What is the Law in your Life?

5 things you should know about The Legal Writings (Counterparts and Delivery) (Scotland) Act 2015:

1.   This eagerly awaited piece of legislation finally came into force on 1st July 2015.  In short, this means that execution in counterpart in now recognised in Scots law. For a brief overview of this Act, please see our blog “Electronic deeds and execution in counterpart”.

2.   Nominee: Under section 2 of the Act, the parties to a document executed in counterpart can nominate someone to take delivery of the counterparts. It is perfectly competent for a solicitor acting for one of the parties to take on this role and indeed this is what was envisaged when the Act was drafted.  With regard to the scope of the nominee’s role, the Act makes it clear that the nominee’s duty is to “hold and preserve” the counterpart(s) for the benefit of all the parties.  If a solicitor does take on this role, they should take care so as not to inadvertently breach their duty as a nominee. A solicitor could not, for example, withhold a counterpart on a client’s instructions without breaching their duty under section 2 of the Act.

3.   Delivery by electronic means: It is clear under the Act that parties can agree to deliver by fax/email only the signing page of the contract, once signed in counterpart. The Act also makes it clear that there must be something beyond the signature to show it is part of the correct document. One possible solution to this would be to insert a footer/header which would set out the full name of the contract, the version of the contract, and the date it was transmitted etc.

4.   Counterparts clause: Under the Act, there is no requirement to have a counterparts clause.  However, it would be good practice to have such a clause, at the very least to serve as an explanation to third parties such as Registers of Scotland or Companies House.

5.   Assembly of the document: Under section 1 of the Act, upon execution, the counterparts are to be treated as a single document which may be made up of both/all the counterparts in full OR one of the counterparts in full, collated with the pages on which the other counterparts have been signed. For obvious reasons, the first option would be a much more unwieldy document but either is competent.

What is the Law in your Life?

5 things you need to know about Passing Off:

1.   Passing-off is a common law action rather than a statutory cause of action and is used to prevent one party from using the goodwill associated with another party for their own benefit.

2.   Passing-off does not provide the owner of the goodwill with a monopoly in the mark or get-up, rather it protects the trader’s business against what can essentially be described as “unfair competition.

3.   There are three basic requirements to establish passing-off.  These are commonly known as the trinity test:

a.    that goodwill exists in his or her goods or services, in the area where infringement has taken place;

b.    misrepresentation by the infringer to the public such that the public are or are likely to believe that the goods or services offered by the infringer are those of the claimant; and

c.    that he/she has suffered damage or the likelihood of damage occurring due to the infringer’s misrepresentation.

4.   Once the trinity test is successfully established, there are a number of legal remedies available to the infringed party.  These are interdict, damages or an account of lost profit. It should be noted that the pursuer will not obtain all three remedies against the infringer and that they do not get the privilege of choosing which remedy they would like. This is of course, left to the Court’s discretion.

5.   The law of passing off is wide and also covers goodwill associated in slogans, visual images, domain names and other descriptive material.

What is the Law in your Life?

5 you need to know (from a company law perspective) about the Small Business, Enterprise and Employment Act 2015:

1.   The new PSC register.

Provisional implementation date January 2016

UK companies (other than companies which already report under the Disclosure and Transparency Rules) will be required to create and maintain a register of “persons with significant control” (“PSC”). The intention is that this register will be made publicly available provided the inspection is for a "proper purpose". A PSC register should include any person who (i) holds 25% or more of the issued share capital of a company, or (ii) who exercises 25% or more of the voting rights, or (iii) who is entitled to appoint or remove a majority of the board of directors, or (iv) any person who can exercise “significant influence or control” over the company. Companies will be required to file details of their PSC register at Companies House along with the new confirmation statement, envisaged as replacing the annual return (see further below).

2. Removal of the requirement for companies to file an annual return at Companies House.

Provisional implementation date April 2016

The annual return with a set date will be replaced by a confirmation statement, which must be filed at Companies House not more than 12 months from the previous statement of confirmation, incorporation or annual return. The filing period for the confirmation statement is reduced to 14 days from the existing 28 days for the annual return. The statement must confirm that all information required to be delivered by the company in respect of the relevant period has been delivered. Information includes changes to the registered office address, directors and company secretary’s details, directors’ residential addresses, statement of capital, details on register of members and of the PSC register

3. Option for private companies to keep statutory information on a central register.

Provisional implementation date April 2016

Instead of keeping their own registers, private companies will have the option to keep certain statutory registers on the central register, kept by Companies House, The scope of the information includes the registers of members, the PSC register, the register of directors, the register of directors’ usual residential addresses, and the register of secretaries. A company may only elect to keep its register of members on the central register if all members agree.

