Corporate Blawg UK

Blogging Good New Year!

At this happy time of year, New Year draws near, and Corporate Blawg hears that it's time to make some resolutions.  Aspirations that have been burning and the yearning for learning how to increase one's earning have not yet reached their absolution.  By pondering and wondering some sort of tortuous answer must be sought, ought not Corporate Blawg's staticity suffer oblution?  Alas 'tis now the manner how Corporate Blawg locates his Tao for bloggin' evolution:

Resolution 1: Post weekly, but strongly

Resolution 2: Continue to disseminate legal information to the general public via the medium of blogging and thereby provide a public service free of charge and free of liability (see Disclaimer) and only for the good of one's corporate soul

Resolution 3: Leave droll comments on other Blawgs so that other Bloggers may one day feel comfortable and confident enough to leave comments on this awe-inspiring "Blawg of Power" (do you get the impression that no one reads this blog?)

Resolution 4: Extraordinary and Special (s.378 of the Companies Act 1985)

Corporate Blawg apologises for the recent lack of anodyne corporate insights into the world of corporate, company and commercial law.  This interlude in intellectual analysis is interpreted in infinite illustrations, yet the most simplest way is to say, it's holiday time so Corporate Blawg is chilling out in his linguistical labyrinth.  Corporate Blawg will return to his usual depth of analysis, width of scope and brevity of waffle all in due course.  In the meantime, it's the New Year so live long and party! And may Bill Gates be with you.

Happy New Year Everyone!

New Statute Resource

Joining the revolution to the way legal information is disseminated, the Department for Constitutional Affairs have launched a UK Statute Law Database which contains search engines and is updated and everything.  This mighty force shall soon rival Butterworths with law students looking up rude words and finding new ways to get out of their parking fines. 

Also this new tool means that you, dear reader, can look up any statute referred to in this blog!  Happy days.

Thanks to Information Overlord for pointing out this new arrival to the internet, and freedom.

Non-Corporate Santacon

Corporate Blawg went on the very non-corporate Santacon on Saturday.  It was brilliant and had no purpose whatsoever (other than fun).  This was of great disbelief to many observers, and of equal mirth to all the 600-odd Santas.  Here are some pictures, Ho ho ho.

Like Santacon, this post has no relation to corporate, company or commercial law whatsoever.

Happy Christmas!

'Orrible office phrases

Is Corporate Blawg too sensitive, or does Corporate Blawg have a dirty mind?  Both probably.
             Either which way but inward, Corporate Blawg wishes to express that there are one or two phrases used in the office environment which on a hung-over morning such as this, Corporate Blawg would like to see expurgated.  Corporate Blawg finds that such expressions conjur up strange mental imagery which he does not approve of, especially today.  Let's see what they are: "touch base", "grab him", "finger him", "in bed together" or "sleeping with", "shafted", and "beasted".
             In a politically sensitive industry, which has not caught up with the current tide of post-feminist pseudo-modernism, Corporate Blawg finds that these phrases are odd when better phrases are available, like "update", "bring him", "allocate", "close relationship" and "worked hard". 
             A static believer in the slippery slope syndrome, Corporate Blawg suggests that unless such phrases are removed from common usage, the danger is that lazy analogies may become even more extreme, leading to common usage of terms by analogy such as "fist-ing" "rimming" "docking" and, as Corporate Blawg's dark and twisted friend at Taylor Wessing recently explained to him, "double-dragonning".
           Although the amusement factor is apparently high, this does not excuse the fact that such phrases are inappropriate and potentially perceived to be misogenistic.  On no account should these phrases be used in the work place, or within earshot of anyone generally who may take offence, because that would be f*cking stupid.

S.185 and the mystery of share certificates

Ever as controversial as a condom in the Vatican toilet, Corporate Blawg has learnt that section 185 of the Companies Act 1985 requires companies to send to shareholders a share certificate within 2 months of allottment.  However, there is no such requirement to issue a share certificate if stated as a condition of issue.  This provision is repeated in section 769 in the Companies Act 2006.
          Corporate Blawg understands that a share certificate is prima facie evidence of ownership of a share, and is strong evidence of title, but when a company is issuing shares out of the goodness of its heart (e.g. to employees) why bother sending them the certificate?  Apparently it is common in the U.S. for a nominee company to hold onto the share certificate but less so in the U.K. 
          Corporate Blawg questions the purpose behind sending out share certificates...

