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Employment law insight: what were the BBC’s obligations during the Huw Edwards scandal?

Posted on: March 7th, 2025 by Natasha Cox

The BBC have come under questioning regarding its handling of the Huw Edwards case in the wake of him pleading guilty to child sex offences on 31 July 2024. There is a particular focus on the period of Edwards’ suspension from July 2023, when he continued to receive his full pay of £475,000 per annum, and also received a pay rise of £40,000 during this time. We now know that the BBC were made aware of his arrest during November 2023. The underlying question here is whether his employer should have dismissed him at this point.

Putting aside the awful nature of his crimes, there is no getting away from the fact that, from an employment law perspective, the BBC had obligations towards Edwards until his resignation in April 2024.

Obligations during suspension

Once an employer is made aware of allegations of criminal activity and criminal charges relating to its employee, they are obligated to investigate to try and obtain as much information as possible.

Right to suspend

In most cases of gross misconduct (and more serious cases of simple misconduct), employers should consider suspending an employee pending the results of their investigation. Whilst suspension is by no means the default position, the ACAS code of Practice suggests suspension is acceptable if the employer reasonably believes it would be protecting any of the following:

  • the investigation: for example, if you’re concerned about someone damaging evidence or influencing witnesses;
  • the business: for example if there’s a genuine risk to your customers, property or business interests;
  • other staff; or
  • the person under investigation.

During the suspension, the employer will need to carefully consider decisions surrounding pay. Unless there is a clear contractual right to do so, the employer is not entitled to suspend a salaried employee without pay or contractual benefits.

In this case, if the BBC withheld or reduced Edward’s pay during his suspension, there would have been a risk of legal action by Edwards, although it is questionable whether Edwards would have wished to attract further media attention by instigating legal proceedings. In fact, there would still have been a risk of legal action, such as a claim of constructive unfair dismissal even if the contract allowed reduced or no pay during suspension.  

Would it have been fair to dismiss Edwards from November 2023, had he not resigned in April 2024?

Following the allegations, careful consideration ought to have been given to the pending disciplinary process and what action to take.

Prior to any dismissal, employers should consider the following:  

  • nature of the conduct: in cases of misconduct, consider whether actions or allegations relating to actions outside of work are sufficiently serious to warrant disciplinary action at work. Sometimes even cases that appear to be obvious misconduct affecting employment can lead to successful claims of unfair dismissal, such as in Walters v Asda Stores.
  • the evidence: when considering dismissal, the employer should endeavour to have as much information as possible prior to making any decision.
  • employee’s health: prior to any dismissal, the employer ought to consider whether there are any allegations or information to suggest ill-health on the part of the employee. If so, the employer ought to investigate the employee’s health. If the employee refuses to co-operate, it may be fair for the employer to dismiss.
  • the procedure: an employer must still follow a fair and reasonable procedure if an employee is accused of misconduct, including gross misconduct. What is fair and reasonable will vary from case to case, but there are certain minimum requirements, which ought to be followed in all cases. For example, employees have the right to be accompanied by a colleague or Trade Union representative at a disciplinary hearing.

In the case of Edwards, the complexity arises from the fact his criminal activity and convictions were unrelated to his work. Further, at the time of his arrest, the BBC claimed it did not have all the details surrounding the offences. It was also known that Edwards was hospitalized due to experiencing severe mental health issues which had worsened since the allegations were made. 

While criminal allegations or convictions alone may not justify disciplinary action or dismissal, there may still be grounds to dismiss. An employer may be able to establish a potentially fair reason for dismissal, if they can show there is misconduct sufficiently serious to justify dismissal for some other substantial reason. 

Employers may consider that an employee’s conduct (in this case criminal conduct outside of the workplace) is sufficiently serious to justify a dismissal on the basis that continuing to employ them would have a reputational impact. They would have to consider the nature of the offence and whether this will attract negative publicity. If so, they would need to consider reputational risk, as well as their health and safety obligations towards other staff, or service users. 

In the case of Edwards, given the nature of his offending, the reputational damage would have had a huge negative effect on the reputation of the BBC – a body that must be seen to uphold the highest standards. Had Edwards not resigned and the BBC continued to employ him, this would have exposed the BBC to disrepute, scandal and contempt. Edward’s link to the BBC could have caused sufficient damage to its reputation to affect the amount of licence revenue the BBC could generate for years to come.   

