Please see below our corporate insights for September from our business law experts.
Requests to inspect your Company’s Register of Members
by Greg Vincent
All companies registered in England and Wales are subject to legislation that permits any person to inspect or request copies of their register of members.
These requests are uncommon with smaller owner-managed businesses and the public register at Companies House will contain some (albeit often out of date) information on a company’s membership. Nevertheless, companies with a large number of members and those whose filings at Companies House are not up to date (or which have a fluctuating membership) may find themselves receiving a request and should have procedures in place to deal with it.
On receipt of a request, companies should ensure that the request itself is compliant with the legislation. The request should contain the person/organisation’s name and address and should state the purpose for which the information is to be used. Additionally, if the information is to be disclosed to another person or organisation, this also needs to be stated in the request.
The legislation gives companies a timeframe of five working days to respond to a valid request. During this timeframe the company needs to determine whether the request is for a proper purpose as it must either comply with the request or refer the request to court for a determination on this issue.
There is no definitive answer to what constitutes a “proper purpose” and no guidance in the legislation. Therefore, as a starting point companies should refer to industry guidance on the matter and consider seeking legal advice if further assistance is required.
The issue of ‘proper purpose’ was considered in the Court of Appeal last month in the case of Richard Charles Fox-Davies v Burberry plc [2017] EWCA Civ 1129. A request by a third party purporting to trace lost members of public quoted companies was found to be invalid as it didn’t contain the names and addresses of individuals with whom the tracing agent was going to share the information. The court also found the purpose to be improper and provided useful guidance on the test it would use to determine ‘proper purpose’. It held that:
– The onus is on the company to show that the purpose is improper.
– The test of whether a purpose is improper is an objective one to be carried out by the court and will be applied equally to requests by members and non-members.
– The court will look at the objective behind the person’s request and the means of achieving that objective.
– The test does not depend on whether the request is in the interests of the company’s shareholders or not.
If a company determines that it will comply with a request, it should allow members to inspect the register free of charge. Non-members must pay a prescribed fee of £3.50. If copies of the register are requested, the company can charge both members and non-members a fee of £1 for each of first 5 entries and £30 for the next 95 entries.
Should you have any questions or require help or assistance in relation to these or any other corporate or commercial issues please feel free to contact your usual corporate advisor at Morrisons Solicitors or contact Greg Vincent, a Partner in our Corporate and Commercial Team by phone 0208 971 1033 or by email [email protected]
No G&T, no VAT
by Sally Hutchings
Two recent cases, Languard New Homes Ltd and MacPherson illustrate the continuing VAT issues with non-residential conversions, particularly the conversion of pubs and shops if there was some associated residential accommodation for the landlord or staff.
Often this residential accommodation is on upper floors with the commercial use being carried out below. Upon conversion, the building may be divided into new residential units vertically, not horizontally, meaning that the new dwellings all incorporate a part that used to be commercial along with a part that has always been residential.
The question that arose in both of the above cases was whether the sale of interests in the dwellings (made up partly of the former non-residential part of the building and partly of the former residential part) was a zero-rated supply or an exempt supply under the Value Added Tax Act 1994 (“VATA”).
This is important because if it is a zero-rated supply, developers can recover the VAT paid on the supplies used in carrying out the conversion. If the supply is not zero rated then it is not a taxable supply even if the supply is made in the course of a business. This is because it will be an exempt supply under sections 4(2) and 31(1) of and item 1 of Group 1 of Schedule 9 to the VATA. Where the supply is exempt, then there can be no recovery of the input VAT which will increase the cost of the development.
The Upper Tribunal decided that none of the dwellings in either case had been created by converting part of a building that had not been previously designed for use as a dwelling, because they had been created from an amalgamation of the non-residential parts and the residential parts. Accordingly, the sales were exempt supplies and the developers were unable to recover the VAT paid on supplies used in carrying out the conversions.
Developers and builders need to understand the rules about conversions to maximise VAT recovery and avoid errors. If you would like to discuss this case or similar developments please contact Sally Hutchings by phone on 020 8971 1048 or by email [email protected]
Three key questions when acquiring commercial property
by Cathryn Pernstich
Businesses considering a property purchase (whether a stand-alone purchase or part of a business acquisition) need to consider a number of important issues. This month, we set out three key questions that can impact on a buyer’s timings and costs:
1. What type of property interest does the business hold?
You will need to ascertain the type of property interest held by the current occupier. The business might have a leasehold interest, own the freehold or could be occupying the property on an informal basis i.e. with no tenancy at all!
Ideally, you want the assurance that the business’ occupancy is on a formal basis and that its ability to remain in the property is secured. Without that security, the landlord could remove the occupying tenant at any time.
2. Is the property fit for purpose?
Commercial properties will likely come sold as seen, so you should consider whether you will need to fit the premises out or carry out refurbishments.
Planned Changes
Any changes to the property will likely require the landlord’s consent and may not be permitted at all if they are structural or could require planning consent.
If a tenant has a lease, it is likely that this will state that certain alterations to the property will be permitted with the landlord’s consent. Obtaining landlord’s consent can add delay and additional costs.
Previous changes
Have you carried out a site visit of the property? We would always advise an inspection of the property and to carry out a survey. Doing this should highlight if any alterations have already been carried out and will help you to determine if the necessary consents exist. It is important to confirm that the consents exist as you will be taking the property as it is.
3. Do you have the rights required to use the property?
Does the property you are buying have the rights of way you require? Can you access service media? Can you enter adjoining land to carry out the repairs you are obliged to carry out?
Access to and from the property is vital to the day to day operation of any business. You need to establish that you will have the authority and consent to gain the access you require. Otherwise, you could have to negotiate with another party to acquire these rights, incurring further costs.
Each property will require use and access of water, electricity, gas, telecommunications etc. This will likely be over adjoining land so be outside the demise or ownership of the property.
Whatever interest you purchase in a property, you will need to maintain and repair that property and, to do that, you might need to access adjoining land.
It is important to discuss and review the plans for the property with your commercial property solicitor at the outset of any purchase. If you wish to do this please contact Cathryn Pernstich by phone on 01737 854 521 or by email [email protected]