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Legal Matters.....with McGrigors
The importance of the vertical agreements regime to companies in all sectors cannot be overstated: the rules have proved to be an indispensible and valuable source for analysing and assessing and compliance position of many commercial agreements. The original block exemption, implemented in 2000, introduced a regime based upon automatic exemption for restrictive agreements where market share thresholds were not exceeded and a limited black list of restrictions were not infringed (such as price fixing, export bans, etc). Whilst the substantive provisions of the old regime have not been fundamentally modified, there have been a number of key developments in order to reflect market developments (such as the increased buyer power of the big retailers and the evolution of online trade) since the original block exemption. The main change is to the market share thresholds. For an agreement to benefit from automatic exemption, not only the supplier's but also the purchaser's market share must not exceed 30%. This change is clearly motivated by the market power of larger retailers and distributors and will undoubtedly result in an increased and more onerous economic/legal analysis for the parties to a supply agreement. Another key feature of the new regime is the guidance of what types of restrictions to online sales are acceptable. There has been some fine-tuning of the passive/active distinction for online sales and the new guidelines are considered to be "internet friendly". In summary, they limit the ability of suppliers to restrict online sales and provide extensive examples of hardcore restrictions that would remove the benefit of the block exemption from online sales. There is also a new section in the guidelines analysing how the law should be applied to resale price maintenance ("RPM"), i.e. a supplier in some way imposing on a distributor a resale price which is not a maximum or recommended price. In this new section, which supplements the existing (and retained) section on RPM from the old guidelines, the existing rules on RPM are reiterated and its anti-competitive effects clearly enumerated. As with the old guidelines, the new guidelines leave no room for doubt as to the hardcore nature of RPM. In addition, however, the guidelines now set out the various economic benefits (efficiencies) that could potentially apply to the use of RPM for new products or promotions, but only in defined circumstances. It seems that these kinds of efficiencies will not be easy to demonstrate, but this change in the guidelines indicates that such arguments can be made. This is again a clarification of the current situation, but it is significant that the guidelines even hint at more flexibility for a form of restriction which has always been perceived as hardcore. Despite the similarities with the old regime, there are significant changes and developments in the new rules for vertical agreements. Companies will need to decide whether existing arrangements need auditing to ensure compliance with the new rules on (above all) the purchaser's market share and online trade. For further details on any of the matters raised in this article, please contact Richard Murphy (DDI: 028 9089 4844: E-mail: richard.murphy@mcgrigors.com) The contents of this article is provided for information purposes only and does not constitute legal or other advice.
That said, the cavalier spirit of investment displayed by some prior to the recession is unlikely to be a feature of the next couple of years. Not that long ago, there were investors whose modus operandi was to secure land first and worry about planning second. As stakeholders now look to be 100% sure that any potential development sites that they acquire are viable, it is likely that any contracts that do complete will be conditional upon full planning permission being obtained. However, a conditional contract that is badly or ambiguously drafted is a dangerous thing and here are some key points that should be borne in mind by any prospective purchaser. Who is doing what and when? If completion of his sale is dependent upon you getting planning permission, then your seller will want to make sure that the contract imposes positive obligations upon you to submit and then progress your planning permission as expeditiously as possible. Over and above this, your seller may seek to impose obligations on you not to pursue applications on competing sites and even to pursue an appeal against any planning refusal. From your perspective, your seller should be committed to assist you in obtaining planning. This should include not making any objection or other challenge in respect of your application as well as not pursuing any other application that might reduce the likelihood of your application being successful. Your seller should also be required to enter into any planning agreement that the planning service may require be entered into by the then owner of the land, provided that any such agreement will not impose an undue burden on him and you agree to indemnify him against any costs that he may incur in relation to any such agreement. What is a "satisfactory planning permission"? Completion of the sale and purchase of the property is likely to be conditional not just upon the grant of any planning permission, but upon the grant of a satisfactory planning permission. How such a term is defined is of great importance. From your seller's perspective, he will want this to be restricted by reference to a narrowly drafted list of unacceptable conditions tailored to the development referring to the likes of housing density or the net floor space or opening hours of your development. You will want it to be entirely a matter for you to determine whether any permission granted is satisfactory. Reference to your absolute discretion as opposed to your reasonable discretion would be preferable, but it would be hard to argue against the former and in any event there is case law that suggests that a court may still analyse the exercise of your discretion to check that it was properly exercised. When will you be bound to complete? For more information please contact Dawson McConkey, Director, at McGrigors Belfast LLP on 028 90894911 or by email to dawson.mcconkey@mcgrigors.com The contents