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October 2012
New Workplace Pensions Regulations & Changing Employment Terms
September 2012
Luxury Goods And Services, Website Contracts and Cookies
August 2012
The Olympics and Legal Implications of High Profile Events
July 2012
Hedging, LIBOR and Why Canadian Banks Are Setting Benchmarks
June 2012
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April 2012
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March 2012
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February 2012
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January 2012
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Visit Our Archive for previous newsletters covering Hospitality, Recruitment, Intellectual Property, Food & Drink, Commercial Property, Employment, Hotels, Restaurants, Start Ups and many other topics
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Visit Our Archive for previous newsletters covering Hospitality, Recruitment, Intellectual Property, Food & Drink, Commercial Property, Employment, Hotels, Restaurants, Start Ups and many other topics
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Find Previous Featured Articles
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October 2012
New Workplace Pensions Regulations & Changing Employment Terms
September 2012
Luxury Goods And Services, Website Contracts and Cookies
August 2012
The Olympics and Legal Implications of High Profile Events
July 2012
Hedging, LIBOR and Why Canadian Banks Are Setting Benchmarks
June 2012
May 2012
Employee Incentives and Share Option Schemes
April 2012
Hotels
March 2012
Marketing
February 2012
International Services
January 2012
Contract Law
Visit Our Archive for previous newsletters covering Hospitality, Recruitment, Intellectual Property, Food & Drink, Commercial Property, Employment, Hotels, Restaurants, Start Ups and many other topics
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Visit Our Archive for previous newsletters covering Hospitality, Recruitment, Intellectual Property, Food & Drink, Commercial Property, Employment, Hotels, Restaurants, Start Ups and many other topics
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Welcome to our March Newsletter!
Well Spring has officially sprung according to the press (but not according to the weather!) and with the clocks changing this weekend and brighter evenings ahead of us, it gives us a glimmer of hope that the weather will improve and positive times are upon is!
Green shoots are always a good sign in business especially for those starting out on a new venture.
Start ups usually need a cash injection to kick-start them and this month's theme is closely related to investment and an important part of any transaction - Completion Meetings. There are a number of matters to be put into place prior to completion in order to execute a transaction smoothly and without any delays.
We have highlighted key points a good completion agenda should cover and their importance in the process.
One way of encouraging investment in higher risk companies is tax relief. Enterprise Investment Schemes (EIS) are a way (subject to certain restrictions and requirements) for smaller companies to raise finance which provide for various different tax reliefs to investors.
Our client of the month is Carbonate Solutions, whose business is based on an innovation in technology relating to carbonated drinks using a revolutionary system called "Draftstream". They have successfully completed first round funding and are poised for round two. See their YouTube link here.
The technology Carbonate use has been patented to ensure protection from third party infringement. Our third article highlights how important it is to Register a Trademark correctly worldwide and the consequences if this is not actioned correctly.
If you have any queries or need advice in relation to any of the matters set out in this newsletter or any other legal issues, do not hesitate to call us on
020 3102 6372 or e-mail us at enquiries@fortunelaw.com. We are always happy to help.
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Shainul Kassam
Fortune Law Solicitors
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Completion Meetings: Things to Remember
Completion of a transaction is most often a real cause for celebration. The journey however can also often have been a complex one and it is very important to make sure that the small print has been carefully checked in advance to prevent any unforeseen complications. Whether you are completing on a lease, transfer of shares or a property, there are some key issues which need consideration in order for the transaction to be as successful and as seamless as possible.
Exchange and Completion
Exchange and completion can take place simultaneously, but in some transactions it may be necessary for there to be a gap between exchange and completion. The main advantage of a simultaneous exchange and completion is that it eliminates transaction risk during the intervening period between the two. If there is a split exchange and completion, additional negotiation and drafting will inevitably be required in order for the parties to agree and document how the transaction risk should be borne.
