UPDATES FROM OUR LONDON BRANCH
Your source of financial, corporate and commercial law insights
Week of November 6, 2023
Greetings from the London office of Grimaldi Alliance!
We are excited to bring you the latest news and updates from the heart of the UK’s vibrant legal and business landscape. Our team of legal experts is at the cutting edge of corporate, financial, and commercial law, pioneering innovative and strategic solutions to our clients’ most complex challenges. Below is a glimpse of our recent impact in London and across the UK.
Highlights from the London Office
Our firm has recently advised a client, world leader in its category of products, in relation to the termination of an agreement concerning a sophisticated and complex sale workforce. The agreement was complex and the advice involved aspects such as the definition of the scope of the exclusivity, the determination of a reasonable notice, and other crucial elements under English law. We have been working closely with our client in order to understand their needs, to evaluate the pros and cons of the existing agreement and to identify the specific objectives that it was trying to achieve in the UK market. We have conducted a thorough review of English law on all relevant legal issues, which has enabled us to advise our client on the specific steps to take to terminate the agreement in a legally enforceable manner, and to reorganise their sale force in a manner better suited to the new market conditions.
Navigating Legal Waters
Agency or Distribution: Key Characteristics
Agency and distribution are two common channels to market for manufacturers. They both involve working with third parties to sell products to customers, but they have different legal structures and implications.
In an agency relationship, the manufacturer (principal) appoints the agent to represent them and sell their products. The agent acts on behalf of the principal and negotiates and/or concludes contracts with customers. The agent is typically paid a commission on sales. In a distribution relationship, the manufacturer sells products to the distributor, who then resells them to customers as an independent business. The distributor owns the products and has the contractual relationship with the customer.
There are a number of key differences between agency and distribution, including: 1. In an agency relationship, the manufacturer owns the products until they are sold to the customer. In a distribution relationship, the distributor owns the products from the time they are purchased from the manufacturer. 2. In an agency relationship, the customer contracts with the manufacturer, even though they are dealing with the agent. In a distribution relationship, the customer contracts with the distributor, not the manufacturers. 3. Agents are typically paid a commission on sales, while distributors are typically paid a mark-up on the products they sell. 4. In the UK, commercial agents are entitled to compensation if their contract is terminated without serious breach. Non-commercial agents and distributors are not entitled to compensation unless the contract provides for it.
Which channel to market is best for a manufacturer will depend on their specific needs and goals. If the manufacturer wants to maintain control over the sales process and have direct contact with customers, then an agency relationship may be the best option. If the manufacturer wants to delegate more responsibility to a third party and focus on their core business activities, then a distribution relationship may be a better fit. It is important to note that courts will look at the actual relationship between the parties, not just the label of “distributor” or “agent.” If a manufacturer has a close relationship with a distributor and gives them significant control over the sales process, then the court may find that the relationship is actually an agency relationship, even if the parties have labelled it as a distribution relationship.
Manufacturers should carefully consider their needs and goals before choosing a channel to market. They should also have a written agreement in place with any third-party partners to clarify the relationship and protect their interests.
UK financial authorities set out proposals for stablecoin regulation
The Financial Conduct Authority (FCA) and the Bank of England (BoE) have published discussion papers on the regulation of stablecoins, and a cross-authority paper explaining how UK authorities’ current and proposed regulatory regimes will interact. The Prudential Regulatory Authority (PRA) has also published a letter on how it expects deposit-takers to address the risks that arise from issuing multiple forms of digital money, while welcoming the benefits that could come from innovation in this area.The proposed regulatory approach put forward by the FCA, the BoE and the PRA looks to harness the potential benefits stablecoins could provide to UK consumers and retailers. The proposals aim to protect consumers, prevent money laundering, and safeguard financial stability. The regime(s) applicable to firms engaged in issuing different forms of money and money-like instruments and operating payment systems will depend on the purpose of their business, how it is conducted, and the risks it presents. As well as discussing how the PRA expects deposit-takers to address the risks that arise from issuing multiple forms of digital money, the PRA’s letter also sets out its broader expectations for banks regarding their use of digital money for retail or wholesale innovations, covering areas such as operational resilience; anti-money laundering and countering the financing of terrorism (AML/CFT); and liquidity and funding risks.
