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Large private companies subject to new corporate governance and strategic reporting requirements
Friday 6th July 2018

New corporate governance rules and reporting requirements are set to apply for financial years beginning on or after 1 January 2019.

Draft regulations were laid before Parliament on 11 June 2018, requiring companies that have either:

  • more than 2,000 employees; or
  • a turnover of more than £200 million and a balance sheet total of more than £2 billion

to prepare a statement of corporate governance in addition to its yearly directors report. Along with a further strategic reporting requirement, requiring companies to include a section 172(1) statement in its strategic report.

What are the new requirements?

A “Statement of Corporate Governance Arrangements”

This statement must be made alongside a director’s report, stating:

  • which corporate governance code, if any, the company applied in the financial year;
  • how the company applied that code;
  • if the company departed from that code, how this was done, and why; and
  • if no corporate governance code was applied, the statement of corporate governance arrangements must explain the reasons for this decision, and outline what arrangements for corporate governance were applied.

The most appealing and what is expected to be the most commonly chosen corporate governance code will be The Wates Corporate Governance Principles for Large Private Companies. A draft set of principles was prepared and they will be finalised before the end of this year. The principles provide a concise code of practice for companies required to report on its corporate governance. 

A section 172 Companies Act 2006 Statement

A statement outlining how the directors have regard to the matters set out in section 172(1) (a) to (f) when performing their duty under section 172. I.e. a description of the ways in which the directors promote the success of the company. This statement must provide a meaningful description, and disclosures of information in consideration of the section 172 duties.

What needs to be done?

Both statements must be made available on the company website.

For the “Statement of Corporate Governance Arrangements”, companies should consider the choice of codes, and identify which is most appropriate.

For the section 172 statement, companies must ensure its directors are aware of section 172. And look out for the Financial Reporting Council’s revised guidance on how to prepare the report.

For more information on the new requirements, or corporate matters generally, please contact John Quinn or Rupert Gill.



High Court rectifies Share Purchase Agreement and Disclosure Letter to reflect parties’ “common intentions”
Monday 14th May 2018

In the recent case of Persimmon Homes –v- Hillier and others [2018], the High Court took the unusual step of rectifying the terms of a completed share purchase agreement (and related disclosure letter), in order to give effect to what the court believed to be the parties’ common intentions at the time of the deal, having regard to the nature of their pre-completion negotiations.

Persimmon Homes (“the Claimant”) had sought to acquire a site in Felbridge, West Sussex (“the Site”) which it had identified as being suitable for development.  The Site was split into a number of separately registered parcels of land.  These parcels of land were variously subject to options to purchase granted in favour of a number of companies (each of which were owned by the Defendants).

As the Defendants did not own the legal title to any land at the Site (and so could not transfer the land at the Site to the Claimant), the parties instead entered into a share purchase agreement (“the SPA”) in October 2012 for the Claimant to acquire the companies which held options over land at the Site (“the Target Companies”).  Once it had acquired control of the Target Companies, the Claimant would (it believed) be able to exercise the options to acquire the whole Site and commence its planned development works thereafter.

However, following completion it transpired that the Site comprised two further parcels of land in addition to those optioned to the Target Companies (“the Additional Parcels”).  The Additional Parcels were optioned to another company under the control of the Defendants, but which had not been acquired by the Claimant under the SPA.  Unfortunately for the Claimant, the Additional Parcels constituted the only means of accessing the Site from the road (and thus were of critical importance to the Site’s viability as a development site).  The Additional Parcels were, in effect, a ‘ransom strip’ retained by the Defendants.

The Court’s View - Caveat Emptor?

The Claimant brought court proceedings, arguing that the pre-completion negotiations showed that the parties envisaged that the Claimant, as an obvious commercial point, wanted to acquire options over the entirety of the Site.  The Claimant submitted, therefore, that the omission of the Additional Parcels from the SPA was a common mistake made by both parties which was suitable for amendment under the equitable doctrine of rectification.  The Defendants contended that the purchase price of circa £35m offered by the Claimant for the acquisition of the Target Companies indicated that the Claimant could not have intended the offer to include the Additional Parcels.  The Defendants further contended that the Claimant had simply misunderstood the offer, which was that the Additional Parcels were ‘available for purchase, but were not included in the present deal’.

