New Acts

It has been interesting to watch the progress of bills going through Parliament this month.  Both Houses of Parliament officially prorogued on 12 November, marking the formal end to the parliamentary year and will meet again for the State Opening of Parliament on 18 November.  During the past month, nearly 40 bills have lapsed or been dropped.  The Government appears to be clearing the table to concentrate on the bills that are important to them.  During the prorogation announcement on 12 November, 13 Bills became Acts:

• Apprenticeships, Skills, Children and Learning Bill
• Autism Bill
• Coroners and Justice Bill
• Driving Instruction (Suspension and Exemption Powers) Bill
• Green Energy (Definition and Promotion) Bill
• Health Bill
• Holocaust (Return of  Cultural Objects) Bill
• Law Commission Bill
• Local Democracy, Economic Development and Construction Bill
• Marine and Coastal Access Bill
• Perpetuities and Accumulations Bill
• Policing and Crime Bill
• Welfare Reform Bill

A couple of bills, the Equality Bill and the Constitutional Reform and Governance Bill have the benefit of carry-over provisions so that, not having completed by the end of this Parliamentary session, they can continue their progress in the next session.  Other bills will have to be re-presented in the next session.  There is a bit more detail in my “Tracker“.

Rescue financing abandoned

The Government have dropped the idea of introducing rescue finance, with super-priority for new lenders to troubled companies, for the time being.

The Insolvency Service announced this today in response to the consultation, “Encouraging Company Rescue”.  You can see the range of replies to the consultation here; (name-check my firm, CMS Cameron McKenna ).

It seems there was a more positive reaction to the suggestion of a moratorium for companies that need a breathing space in order to agree restructuring proposals with their creditors.  We can expect more detailed proposals to be published in due course.

An article with more detail will shortly be published on www.law-now.com .

Emissions trading schemes

Emissions (or carbon) trading is the buying and selling of  the right to emit carbon dioxide.  It is a growing market, which worries both the Financial Markets Law Committee and Friends of the Earth although they make their arguments from, naturally, very different positions. 

The FMLC are concerned about legal uncertainties in the carbon emission allowances which underlie this market and have published a paper on this (October 2009).  The FMLC point out that in the European Union Emissions Trading Scheme (EU-ETS), the largest carbon markets scheme, nothing provides any indication of the legal nature of emission allowances. Emission allowances, they say, have aspects of administrative grants  or licences and of private property, and different conclusions as to their legal classification may already have been, or are in the course of being, reached in a number of Member States.

This matters because the legal nature of an emission allowance is relevant to decide which law govers the creation, transfer and cancellation of the allowance.  Are they capable of being stolen?  How do you treat them for tax and accounting purposes?  If the holder becomes insolvent, how should the allowance be dealt with?  If, as is happening, derivative interests in emissions are traded (allowances being recognised as a valuable financial commodity) should they be subject to regulation as an investment?

The FMLC believes that unless these issues are sorted out, they could slow down development of the market in carbon emission allowances.

Friends of the Earth, natuarally, have a different point of view in their report, “A dangerous obsession“.   They don’t want banks to risk a collapse in confidence in the market by trading in derivatives of carbon credits.  Taking a step back, in fact, they question whether carbon trading can reduce emissions levels effectively.  They want governments to use more direct tools, e.g, they say, investment and regulation.  The conclusion of their report demands the expansion of emission trading schemes to be halted globally, that the schemes be not linked, that offsets be removed from existing schemes and that schemes be reformed to avoid “abuse and profiteering by industry and finance”.  They draw a parallel with the uncertainty surrounding the trading of derivatives in emissions against the collapse of the sub-prime mortgage market.

The FSA has responsibility for regulation of the emissions derivatives markets.  It published a paper, “The emissions trading market: risks and challenges“ in March 2008.   The paper sets out some technical considerations for risk managment of the emissions market.  Personally, I think it is time they had another look at the topic, given this paper pre-dates the financial crisis.

The United Nations Climate Change conference is being held next month in Copenhagen. Iit is likely this issue will get more of an airing in the next few weeks.

Companies Act 2006

On 1 October 2009 virtually all sections of the Companies Act 2006 that had not been implemented earlier came into force.  This tour de force of UK legislation (the largest Act on the statute book, now)  has reached the end of its marathon along the implementation timetable.  The main areas of change are in relation to the formation of companies, the memorandum and articles, share capital, and directors’ home addresses.  This is a helpful note that is on Law-Now (my firm’s website) which sets out the detail of the new regime.

Debt buy-backs – not so popular?

The tax treatment of debt buy-backs has been changed with immediate effect.  A Ministerial Statement explaining this was published on Hansard  on 14 October.  This will affect any transaction that involves debt being bought back by a borrower group.  If a borrowing company is released from a liability and pays less than the amount borrowed in order to do so, the discount is normally subject to tax. Until now, the practice in such transactions was to rely on an exemption avoiding a tax liability.  Now, however, the rules have been tightened.  Are the reasons for this an underlying policy for all government departments to do what they can to swell the public coffers?  There was a perceived abuse of the exemption, e.g. by healthy companies buying back their listed debt at a discount without paying tax but surely overall, buying back debt should be encouraged? The Finance Bill, when published, will have details of the proposed legislation.

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.

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.

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.

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.