The BBC probably had all these considerations in mind when it decided not to dismiss Edwards. Edwards had not been found, or pled, guilty and the complex investigation was still ongoing. He was also hospitalised due to a mental health crisis. Failing to follow a fair and reasonable procedure, and disregarding his ill-health, could have exposed the BBC to liability for a claim of unfair dismissal. However, had Edwards not resigned in April 2024, the BBC would have had fair reason to dismiss him following his guilty plea.

When should an employer take action against the employee?

There are no hard and fast rules to apply when determining whether to go ahead with disciplinary proceedings when there is a criminal trial pending. The most important thing is for the employer to conduct its own investigations into the issues and to properly consider the options available in line with their requirements in the Employment Rights Act 1996. Employers have discretion whether to postpone disciplinary action where the employee’s misconduct is also the subject of a criminal investigation and prosecution. Even in emotive cases such as this, an employer ought to be careful not to act precipitously. 

BBC’s obligations to other staff

Whistleblowers who gave evidence to the BBC internal inquiry into Huw Edwards have criticised the way it was handled. One staff member says they were sent flirtatious private messages by the presenter in 2023. They complained that they had not been kept informed about the progress of the inquiry. Another staff member claimed that Edwards sent suggestive messages alongside a picture of his hotel suite.

Such allegations may constitute whistleblowing, which affords the employee various protections from dismissal and detriment, on the ground that they have made a protected disclosure. Providing effective protection for whistleblowers is important for several reasons, including:

  • encouraging a speak-up culture;
  • internal risk control;
  • limiting reputational damage;
  • protecting staff morale; and
  • avoiding unnecessary litigation.

If an employee is dismissed or is subjected to detriment on the ground that they have made a protected disclosure, this can expose the employer to potential tribunal claims for automatically unfair dismissal or whistleblowing detriment. Importantly, financial compensation in respect of these claims is uncapped, so employer liability can be significant.

When someone blows the whistle, the employer should explain its procedures for making a disclosure and whether the whistleblower can expect to receive any feedback. Often a whistleblower expects to influence the action the employer might take, or expects to make a judgement on whether an issue has been resolved, but this will rarely be appropriate.  

It is in the employer’s best interests to deal with a whistleblowing disclosure promptly. This allows the employer to fully investigate, make any further necessary enquiries and determine any appropriate action.  

There are several things an employer should do when a whistleblowing disclosure is made. It is important to make sure that as an employer, you:

  • handle any whistleblowing complaint fairly and consistently;
  • follow any process your organisation has for whistleblowing; and
  • keep the identity of the whistleblower confidential. 

The Government’s Whistleblowing Code of Practice encourages clear and prompt communications between the whistleblower and the employer. They should provide feedback to whistleblowers, within the confines of their internal policies and procedures. This is vital so that whistleblowers understand how their disclosure has been handled and dealt with. Failing to do so may result in the whistleblower approaching other individuals or organisations to blow the whistle externally. Therefore, it is strongly advisable for an employer to have a policy which explains the benefits of making a disclosure, the process and how the disclosure will be dealt with.

Takeaways from this case

It is reasonable to say that this case is far more complex than it may have initially appeared. If you need further guidance in relation to employee misconduct, suspension or dismissal, or you need a whistleblowing or disciplinary policy, please speak to our specialist employment team.

 

Celebrating gender equality on International Women’s Day

Posted on: March 7th, 2025 by Natasha Cox

Supporting women in the progression of their careers is important to us at Lawrence Stephens. We are proud to have established a Gender Equality Network (GEN) to drive equality initiatives forward. In its first year, GEN has developed a toolkit of supporting resources, held a panel event to explore allyship, arranged the provision of sanitary protection in the loos in our building and invited speakers to discuss topics from effective communication to hormone health. 

With International Women’s Day approaching, we decided to widen the conversation to mark GEN’s first anniversary. Over the last few weeks several members of the GEN committee and the wider firm were interviewed on the topic of equality in the workplace. Many interesting insights were shared, including the things we would say to our younger selves and what we would like to see change in the next decade. We put them together in a short film which was premiered at our International Women’s Day party yesterday. We look forward to sharing a shorter version of this video with you soon. We hope you enjoy watching it and that some of our insights resonate with you. 