On balance, however, the court was convinced by the Claimant’s argument that a mistake had arisen, and therefore stated its willingness to rectify the SPA.  It took the view that the SPA should be amended to expressly state that the Additional Parcels formed part of the Site (which hitherto had been described in unusually vague terms).  Making this amendment would prima facie place the Defendants in breach of a warranty that they had given under the SPA, which stated that the Target Companies had “good and marketable title” to the entirety of the Site.  The inclusion of the Additional Parcels into the definition of the Site rendered this warranty inaccurate, providing the Claimant with ground to sue the Defendants for damages arising therefrom.

However, the court was now faced with a further issue, which related to the Defendants’ Disclosure Letter.  A disclosure letter is a document commonly delivered to the buyer upon completion of a share purchase agreement, under which the seller discloses any inaccuracies in the warranties given under the main agreement (thereby removing a buyer with grounds to sue it in respect of such inaccuracies).

Within their Disclosure Letter, the Defendants had made a ‘specific disclosure’ against the abovementioned warranty, stating that the Target Companies did not in fact have “good and marketable title” to the Site, because technically the Target Companies actually only had options over the Site (“the Specific Disclosure”). Had the court allowed the Specific Disclosure to stand, then the Claimant would have been unable to recover from the Defendants for breach of warranty in any event, given that the Defendants had qualified this warranty by stating that it was, essentially, wholly untrue.

The court therefore deemed that it would be appropriate to also rectify the wording of the Specific Disclosure so that it stated only that the Target Companies “did not have good and marketable title to the Site (as they only had options to the four parcels therein)”. 

The effect of the two rectifications was that that:

  1. The Defendants were now giving a warranty under the SPA that they had good and marketable title to the entirety of the Site (including to the Additional Parcels) (the “Rectified Warranty”); and
  2. The Defendants were now giving a specific disclosure under the Disclosure Letter that they did not in fact have good and marketable title to four parcels of land at the Site (but made no mention of their title to the Additional Parcels) (the “Rectified Disclosure”)

Accordingly, the Rectified Warranty was inaccurate, and was not qualified by the Rectified Disclosure, meaning that the Claimants had a clear cause of action against the Defendants for breach of warranty.


This is an interesting case, as the courts are generally unwilling to interfere in commercial agreements made between sophisticated parties such as the Claimant and Defendants here.  The case highlights that the courts are willing to utilise their powers in order to ‘do the right thing’ where they are convinced that a clear mistake has arisen in the drafting of the documentation such that it does not stack up with the perceived pre-contract intentions of the parties.

It is worth noting that, although the Claimant was partially successful (in that the court rectified the SPA such that it had a subsequent claim for breach of warranty), it did not actually have the Additional Parcels transferred to it (an outcome which would have rendered the Site viable for development).  This would have required the company which owned the Additional Parcels to be made a party to the SPA.  The court was unwilling to do this given that, although it was under common ownership with the Target Companies, this company had not technically been a party to the negotiations in respect of the Site. 

The case is a timely reminder for parties to corporate transactions of any size of the potential pitfalls of failing to undertake a rigorous due diligence process in respect of a target company.  It is essential that the parties and their legal advisors work collaboratively to ensure that details of the target company and its assets are made available to the buyer promptly, so that the buyer may conduct its investigation of the same in order to gain an understanding of exactly what it is buying.  A buyer’s legal team should be able to call upon a wide range of expertise to ensure that their due diligence investigation is effective and that complex issues such as the above are ‘flushed out’ in good time prior to completion, allowing them to negotiate the inclusion of adequate protections for their client in respect of the same within the transaction documentation.

For more information on the topic please contact Alex Thow on 0151 600 3159 or via email


Changes to tax treatment of PILONs with effect from 6 April 2018
Tuesday 27th March 2018

From 6 April 2018 a new regime will apply to payments in lieu of notice (PILONs) paid on termination of employment.