Financial Insights FRC publish policy update
In May 2023, the Financial Reporting Council (FRC) proposed 18 changes to the UK Corporate Governance Code (UKCG Code). After a consultation period, the FRC has decided to implement only a small number of these changes, in response to the government’s withdrawal of draft legislation that would have added additional corporate reporting requirements.The main substantive change is to the proposals on internal controls. The FRC will merge the requirements of Principles C and O into one Principle, making the board responsible for both establishing and maintaining the effectiveness of the risk management and internal control framework. The annual report will include a declaration from the board on the effectiveness of the company’s risk management and internal control systems, but the FRC has not yet provided details of the other supporting information that will be required.The FRC will not be taking forward some proposals, including giving the audit committee responsibility for monitoring the integrity of narrative reporting, and sustainability reporting and moving away from the current UKCG Code approach of specifying particular diversity characteristics that should support companies’ appointments and succession plans.
Committee launches inquiry into EU Entry/Exit and the UK border
The European Scrutiny Committee has launched a new inquiry into the EU Entry / Exit System (EES) and its potential implications for the UK’s border.The EES is a new automated IT system proposed by the EU to replace manual passport stamping, which will allow to record when travellers enter and exit the Schengen Area. The EU stressed that this system will ensure that rules, such as the 90-day limit for travellers within a 180-day period, are followed. The aim is for this automated system to be operational by Autumn 2024. However, as the current plan for EES does not allow travellers to register remotely before their trips, this may cause disruption, in particular at UK ports operating ‘juxtaposed’ border controls, where EU checks are conducted on UK soil.The Committee invites experts to submit written evidence on several topics, such as the history and development of EES proposals, challenges that EU Member States may face in implementing EES, and the impact on third-country nationals and the potential disruptions resulting from the EES at UK ports.
Parliamentary and Legal News AI safety summit at Bletchley Park
The UK hosted an AI safety summit at Bletchley Park, where experts from around the world discussed the risks and benefits of artificial intelligence. The UK, US, EU, Australia, and China have joined forces to warn of the potential dangers of artificial intelligence, in the first international declaration to address the rapidly developing technology. Twenty-eight governments signed the Bletchley Declaration on AI safety at the start of the AI safety summit hosted by the UK government. Rishi Sunak stressed the importance of implementing strong AI regulation to ensure safety for future generations. The EU is close to passing its AI Act, but UK officials have said that they don’t think regulation is needed yet, or even possible, given how quickly the AI industry is developing.
However, most countries agree that international summits like this one are important, especially to help define the problem that different countries are trying to address.
Takeover of the week Tadweld Limited announces successful acquisition of AJAX Safe Access from Canal Engineering
Tadweld, a Tadcaster-based engineering and fabrication specialist, has acquired AJAX Safe Access from Canal Engineering, strengthening its position in the UK engineering sector. AJAX has a reputation for providing cutting-edge safe access solutions to a variety of industries, including warehousing, quarrying, mining, petrochemicals, and road tanker access. The addition of AJAX’s well-established products, such as folding tanker access steps, roller step units, and various pallet gates, enhances Tadweld’s already strong product offerings.
Tadweld Managing Director Chris Houston commented, “AJAX’s innovative product range is a great complement to our existing portfolio of access solutions and walkways, and aligns perfectly with our commitment to quality and safety. We are eager to explore synergies and invest in the brand further.” Canal Engineering Managing Director Gareth Bull expressed confidence in the acquisition, stating, “Tadweld’s reputation and expertise assure us that the AJAX brand is in capable hands, poised for continued growth and innovation.”The acquisition includes all finished and work-in-progress goods, drawings, and tooling of AJAX Safe Access. Additionally, Tadweld has welcomed Mike Godbert to the team as Business Development Manager. Godbert’s 17 years of experience as AJAX’s Technical Sales Manager will be invaluable in accelerating the integration of AJAX products into Tadweld’s portfolio. Houston warmly welcomed Godbert, stating, “Mike’s in-depth knowledge of AJAX’s offerings and industry insights will be essential in ensuring a smooth transition and sustained innovation. We are excited about the expertise and energy he brings to the table.” The acquisition has created three new jobs at Tadweld’s Tadcaster site, and the first shipments of AJAX products have already been completed.
Country
United Kingdom
