Subsidy Control

July 1st, 2021 by James Goudie QC in Capital Finance and Companies

Subsidy Control replaced State Aid six months ago. A Subsidy Control Bill has now been published.

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Director Duties

May 19th, 2021 by James Goudie QC in Capital Finance and Companies

A fiduciary, such as a company director, must not act in a position where his interest and his duty conflict or may possibly conflict. An exception is when there is fully informed consent, the burden of proving which is upon the fiduciary. As to informed consent, including implied consent, see John Reader v Spie Ltd (2021) EWHC 1221 (QB), in the context of an enhanced bonus on a TUPE transfer.


State Aid during Covid

April 15th, 2021 by James Goudie QC in Capital Finance and Companies

Damage is caused by an exceptional occurrence, such as the Covid-19 pandemic. The entirety of the damage is not made good. Not all victims receive aid from state resources. In Cases T-378&379/20, Ryanair v Commission, it is held that it does not follow that a measure benefitting an individual company is state aid and/or discriminatory, provided that the benefit does not overcompensate and is proportionate.



March 9th, 2021 by James Goudie QC in Capital Finance and Companies

The Duomatic principle, that anything a company’s members could do by formal resolution they could also do informally if they all assented to it, does not apply where the transaction would be ultra vires: Satyam Enterprises Ltd v Burton (2021) EWCA Civ 287.



February 25th, 2021 by James Goudie QC in Capital Finance and Companies

In Byers v Chen (2021) UKPC 4 the Privy Council affirmed, at paras 64/65, the Duomatic principle, that, where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be. The Privy Council also affirmed, at paras 68/69, that a director who has given the company proper notice of his or her resignation is not entitled to withdraw that notice, save with the consent of the company or possibly the ultimate beneficial owner.


Company Directors

February 9th, 2021 by James Goudie QC in Capital Finance and Companies

On disclosure by the director of a company of a conflict of interest, see Fairford Water Ski Club Ltd v Cohoon (2021) EWCA Civ 143. The disclosable interest may be of any kind, direct or indirect : para 43. What is then required is a clear declaration of the interest : para 45.


State Aid

December 29th, 2020 by James Goudie QC in Capital Finance and Companies

The Brexit deal agreement is accompanied by Declarations. These include a non-binding Joint Declaration of the UK and the EU on Subsidy Control Policies. These are described as “ guidance”. They may be “ taken into consideration” in the respective systems of subsidy controls.

The guidance is concerned with subsidies for (1) the development of disadvantaged and deprived areas or regions, (2) transport, and (3) research and development.

When determining the amount of subsidy for such areas, there may be taken into account (1) the socio-economic situation of the area, (2) the size of the beneficiary, and (3) the size of the investment project. However, (1) the beneficiary should provide its own “ substantial contribution” to the investment costs, and (2) the subsidy should not have as its “ main purpose or effect” to incentivise the beneficiary to transfer the same or a similar activity across borders.

Transport covers (1) airports, (2) roads, and (3) ports. Subsidies to road infrastructure projects may be granted if they are not designed “ selectively”, but provide benefits to society at large. It must be “ ensured” that open access to infrastructure is available to “ all” users on a “ on-discriminatory “ basis.


State Aid

December 29th, 2020 by James Goudie QC in Capital Finance and Companies

The UK will continue to have after 1 January 2021 a subsidy control system that will be legally enforceable. The subsidy provisions in the 1246 pages Brexit deal are however weaker than the EU’s initial proposals. These had been for the UK to align with EU state aid law. They are nonetheless stronger than the provisions of the EU’s free trade agreements with Canada and Japan. Indeed, many of the definitions and principles in the Brexit deal are similar to the EU State Aid system. There are features that the UK’s subsidy control system must include.

The Brexit deal sets out a definition of a subsidy, basically selective advantage, a list of common principles, and exemptions from prohibitions. The deal also addresses enforcement. There will have to be a Court or Tribunal for subsidy cases, and specified common remedies for breach, including recovery of a payment.