The basic pay that an employee would have earned (had they worked their notice in full) will be subject to income tax and NICs.

The £30k tax-free exemption will no longer apply to PILONs, and the tax treatment of such payments will therefore no longer depend on whether a contractual PILON exists.

Employers will need to calculate the employee’s “post-employment notice pay” to determine what part of a termination payment is subject to income tax and NICs under the new rules. Only basic pay is to be taken into account in the calculation, such that overtime, bonuses and commissions, etc. can be ignored. The £30k exemption is being retained (for now) however its scope has been significantly restricted (statutory redundancy payments will, for example, continue to benefit from the £30k exemption).

It has recently been confirmed by HM Revenue & Customs that the new rules will only apply to payments made on or after 6 April 2018 in relation to an employment which itself is terminated on or after 6 April 2018 – there had been some confusion about the exact start date.

Although billed by the Government as being a measure to “clarify and tighten” the tax treatment of termination payments, the only winner appears to be HM Treasury – employees will typically suffer a higher income tax charge and employers will become liable for employer’s NICs (although who effectively picks up the cost of this will no doubt form part of the negotiation process).

Given the changes, and issues surrounding post-termination restrictive covenants, it would seem to make sense to always include contractual PILONs in employment contracts going forwards.

For more information on this topic, please contact Mark Whiteside on 0151 600 3269 or via email



2018 Private Equity Review and Predictions
Monday 19th February 2018

Following on from our Private Equity predictions for 2017, our Private Equity and Venture Capital team reflect on activity over the previous 12 months and give their predictions for 2018:

2017 was a strong year for fund managers raising new funds, globally Private Equity funds raised over $450bn, with $1 trillion now available to pour into companies (Reuters). Regionally, both Mercia and Spark Impact closed new funds, while pre-budget concerns of a potential tightening of EIS and VCT led to an early bump to fund raising, as investors attempted to invest money ahead of any rule changes. 2017 also saw new entrants into the North West market, with Waterland Private Equity establishing their first UK office in Manchester and completing their maiden investment (investing into Gas Tag Limited).

and 2018 will continue to be a strong year for the raising of new funds, supported by continued strong interest in PE funds generally and the Government’s commitment to make available a further £2.5 billion to the British Business Bank, to establish and cornerstone new funds.

Private Equity remained active acquirers through 2017, with strong buyout activity (up by 27% year on year), contributing to an increase in deal multiples (the typical multiple of profit that a buyer is will to pay to acquire a company).

and deal multiples will continue to increase in 2018, strong demand from both Private Equity and trade acquirers has already driven multiples to pre-2008 levels and the market shows no immediate signs of slowing. 2018 is therefore likely to prove an attractive time for shareholders to consider exploring exit and cash out opportunities.

VCT and EIS funds will become more active in the early stage funding market, as new “principle based” tests on risk to capital are introduced, to dissuade such funds from investing in safe established businesses. This, coupled with a continued focus by the Government on easing the gap for equity finance between London and the regions (such as through the establishment of a new regional angel funding initiative by the British Business Bank), will make 2018 a strong year for early stage SMEs seeking investment.

Funding from business angels will become an increasingly prevalent source for finance by SMEs, supported by the British Business Bank’s new regional angel initiative, the UKBAA’s continued work to support angel hubs and Brabners own collaboration with Tech North to establish and support a northern tech angel community.  We expect the northern angel ecosystem to continue to develop over the course of 2018.

Predictions contributed by Paula McGrath, Andrew O’Mahony and Daniel Hayhurst


Buying a pharmacy: Key issues to consider
Monday 2nd October 2017

Ahead of this year’s Pharmacy Show at NEC Birmingham, our corporate law and pharmacy transaction specialist, David Seddon, takes a look at some of the key issues you may need to consider if you are looking to buy a pharmacy. 