However, in some transactions the need for a split exchange and completion may arise, for example, where there are certain requirements that must be satisfied before the transaction can proceed to completion (such as obtaining a third party consent to the transaction). In such a scenario, the parties will have generally have two options:
- Delay exchange of agreements until all the requirements for completion are in place. This has the advantage of simplicity but does carry the potential drawback that the parties are not committed to proceed with the transaction until all the requirements for completion are in place.
- Proceed on the basis of a split exchange and completion. The parties will commit at exchange to proceed with the transaction subject to certain conditions being satisfied within a specified period following exchange. The parties will therefore gain certainty that the transaction will take place as and when the outstanding conditions to completion have been satisfied.
Completion Agenda
The key to a well organised completion meeting is the preparation of a completion agenda. In general, the more complex the transaction, the earlier the completion agenda should be produced. The agenda should cover:
Funding
The timing of money transfers can be a complicated arrangement at any completion meeting. It can be difficult co-ordinating when the money is to be transferred, depending on the stage of the process. One buyer may not feel comfortable handing over the money if they are not at a certain stage of the process, whereas the seller may not wish to continue without having the money in place as a form of security. A common protocol is for the buyer's solicitor to hold the money in a client account, and confirm this in writing to the seller that upon completion this money will be transferred.
Undertakings
Undertakings are commonly sought from solicitors to deal with fund flows or the transmission of original documents. A solicitor should always consider the Law Society Rules when giving an undertaking notably that it constitutes a binding obligation which must therefore be wholly within the control of the solicitor. This is also required when, as mentioned above, solicitors are holding client monies in an account upon completion. An undertaking must be given to the seller when the money will be paid, to whom and with what interest. Undertakings can therefore play a critical part in ensuring certainty and comfort for both parties.
Correct documents
Engrossment's of all documents to be signed at the completion meeting should be produced and carefully checked by lawyers acting for all parties. Particular care should be taken to check the most recent set of amendments have been incorporated and all documents are in agreed and final form. Leaving square brackets in unintentionally, for example, can cause difficulties if there is a subsequent dispute as to what was actually agreed. Documents will either be deeds or in simple form. The distinction is important because additional formalities are required for the execution of deeds. If these are not followed, a deed may not be enforceable. The main requirement is that a deed must make it clear on its face that it is intended to be a deed, must be witnessed and must be delivered as a deed.
Who is signing?
It is necessary to consider who is going to sign documents and when. Failure to have the right person available can cause unnecessary delays. There are a number of possibilities:
- A party executes a document and sends it to his lawyer to hand over at completion.
- A party appoints another person to sign on his behalf (by way of power of attorney - see below).
- A party (or an authorised signatory of a party) attends the meeting to sign in person.
Power of Attorney
If any documentation is due to be executed on behalf of a party by an attorney, it is important that authority has been given by way of an original power of attorney. The other party should ensure that the power of attorney has been executed correctly, and that its terms are sufficient enough to cover the attorney's actions at the completion meeting.
Post completion events
A number of matters must be dealt with after completion. These should be mentioned initially in the completion agenda, and include any of the following:
- Announcing the transaction
- Submitting stock transfer forms to HMRC
- Making any necessary filings with Companies House within the specified time period
- Writing up a company's statutory register
- Sending share certificates and other original documents to investors
- Registering charges at the Land Registry
- Registering leases of more than 7 years in duration
- Preparing a bible of transaction documents
If you have any queries surrounding the points to follow during a completion meetings, please do not hesitate to get in touch:
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Client of the Month: Carbonate Solutions
www.carbonatesolutions.co.uk
Grant Walker
 | | Grant Walker of Carbonate Solutions |
Tell us a little about Carbonate Solutions.
"Carbonate Solutions was set up to exploit a new and exciting technology allowing the on-trade to carbonate drinks at the point of dispense, negating the need for pressurised kegs. Not only that but it provides a platform for new draft drinks to enter the market such as sparkling wines and pre-mix cocktails.
