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Archive for the ‘Business Disputes’ tag

John Wick: Chapter 2(2017)

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Written by Rupert Wright

December 7th, 2016 at 1:55 pm

Misleading Statements From Directors – Actions Available to Shareholders

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When directors have made misleading statements there are a number of potential penalties and remedies available to minority shareholders. Rupert Wright, a corporate lawyer with Charles Lucas & Marshall explains.

Rupert Wright

Rupert Wright

Misleading statements by directors mainly relate to information and projections which are presented to investors which are false or misleading and which never had any hope of ever being fulfilled.

There are a number of options for redress by shareholders – whether under criminal law, common law or under the Companies Act 2006.

The first consideration in any potential criminal prosecution is the Code for Crown Prosecutors.  Any prosecution must comply with the evidential stage and the public interest stage.  A person is only charged with allegations of crime where both tests are met.  Potential criminal offences might include misleading statements in relation to investments, fraud by false representation, fraud by abuse of position and conspiracy to defraud.

Under Section 397 of the Financial Services and Markets Act 2000, there are three elements which the prosecution must prove to make out an offence: namely that a misleading statement was made, that there was a requisite state of mind and also that the defendant must have acted with the purpose of inducing any person to act or refrain from acting in a way specified or was reckless.  The maximum sentence for an offence contrary to Section 397 is seven years in prison although this would be reserved for the worst cases of its kind.

As well as a criminal claim, there are potential civil remedies for making a misleading statement.  In the case of a civil claim, the following matters need consideration: deceit, conspiracy, dishonest assistance, breach of fiduciary duties, unjust enrichment and knowing receipt.

The Companies Act lays down the various fiduciary duties for directors.  In particular, a director must act within its powers, promote the success of the company, exercise reasonable skill, care and diligence and avoid conflicts of interest.

It is also open to minority shareholders to make a derivative claim which applies where shareholders have suffered or may suffer damage to their shareholding as a result of the conduct of a director.  A derivative claim is an action commenced by a shareholder seeking relief on behalf of the company in respect of wrong done to the company.  It is also open to members to make an unfair prejudice claim under Sections 994 to 999 of the Companies Act 2006.  A claim under this section can be made where the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members.

In summary, there are a number of avenues open to shareholders to make a claim where misleading statements have been made by directors.  Directors can potentially face a wide ambit of potential criminal and civil claims and should consult their lawyers on a regular basis before making statements which could be potentially misleading.

For further information contact Rupert Wright on 01635 521212 or

Written by Rupert Wright

August 25th, 2014 at 3:31 pm

Business debts: “To Sue Or Not To Sue – That Is The Question”

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Paul Trincas, a litigation specialist at law firm, Charles Lucas & Marshall weighs up how far a business should go to recover money it is owed.

Paul Trincas

Paul Trincas

Very often, the first, and perhaps most natural reaction for a business owner faced with a customer or client who has failed to pay without good reason, is to sue for the monies owed.

However, to implement that initial reaction is not as easy or straightforward as you think it might be. Several business and economic factors need to be weighed in the balance before making the decision to sue.

Is there an on-going commercial relationship to maintain ?

It may well be that the monies owed are small compared to the overall gain to be

achieved by not pursuing it through the courts and securing future business worth significantly more, in financial terms, than the current sum owed.

Is the amount worth suing for ?

If the amount is of any significance, and all other measures to secure payment have failed, then it may well be worth suing through the courts. If you succeed in your claim, you would also be entitled to seek payment of your legal costs.

However, where the sum involved is £5,000 or less, then this will constitute a ‘small claim’, where normal costs rules do not apply. Instead, in such cases, the costs rule, subject to very limited exceptions, is that each party, win or lose, will have to pay its own costs. All the successful creditor will be able to recover are the court fee and limited fixed costs. This means that for lesser value claims, the whole exercise is not economically viable.

Will you actually get paid ?

Having succeeded in the action, you will get a Judgment, effectively ordering the customer or client to pay the money. But what if the client or customer does not pay? In this scenario, there is no magical formula for securing payment of your money. The client or customer will not go to prison for defaulting on payment on the Judgment as this is a civil debt and not a criminal matter.

You as the business owner, will then have to go back to court in order to enforce the Judgment debt in the most appropriate method, given the financial circumstances of your customer or client. However, further costs will be incurred in the enforcement process, and, you will only be able to recover limited fixed costs – normally a fraction of the total costs incurred in the enforcement process.