  • Obtaining Specialised Advice – Candidly, there is no substitute for securing both early and quality legal advice from a law firm which specialises in buying and selling pharmacies. As with any business purchase, the process can be demanding and pressurised and various legal and regulatory pitfalls await the unwary or unprepared. Obtaining specialised advice from an accountant who also understands the sector is an important consideration.
  • How much can you afford to pay? - Knowledge of your resources and what might be available from a lender will be key to purchase negotiations and paying the right price for the pharmacy. Financial projections are also be important; both to satisfy the requirements of your lender (if any) and to understand how the new pharmacy will fit into your existing financial modelling.
  • Due Diligence – Due diligence is fundamental in any transaction and the purchase of a pharmacy is no exception.  If properly conducted, it allows the buyer to check the health of the target business and to identify the business potential with a review of historic prescription sales and trends. Professional advice should be sought to ensure that you have identified all potential issues, so that these can then be dealt with before becoming too immersed in the transaction.
  • Fitness to Practise - Pharmacies are required to provide a Fitness to Practise declaration to NHS England before they can provide NHS services. As this is the backbone of a dispensing pharmacy, it is important to check there are no problems in satisfying these requirements before committing to buying a pharmacy.
  • Financing the Acquisition – Finance for pharmacy acquisitions is ordinarily obtained through either a pharmaceutical wholesaler or a bank. Should you opt for bank finance, make sure that you deal with that bank’s specialist healthcare team. We are well known to all the funders (who are happy to work with us as we understand their requirements) and can put you in contact with the right people, if required.
  • Structure of the Transaction - In the early stages of the negotiations, it will be decided whether the transaction will be a purchase of assets or shares. Where the pharmacy business is owned by a company, you will have the choice of buying: (i) the whole company, by acquiring its shares from its shareholders, or (ii) all or some of its assets, which may include the premises (freehold or leasehold), NHS contract, goodwill, staff and stock. If the pharmacy business is run by a sole trader or a partnership, then there will be no shares to buy and an asset purchase will be your only option. The advantages and disadvantages of both purchase methods, including the tax implications, should be discussed in advance with your solicitor and accountant.  
  • Pharmacy Premises – If a property is included in the assets being acquired, then the early use of a surveyor is vitally important. Your solicitors should also investigate the seller’s title to the property, to ensure (amongst other things) that it is free from mortgages or restrictions and can be legally used as a pharmacy. The GPhC will need to be notified of a transfer of ownership of any pharmacy premises within 28 days of the transfer of ownership taking place.

Members of our pharmacy team will be attending the Pharmacy Show at the NEC Birmingham on 8th & 9th October 2017. We will be exhibiting at Stand PG31Richard Hough, a pharmacist and lawyer, who is head of our pharmacy team, and David Seddon, a specialist pharmacy transactional lawyer, will be on hand to answer any questions you may have about our specialist legal service for pharmacists and pharmacy business owners. To arrange a meeting with either Richard or David, please get in touch using the details provided on their profiles. Alternatively, we would be delighted if you visited us at our stand anytime.


Specialist dental lawyer’s guide to growing a dental business
Monday 24th July 2017

As a niche lawyer working within the dental sector, I am often involved with businesses experiencing periods of rapid growth. Whether the quick growth strategy is the way forward for you is a personal decision, depending on your individual circumstances, but many practice owners would benefit from implementing a clear strategy for developing and growing their business.

The most obvious form of expansion for many practices is to consider an alternative income stream, most commonly through the development of a private patient base. The introduction of a payment scheme would often come with guidance from the scheme providers in terms of attracting a patient base. Offering a capital scheme payment plan is perhaps the most common and obvious way to add to the income of a practice. However, it is only going to work if you are attracting sufficient patients to cover any existing NHS obligations.

If you have space within your existing premises, this may also prove to be a useful way to expand your business. Many practices look to make arrangements with complimentary businesses – with the double benefit of receiving a rent for the room and attracting more people to the surgery. Alternative businesses such as chiropractors and podiatrists, were historically more common, but now aesthetics are proving popular. Whether the aesthetic services business is run by you or another business owner leasing space from you, their association with your surgery can bring a boost in terms of patients looking for a wider array of private treatments and it can also add to the ‘spa experience’ feel of a surgery. However, there are legal considerations to bear in mind; do you wish the tenant to have a right to remain and renew their lease at the end of the term, is planning permission necessary and will any letting arrangement breach the terms of your own lease (if you let the property yourself)? It is important to take independent legal advice on your practice property before going ahead with a letting arrangement, and it is strongly recommended that the terms of any letting be put in writing.