• the Company would still have to notify the shareholder of its ownership of the shares, so not issuing a share certificate hardly affects the administrative burden on the company;
• if the Company needs to enforce a compulsory transfer of the share, it may do this whether or not the shareholder has his certificate;
• where there is conflict between the register and the share certificate, the register prevails.

So it seems that there is only one tangible benefit of issuing a share certificate, which is that it is stronger evidence of title than a letter of allotment (and in Corporate Blawg's view this difference does not, in real practical terms, have much effect).  Since companies can simply avoid the requirement to send out share certificates, Corporate Blawg considers such certificates to be archaic and as relevant to current market practices as the Catholic church's view on contraception.  The only explanation for issuing a share certificate must be that such a certificate looks quite nice, and has the potential to be discovered under the bed of a dead shareholder.  Happy days.
           Harrumph.

Variation at the top of the class rights

Despite being a white middle class male, Corporate Blawg tans himself darkly,  accentuates his words to sound terribly posh, and freely admits to like floral designs on upholstery; yet Corporate Blawg considers it would be wrong to try to change his demograph, at least without a 75% conviction that it is the right thing to do.
            Similar considerations affect different classes of shares.  The different "class rights" are, by necessity, rights attached to shares (Re Blue Arrow plc [1987] BCLC 585 at 590). Shares can have a wide range of rights attached to them and may be categorised in different classes, e.g. ordinary shares, "A" ordinary shares, or convertible non-redeemable cumulative nil-paid part-participating preference shares.  Varying these rights does not require plastic surgery or a country mansion, but does effect a change in social standing.
              Section 125 of the Companies Act 1985 sets out the preliminary provisions for varying class rights.  Save as to any express contravention in the Articles of Association, a variation in class rights must be by 75% majority decision of the members in that class.  The Memorandum or, more often, the Articles of Association often contain the detail of the class rights, and this is especially so in relation to shares issued as part of a private funding to a private equity investor. 
              Usually the provisions fo the Articles will prevail over the fall-back option of 75% as provided for in the Companies Act, and may require a lesser majority, such as 50 or 60% depending on what percentage the private equity house has and any other investors the house wishes to "freeze-out".  However, section 125 states that the provisions in the Articles for varying class rights does not apply to:

the giving, variation, revocation or renewal of an authority for allotment under section 80 or with a reduction of the company's share capital under section 135

          Why on the future lunar base would this be?  Note that the exclusion makes reference to section 80 and section 135.  The key to understanding this provision is that these activities requires additional statutory actions to be undertaken, which have a statutory requirement of 75% majority approval to overide them.  The lesson here is that not all exclusions or special provisions in legislation have their own purpose under that section.  Some exclusions will be purely to ensure the statute fits together, sometimes with other statute, without leaving any funky lacuni. The spotter is the express reference to another section.  Anyway, back to class rights...
           If there are any variation of class rights, 15 % of the shareholders of the class in question may petition the court within 21 days of consent of resolution to vary the rights.  The 15% can request the court cancel the variation (under s.127(2)).  There are no specific provision for court sanction where class rights are varied by a company without the consent or resolution of the shareholders.  It is not too great a leap of cognisance to see that the court would have the same powers under s.459-461 on the protection of minorities (and unfair prejudice particularly).
          If the varation of class rights (maybe by some members be treated differently to others) is not covered in the Articles or Memorandum, the company must notify the registrar within one month of such variation, setting out the particulars of the rights (under s.128 and on a Form 128).  Failure to do so will make the company and every officer liable to a fine, and a daily fine for further contravention.
          A key point for directors and advisors is that class rights can be varied simply by preferential treatment of certain shareholders over others.  A director who is a shareholder may have access to greater information than an independent shareholder.  If the director's knowledge drives him to make a decision in relation to his shares that he might not have otherwise have made, that director's shares may be construed as being of a different class.  On further consideration under this scenario, the director would have breached a fiduciary duty and made a private profit... but the point remains if the shareholder was an employee of the company.
         Corporate Blawg has found that there are many dangers with varying class rights, and a strict procedure must be adhered to.  Corporate Blawg therefore will continue to apply his tanning lotion every hour on the hour, will never say "orf" instead of "off" and will buy a Batman comic (signed by Bob Kane) to put on his wall for every floral design that also decorates his flat.