The system known as "Draftstream" can be installed in pub cellars or self-contained systems can be mounted under bar counters. The system can be pre-set to varying levels of carbonation depending on the product being offered. Critically the taste and sight of the product is identical to any kegged or bottled alternative.
Carbonate Solutions holds the global patent rights for this technology."
Who is your target market?
"The technology is of interest to both drinks manufacturers and the on-trade. For manufacturers there are great financial advantages in being able to distribute their products via a "one-way" system using 20 litre disposable Bag in Box's rather than owning huge keg fleets. In particular the brewing industry has been suffering greatly with keg theft especially those involved in exports, whereby the keg has to be returned to the UK once the contents are consumed.
For the on-trade the system allows new drinks to enter their market at a time when attracting new customers is becoming of paramount importance. Also however, the system has benefits in terms of being able to mitigate storage requirements, reduce wastage and generally improve stock management."
What legal services did Fortune Law provide and what did you think of them?
"Fortune Law were involved with Carbonate Solutions at a very early stage, most critically, being involved in the drafting of the option and patent licence agreements which required a great level of detail and understanding of what we were trying to achieve.
Once these documents were signed off the next stage was providing a framework for us to go out and raise money under SEIS rules. We were delighted that our prospective investors were immediately satisfied with the shareholder and other relevant agreements provided by Fortune Law, enabling us to quickly and efficiently raise the maximum funding allowed under SEIS regulations.
We have been very impressed with their professionalism, thoroughness and importantly for us, the speed of turnaround for documentation drafting. We look forward to an on-going relationship with Fortune Law as our business develops and expands."
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Enterprise Investment Schemes
 The Enterprise Investment Scheme (EIS) is designed to help smaller higher risk trading companies to raise finance by offering a range of different tax reliefs to investors who purchase new shares in those companies.
EIS relief is available where a qualifying company issues new shares. The purpose of issuing these shares, and any others issued at the same time, must be to raise money for a qualifying business activity.
Investment in companies that are not listed on the stock exchange often carries a higher risk. The tax relief afforded in this manner is intended to offer some compensation for that risk on both income tax and capital gains tax relief.
The different tax reliefs available are:
- Income tax relief- provided an EIS qualifying investment is held for no less than three years, an individual can reduce their income tax liability by an amount equal to 30% of the amount invested.
- Capital gains tax exemption- none is payable on a disposal of shares after three years provided the EIS initial income tax relief was given and not withdrawn on those shares
- Loss relief- if EIS shares are disposed of at any time at a loss, such loss can be offset against the investors capital gains or income in the year of disposal or the previous year
- Capital gains tax deferral relief- tax on gains realised on a different asset can be deferred indefinitely. Deferral relief is unlimited.
The EIS shares must be subscribed wholly in cash (which includes payment by cheque and other means) and the cash must be paid in full by the time the shares are issued. In order to benefit from the relief, the relevant shares must be held for at least three years after issue or, if later, three years after the company begins to trade.
Who can qualify for EIS relief?
EIS relief applies only to individuals over 18 years of age and not, for example, companies or trusts. The individual does not need to be resident and ordinarily resident in the UK for tax purposes when the shares are issued but will need to be subject to UK income tax. There are certain restrictions however:
- The investor may not hold more than a 30% interest in the company
- No partner or associate of the investor (including spouse, relations, prior business contacts) may have other interests in the company
- The investor must not hold any form of preferential shares
- The investor must not hold any other form of controlling interest in the company
- This scheme must not be used for the purposes of evading tax
An investor's associates for these purposes include: spouse, children, grandchildren, parents, grandparents or partners in any business partnership of which the investor is a member or companies which the investor controls. Brothers, sisters, nephews, nieces, uncles and aunts are not considered to be associates for this purpose.
Which companies qualify for EIS?