S 114 – (3) PWLB terms

November 26th, 2020 by Peter Oldham QC in Capital Finance and Companies, General, Judicial Control, Liability and Litigation, Local Authority Powers

Unlinked to any particular LA’s situation, the Government consulted earlier this year on revised Public Works Loan Board lending terms and guidance. The background was LAs’ involvement in the commercial property market as a means of increasing income, which had been the subject of much controversy over the years.  The extreme financial pressures now faced by LAs as a result of the pandemic brings this issue into particular focus. Yesterday (25th November 2020) the Treasury published its response to the consultation, and it can be found here.

As the consultation response explains:-

“In recent years a minority of local authorities have borrowed substantial sums from the PWLB to buy investment property with the primary aim of generating yield. The National Audit Office estimates that LAs bought £6.6bn of investment property between 2016-17 and 2018-19. The government is clear that this is not an appropriate use of PWLB loans.”

The response explains that from today, 26th November 2020, the PWLB (i.e. the Treasury) will apply a new approach to deciding whether to lend for a proposed project.  These include the following:-

“b) the PWLB will ask the finance director of the LA to confirm that there is no intention to buy investment assets primarily for yield at any point in the next three years. This assessment is based on the finance director’s professional interpretation of guidance issued alongside these lending terms.

c) It isn’t possible to reliably link particular loans to specific spending, so this restriction applies on a ‘whole plan’ basis – meaning that the PWLB will not lend to an LA that plans to buy investment assets primarily for yield anywhere in their capital plans, regardless of whether the transaction would notionally be financed from a source other than the PWLB.”

The response also announces that, now a workable system is in place to ensure that loans will “not be diverted into debt-for-yield activity”, PWLB lending rates from today for new Standard Rate and Certainty Rate loans will be reduced by 1%.

Peter Oldham QC


S 114 – (2) Croydon

November 26th, 2020 by Peter Oldham QC in Capital Finance and Companies, General, Judicial Control, Liability and Litigation, Local Authority Powers

On 11th November 2020, Croydon LBC’s s 151 officer wrote a report to the authority under s 114(3) of the LGFA 1988, which can be found here.  For the purposes of this series of posts, the interesting point is that the Council obtained clarification from CIPFA of the meaning of its guidance of June 2020, which I discussed in my earlier post today.

The s 151 officer’s report explains that in early September she issued a draft s 114 report to the Leader and others in the Council, and also sent it to the MHCLG, the LGA and the Council’s external auditors.  She explains that she did not issue a formal s 114 notice “as the conversations with MHCLG were ongoing”.  As we have seen, this was in accordance with the CIPFA guidance of June.

She reports that, on 6th November:-

“the Chief Executive of CIPFA clarified in a letter to Croydon Council that the modified guidance regarding the issue of S114 notices was as a direct result of costs incurred by the Covid19 pandemic. Croydon’s financial pressures are not all related to the pandemic.”

Stopping there, this clarifies the purpose of the CIPFA guidance of June 2020: that it was directed to pressures arising as a result of Covid. It was not meant to apply to situations where the financial crisis arose for other reasons, or other reasons as well.

The S 151 officer went on to explain that the financial pressures in Croydon also arose because of a misidentification of in-year savings as “new” savings; a greater risk of a group company, Brick by Brick, not making interest and dividend payments; a failure to identify medium term budget savings; and the continued incurring of non-essential costs. She also referred to the October report in the public interest under the Local Audit and Accountability Act 2014 from the Council’s auditors (s 24, Sched 7), which had detailed its deteriorating financial resilience.  She said:-

“I am not seeing the necessary level of pace, urgency or radical options to be presented to members to take decisions upon to give me confidence that the Council can make the level of savings required to deliver a balance budget in year, without external support in the form of a capitalisation direction.”

Peter Oldham QC