Bulletins | April 25, 2018

In Counsel – Spring 2018

Welcome to the Spring edition of our In Counsel publication

The public spotlight over the last few weeks shifted away from Brexit towards takeovers and the question of if and when the UK government could and should intervene in the interest of national security. This In Counsel contains three articles on this topic, two of which focus on the hostile takeover of GKN by Melrose, one from a corporate perspective looking in particular at the post-offer undertakings Melrose gave, and the other analyzing pensions issues. The third piece comments on the government’s plans to change UK merger law.

The improvement of corporate governance also remains a topic high on the government’s agenda. As AIM companies are required, with effect from 28 September 2018, to comply with a corporate governance code, our Corporate team introduces the newly revised Corporate Governance Code for Small and Mid-Size Quoted Companies published this week by the Quoted Companies Alliance with the assistance of our Partner Edward Craft, and our Insolvency & Restructuring team provides insights into the latest proposals to improve the governance of companies when they are in or approaching insolvency.

As the EU’s position in relation to Brexit seems to become more and the UK’s less clear, our Financial Services team looks at the implications of MiFID II on the UK financial sector, and asset managers in particular, before and beyond Brexit.

Our Employment team further looks, among others, at the new tax rules governing termination payments, and our IP & Commercial team analyzes recent case law on word trade marks and explains the judgment of the Court of Justice of the EU in Coty Germany v Parfümerie Akzente. Our Pensions & Employee Benefits team highlights mechanisms for employers and trustees to reduce pension costs, and our Commercial Property team asks whether co-working is hype or here to stay. And finally, our Corporate Tax team recommends caution when granting EMI share options as we await EU State Aid approval for the EMI scheme which expired on 6 April 2018.

If you would like to know more about any of the topics covered in this update please get in touch.



UK merger control law – The goalposts are moving – There are plenty of things to worry about when planning a merger. But top of the worry list must be the possibility of governmental or regulatory intervention, either to block the merger before it occurs, or (even worse) to require that it be unscrambled ex post facto. True, this nightmare scenario seldom happens at the moment. But it could become a more frequent occurrence if and when the government’s planned changes to UK merger law are implemented.


Melrose’s takeover of GKN provides another instance of post-offer undertakings – In one of the most dramatic corporate struggles of recent time, Melrose Industries Plc won a significant battle in its hostile £7.9 billion bid for GKN Plc has 52% of shareholders voted in favour of the takeover by the US based turnaround specialist. The only legal challenge that stood in Melrose’s way was intervention by the UK government but the latest reports suggest that the takeover will be given the green light.

The proposed register of beneficial owners for overseas companies – The Department for Business, Energy and International Strategy recently published the government’s response to its “call for evidence” last year on proposals for a register showing who owns and controls overseas companies and other legal entities that own UK property and/or participate in UK government procurement.

New QCA Code – The Quoted Companies Alliance has issued an update to its Corporate Governance Code for Small and Mid- Size Quoted Companies. The previous version of the QCA code was issued in 2013. Wedlake Bell corporate partner Edward Craft led the working group, drawn from across the QCA community of small cap companies, investors and advisers in delivering the new QCA Code. 

Joint ventures and the implied duty of good faith – Joint ventures have become an increasingly common method by which certain business activities are undertaken. A JV is a commercial arrangement in which two or more parties agree to pool their resources to accomplish certain goals.

ESMA’s proposals for simplifying prospectuses – On 3 April 2018, the European Securities and Markets Authority published the final report of its Technical Advice under the new Prospectus Regulation, covering the format and content of the prospectus, including the new Universal Registration Document, the EU growth prospectus, and the scrutiny and approval of prospectuses…


Termination payments – The new tax rules – New rules came into force on 6 April 2018 that affect how termination payments are taxed and whether an employee can benefit from the £30,000 tax exemption.

National Minimum Wage, National Living Wage and compensation limits – The government has announced the new rates and limits which were introduced from April 2018 in relation to the National Living Wage, National Minimum Wage and employment compensation limits.