Another route forward in terms of growth would be to consider a new or expanded NHS contract. There are two ways this may be possible- the NHS in your area may have UDAs available for tender applications. Tendering is often highly competitive, but specialist companies may be able to assist with the process, improving your chances of success. An alternative way forward may be for you to acquire an additional practice with an existing NHS contract.

If you do look to acquire a second practice you then have several options. You may choose to run two practices, your own surgery and the newly acquired surgery. Alternatively you might look to migrate the patients at the newly acquired practice over to your existing surgery and close the second location. Choosing to close the second site would involve obtaining the consent of the NHS local area team, who would need to give consent to relocate an NHS contract. It is also worth taking advice as to whether you can either re-sell the second premises or whether any lease for that building can be terminated.

If you choose to run a second site, there may be some factors to bear in mind. Will you need a full staff at both locations or will there be some benefits in terms of economies of scale? Will you need a practice manager for each site? How will you split your own time between the surgeries? If you are likely to be present at one site more frequently than the other, how will you ensure that standards are maintained at both locations?

A common way forward is to delegate responsibility for day to day management of the second site to an associate. However, if you choose this route, it involves a significant degree of trust on both parts. You will also need to ensure that the associate is sufficiently well rewarded not to want to leave your practice and do the same thing for their own benefit. It is important to include effective provisions within their associate agreement to prevent them competing with the practice should they choose to move on. It is vital that such provisions are reasonable both in terms of timeframe and distance from your practice to be enforceable. If you aren’t sure then take advice on what is likely to be reasonable.

A second site would also need to be registered with the CQC in England. The application process for a second site is likely to be shorter, but you will need to consider whether you are to be the person with registration or whether this can be delegated to a registered manager who is on site. The way forward will depend on whether you feel comfortable taking responsibility for the practices at the second site, which will depend on how much time you are planning to be present at this site.

If your business does expand, you may then wish to consider the legal structure of your business. There are several options in terms of business ownership- the individual sole trader, a partnership, an expense sharing arrangement, an LLP (limited liability partnership) or a limited company. How you choose to structure your business is likely to depend largely on the tax position, so it is important to speak with your accountant. Any bank  which finances your business (or acquisition), will also need to be involved with the decision as to how to structure your practice, as they may refuse to lend on certain structures, or wish you to put in place certain arrangements or guarantees. Decisions as to structure may depend on the risks that are associated with your business, as structures such as limited companies and LLPs will protect any other personal assets from the liabilities of the business. If you have an NHS practice, you will also need to consider whether the contract will be transferred into a company name or whether arrangements for subcontracting may be possible.

Whether business expansion is something that is at the forefront of your considerations in your day to day practice management, or just something that you vaguely wish to do in the future, enlisting the help of specialist dental lawyers and accountants is a good first step. The dental team at Brabners regularly advises clients who are in the process of expanding their businesses and can offer advice and assistance having helped others successfully manage the process.


When can parent companies be liable for their subsidiaries?
Thursday 20th July 2017

A recent case has provided further clarification of the scope of the potential liability of parent companies for the acts or admissions of their subsidiaries.

The case confirmed that the fact that two companies form part of the same group does not in itself impose responsibility on the parent for the acts of its subsidiary. The level of specialist knowledge and reliance placed on a parent is particularly important to consider when establishing if there exists a duty of care.

In the case of His Royal Highness Emere Godwin Bebe Okpabi and Others v Royal Dutch Shell PLC and Shell Petroleum Development Company of Nigeria Ltd 2017 EWCH 89 (TCC)  a claim was brought roughly 42,000 Nigerian Citizens (“the Claimants) against Royal Dutch Shell PLC (“the Parent”) and Shell Petroleum Development Company of Nigeria (“the Subsidiary”). The Claimants sought to bring proceedings against both the Parent and the Subsidiary. The Parent argued that they should not be a party to the proceedings and that the only cause of action available was against the Subsidiary. The Court decided to look at this as a preliminary issue before allowing the claim to proceed.

