Corporate weekly highlights—24 May 2018

This week’s edition of Corporate highlights includes news analysis of the Supreme Court’s judgment in Rock Advertising Ltd v MWB Business Exchange Ltd on no oral variation clauses and the BEIS committee’s verdict on Carillion. We have also published several new Q&As including one on the impact of the GDPR on M&A transactions.

Contract law for Corporate lawyers

Contract law in the Supreme Court—a sensible break with the common law? (Rock Advertising Ltd v MWB Business Exchange Centres Ltd)

The Supreme Court has unanimously held that licence fee payments under a licence agreement containing a ‘no oral modification’ (NOM) clause could not be varied by oral agreement between representatives of the licensor and the licensee, in Rock Advertising v MWB Business. Lawyers at Bird and Bird, Clifford Chance, Charles Russell Speechlys, Herbert Smith Freehills, Howard Kennedy, Stewarts and Wedlake Bell discuss the impact of this decision which will have 'wide ramifications for all types of contracts' and give ‘real meaning and support to NOM clauses within contracts’.

In a separate analysis piece, Michael Paget, at Cornerstone Barristers, examines the decision and concludes that it will make contractual relations more certain. Any party who has the benefit of a contract with a NOM clause no longer needs to worry about the risk of an oral variation unless they have allowed the other party to rely on that apparent variation. It should reduce the risk that companies are inadvertently bound into a variation without senior management’s agreement.

For further information, see Contract law in the Supreme Court—a sensible break with the common law? (Rock Advertising Ltd v MWB Business Exchange Centres Ltd) and LNB News 16/05/2018 112.

Corporate Crime for corporate lawyers

Corporate Manslaughter and Corporate Homicide Act 2007: ten-year review: part one

In the first of a three-part series on the ten-year anniversary of the Corporate Manslaughter and Corporate Homicide Act 2007 (CMCHA 2007), Kevin Bridges, partner and head of health and safety at Pinsent Masons LLP, examines why CMCHA 2007 was introduced and what practical impact it has had on the prosecution of work-related deaths.

Bridges concludes that a decade on CMCHA 2007 appears to have been overly conservative and its focus on substantive senior management failings has failed to capture the corporate liability. Had the offence of corporate manslaughter simply required an organisation to have breached its duty of care, and for that breach to have been gross, CMCHA 2007 would likely have resulted in more prosecutions—and certainly, more prosecutions of larger entities. However, such a straightforward test would have been problematic for an offence involving manslaughter designed to address the worst types of failing. Given its track record and the difficulties in satisfying every element of the offence when compared with the sums at stake under the new sentencing guidelines and the ease of meeting the evidential burden under Health and Safety at Work 1974, there is some merit in thinking that the corporate manslaughter regime may now be redundant.

For further information, see Corporate Manslaughter and Corporate Homicide Act 2007: ten-year review: part one.

Corporate Governance

‘A story of recklessness, hubris and greed’: committees’ verdict on Carillion

A damning 100-page report, jointly published by the Work and Pensions and Business, Energy & Industrial Strategy committees, has accused Carillion’s board of ‘recklessness, hubris and greed’, holding them ultimately ‘responsible and culpable’ for the firm’s failure. Sarah Schütte, of Schütte Consulting Limited—a bespoke legal consultancy firm for the construction industry—warns that Carillion’s demise highlights the ‘desperate need for a big shake up in the way in which contracts are awarded’ in the public sector, while Gayle Monk, senior associate at Anthony Collins, warns of the dangers of ‘tick box’ thinking in the procurement process.

The report has been highly critical of both the board and the failed system of ‘checks and balances’ which contributed to Carillion’s collapse. It recommends that, during its forthcoming investigation, the Insolvency Service should closely examine whether the directors breached their duties under the Companies Act 2006. It also accuses the company’s non-executive directors of failing to scrutinise or challenge the executives.

For further information, see LNB News 16/05/2018 119.

Additional Corporate updates this week

Late Payment of Commercial Debts (Scotland) Amendment Regulations 2018

An amendment has been made to the Late Payment of Commercial Debts (Scotland) Regulations 2002 to clarify transposition of Article 7(5) of EU Recast Directive 2011/7/EU on combating late payment in commercial transactions in Scotland. The new provision clarifies that representative bodies are able to challenge in the Court of Session (on behalf of undertakings of all sizes, not just small and medium enterprises) the use of certain grossly unfair terms or practices in, or in relation to, contracts to which the Late Payment of Commercial Debts (Interest) Act 1998 applies. The Regulations will come into force on 29 June 2018.

For further information, see LNB News 21/05/2018 75.

Date Development
25 May 2018 Data protection: the General Data Protection Regulation (EU) 2016/679 (GDPR) shall be directly applicable and fully enforceable in all Member States.
On 15 December 2015, the EU institutions reached agreement on the GDPR, which will replace the Data Protection Directive 95/46/EC, upon which the Data Protection Act 1998is based. The GDPR was published in the Official Journal of the European Union on 4 May 2016. It came into force on 24 May 2016.
The General Data Protection Regulation (GDPR)
The GDPR—preparing for implementation
25 May 2018 AIM: deadline for responses to consultation on proposed changes to the AIM Rules for Nominated Advisers.
Following on from issues raised in its AIM Rules Review Discussion Paper published in July 2017, the London Stock Exchange (LSE) issued AIM Notice 51 on 26 April 2018 under which it is proposing changes to the AIM Rules for Nominated Advisers. The proposed changes cover eligibility and continued eligibility of nominated adviser firms and clarity in relation to the LSE’s supervisory powers.
AIM Notice 51
Mark-up of Nomad Rules
1 June 2018 Financial Reporting Council: updated sanctions guidance for auditors, accountants and actuaries takes effect.
The updated guidance has been produced in response to the October 2017 report of an independent panel, led by Sir Christopher Clarke, which reviewed the nature and appropriateness of sanctions for auditors, accountants and actuaries.
See LNB News 09/04/2018 6.
11 June 2018 Consultation on insolvency and corporate governance has launched.
The Department for Business, Energy & Industrial Strategy has launched a consultation in relation to new proposals to improve the corporate governance of companies when they are in or approaching insolvency. The consultation closes on 11 June 2018.
See LNB News 15/05/2018 69.
11 June 2018 UK merger thresholds have been amended for certain transactions impacting national security.
Two statutory instruments have been made which will amend the UK merger control regime’s notification thresholds for certain sectors impacting national security (namely military or dual-use goods which are subject to export control; quantum technology and computing processing units). For these sectors only, the share of supply threshold will be amended so that it can be met solely by the activities of the target and the turnover threshold will be reduced to £1m. The revised thresholds will enter into force on 11 June 2018.
See LNB News 15/05/2018 69.
29 June 2018 Late Payment of Commercial Debts (Scotland) Amendment Regulations 2018
An amendment is made to legislation to clarify transposition of Article 7(5) of EU Recast Directive 2011/7/EU on combating late payment in commercial transactions in Scotland, by substituting a provision which allows representative bodies to challenge certain ‘grossly unfair’ contractual terms or practices on behalf of small and medium sized enterprises (SMEs). The new provision clarifies that certain representative bodies are able to decide whether to take action to bring proceedings to challenge the use of certain grossly unfair terms or practices, on behalf of any size business undertaking (not just SMEs) in or in relation to contracts to which the Late Payment of Commercial Debts (Interest) Act 1998(LPCD(I)A 1998) applies. The Regulations will come into force on 29 June 2018.
See LNB News 21/05/2018 75.

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