Hello Bye-laws - a trot through two recent cases

On this dark wintery morning, a cold wind blows down from the North.  Empty cans of special brew rattle along the gutters before ganging up in doorways or street corners.  Paperbags circle the air and harbour microbiotic bugs that click their red feet together to the words: "I want to go home".   The mouse on Brick Lane awaits visitors to the Beigel shops before it can settle to breakfast on discarded flat bread, chilled by the winter air.
          At seven thirty-five the first light streaks across the horizon like a rocket bound for the Outer Hebrides.  Minutes later the sky is lifting its veil and warmth floods the roof of London.  Deftly, the wind softens its knives.  Litter shrinks in the pathways of hungry men head down heading to work.  The bugs bury deep in the mouse's long mane that feast's on the myosin in congealed salt beef. 
         This happy scene sets out a number of examples of dominence.  The morning is dominent over night.  The salt beef is dominent over the Beigel.  The focus on work is dominent over faux-poetic social commentary.  And a shareholder's agreement and bye-laws preventing a company from listing on the Bulgarian stock exchange is dominent over a resolution of the majority shareholders to undertake such a listing.
          This latter point was dissected, analysed and rejuvinated with a bolt of electricity on a full moon in the case of (1) Growth Management Ltd, (2) Hillside Apex Fund Ltd v (1) Ivailo Mutafchieve (2) Tzeko Minev EWHC 2774 (Comm).  In this case, the two claimants were investment funds each holding 10% of the shares in a Bulgarian bank, which two majority shareholders (each with 32%)wanted to list on the Bulgarian stock exchange.  The minority shareholders sought an injunction against a resolution of the majority shareholders to go ahead and change both the shareholders agreement and the bye-laws of the bank.
           The were two issues: (1) In order to list, the bye-laws of the bank had to be changed.  The bye-laws could only be changed by unaninmous agreement of the Supervisory Committee, and the minority shareholders had a right to appoint one member of the Supervisor Committee.  (2) Further, the commerciality of the shareholder's position was also considered, and it was held that the shareholder's agreement added commercial benefit to minority shareholders which may have encouraged them to enter the agreement in the first place, and the decision to list could adversely affect the value of the minority shareholders' shares.
            Corporate Blawg is not so profoundly amazed by this case, which merely emphasises that big shareholders cannot bully minority shareholders, especially where those shareholders are protected by contract.  It is an example of where dominence is not by size, but by power under contract.
            Another recent and interesting case, which demonstrates the dominence of the wording in a contract over the will of a third party, is the case of (1) Themis Avraamides (2) Emma Maitland v (1) Mark Colwill (2) Stephen Martin (T/A Bathroom Trading Company) [2006] EWCA Civ 1533.  In sum, this case reiterates the general principle that a third party cannot enforce a contract under the Contracts (Rights of Third Parties) Act 1999 unless that third party has been expressly identified as a beneficiary under the contract.  The dominence of third parties is clearly subordinate to the substance and expressed wording in a contract, and the 1999 Act is not going to convey any rights were those rights do not exist.
           With these tenuous links attached to dissemination of legal knowledge, Corporate Blawg now goes to don his scarf and hat, and carve his way through the brisk air. With further contemplation of his dominence at the foremost of his mind, Corporate Blawg will take on that icy chill all the way to the bus stop.  Once on the bus Corporate Blawg will allow himself to be knocked and jostled around by other males vying for dominence. At work Corporate Blawg will put his antlers away, as at work it is inappropriate to play the game of dominence, and the game of dominoes is much more acceptable.