In the Shell case the judge noted that the Parent:

• did not hold shares in the Subsidiary;
• did not conduct any oil operations;
• was not allowed to conduct oil operations in Nigeria; and
• unlike the Subsidiary was not a party to the Nigerian Joint Venture.

In limited circumstances a parent may be liable for its subsidiary in health and safety law. If a parent has ‘superior knowledge or expertise’ than that of its subsidiary in relation to the harm a judge may impose liability. In the Shell it was the Subsidiary, rather than the Parent, who had specialist knowledge and expertise in the oil industry in Nigeria. There was and no evidence to suggest it was relying upon the knowledge and expertise of Parent.  The judge held that the Parent did not owe a duty of care to the Claimants.

The best practice advice to reduce the risk of liability of a parent company for that of its subsidiaries would be to ensure that:

• the parent and subsidiary operate in different markets or the parents only business is holding shares in its subsidiary;
• the control exercised by the parent in relation to the subsidiary is minimal;
• those accountable for health and safety matters in subsidiaries are furnished with as much knowledge as those at parent company level.

For more information on parent and subsidiary companies liabilities or corporate matters generally please contact Rupert Gill on 0151 600 3106 or via email


Theresa May and Brexit
Wednesday 14th June 2017

Theresa May called a snap election in order to strengthen her mandate to negotiate the Brexit deal. She wholly failed in this stated aim.

This was an election in which politics were irrelevant to the Conservatives’ campaign. For the other parties, especially their main rivals, it was all about politics. So what did she ask us to show our support for? Her mantra was strong and stable leadership and the most capable to deliver in the Brexit negotiations. Within the message, the Conservatives campaigned on was their view that the opposition did not have stable leadership and was incapable of negotiating a sensible deal. Initially, all opinion polls were of the view that she would substantially increase her margin. So why did she fail to garner the support at the ballot box 6 weeks later.

A good negotiator is one who does not get (or look) flustered; who has a strong grasp of their own strengths and weaknesses; understands their own arguments; is lucid and able to carry and illustrate an idea; is able to listen and understand the arguments posed against them; can think on their feet; knows when to compromise and when to stick; is able to manage their own personality; can show empathy, can cajole, can resist and can reject in the right circumstances. Ideally, a negotiator will have charisma and charm to help carry arguments and persuade.

A good leader will ideally carry the majority of the above qualities, but must also be principled and able to stand up for their principles. Can a real leader be devoid of charisma and of personality in the World we now live in?

Throughout the 6 weeks of the election campaign, Theresa May managed to convince the electorate that she had none of the above qualities. In addition, she was incapable of answering what it was she was seeking to negotiate, other than to say that she was looking to negotiate the “best deal available”, an incomprehensible threshold. Interestingly, at the same time, the leader of the opposition appears to have travelled the opposite path and as well to have focussed on real political issues. In my view the electorate ceased to see this as an election to vote the best leader and negotiator of Brexit and fell back instead on their own beliefs and politics and the parties that best portrayed those.

What does this mean for the Brexit negotiations, due to start imminently? Thankfully, 95% plus of the negotiations will not have any personal negotiating involvement of the Prime Minister. They will be negotiated by a team of civil servants. The Prime Minister sets the scene. Having a publicly diminished status, the Prime Minister cannot be bullish in her attitude if she wishes to survive. She is more likely now to set a scene that is conciliatory and collaborative (if she is capable of that), at least across the breadth of her own party. She will also need to seek an approach that keeps the DUP on side. It will be interesting to see how this comes over in the public sphere by comparison with her last affray with Mr Juncker. It will also be interesting to see how her changed status will alter the tactics and public messages proposed by Mr Juncker and the European negotiating team.

We will be keeping an eye on the path of the negotiations and the tactics of the various negotiating parties over the next several months. 


