Wales

March 14th, 2018 by James Goudie QC in Capital Finance and Companies

The Local Authorities (Capital Finance and Accounting) (Wales) (Amendment) Regulations 2018 (SI 2018/325 (W.61)) amend the Local Authorities (Capital Finance and Accounting) (Wales) Regulations 2003 by: introducing new definitions of “securitisation transaction” and “money market fund”; providing that a securitisation transaction must be treated as a “credit arrangement” for the purposes of the Local Government Act 2003 s.7; making a substitution to provide for the calculation of the cost of a securitisation transaction; replacing the term “fixed asset” with the current terminology in local government accounting practice; making it clear that sums received by the local authority in respect of the redemption of a bond on its maturity, or disposal of a bond, must not be treated as a capital receipts, unless the bond was acquired before 1 April 2018 and the expenditure on acquisition was treated as “capital expenditure”; inserting a new reg.8A which provides that the value of any consideration received as a result of a securitisation transaction by a local authority must be treated as a capital receipt; removing the requirement that only capital receipts received in respect of a disposal of an interest in land other than housing land may be used to meet the costs of, or incidental to, the disposal, provided such costs do not exceed 4% of the capital receipt arising from the disposal; removing the requirement for expenditure by local authorities on the acquisition of loan capital to be treated as “capital expenditure”; extends the ability of local authorities to defer charging liabilities for back pay due to equal pay claims to revenue account until the date on which the local authority must pay that back-payment; and removing the reference to one of the documents identified as constituting “proper practices” for the purposes of the Local Government Act 2003 s.21.

 

State Aid

March 8th, 2018 by James Goudie QC in Capital Finance and Companies

Case C-127/16 P, European Commission v French Republic, ECJ Judgment on 7 March 2018, has concerned unlawful State Aid by SNCF in the context of restructuring and recapitalisation and the application of the private investor test to an assignment of debts en bloc.   The Court stated as follows:-

(1) In interpreting a provision of EU law it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it is part;

(2) The operative part of a Union act is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption;

(3) State aid law is not concerned with the legal forms that transactions may take, but rather focuses on their economic reality; Read more »

 

State Aid

March 8th, 2018 by James Goudie QC in Capital Finance and Companies

Does a transfer of property-related assets from the public to the private sector constitute State Aid. This was the issue before the Grand Chamber of the ECJ in Case C-579/16 P, FIH Holding A/S v FIH Erhversbank A/S, Judgment on 6 March 2018.  The Court reiterated:

(1) Classification of a measure as “State aid” for the purposes of Article 107(1) TFEU requires all of the conditions set out in that provision to be fulfilled;

(2) First, there must be an intervention by the State or through State resources;

(3) Second, the intervention must be liable to affect trade between Member States;

(4) Third, it must confer a selective advantage on the recipient;

(5)  Fourth, it must distort or threaten to distort competition; Read more »

 

PRUDENTIAL FRAMEWORK

February 5th, 2018 by James Goudie QC in Capital Finance and Companies

Statutory Guidance (3rd Edition) on Local Government Investments, under Section 15(1)(a) of the Local Government Act 2003, and effective for financial years commencing on or after 1 April 2018, has been published on 2 February 2018.  Also on 2 February 2018, Statutory Guidance (4th Edition) on Minimum Revenue Provision has been issued, under Section 21(1A) of the 2003 Act.  Both were preceded by consultation on proposed changes and are accompanied by a summary of consultation responses and the Government’s responses to those responses.  This document states:-

“Following consideration of the consultation responses the Government, in summary, intends to:

  • make some technical changes to the Investments Guidance and the MRP Guidance reflecting respondents’ feedback;
  • amend proposals related to the Useful Economic Lives of assets;
  • implement the Investments Guidance for 2018-19, but allow flexibility on when the additional disclosure first needs to be presented to full Council or its equivalent; and
  • defer implementation of MRP Guidance to 2019-20. This is in recognition of the fact that it is very late in the 2018-19 budget setting cycle.”