This International Women’s Day we celebrate our brilliant female colleagues and our wonderful male allies with whom we continue our efforts to move towards greater equality at work and in society. 

 Who inspires you to use your voice to strive for greater equality?

 

Dominic Holden discusses encryption in The Times

Posted on: March 6th, 2025 by Natasha Cox

Director Dominic Holden explores the recent dispute between Apple and the Home Office over the use of end-to-end encryption and potential backdoors into user data, in The Times.

Dominic’s article was published in The Times, 6 March 2025, and can be found here. 

Apple refuses to open the backdoor, but at what cost?

The Home Office’s demand for Apple to provide them with a ‘backdoor’, allowing access to users’ encrypted data, has been met by simple refusal by Apple. In protest, the tech giant instead opted to entirely withdraw from UK users the ability to protect their data using Apple’s most advanced encryption feature.

End-to-end encryption is double-edged – and the arguments on both sides are compelling.

On the one hand, it allows users to better protect their private data from hackers and other prying eyes. On the other, it can allow criminals to avoid law enforcement’s digital surveillance. It can also be a minefield for prosecution lawyers hampering their ability to obtain disclosure of the documents they need to build a case against terrorists and others who have threatened national security.

Like many tech companies, Apple faces a dilemma. It must respect the laws of the jurisdiction in which it operates. However, security and privacy are at the heart of its offering. Kowtowing to the UK government, risks opening the floodgates to other governments making similar demands in spite of Apple’s privacy commitments to its customers.

As this debate rages on, it remains to be seen whether Apple’s solution sufficiently placates the UK Government, or whether the next round will involve a demand that a backdoor is provided for all data.

The creation of a backdoor is, by its very nature, a risk. It creates a vulnerability which could be exploited by hackers. It is perhaps for this reason that Apple has made this decision – either you have encryption (with no backdoor), or you don’t have encryption at all.

This approach, however, misses a nuance.

Permitting users to encrypt their data is an effective tool against hackers and will ward off the vast majority of opportunistic hackers. Although creating a backdoor may create a vulnerability for the most sophisticated of hackers to exploit, this must surely be a better option than a blanket removal of such a powerful weapon users have at their disposal?

Understandably, many will bristle at the idea of the Government being able to gain access to their encrypted data. However, given that we do not live in a police state and the vast majority of us are not up to no good, a backdoor could help to keep the public safe – provided that there is robust, considered legislation and supervision from the English Courts.

For now, Apple users should take stock of their data and consider that which they would most regret falling into the hands of a hacker. There are still, after all, many (non-Apple) services available that allow for the secure storage and transmission of your data.

For more information on our data privacy and data protection services, please click here

 

Helping children understand divorce and blended families: Our top book picks

Posted on: March 3rd, 2025 by Hugh Dineen-Lees

World Book Day, on the 6th of March, presents an excellent opportunity to explore literature that can assist families in navigating the complexities of separation and blended family dynamics. The emotional turmoil that often accompanies separation can make it difficult for parents to communicate effectively with their children. While each family’s circumstances are unique, the following books can serve as valuable resources to facilitate discussions with younger children about these significant changes.

Metaphors can be an effective tool in helping children comprehend and process difficult topics. The selected titles below not only address the issue of separation but also explore the dynamics of blended families, offering a gentle and relatable approach to these sensitive subjects.

Our Top Seven Recommendations

  1. https://www.andersenpress.co.uk/books/the-box-full-of-wonders/

  1. https://www.andersenpress.co.uk/books/the-hairdo-that-got-away-2/

  1. https://www.walker.co.uk/9781406341768/living-with-mum-and-living-with-dad-my-two-homes/

  1. https://www.walker.co.uk/9780744589252/two-homes/

  1. https://www.penguin.co.uk/search-results?q=two+places+to+call+home&tab=books

 

  1. https://www.andersenpress.co.uk/books/marry-me-mole/

  1. https://www.andersenpress.co.uk/books/luna-loves-library-day/

Key dates to enhance transparency and prevent crime within UK business

Posted on: March 3rd, 2025 by Hugh Dineen-Lees

As a reminder to those in charge of company administration, the Economic Crime and Corporate Transparency Act (ECCTA) became law in October 2023. It set out a phased timeline for new requirements on businesses to enhance transparency and prevent crime within UK business. In this summary we highlight the upcoming key dates to note.

