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<h3>Companies House gets new powers</h3>
<p><a href="https://www.legislation.gov.uk/ukpga/2023/56" target="_blank" rel="noopener">The Economic Crime and Corporate Transparency Act 2023</a> introduced major changes to company law in March 2024. Most notably, the Act gave Companies House greater powers to query and verify information supplied to it (including ensuring identities of all directors and people with significant control have been verified), altering the role of Companies House from a passive authority to an active gatekeeper. These new powers mean that Companies House can now carry out investigations and even remove information provided to it.</p>
<p>Further changes to company law following the Act include the following:</p>
<ul>
<li>Companies must have an ‘appropriate address’ as their registered office and can no longer use PO boxes as their registered office</li>
<li>Companies incorporated from 4 March 2024 must confirm they are forming the company for a lawful purpose</li>
<li>New restrictions have been introduced on using company names that: contain ‘computer code’, suggest foreign government affiliation or give a misleading impression of a company&#8217;s activities</li>
<li>Companies House will have the ability to share data with other government departments and law enforcement agencies</li>
</ul>
<p>As part of the Act, Companies House will also be required to carry out <a href="https://companieshouse.blog.gov.uk/2024/09/13/authorised-corporate-service-providers-what-you-need-to-know/" target="_blank" rel="noopener">identity verification procedures</a> for anyone submitting information to the public register, including those acting on behalf of a company. But this change is not expected to be enacted until the end of 2026.</p>
<h3>Literacy Capital v Webb: a lesson on restrictive covenants</h3>
<p>A <a href="https://www.bailii.org/ew/cases/EWHC/KB/2024/2026.html" target="_blank" rel="noopener">case</a> before the High Court involving restrictive covenants served as a reminder to avoid making such restrictions unreasonably broad in terms of length, scope and geographical range.</p>
<p>In this particular case, the restrictive covenants were given by the founder of a business providing medical services to sexual assault referral centres (SARCs). Following the sale of her shares (25%) for around £7 million and a 12-month non-compete restriction, she formed a new company, which initially traded in unconnected fields. But towards the end of the 12-month non-compete agreement, it began to provide services to SARCs and won a contract with South Wales Police.</p>
<p>The buyer of her shares then applied to court for an interim injunction to enforce the restrictive covenants against her. However, the High Court found that the restrictive covenants were unenforceable due to being overly broad.</p>
<p>Notably, the covenants restricted the defendant from undertaking work that went ‘far beyond any legitimate protectable interest’, covered a geographical scope that spanned the entirety of the UK and Channel Islands, and were so long-lasting (in effect set to a maximum of 10 years thanks to the nine-year term of loan notes plus a further 12 months) that they would have banned the defendant from working in her chosen field until retirement age.</p>
<p>This case highlighted that the wider a restrictive covenant’s scope, the greater the risk of it being found unenforceable before the courts as a void restraint of trade. When negotiating and drafting restrictive covenants in investment agreements, it’s important to consider the extent to which the covenants should go to protect your legitimate business interests and no wider than reasonably necessary.</p>
<h4>What is a restrictive covenant?</h4>
<p>A covenant is essentially a contract or agreement between two parties, from the Latin word ‘convenire’, which means ‘to gather, to come together’. As the name suggests, restrictive covenants restrict one of the parties to the agreement from carrying out certain actions. Often these are used in employment contracts (e.g. non-compete, non-poaching and non-solicitation agreements), but they can also be used in shareholder agreements, real estate deals, and M&amp;A contracts, among others.</p>
<h3>Bland and Mayo v Keegan: family fallout highlights value of good secretarial practice</h3>
<p><a href="https://www.bailii.org/ew/cases/EWCA/Civ/2024/934.html" target="_blank" rel="noopener"><em>Bland and Mayo v Keegan</em></a> concerned construction company JDK Construction Ltd, whose sole director was Jeanette Keegan, despite the company being managed and controlled by her son Darren. In 2015, Darren’s wife Julie became the second director, acquiring 50% shares by transfer from Jeanette.</p>
<p>By 2019, the relationship between Julie Keegan and her mother-in-law Jeanette had broken down, and Julie Keegan unilaterally attempted to transfer half of the company’s shares from her mother-in-law to herself. To do this, she allegedly forged her mother-in-law’s signature by signing the stock transfer form as ‘J. Keegan’.</p>
<p>Then, when divorce proceedings began between her and her husband, Julie Keegan – as the sole member of the company – decided to appoint liquidators.</p>
<p>Despite her mother-in-law appealing against the High Court’s decision to uphold the validity of the appointment of liquidators, the court of appeal also upheld the decision and ruled in favour of Julie Keegan. This highlights the principles found in the Companies Act 2006 – reinforced by case law – that the entries on the register of members are presumptively valid and the members of a company are taken to be those shown on the register ‘unless and until the register is rectified’.</p>
<ul>
<li>See also: <a href="https://www.linnearlegal.co.uk/resources/uk-corporate-law-overview-part-1/">UK corporate law: overview (part 1)</a></li>
<li>See also: <a href="https://www.linnearlegal.co.uk/resources/terms-and-conditions-for-smes/">Terms and conditions for SMEs</a></li>
<li>See also: <a href="https://www.linnearlegal.co.uk/resources/how-to-issue-shares-in-your-company/">How to issue shares in your company</a></li>
</ul>
<p>Bizarrely, the court noted that an order for rectification of the register had been made but had been withdrawn for unexplained reasons as part of a settlement prior to this judgment being made.</p>
<p>This case provides a stark reminder that shareholders must ensure that their name has been written up in the register of members to provide for their legal ownership of shares (and connected voting rights within a company). It is vital for companies to maintain an accurate and up-to-date register of members to protect against forgery and fraud.</p>
<h3>Crypto-tokens: a new class of personal property</h3>
<p>Property law is a fundamental part of the UK legal system and arguably one of the principal constructs around which the entire Western legal system revolves. So of course, defining what does and does not constitute personal property is important.</p>
<p>Moreover, personal property is afforded certain rights depending on how it is categorised. Being classified as personal property can provide legal protections in the event of fraud or theft, and means being included in bankruptcy and insolvency proceedings.</p>
<p>Historically, English law has recognised two types of personal property: things in possession (e.g. cars, money, jewellery) and things in action (e.g. shares or debts). But digital assets such as non-fungible tokens (NFTs), cryptocurrencies and carbon credits do not fall neatly into either category.</p>
<p><a href="https://bills.parliament.uk/bills/3766" target="_blank" rel="noopener">The Property (Digital Assets etc) Bill</a>, introduced in Parliament in September, seeks to address this problem by defining a third category ‘digital assets’. This will make the UK one of the first countries to recognise digital assets in law, and the government are keen to position this move as a sign that they are leading the way in modernising the legal system.</p>
<p>While this bill may appear significant, it has been pointed out by legal experts that crypto-tokens and other digital assets <a href="https://blogs.law.ox.ac.uk/oblb/blog-post/2024/11/there-point-property-digital-assets-etc-bill">have already been recognised as personal property</a> in <a href="https://www.bailii.org/ew/cases/EWCA/Civ/2023/83.html">Tulip Trading Ltd v Bitcoin Association For BSV &amp; Ors</a>, and this bill is putting into statute what the Court of Appeal has already recognised.</p>
<h3>UK set to go ahead with Pisces intermittent trading venue in 2025</h3>
<p>An innovative type of private stock market is set to go ahead in 2025 that will provide investors with more opportunities to take stakes in private companies.</p>
<p>Currently under consultation with the Financial Conduct Authority (FCA), the Private Intermittent Securities and Capital Exchange System (Pisces) was announced in Chancellor Rachel Reeves’s Mansion House speech in November, responding to growing demand for investors to be able to trade in private companies more easily.</p>