 

State Aid

December 4th, 2017 by James Goudie QC in Capital Finance and Companies

The Ricoh Arena saga continues. In JR1 Coventry City Football Club’s owners, SISU, failed up to the Supreme Court in their State Aid challenge to Coventry City Council’s £14.4m loan to the company, ACL, which the Council half owned that operates the Arena. The Market Economy Investor Principle was satisfied.

SISU have now brought JR2, which is to be heard on 2/3 May 2018. This seeks to challenge as State Aid the Council’s subsequent deal with Wasps Rugby Club.  On 28 November 2017 the Court of Appeal gave interlocutory rulings, allowing SISU to amend its claim, provided that the case on State Aid was confined to the lease extension granted by the Council to ACL, and allowing the introduction of expert evidence.

 

Infrastructure projects

November 24th, 2017 by James Goudie QC in Capital Finance and Companies

The Treasury has on 22 November 2017 confirmed that it will lend local authorities in England up to £1 billion at a new discounted interest rate of gilts + 60 basis points, accessible for three years, with a maximum term of 50 years, to support infrastructure projects that are “high value for money”. Details of the bidding process are to be published in December 2017.

 

Capital finance and companies

November 13th, 2017 by James Goudie QC in Capital Finance and Companies

CLG is consulting, from 10 November to 22 December 2017, on changes to the prudential framework of capital finance, set out in the Local Government Act 2003, Regulations and CIPFA Codes, and in particular statutory guidance on local authority investments and guidance on minimum revenue provision, applying to local authorities in England.

The Statutory Guidance on Local Authority investments (“Investments Guidance”) covers proper practices that local authorities are required to follow when making investment decisions. It gains its statutory status from Section 15(1)(a) of the Local Government Act 2003, under which local authorities are required to have regard to such guidance as the Secretary of State may issue.  The Investments Guidance was last updated in 2010, following Parliamentary inquiries into local authority investments in Icelandic Banks. As a result the Investments Guidance was very focused on investments in financial institutions. Read more »

 

Corporate veil

November 1st, 2017 by James Goudie QC in Capital Finance and Companies

In Persad v Anirudh Singh [2017] UKPC 32 Lord Neuberger reaffirmed, at paragraph 17, that piercing the veil of incorporation is justified only “in very rare circumstances”.  It can be justified only where a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control, as made clear by the Supreme Court in VTB Capital v Nutritek [2013] 2 AC 337 and Prest v Petrodel [2013] 2 AC 415.  Lord Neuberger further reaffirmed, at paragraph 20, that the fact that a company is a “one man company” is irrelevant: Salomon v Salomon [1897] AC 22.  It is a fallacy to suppose that the Court can pierce the corporate veil where the purpose of interposing a company into a transaction is to enable the owner or controller of the company to avoid liability.  Lord Neuberger said, at paragraph 21, that use of terms such as “front” or “alias” can too easily be invoked to justify a wrong decision.  The company has a distinct legal personality. As Lord Neuberger observed, at paragraph 22, cases such as Gilford Motor Co v Horne [1933] Ch 95 and Jones v Lipman [1962] 1 WLR 832 were distinguishable.

Not only did the person who set up the company in those cases have an existing relevant legal obligation which he was trying to avoid by entering into a transaction involving the company, but also the involvement of the company was unilaterally effected by the person concerned, without the knowledge, let alone the consent, of the other party.

 

State Aid

October 11th, 2017 by James Goudie QC in Capital Finance and Companies

There is an obligation on public authorities to recover unlawful State Aid. The nature of this obligation has been considered by Advocate General Sharpston in an Opinion delivered on 10 October 2017 in Case C-363/16, European Commission v Hellenic Republic. Read more »

 

State Aid

September 29th, 2017 by James Goudie QC in Capital Finance and Companies

For a measure to be classified as aid within the meaning of Article 107(1) TFEU, all the conditions set out in that provision must be fulfilled. First, there must be an intervention by the State or through State resources. Secondly, the intervention must be likely to affect trade between Member States. Thirdly, it must confer an advantage on the recipient by favouring certain undertakings or the production of certain goods. Fourthly, it must distort or threaten to distort competition. The application of Article 107(1) TFEU may entail a verification as to whether an entity should have been regarded as an undertaking, within the meaning of EU competition law. Read more »