their activities where certain expertise was required. Examples include matters involving statutory compliance and asset realisation/distribution. This narrative will aid Interested Parties in assessing the reasonableness of fee estimates.
Will these changes be effective?
Although transparency and fairness are principles valued in many aspects of the law, commercial considerations such as cost and efficiency have a key part to play in insolvency practice. Requiring provision of fee estimates by law may create higher costs for Insolvency Practitioner firms as these estimates require earlier, more complex fee calculation by IOH legal advisors. Provision of additional information to Interested Parties will also bear a financial burden on such firms – factors unsupportive of the revised approach to IOH remuneration.
The system is likely to benefit from a move away from ‘taxi-meter’ fees with fixed estimates improving the efficiency and quality of work by IOHs. The true impact of the changes may soon be revealed.
This post was edited by Kassia Lewis-DeBoos. For more information, email firstname.lastname@example.org.
Posted on 26/11/2015
For the first time in a century, the Supreme Court has recently considered the law of penalties, when handing down its judgments on two cases relating to contractual penalty clauses . In principle, these decisions will be applicable to liquidated damages clauses in construction contracts.
The previous position
Prior to these decisions, the amount of liquidated damages had to represent a genuine pre-estimate of the employer’s loss. A liquidated damages clause would be unenforceable if the level of damages was extravagant, bore no resemblance to the employer’s loss or was intended to deter a breach of contract.
The Supreme Court’s decision
The court decided that the doctrine of penalties should be upheld, but it rejected the ‘genuine pre-estimate‘ test which was established just over one hundred years ago .
Instead, it decided that the true test as to whether a clause constituted an unenforceable penalty was whether or not it imposed a detriment which was “out of all proportion to any legitimate interest of the innocent party”.
The practical effect of the new test is well illustrated by the ParkingEye case. Here, the car park owner set a high charge (£85) for overstays, as it relied on these amounts to keep the business afloat. Whilst this had the indirect effect of punishing the wrongdoer, it was recoverable as it could be backed up by a legitimate business interest (i.e. the charges were needed to keep the business afloat). This points towards quite a significant relaxation of the test – the charge bore no resemblance to ParkingEye’s actual loss (which is probably next to nothing in most circumstances), but the fact that it allowed them to make a small profit meant it was enforceable.
Whether an employer will now be able to claim that it relies on high levels of liquidated damages to stay afloat remains to be seen, but it seems unlikely. What the new test does mean, however, is that when calculating the amount of liquidated damages in a contract, an employer can include considerations such as (1) the knock-on effect of delay on the rest of the project, (2) loss of reputation, or (3) any amounts it might become obliged to pay to its future occupiers as a result of the delay.
Also significant was the fact that the Supreme Court emphasised that where there are two properly advised parties of comparable bargaining power, the presumption is that the parties themselves are the best judges of what is ‘legitimate’.
Points to note
Commercial interests, such as goodwill, reputational damage, third party interests, and other losses which can be easily quantified will be taken into account in determining the level of liquidated damages which is recoverable.
There is a strong initial presumption that a clause is not disproportionate if it has been negotiated in a commercial contract between two comparable parties and their respective legal advisors.
An employer may be obliged to show documentary evidence of the legitimate commercial interest which the liquidated damages relate to.
If a contractor successfully challenges a liquidated damages clause, the employer remains entitled to general damages in the usual way.
A calculation based upon ‘legitimate commercial interests’ might sound similar to one based upon ‘a genuine pre-estimate of loss’, but in practice, it looks likely to be an easier test for employers to meet. The main difference is that clauses which are, in principle, intended to deter a breach of contract will now be enforceable (this being a legitimate commercial interest of the employer). However, a fine line needs to be drawn between liquidated damages which are intended to deter a breach, which are allowed, and liquidated damages which are intended to punish the contractor, which are not.
For more information, email email@example.com.
 Cavendish Square Holdings v El Makdessi and ParkingEye Limited v Beavis  UKSC 67
 Dunlop Pneumatic Tyre Company, Limited Appellants; v New Garage and Motor Company, Limited Respondents  AC 79
Gateley Plc appoints new Private Client head
25th November 2015
Gateley Plc, the UK’s first AIM listed law firm has strengthened its offering with the appointment of partner and new head of its national Private Client team, Catriona Attride.
Catriona joins the firm from Shakespeare Martineau, having spent over four years leading its Private Client service in the South Midlands. Prior to that, Catriona spent five years as partner at Williamson & Soden, where she was responsible for developing and building the firm’s Private Client practice.
Catriona advises on a range of matters including the use of wills and trusts for estate planning and family protection purposes tax, estates administration, court of protection issues and, contentious trust and probate matters. Throughout her career, she has acted for high net worth individuals and entrepreneurs, and regularly advises corporate clients on ways to maximise financial opportunities.
With extensive experience in building, developing and leading teams, Catriona joins Gateley to expand its national Private Client offering. Commenting on her appointment, Catriona said: “I’m delighted to be joining Gateley. With a number of offices established in other regions and high quality teams, I’m looking forward to taking on the role of leading and developing the Private Client practice at what is a really exciting time for the company. Our team takes a holistic approach to Private Client services that result in long-standing personal relationships. Many of our clients consider us the first port of call for all of their personal contentious and non-contentious legal work.”
Gateley’s Private Client practice offers a national reach, working with individuals across the UK to provide the highest quality advice on how to best manage their wealth and personal affairs. Its clients range from CEOs of Plcs and start up entrepreneurs to large estate owners and lottery winners.
Gateley Plc recently became the first UK commercial law firm to float on the AIM market of the London Stock Exchange. The company raised £30 million as part of its listing and was valued at £100 million on first day of dealings.