We have reported on the objectives of ECCTA in this article by Isobel Moran.

From 25 March 2025 – Identity Verification

From 25 March 2025, individuals may voluntarily verify their identity directly with Companies House or via an Authorised Corporate Service Provider (ACSP). Identity verifications apply to all new and existing company directors and people with significant control. They also apply to members of LLPs.  

Identity verification will become compulsory and so it is advisable to do this as soon as possible to avoid missing the compulsory deadline. If you need any guidance or assistance, please be in touch.

Missing the deadline is an offence. The consequences include financial penalties and may prevent you from being able to make other filings on behalf of existing companies or setting up a new company.

From 27 January 2025 – Suppression of Personal Information

From 27 January 2025, individuals can apply to supress personal information from historical documents such as their home address, date of birth, signatures, and business occupation.

Additional protection will be available to those at risk of harm by protecting their information from public view.

From spring 2026 – Changes to Limited Partnerships

From spring 2026, LPs must: 

  • provide partners’ names, date of birth and usual residential address
  • verify the identity of general partners
  • provide a registered office address in the UK – this must be in the same country the LP is registered in, for example a LP registered in Scotland must have a registered office address in Scotland
  • provide a standard industrial classification (SIC) code
  • file an annual confirmation statement

LPs will need to file their information through an Authorised Corporate Service Provider (ACSP).

There will be new powers to:

  • close and restore LPs
  • apply sanctions
  • protect partners’ information
  • operate a statutory compliance process

These changes for LPs will be implemented following secondary legislation and so we are continuing to monitor these changes.

Please see our initial report on the objectives of ECCTA here. We will continue to provide updates as they come into effect. Now is the time to start taking action to verify the identity of the individuals behind your organisation. If you need any guidance or assistance, please be in touch.

Will Bowyer and Angelique Richardson named in first cohort of ISC 30 Under Thirty Awards

Posted on: February 28th, 2025 by Natasha Cox

Lawrence Stephens is delighted to announced that William Bowyer and Angélique Richardson Richardson from our Sports team have been named in the first cohort of the International Sports Convention‘s 30 Under Thirty Awards. These awards have been created to celebrate young professionals who have demonstrated exceptional talent, innovation, and dedication within the sports, media, and entertainment industries.

Will has been recognised as “one of the go-to advisors in the field of talent representation, sponsorship and image rights” while Angelique is described as “one of the UK’s leading sports lawyers”. 

Nigel Fletcher, CEO of the International Sports Convention, highlighted the importance of recognising young talent: “The ISC 30 Under Thirty Awards celebrate the next generation of sports industry leaders. We are committed to supporting career development and acknowledging those making an impact behind the scenes of the sporting world.”

The full announcement can be found here.

For more information on our Sports and Entertainment services, please click here

 

Dominic Holden comments on Apple’s end-to-end encryption in TechRound

Posted on: February 27th, 2025 by Natasha Cox

Director Dominic Holden comments on the news that Apple is set to withdraw its Advanced Data Protection feature from the UK, following a dispute with the Home Office over end-to-end encryption and enabling government access to user data. 

Dominic’s comments were published in TechRound, 26 February 2025, and can be found here.

Dominic’s comments are replicated below:

“Balancing privacy rights with the needs of national security is a tightrope that tech companies walk daily. In this case, it appears Apple have begun to teeter.

“End-to-end encryption allows users to more effectively secure their data and better protect it from hackers and other bad actors. However, it can also allow criminals to plot and conduct illicit activity.

“Aside from whether the public trust that a back door such as this will not be misused by the government, the danger of a back door is that it also creates a vulnerability which a hacker may be able to exploit.

“Apple’s decision to withdraw UK user’s ability to encrypt data removes an effective weapon to protect against hacking, whilst hackers and other bad actors will likely migrate to alternative encrypted services that the government cannot access.”

 

Alex Edwards explores loan enforcement and recoveries in Bridging & Commercial

Posted on: February 26th, 2025 by Hugh Dineen-Lees

Following the fallout of last year’s Autumn budget, Director Alex Edwards explores how recent legislative and political reforms have impacted loan enforcement and recoveries across the UK real estate market.