Simon Walls

‘Next year we will ring the bell on a new private stock market that could transform how private companies access funds and grow. It will offer investors more access and a greater confidence to invest in private companies and could act as a stepping stone to public markets for those firms.’

<p>The government has confirmed that Pisces will be a regulated secondary market for trading existing shares in intermittent trading windows, initially running in a sandbox for five years.</p>
<p>The market will only be open to institutional investors, employees of participating companies and high-net-worth individuals. It is also worth noting that transaction reporting requirements will not apply, and buy-backs will not be possible – although this may change at a later date.</p>
<p>Details at this stage are few and far between, but FCA director Simon Walls had the following to say about the intermittent trading venue:</p>
<p>‘Next year we will ring the bell on a new private stock market that could transform how private companies access funds and grow. It will offer investors more access and a greater confidence to invest in private companies and could act as a stepping stone to public markets for those firms.’</p>
<p>Alongside this, the FCA is bringing about reforms to the UK’s markets by:</p>
<ul>
<li>Reforming the prospectus regime with the aim of making it cheaper and easier for companies to raise funds in the UK</li>
<li>Giving asset managers greater flexibility in funding investment research</li>
<li>Opening the Digital Securities Sandbox for facilitating ‘the use of developing technology such as distributed ledgers in the issuance, trading and settlement of securities in the UK’</li>
<li>Setting out a roadmap for regulating the promotion of crypto assets</li>
</ul>
<h4>What is a sandbox?</h4>
<p style="text-align: left;">A ‘sandbox’ is a controlled environment in which new products are tested live in the market. In investment terms, as of March 2024, His Majesty’s Treasury has the power to create financial markets infrastructure (FMI) sandboxes for the purpose of testing new technologies &#8211; generally in the context of FinTech. This follows the introduction of the <a href="https://www.legislation.gov.uk/ukpga/2023/29/contents">Financial Services and Markets Act 2023</a>, which was prompted by the FCA’s launching of ‘regulatory sandboxes’ in 2016.</p>
<h3>The Finance Act 2024: amendments to the Company Directors Disqualification Act 1986</h3>
<p><a href="https://www.legislation.gov.uk/ukpga/2024/3/contents" target="_blank" rel="noopener">The Finance Act 2024</a>, which received Royal Assent in February 2024, amended the Company Directors Disqualification Act 1986 (CDDA) by empowering HMRC to initiate disqualification claims against company directors involved in tax avoidance schemes, which was previously the remit of the Insolvency Service.</p>
<p>This amendment (specifically, Schedule 13 of the Act), also covers individuals who exert control or influence over a company despite not being listed on company registers, such as shadow directors.</p>
<p>Alongside the Economic Crime and Corporate Transparency Act 2023, this amendment signifies a greater focus on addressing corporate compliance and tax avoidance, as well as giving bodies such as HMRC and Companies House greater autonomy when it comes to nipping economic crime in the bud.</p>
<h3>Speak to a lawyer</h3>
<p>At Linnear Legal, we offer legal advice tailored to your business’s needs. To navigate the complexities of corporate law and ensure your business is best positioned for success, <a href="https://www.linnearlegal.co.uk/get-in-touch/" target="_blank" rel="noopener">speak to one of our lawyers today</a>. Take a look at our <a href="https://www.linnearlegal.co.uk/corporate/" target="_blank" rel="noopener">corporate law services</a> to see what Linnear Legal can offer.</p>


Corporate law 2024 roundup: key cases and developments

A roundup of the most significant cases and developments from 2024 in corporate law.

Corporate law 2024 roundup: key cases and developments | Linnear Legal

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