of this article is provided for information purposes only and does not constitute legal or other advice. April 2010 Magistrates Court County Court The County Court of Northern Ireland deals predominantly with tortious actions and breaches of contract where the amount claimed is less than £15,000, libel or slander claims where the amount claimed is less than £3,000, equality and discrimination cases, and applications for licences to sell intoxicating liquor or licences for bookmaker's shops. It is usually quicker than litigation through the High Court, and relatively inexpensive as a result of the system of scale fees for both solicitors and barristers costs, as prescribed by The County Court Rules Committee. If a party is aggrieved by a judgement of the County Court, there may be a right to appeal either to the High Court by way of a full rehearing or to the Court of Appeal on a point of law. In March of this year the Northern Ireland Court Service published a Consultation Paper outlining a proposal to increase the jurisdictional limits for bringing cases in the County Court from £15,000 to £50,000. As yet no firm decision has been made on raising the financial threshold of the County Court and we await the outcome of the Consultation Process to assess the likely impact upon the Court hierarchy. High Court Deciding to commence litigation can be both daunting and indeed a costly process. It is important therefore to take appropriate advice to ensure that the most sensible commercial solution is achieved taking into account all associated litigation risks. Further, whilst parties often see a Court forum as their only option, there are a number of Alternative Dispute Resolution mechanisms available for parties to explore, such as Mediation, Adjudication and Arbitration. It is important for your legal adviser to ensure that all options are fully explained and assessed in line with your expectations and wishes prior to the commencement of proceedings. For more information on the commencement of civil proceedings in Northern Ireland and Alternative Dispute Resolution, please contact Heather Hoey, Senior Solicitor, at McGrigors Belfast LLP on 02890 894876 or by email to heather.hoey@mcgrigors.com. The content of this article is provided for information purposes only and does not constitute legal or other advice. March 2010 Background Decision The English Court of Appeal dismissed the appeal holding, inter alia, that where a director is effectively the "mind of the company" and where the document he signs makes a fraudulent misrepresentation to his knowledge then, even if the company would be liable for the deceit carried out by its director, the director has a personal liability for his own fraud. Where fraud is committed by a director, his status as director of the company can not be used as a shield from the liability for his own fraud. In addition, any recovery made by the liquidator pursuant to a fraudulent trading or wrongful trading action is paid into the general pool of assets which are available for distribution amongst all creditors. Lindsey Fleck is a Solicitor at McGrigors Belfast LLP. For more information Director's Personal Liabilities please contact Lindsey by phone on 028 90894829 or by email at lindsey.fleck@mcgrigors.com. The contents of this article is provided for information purposes only and does not constitute legal or other advice. Perhaps one of the most significant changes implemented by the Companies Act 2006 (the "Act") is the introduction of a codified set of directors' duties, which replace many of the existing common law and fiduciary duties, most of which have evolved through case law over the years. The duties apply to anyone occupying the position of a director, including those who act as directors without having been validly appointed and notably there is no distinction made between executive and non-executive directors. These duties are owed to the company although be aware that in certain circumstances shareholders are now able to bring a derivative action against a director for an unauthorised breach. The Magnificent Seven The seven general duties which can be found in sections 171-177 of the Act are as follows: • to act within powers; The Act is particularly prescriptive in relation to a director's duty to promote the success of the company for the benefit of its members as a whole by setting out some factors to which a director must have regard including, the likely consequences of any decision in the long term, the interests of any employees, the need to foster business relationships with suppliers and customers, the need to act fairly as between the shareholders and notably the impact of the company's operations on the community and environment. Clearly such a list is non-exhaustive and there may be competing matters bespoke to the market area in which the company operates. Although 'success' is not itself defined in the Act, the government has stated that in the context of a commercial company it will usually mean "long-term increase in value" driven by a director's good faith judgement. Practical ways to ensure compliance with the duties 1. Brief the board – ensure that all board members and management are 'up to speed' on the content and practical implications of their duties. 2. Know the constitution – directors to be familiar with limitations on the powers of the company and its directors and consider amending the Articles of Association. 3. Document it well – document the reason behind decisions and ensure that any significant ones are ratified by the members. 4. Insurance – ensure any director and officer insurance policies are updated to cover the defence of any derivative actions brought by shareholders under the Act. In addition to these duties, directors should be mindful of their other duties under other laws and regulations such as the duty of confidentiality and a duty to consider creditors' interests in a time of threatened insolvency. Sharon Gowdy is a Solicitor at McGrigors Belfast LLP. For more information on directors' duties and how directors can best ensure compliance in the conduct of their business feel free to contact Sharon by phone on 028 9089 4800, online at www.mcgrigors.com or by email. The contents of this article is provided for information purposes only and does not constitute legal or other advice . |