Alex’s article was published in Bridging & Commercial, 18 February 2025, and can be found here.

Seismic activity ahead in the land of BTL

Following the Autumn Budget, landlords and lenders are facing an incredible complex and ever-changing landscape when it comes to real estate finance. Alex Edwards advises on what to anticipate to avoid disputes around loan enforcement and recovery

Words by Alex Edwards, director at Lawrence Stephens

On first inspection, there was little in chancellor Rachel Reeves’ first Budget to concern either mortgage lenders or borrowers. The most attention-grabbing announcements have proved to be those on inheritance tax for farmers and increased employers’ national insurance contributions.

However, several aspects of this Budget are likely to create a volatile landscape for lenders and have a long-term impact on the UK mortgage industry, posing challenges for landlords and lenders alike.

Alongside these domestic political factors, which are likely to impinge on the UK real estate finance market in the coming months and years, are global geopolitical changes that could prove to be even more critical.

By far the most prominent probable cause of a profound economic shift is the election of Donald Trump as the next US president.

Trump’s second term, for which he is far more prepared than when he previously took office in 2016, will be a White House with radically different policies and intentions compared with the previous administration. Under Trump’s leadership, the world’s economic powerhouse will be more inward looking, adopting policies that could lead to higher costs, higher inflation and, in turn, higher interest rates in the US. These untested policies could impact growth in the US and in the UK.

Renewed and potentially expanding conflict in the Middle East, with the Israeli military action in Gaza and Lebanon bringing in Iran and other significant players in the region, could have far-reaching global effects. Instability in Taiwan, with China perhaps waiting for Trump to take office in January to launch an assault, could be another source of major financial instability.

Nearer to home, the fault lines of political cohesion in Europe appear to be fracturing.
How these macroeconomic headwinds will impact the UK as it settles into having its first Labour government in 14 years is yet to be seen.

Whilst the latest economic growth figures may have dealt a blow to Rachel Reeves, the softer than expected inflation figures suggest that there is now an expectation of interest rate cuts in the coming months which will be welcomed by borrowers. That said, with the concerns around the growth of the economy, the level of inflation predicted to remain around 3% for the rest of the year, uncertainty as to how fast interest rates will continue to fall and borrowers struggling when they come to refinance could therefore be the early indicators of a new or revived cost-of-living crisis on the horizon.

While not directly linked, the tax-raising policies in Labour’s Budget will have an undeniable impact on the housing market. Shortly after the budget statement to MPs in the House of Commons, UK government borrowing costs rose to their highest level this year. This prompted many City investors to predict that the Bank of England will now be more cautious in its approach to cutting interest rates, contrary to earlier expectations.

Nonetheless, there is still very much an expectation that interest rates will gradually come down.  

Prepare for enforcement

These issues will have to be carefully considered to avoid potential disputes around enforcement and recovery. Lenders will have to ensure their teams are well prepared. They will want to carry out thorough security reviews on loans and portfolios that could go under, and carefully consider what options are available to them before they start looking at formal enforcement.

Large numbers of borrowers on fixed low rates are now far more likely to be adversely affected when their rate deals come to an end. The most dramatic consequence will likely be an increase in defaults as fixed rates come to an end.

For lenders, it will be challenging to stay up to date with such a volatile market.

It is certainly plausible that borrowers whose budgets are already squeezed may struggle this year as these many factors combine to create a tough monetary environment.

Slower development

While there has been talk of 300 new planning officers—which is of course welcome—in reality, this likely equates to around one per local authority. In terms of the day-to-day workload, this is a drop in the ocean and is unlikely to improve the planning process or make it quicker and more efficient.

Despite Labour’s rhetoric around support for developments, building and unlocking the grey belt, planning applications taking longer to be processed (due to the lack of extra planning officers) will certainly have an impact on the new build market.

We are also seeing unit sales on developments taking longer than expected, which will continue to impact developers, at least until interest rates and construction costs stabilise.

Rental yields for landlords may also drop as tenants are more likely to be unable to afford to continue to pay rents as they too continue to rise. The risk of late or missed rent payments could leave landlords in an invidious position when servicing loans secured on their BTL properties. That said, with first time buyers continuing to struggle to gain a foothold on the property market, rental demand in urban areas is likely to remain strong. 