Could a long hours culture lead to a discrimination claim? – In Carreras v United First Partners Research, the Court of Appeal has upheld a decision by the Employment Appeal Tribunal that an expectation that a disabled employee would regularly work late could amount to a provision, criterion or practice under the Equality Act 2010, requiring the employer to consider making reasonable adjustments.

Financial Services

Before Brexit and beyond, the UK financial sector prepares for MiFiD II – While Brexit negotiations continue, behind other closed doors in the City of London, strategy teams are working on plans for various post-Brexit scenarios.  How will the UK retain top talent?  How will we secure our competitive position as the second largest asset management centre in the world?   How can we harness AI capabilities to nurture our innovative FinTech sector?

Fail to prepare…and prepare to face the FCA: Considering the implications of the FCA’s first statement of objections – On 10 November 2017, the Financial Conduct Authority published a final notice against a fund management company in relation to the collapse of a fund that it had operated.  Three weeks later, the FCA issued a statement of objections against four asset management firms in relation to information sharing arrangements. While these decisions are close in time, they are miles apart in terms of content and implications. Can you spot the key difference?

Insolvency & Restructuring

Trying to lighten the twilight zone: Insolvency and corporate governance proposals – On 20 March 2018 the UK Department for Business, Energy and Industrial Strategy published a consultation seeking views on proposals to improve the governance of companies when they are in or approaching insolvency.

IP & Commercial

You want a pizza me? – Following an earlier decision in the Intellectual Property Enterprise Court, the Court of Appeal recently dismissed an appeal against a declaration of invalidity in respect of the word trade mark “CASPIAN” and permitted a cross-appeal declaring a device mark incorporating the word “Caspian” to have been invalidly registered.

Living a life of luxury – It is not so often that the official press release about an EU case opens with the words ‘A supplier…can prohibit…’. After all, the EU tends to disapprove of internal trading bans and prohibitions, to put it mildly. But there are exceptions to every rule, and the recent judgment of the Court of Justice of the European Union in Coty Germany v Parfümerie Akzente provides an important example of that. We explain that judgment and see what lessons can usefully be drawn from it.

Pensions & Employee Benefits

Managing pension scheme liabilities – The options – Many sponsoring employers and trustees continue to look at ways of controlling defined benefit pension scheme liabilities to reduce cost, to reduce volatility and to manage risks. For regulatory reasons it is essential to consider accrued benefits – relating to historic employment – and future benefits separately. There are a number of mechanisms at the employers’ and trustees’ disposal for reducing pension costs.

Barclays ring-fencing proposals sanctioned by the High Court – The High Court has ruled that Barclays’ pensions proposals will not hold up its ring-fencing plans, in a decision that considered widely relevant issues of restructuring defined benefit pension schemes and Pensions Regulator clearance.

GKN and Melrose… The battle continues – In my last article at the beginning of the year (see GKN offer and the response from the companies schemes’ trustees), I wrote about the pensions issues surrounding the hostile bid made by Melrose in respect of the proposed takeover of GKN.  No doubt our readers will have noticed that this topic has continued to be reported on in a rather public manner for many reasons, not least the pension issues!  It is understood that GKN’s pension schemes have a funding deficit of around £1.1bn and overall liabilities of approximately £3.3bn.  With numbers this large it is no wonder the parties have been so vocal!

Property & Construction

Co-working: Hype or here to stay? – Co-working premises have flourished in cities in the last few years: CBRE estimate about 4% of the central London stock is now co-working space while property guru Anthony Slumbers predicts that 40-60% of all workplaces will ultimately become co-working spaces.

Breaking Good – Guidance for the successful exercise of break clauses in commercial leases – In times of increased political and economic uncertainty, the prospect of a long leasehold interest in a commercial building is not as attractive as it perhaps once was, neither for landlords or tenants. To incentivise parties to commit, as well as provide a form of security, the implementation of break clauses within leases has become far more common in recent years.


Tax relief for EMI share options put in question – On 4 April 2018 HM Revenue & Customs announced that existing EU State Aid approval for the tax-advantaged share option known as Enterprise Management Incentive would expire on 6 April 2018.