The negotiation of Brexit from the perspective of a transactional lawyer
Monday 22nd May 2017

Negotiating a transaction

When approaching a transaction experience has shown us some of the key considerations are as follows:

  1. Information - each party should learn as much as possible about the other so that they are better able to understand areas of leverage, easy gives and no go areas.
  2. Leverage - the parties should evaluate the intrinsic factors of need, desire, competition and time pressures. For example, if a company’s business critical IT system fails they will need a replacement system straight away. As they enter into a deal for the supply of such a system their need will be high, they will be under considerable time pressure. Unless the system is easy and quick to procure from many competing suppliers, their leverage is less than someone who can wait several months to purchase a new system. 
  3. Analysis - the parties should carefully consider what all of the issues are, aiming to have no unknowns. They should consider also outside impacts and understand what they can control and what they cannot control. They should aim to isolate each issue and specifically reflect upon the relative importance of each individually.
  4. Rapport - it is key to establish a mutually beneficial working relationship with the other party. This can help to determine what type of negotiator each party is dealing with and whether or not they are likely to be cooperative.
  5. Expectations- it is important to set realistic expectations and then work to achieve them.
  6. Plan - the parties should have a flexible plan and strategy for the negotiation, flexible because unknowns and uncontrollables arise. A plan enables a party to drive negotiations.
  7. Available outcomes and alternative options- if the negotiation stalls and the parties reach deadlock it is important to effectively evaluate what the best alternative would be. You should always seek to understand what your own and the other side’s worst case scenario is. In the disposal of a company, the best alternative could be that another buyer immediately agrees to purchase the business at a better price. The worst alternative could be that a new buyer isn’t found and the company continues to operate. By contrast, the worst case scenario might be that the management team walk, that the buyer takes the customers or staff or that the business runs out of funds. As well as weighing up your own best and worst alternatives it is vital to be aware of the other side’s and also to have consideration as to whether or not they will be aware of your own. This enables pre-emption of the tactics the other side will employ in negotiation and allows an appropriate fall back, bottom line position to be set.     

Negotiating Brexit

The opposing sides in the Brexit negotiations have been doing their homework, gathering and analysing the information. The UK and EU are now laying out their opening positions. This is not going to be a quick negotiation, Article 50 specifies that the parties have two years to negotiate the withdrawal and the UK’s future relationship with the EU. By comparison, trade deals usually take decades to negotiate.

At this starting point in the negotiations, there are no immediate time pressures. It is acknowledged by both sides that there is much to achieve in the timescales, but given the short termism of politics, the time pressures are not yet taking any priority or providing any leverage in the negotiations. As a result, neither side has been prepared to take a particularly reasonable initial position, no easy wins will be given at this stage. In other words both sides have adopted aggressive unilateral positions in an effort to retain all of their respective bargaining chips.

Theresa May started by taking any monies the UK may or may not owe in the “divorce” off the table unless a sensible trade agreement can be reached, so seeking to prioritise the trade agreement over Brexit. This is at odds with the EU position, who wish to secure the terms of the “divorce”, especially the financial terms, before they will allow any concessions and favours in any trade agreement. The relatively easy ‘gives’ for the both sides, for example, the rights of EU citizens already resident in the UK and vice versa, are currently not on the negotiating table. From the UK’s perspective, raising and dealing with these at this stage would be prioritising the divorce, rather than prioritising a trade deal.

The way in which each party has laid out their positions and reacted says quite a bit about the negotiation behaviour that each party is looking to use. Theresa May appears to have taken a quiet but firm approach, with some no go areas raised early. This has been proposed and discussed in private over dinner, backed up with conversations entered into by her negotiating team with their opposition. She has attempted to establish a personal rapport with Jean-Claude Juncker, President of the European Commission, to enable principle issues to be aired, whilst keeping the detail of the negotiations out of the public eye.

Juncker has sought to establish himself as the EU’s “negotiator” and middle man. He has listened to what May is saying, but has proposed nothing and given nothing away. At this stage it suits him to negotiate as the mouthpiece of the members and he has stressed the need for the Commission to keep the EU Parliament and member states informed throughout the process. His position is at odds with that of Theresa May. Juncker sought to illustrate the power of this position by publicly unleashing the voices of his 27 members (apparently as one) when he reportedly stated he left ‘Downing Street 10 times more sceptical’ than he was before he arrived. A series of leaks from his visit have cast doubt on any genuine rapport between him and May.

