Letters of credit – Guaranteed reimbursement?

Consultation on a product that guarantees reimbursement of UK confirming banks under letter of credit arrangements has started. The Export Credits Guarantee Department seeks views on such a scheme. Export finance has recently become harder to obtain and more expensive. The ECGD propose to launch the Letter of Credit Guarantee Scheme (provisional title). The LCGS would take the form of a master guarantee issued to participating UK banks, under which those banks cede to the guarantee potential exposure which they would incur by virtue of confirming letters of credit issued by overseas banks in favour of UK exporters. In respect of individual transactions ceded within the limits of the master guarantee, ECGD would guarantee repayment to the confirming bank of sums owed to it by the issuing bank.  Replies to the consultation paper are sought by 3 July 2009.

Limitation periods – proposals for reform

A bill is to be published later this year that will propose a “primary” 3-year period for contract (and other) claims starting from, broadly, the date on which the claimant knows of the facts which give rise to the action and a “longstop” 10-year period starting from, broadly, the date of accrual of the cause of action. 

The ‘Limitation Bill’ will be published in draft as part of the provisions of the Civil Law Reform Bill later this year (2009) for pre-legislative scrutiny.  The draft Limitation Bill is expected to follow the terms of the draft Bill that was published by the Law Commission in 2001 with their report, following their consultation on reform of the Limitation Act 1980.  There is a shorter, 31 page, executive summary from 2001.

CVAs: the future?

JJB Sports plc has been the first listed UK company to use a CVA successfully.  They have announced that 99% of the retailer’s unsecured creditors had approved a company voluntary arrangement which will facilitate a restructuring of JJB’s business.  It is believed that the restructuring will protect around 12,000 jobs by allowing JJB to survive as a corporate entity, while implementing a managed store closure programme.

This CVA is the first of this scale to pass without challenge or opposition from landlords who appear to have been persuaded by the fact the CVA provides for landlords to receive around £10,000,000 (or six months rent) and the landlords will accept rent on a monthly, rather than a quarterly basis.

Equality Bill

The Government introduced the Equality Bill to the House of Commons on 27 April 2009.  The Bill is to strengthen existing equality law and introduce new measures against discrimination. The Bill makes it unlawful to discriminate against someone aged 18 or over when providing services, which will include the provision of financial services.  The second reading is due on 11 May 2009.

The Privy Council on “appropriation” under the FCA Regs

The Privy Council have decided (5 May 2009) that it is not necessary for the person taking security in the form of share charges to become the registered holder of the shares for there to be a valid appropriation within the meaning of “appropriation” in Directive 2002/47 and the Financial Collateral Arrangements (No.2) Regulations 2003.  A pragmatic interpretation was required. 

The case arose in the British Virgin Islands and Harney’s, solicitors, have issued a report on it. They comment: “The case is the first known judicial decision anywhere on the interpretation of the Regulations … [it draws] a definitive end to the vexed preliminary issue under British Virgin Islands law.”

1) Cukurova Finance International Ltd (2) Cukurova Holding As V Alfa Telecom Turkey Ltd[2009] UKPC 19 PC (BVI) (Lord Hope of Craighead, Lord Scott of Foscote, Lord Walker of GestingthorpeBaroness Hale of Richmond, Lord Mance) 5/5/2009

Registration of charges created by overseas companies

The Department for Business, Enterprise and Regulatory Reform (BERR) has published revised draft regulations for the registration of charges created by overseas companies.  The Overseas Companies (Company Contracts and Registration of Charges) Draft Regulations 2009.  They have also published a note on the revised regulations.

The main changes are:

• The creation of a single regime applicable to all overseas companies that create a charge on property in England and Wales which closely follows the regime for English companies.
•  There is no longer a provision to determine whether property is situated in the UK.
• There are special rules for debentures that apply to English companies.
•  The rules for inspection of records that are generally applicable to private companies will apply to the inspection of overseas companies’ records in respect of the inspection of the register of charges and copies of instruments creating charges.

The Regulations are expected to come into force on 1.10.09.

Lending Regulation Bill – is it or isn’t it?

There is conflicting news about the progress of this Bill.  A commercial legal information provider this week reports it as having been withdrawn at its second reading in the Commons.   The Parliament website says there was not enough time to complete the debate before the end of the session on 27 February 2009,  so it has been postponed to 15 May.  Perhaps the Parliament website just needs updating to catch up with subsequent, unknown events.  If I find out what is really happening, I will let you know … The Bill is to impose requirements on lenders relating to the calculation of interest rates and to regulate the promotion of lending.

Trends in Lending

The Bank of England has begun a new monthly publication that presents the Bank’s assessment of lending to the UK economy.  The Bank say, this first report provides a longer-term perspective and is therefore more comprehensive than will be the case for future editions.

The report draws on existing monetary and financial statistics collected by the Bank and data from six major UK lenders that participate on the Lending Panel established by the Chancellor in November 2008. The report also draws on intelligence gathered by the Bank’s regional Agents and market contacts, as well as the results of other surveys. 

The main findings of the report are:

• Growth in the stock of lending to UK businesses slowed markedly during 2008 but looking ahead, some lenders expect the overall availability of credit to the corporate sector to increase over the next three months.
• Growth in the stock of mortgage lending to individuals has slowed sharply since the start of the financial crisis as credit availability declined. Lenders expect the demand for secured credit to remain weak in coming months.
• The availability of unsecured credit has tightened over the past year and weak demand for unsecured lending is expected to continue over the coming months.

Asset Purchase Facility

The BoE has published the first quarterly report on the transactions undertaken through its Asset Purchase Facility.  The objective of the Facility was to improve the liquidity in, and increase the flow of, corporate credit by making purchases of high quality private sector assets including commercial paper and corporate bonds.

The Facility was authorised by HM Treasury to purchase up to a total of £50 billion of private sector assets financed by Treasury bills. The first purchases of commercial paper began on 13 February.

Co-operative and Community Benefit Societies and Credit Unions Bill

This private member’s Bill received its second reading on 24 April.  The Bill is to:

• make provision for societies to be registered as co-operative or community benefit societies;
• to re-name the Industrial and Provident Societies Acts;
• to apply to registered societies the provisions relating to directors’ disqualification and
• to make provision for the application of certain other enactments relating to companies; to confer power to make provision for credit unions corresponding to any provision applying to building societies.