There will continue to be challenges for developers to access financing at cost levels which are profitable, which will have an impact on the number of large scale projects getting off the ground.

Perhaps insulated from these overarching issues is student accommodation, which is an ever-growing market, and the residential market in prime London, which seems to be in its own bubble. There is consistent appetite for these types of developments.

Lenders will need to be extremely conscious of such issues and monitor potential defaults and, given the state of the market, fully assess their options in terms of next steps.

Look at the loan book

Of equal importance is that lenders must look closely through their loan books. It is crucial that they scrutinise the financial condition of borrowers who may have only one or two properties, rather than that of professional landlords with more substantial portfolios who are better set up to weather such storms.

They may also want to consider the impact of the current market climate, propelled by the aforementioned changes in the Budget, on portfolios that operate on tight yield margins. For landlords, just like residential mortgage holders, the measures announced will heavily impact borrowing rates.

International investors in the UK’s real estate market may be less affected, although the well-signposted issues across Europe and the escalation with Russia following the US’s recent decisions around weapon supplies may change this for certain individuals.

BTLs can still be attractive to borrowers and lenders alike, but lenders should be alive to the changing landscape and the wider economic pressures faced on all sides. They should be continually monitoring the effect of changes brought about by the UK government and issues caused by global shifts to understand what this might mean in the long term for defaults or recoveries.

Dominic Holden explores cybersecurity for SMEs in Thomson Reuters Regulatory Intelligence

Posted on: February 24th, 2025 by Hugh Dineen-Lees

Director Dominic Holden explores the increasingly important role of cyber insurance for SMEs, and discusses how businesses can best ensure they are protected from cyberattacks, data breaches and hacking.

Dominic’s article was published in Thomson Reuters Regulatory Intelligence, 21 February 2025, and can be found here:

Cybersecurity_ a blind spot for SMEs – [regintel-content.thomsonreute

 

 

Sole directors under the Model Articles of association

Posted on: February 20th, 2025 by Hugh Dineen-Lees
  • The High Court has once again expanded on the confusing area of sole director decision making, where a company has adopted the Model Articles.

Confusion within the Model Articles

It is widely accepted that the Model Articles are free from inconsistencies and are suitable for all company incorporations. However, the Model Articles has faced scrutiny in the High Court on numerous occasions, as their suitability for companies with a sole director has been questioned.

Article 7(2) of the Model Articles states that if (a) the company only has one director, and (b) no provision of the articles requires it to have more than one director, the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.

On the other hand, Article 11(2) stipulates that the minimum number of directors required to hold a board meeting must be at least two (i.e., the quorum for a board meeting is two) and that no other decisions can be made (as a sole director) save for appointing another director.

The case of Hashmi v Lorimer Wing [2022] concluded that one director is not sufficient for a board meeting to be held and decisions to be made, given that a sole director is unable to create a quorum by satisfying the minimum of two directors that are required for a board meeting, as set out in Article 11(2).  

In contrast, in the same year, the case of Re Active Wear Limited [2022] concluded that a sole director has valid authority to make decisions on behalf of the company. It is important to note that the judge commented that this would not have been the case where the company has in the past had more than one director.

Whilst the decision of Re Active Wear Limited [2022] was welcomed, the confusion created by contrasting interpretations of Articles 7(2) and 11(2) of the Model Articles remained.

Clarification: Re KRF Services (UK) Ltd [2024] EWHC 2978 (Ch)

In the recent case of Re KRF Services (UK) Ltd [2024], the High Court has provided further clarification on the tension between Articles 7(2) and 11(2) of the Model Articles.

After consideration of the aforementioned cases of Hashmi v Lorimer Wing [2022] and Re Active Wear Limited [2022], the judge held that where a company has adopted Model Articles, the sole director has the authority to act under Model Article 7(2). The judge commented that, insofar as the company has adopted unamended Model Articles, Article 7(2) will triumph over Article 11(2). The Court distinguished the case of Hashmi v Lorimer Wing, as that involved a modification to the minimum number of directors, and the judge concluded that the historical number of directors is irrelevant in determining whether Article 7(2) will take precedence over Article 11(2).