Juncker has, in addition, claimed that the UK has not done its homework and is ill prepared. He claims that Theresa May has unrealistic expectations and believes that she cannot allow the UK to land in what he considers to be its worst case scenario, one where no deal is made. Theresa May has refuted each point, has claimed her position is perfectly reasonable as are the UK’s expectations, is apparently comfortable that all information gathering has been done and the team are fully conversant with all issues to be negotiated and resolved. On 2 February 2017 the UK produced a white paper entitled The United Kingdom’s exit from, and new partnership with, the European Union. Tucked away at the bottom was the following quote:

‘The Government is clear that no deal for the UK is better than a bad deal for the UK’

These two opposing tactics are unlikely to yield much in the way of progress. They oppose each other in such a way that there cannot be a meeting of minds, a real negotiation. If Juncker continues to listen in private and retort in public, less will be said in private and the party’s positions will become intractable. Within the context of a corporate transaction, at this stage, we would look to identify between which other individuals on the opposing teams a rapport could be built, whilst at the same time seeking to mend the damage already done. Obviously, various other tactics and behaviours will already be being used behind closed doors between the negotiating teams, as well as between the various states.

Any agreement between the EU and UK requires the ascent of the ‘qualified majority’, in other words 72% of the member states. One of the key considerations that the UK will have analysed (and will continually re-evaluate) is whether remaining 27 states are speaking as one, through Junker. Each member state may have different and potentially competing best and worst alternatives in the negotiation. This ultimately adds to the complexity of the negotiation and makes Juncker’s actions high risk. He has a powerful position whilst the member states appear to be as one, whether or not he has a rapport with his opposition; but if that ceases to be the case, then he will quickly cease to have any purpose in the negotiations (no longer the mouthpiece and with a negative rapport with the other side) and he would then be seen as obstructive and will be side-lined.

Any ‘deal’ will require, from both sides, creativity and empathy for the other’s position. Many concessions will be required to achieve this. The posturing we have just seen is just the initial positioning of the parties. The positions are not yet close enough for real negotiations to start. We would expect revised opening positions from at least one of the parties in order to provide a platform from which they can reasonably start to make concessions.

Whilst the opening positions of both the UK and EU remain far apart it remains to be seen how the negotiation will unfold. Adopting the transactional approach, seeking a common ground for a meeting of minds is most likely to provide a positive solution for both sides.


Record investment in northern tech businesses in 2016
Friday 24th March 2017

2016 proved to be a record year for investment in northern tech businesses according to data published by Tech North this week in their Investment Index Report.

The report indicated that there has been 1,551% growth on investment finance in northern tech companies with steady year on year growth in terms of both investment and deals over the last ten years.  

The figures for 2016 equate to a total of £326.9m of investments from business angels or venture capitalists with the majority of deals being made to finance growth or expansion.  Fintech has been highlighted as one of the top areas of investment while VR, wearable tech and AI have all been recognised as new and upcoming areas of investment.

With the Manchester digital space well established and the Liverpool digital space following closely behind, it comes as no surprise that the North West led overall for the total number of deals across the North.

It’s clear that the North is becoming more attractive to investors for a number of reasons.  Northern tech founders are not needing to look to relocate South in order to access investment or opportunities and investors are attracted to the North as they can see the ambition and quality of work coming from these companies. In addition, the North is still proving to be a much more cost effect location to set up a business, especially a digital business which does not always rely on a physical geographic location as a base. 

The report also indicates that investment opportunities are not just limited to investors in the UK with Northern Tech businesses receiving investment interest from places as far as Japan, the US and China.

With funding expected to begin arriving from the new £400m Northern Powerhouse Investment Fund, it is clear that there are a growing number of finance opportunities available to Northern businesses establishing themselves in the technology, digital and creative sector.

To find out more about accessing the right funding for your business, please contact Jayne Croft and Mark Rathbone.