The company has to meet a number of requirements regarding the kind of company it is, the amount of money it can make, how and when that money must be employed, and the trading activities carried on.
In order to qualify for EIS relief, the company:
- Must exist for the purposes of carrying on one or more 'qualifying trades' i.e. conducted on a commercial basis with a view to profit. HMRC have set out what does not constitute a qualifying trade
- Must be the holding company of a trading group, provided that it has one or more subsidiaries and the business of the group as a whole does not include a substantial amount of non-qualifying activities
- Must not have assets greater than £7 million
- All capital employed must be actively engaged in the company within 24 months
- The company must not be in specific industries
- Entry into the scheme is subject to a decision and audit made by an appointed tax officer
- The company must not be listed or have any intention of becoming listed at the time of the investment
Companies which HMRC consider are "in difficulty" are not eligible for investment under the EIS scheme. HMRC has, however, published as to when it will not consider a company to be in difficulty, such as within the first three years of operations.
If you have any queries relating to whether you as an individual or a company can benefit from EIS Relief, please do not hesitate to get in touch: 020 3102 6372 or enquiries@fortunelaw.com.
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Patent Protection
In the case of Les Laboratoires Servier v Apotex Inc [2012] EWCA Civ 593 the UK court for the first time found itself having to quantify the loss to a generic pharmaceutical company for being denied the opportunity of being the first generic product on what had previously been a monopoly market for a branded product. The case also highlights the potential difficulties that can arise when a patent is found to be invalid in the country of sale, but the equivalent is upheld in the country of manufacture.
Facts
Les Laboratoires Servier (Servier), a French pharmaceutical company, had patent protection in both Canada and Europe for the product, Perindopil, a drug used to treat hypertension. Though the European patent for Perindopil had expired in 2006, Servier obtained a further European patent covering a new crystalline version of the drug.
Apotex Inc (Apotex), a UK based generic drugs manufacturer, was advised that the European patent was invalid and based on this advice decided to launch its version of Perindopil tablets in the UK after obtaining the relevant market authorisation.
Servier subsequently commenced infringement proceedings against Apotex and also obtained an interim injunction preventing Apotex from manufacturing and selling the drug until validity and infringement issues surrounding the patent were properly considered by the court. In return Servier gave the usual cross undertaking to pay damages to Apotex for loss of opportunity in the event the court decided that the competing product did not infringe the patent or that the patent was invalid.
After a full enquiry, the European patent was held to be invalid by the High Court and Court of Appeal and the injunction was discharged. Following this decision Apotex sought to invoke the cross undertaking for damages given by Servier. In particular, Apotex claimed loss of profit on the products it would have sold in the UK had the injunction not been granted.
In a commercially focused judgement, the High Court awarded Apotex £17.5 million.
This decision, however, was later found to be incorrect by the Court of Appeal.
Although the European patent was found to be invalid, Apotex had manufactured the drug in Canada where Servier did have a valid enforceable patent in place.
Based on the principle that 'a claim cannot arise from immoral or illegal conduct', at the High Court hearing on remand it was held that Apotex was in fact not entitled to any damages under the cross undertaking given by Servier.
Apotex subsequently successfully appealed this decision and conceded that there should be deducted from the damages under the cross undertaking an amount equal to what the Canadian court would have ordered it to pay Servierin Canada for infringement of the Canadian patent had there been no injunction preventing sales in the UK. This appeal was recently allowed by the Court of Appeal.
This case is a clear example of the potential difficulties that can arise when a patent is found to be invalid in one country, but the equivalent patent is upheld in another.
The concession made by Apotex which ensured that Servier would be compensated for the Canadian infringements and that it would be in the same position as if no injunction had been granted no doubt played a significant role in the court's decision.
If you would like further advice on protecting your intellectual property including registering your patent as a UK Patent or Community Patent, or if you have been accused of infringing a patent, please do not hesitate to get in touch: 020 3102 6372 or enquiries@fortunelaw.com.
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