Forbes Solicitors
Corporate eNews  November 2019

'Fire sales' - the pros and cons of buying out of administration


Electronic Signatures: the new form of signing?


Ineffective notice renders SPA tax claim out of time


'Fire sales' - the pros and cons of buying out of administration

The financial gains to be made from buying a business out of administration can be significant. However, the potential risks involved can also be just as great. For this reason, it's vital that potential buyers consider the benefits and pitfalls of undergoing such process and take advice from experienced, specialist advisers.


'Fire sales' often take place either before an administrator being appointed, known as pre-pack administration, or purchasing a company from the administrator once appointed. Assets may be bought by a third party or a trade buyer, but the directors of the failed business often buy the assets and trade under a new company name.

The main benefit is the speed of sale, usually resulting in higher returns for creditors in comparison to alternative routes into insolvency.


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Electronic Signatures: the new form of signing?

Both the Electronic Communication Act 2000, which defines electronic signatures and its authentication, and the EU Regulation elDAS (Electronic Identification, Authentication and Trust Services), which seeks to standardise the use of electronic signatures, appreciate the rapid development of the digital age and specifically the shift to using electronic means as an alternative to wet ink signatures for commercial efficiency and convenience.

e signiture

Despite the existence of law in this area, in August 2018 last year, the Law Commission of England and Wales (a statutory independent body created by Parliament to review existing laws and recommend reforms) released a consultation paper containing its initial conclusions and proposals from its investigations into the statutory formalities surrounding the electronic execution of documents and deeds.

On 4 September 2019, the Law Commission published its report, the purpose of which was to 'address any uncertainty as to the formalities around the electronic execution of documents'.

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Ineffective notice renders SPA tax claim out of time

The following case serves an important reminder of strict compliance with contractual notice provisions and the significant repercussions of failing to draft them accurately.

Stobart Group Limited and another v William Stobart and another (2019)

In March 2008, Stobart Group Limited (SGL) entered into a Share Purchase Agreement (SPA) with William Stobart and another (Sellers) for SGL to purchase the entire issued share capital of Stobart Rail Limited (SRL/Company).

The SPA contained a tax covenant (Schedule 4, paragraphs 6.3 and 7.1) setting out the circumstances in which the Sellers would fall responsible for the Company's tax liability which incurred pre-Completion but which SGL became aware of post-Completion, in addition to seller limitation provisions, which aimed to limit the Sellers' liability in relation to such claims.


Agreement to agree: Court of Appeal rules SPA earn-out unenforceable

The following case serves as an important reminder of the importance of providing certainty within agreements and displays the perils of leaving the option to agree terms at a later date.

Morris v Swanton Care & Community Limited (2018)




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Share Buybacks - Proceed with caution!

An in-specie contribution is a viable alternative to transferring cash into a pension scheme, and can include assets such as property or shares. Dangers can arise where the shares held in the pension scheme are bought back by the company for cash.

Private limited companies can make use of a mechanism under the Companies Act 2006 (the "Act") to buy back their own shares (whether for cancellation or to be held in 'treasury') to provide an exit strategy for a shareholder leaving the business or to return value to one or more shareholders, in this instance the pension scheme.

A valid share buyback

A share buyback must comply with the prescriptive steps set out in Part 18 of the Act 2006. Quite often, the requirements of the Act for a share buyback are overlooked. Some of the key provisions which are frequently not complied with include:


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