What does this mean for companies that have adopted the Model Articles?

Whilst the case of Re KRF Services (UK) Ltd [2024] has provided some clarification and has indicated that the courts are leaning towards allowing sole directors to act where Model Articles have been adopted, it is important to note that it is a High Court decision which does not overrule the previous judgments. It has merely provided some clarification.

As a result, companies with a sole director and who have Model Articles need to be alert to the fact that decisions made by a sole director have previously been deemed to be invalid by the Court. Therefore, it is worth considering whether it would be commercially expedient to appoint another director to ensure all future board meetings are quorate and compliant with Model Article 11(2).

In our experience advising financial institutions in debt finance transactions involving corporate borrowers the preference is amending the company’s Articles. The amendment explicitly states that a quorum can be formed with only one sole director present, and such director has all powers of decision making. It is prudent for shareholders to ratify previous decisions of the sole director as part of this process. This documentation and amendment to the Articles can give comfort to sole directors that they can operate the company as they deem fit without the risk of challenge.

Supreme Court confirms the scope of Section 423 Insolvency Act 1986

Posted on: February 20th, 2025 by Natasha Cox

On 19 February 2025, the Supreme Court handed down its judgment in El-Husseiny and another v Invest Bank PSC which concerned itself with the construction of section 423 of the Insolvency Act 1986 (transactions defrauding creditors) (“Section 423”).

Section 423 is a powerful tool which provides recourse for creditors where a debtor transfers an asset for no consideration or at an undervalue for the purposes of putting the asset beyond the reach of creditors.

The fact that Section 423 is contained in the Insolvency Act 1986 is a red herring as it does not require the debtor to be insolvent or in an insolvency process to apply, and it can be brought by office-holders as well as a ‘victim of the transaction’. Furthermore, unlike other provisions in the Insolvency Act 1986, a transaction under Section 423 does not need to be within a specified period of time before the commencement of insolvency proceedings.

In the case of El-Husseiny the appellant attempted to argue that Section 423 could not apply as the property that was transferred belonged to a corporate vehicle and not himself. The Court disagreed and concluded that Section 423 is sufficiently wide to apply when a debtor causes their company to transfer the company’s assets at an undervalue, thereby resulting in the diminution of the value of the debtor’s shares. If this was not the case, it would prejudice a creditor’s ability to enforce a judgment against a debtor.

This judgment then went further and expanded the definition of ‘transaction, which is also found under sections 238 and 339 of the Insolvency Act 1986 (transactions at an undervalue with respect to administration, liquidation, and bankruptcy), thereby aligning the definition with Section 423. This was reached as it would be “impossible to think of circumstances in which a transaction was held to be within section 423(1) when it would also not appropriately fall within section 238 and 339” [para 64], and there is “no good reason for giving different meanings to transactions at an undervalue in section 238, 339 and 423” [para 72].

This is a welcomed decision for insolvency practitioners as they now appear to have greater scope from which to pursue debtors who may otherwise seek to hide behind corporate structures. It will also allow insolvency practitioners to look to set aside transactions under Sections 238, 339 and 423 even though the asset transferred was not beneficially owned by the debtor. We agree with the Court’s decision as had this decision not been reached, it would have undermined the purpose of Section 423.

The full judgment may be found here: https://www.supremecourt.uk/cases/uksc-2023-0080#judgment-details

For further information on our restructuring and insolvency services, please click here

 

 

 

 

Lawrence Stephens advises Tri Capital on two commercial property sales

Posted on: February 19th, 2025 by Natasha Cox

Lawrence Stephens have recently advised long-standing client Tri Capital Properties in relation to two commercial property sales which have completed within a week of each other.

The first comprised a partially let property in Thornton Heath where contracts were exchanged within ten working days of receipt of agreed terms. The second transaction was a complicated sub-lease of part of premises in West London. 

The transactions were led by Commercial Real Estate Director Craig Mullen who commented: “It was a pleasure to assist Tri Capital with these disposals.  The team at Tri Capital are always proactive and driven to achieve agreed deadlines.  A special mention must also go to the selling agents at Henshall & Partners, Acorn Commercial and Estate Office Property Consultants who were on hand at every step of the way.  I look forward to working with them all again very soon.”

For further information on our Commercial Real Estate services, click here