You can contact Paul Trincas on 01635 521212 or

Written by Paul Trincas

August 16th, 2013 at 4:09 pm

Improving Prospects for Business Acquisitions

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Business owners and potential acquirers are currently finding better prospects for growth in the Thames Valley where recent surveys show greater confidence. With bank lending still difficult though, Rupert Wright, a corporate services lawyer with Charles Lucas & Marshall, says buyers and sellers need to consider creative and pro-active methods to reach a suitable deal.

Rupert Wright

Rupert Wright

The general rule is that buyers tend to favour an asset sale while sellers prefer a share sale.  The main advantage for the buyer of an asset sale is flexibility since the buyer can specify the assets it wishes to purchase and also lower the risk since the buyer does not acquire any liabilities it does not specifically agree to.

For sellers, the main advantage is that the buyer acquires the whole company and therefore they are able to dispose of all potential liability. A recent case involving Dragon’s Den star, Theo Paphitis, emphasised how important it is to minute all matters as he was able to show that he had the interests of the seller company in mind when he had to defend an action for fraudulent breach of his fiduciary duties.

With the current difficulty in obtaining bank finance, deferred consideration will be an important element for disposals.  Acting for the seller, one of the key factors is security, since the buyer will resist personal guarantees.  However, debentures can be considered both for the company being acquired and also for the buyer company.

Another element that must be considered in the current climate is earn-outs.  This can be particularly important when a major part of the revenue is dependent upon one or two major corporate clients or where there is concern from the buyer that the departure of a key member of staff may have a detrimental effect on future trading performance.

Earn-outs should also be considered where there are declining sales, perhaps caused by an owner being unwell or absent from the business due to family or personal reasons. Earn-outs can be a factor where a high price is being sought by the seller and the earn-out protects buyers in order to ensure that they only pay for real tangible profits rather than potential profits that fail to materialise.

A management buyout is often a suitable way of a seller disposing of a subsidiary or certain key assets to its management.  One unusual way of dealing with the management buyout is for the seller to make a payment to its management team to assist it with the purchase.  This will assist the seller with closure and other possible redundancy costs and might well be a suitable way of disposing of its assets.

In summary, in the current economic climate where business prospects are improving, creative and proactive solutions are available which can work to the interests of both buyer and seller.  However, legal advice should be sought at all times at an early stage.

For further information contact Rupert Wright on 01635 521212 or

Written by Rupert Wright

April 13th, 2012 at 3:01 pm

Avoid Costly Business Disputes – Mediate!

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Business disputes detract the business owner away from their prime objective – to make money. Paul Trincas, Head of corporate services at law firm, Charles Lucas & Marshall, highlights the benefits of using mediation to resolve such disputes.

Business disputes, especially if they lead to litigation, can be costly. Courts nowadays, although they cannot compel anyone to attempt to resolve their business dispute, nevertheless expect the parties involved to at least have considered some form of alternative dispute resolution.

Mediation is one of the main forms of alternative dispute resolution – and one of the most successful.

  •  Why use Mediation ?

Mediation is a process of resolving disputes which is a relatively informal procedure and, if successful, will avoid further acrimony, the potential costs of litigation and the risk and uncertainties involved.

  • What is the success rate ?

Statistics show that the use of mediation to resolve business disputes has a high rate of success. Over 80 % of cases have a positive outcome to the parties.

  • What exactly is mediation ?

Mediation is totally outside the court process and involves, in effect, a without prejudice meeting between the parties, facilitated by an appointed and trained mediator, whose task it is to find common ground and “steer” the parties towards a settlement.

  • When to use mediation ?

Mediation can be used at any stage of a dispute. It can be used either before court proceedings or at any stage after court proceedings have commenced.

  • What types of disputes can Mediation be used for ?

Any – that is the beauty of mediation. Trained and experienced mediators are available who have experience in virtually any form of dispute.

  • What are the advantages?

If successful, the main advantages are:

It will bring finality to the dispute and certainty of outcome.

It will avoid either the costs of proceeding to court, or, alternatively, if court proceedings have started, it will avoid having to proceed to trial with all the costs and uncertainties involved.

It is independent of the court process and is a relatively informal procedure.

Although the mediator facilitates settlement, it is actually the parties themselves who come to their own agreement and model the terms of any agreement.

  • What costs are involved ?

These can vary, depending upon the nature of the dispute, the amount involved, the time required and the mediator appointed.

There are many organisations which provide trained and experienced mediators.

The parties will have to pay the mediator’s costs, shared equally.

If the parties have a legal representative and wish to have their legal representative present, then the parties will have to pay for their respective legal advisors. It is normally only in the more complex or larger claims that parties wish their legal representatives to be present.

If the outcome of mediation is successful, then it is time and money well spent.

For further information contact Paul Trincas on 01635 521212 or

Written by Paul Trincas

January 26th, 2012 at 8:42 am