4. All company directors to be natural persons

      

Provisional implementation date October 2015

All directors will be required to be natural persons. Existing companies will have 12 months to comply and once this 12 month period has passed, any director appointment that is not a natural person will automatically cease. The Secretary of State can make exceptions to this general rule and the approach to exceptions will be finalised after the General Election on 7 May 2015.

5. Protection of date of birth information.

Provisional implementation dates October 2015 (directors) and April 2016 (PSCs)

Complete date of birth information held by Companies House will no longer be made available to the public (just the month and year) to make identity theft more difficult. Companies will still need to send Companies House full details of the dates of birth of their directors and PSCs and this information will remain available for inspection on the register held by the company.

Electronic deeds and execution in counterpart

The Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 (“the 2015 Act”) has been passed and received Royal Assent on 1 April. It is expected to be in force from early May. This change to Scots law sits alongside the changes introduced by Part 10 of The Land Registration Etc. (Scotland) Act 2012. Part 10 of the 2012 Act essentially e-enables all the documents referred to in s 1(2)(a) of the Requirements of Writing (Scotland) Act 1995 and thus permits electronic documents to have equivalent status and standards of validity and authenticity to paper documents. The Electronic Documents (Scotland) Regulations 2014 set out the requirements for electronic signatures. It also provides for electronic registration in the Keeper’s registers.

Once the 2015 Act is in force, parties to documents governed by Scots law will be able to be sign a separate identical copy of the document rather than all parties to the document signing the same physical document either at the same time or at different times. This brings Scots law into line with the position in English law. In addition, any paper document will be able to be delivered electronically with full legal effect. Indeed, the document can also be signed electronically if a qualifying electronic signature is being used. For comment on the secure digital signature facility contained within The Law Society of Scotland’s Smartcard see www.lawscot.org.uk/smartcard  

A document executed in counterpart will only become effective if delivery (which can be by electronic means) is made by each party of its signed counterpart to the other party or parties. It is possible for the parties to any document to agree that the document or obligations in it will not become effective until a later specified date.

Once all parties have signed, the document will consist of either (i) all of the signed counterparts put together in their entirety or (ii) simply one full copy of the document attached to the signing page from every counterpart signed by the parties.

As mentioned above, the new law makes it clear that documents created and signed on paper can be delivered electronically and have full legal effect.  This removes concerns that existed that electronic delivery was not sufficient -  a view, whilst correct, that was out of step with modern business methods.

A document once executed in counterpart can be delivered electronically without any need for special clauses or changes to the  document itself.  It is, however, essential that it is clear from looking at a document when it came into effect. Therefore, the date when the document has legal effect will need to be inserted. This date will either be the date when the last of all counterparts have been delivered or a separate later date as agreed  by the parties. In either case, that date needs to be inserted in the document. It will be interesting to see if practice develops along the lines of that which is common in England where a date is inserted on the first page of the text of the document. Above all however, parties and their solicitors must ensure that there is no dubiety as to when the document actually came into effect.

The introduction of execution in counterpart in Scots law is a welcome development which is widely supported by both business and the legal profession. The Scottish Law Commission is to be congratulated for advancing its consideration over a relatively short period of time.

New land and property information system for Scotland

Deputy First Minister John Swinney has announced the development of a land and property information hub for Scotland.

The Keeper of the Registers of Scotland (RoS), Sheenagh Adams, will lead a task force to develop an online system that will allow users to find out comprehensive information about any piece of land or property in Scotland with a single enquiry. The task force has been asked to report to the Deputy First Minister by July this year.

Sheenagh Adams said: “The creation of a land and property information system for Scotland is an exciting development that fits with our current project of completing the land register. Not only will this system make our economy more efficient, but it will reduce both the risks and costs of doing business. Developing the system will involve providing access to the data contained across a wide range of sources. This will remove the current costs and barriers sometimes involved with searching for land and property information.”

Professor Stewart Brymer has agreed to be a member of the task force in his capacity as Chair of Unifi Scotland (www.unifiscotland.com) He commented: “We have a great opportunity to build a spatial information system in Scotland that could be the best in the world. The data is all available but it is held in a range of disparate places. Bringing it together will benefit the economy and increase the knowledge that citizens should have about land and property. There are some excellent systems in other countries such as Norway which can be learned from in creating a digital land and property information service in Scotland.”

What is the Law in your Life?

5 things you need to know when choosing a name for your company or LLP:

1.   Your name cannot be identical to that of another registered company/LLP. Your name must also not be “too similar” to another name on the Companies House register. When considering whether your name is the same as a name that is already registered there is a list of words, characters, and symbols which are disregarded (eg United Kingdom and Great Britain). (Following recent changes in the law (January 2015), a number of words have been deleted from this list. The words Exports, Holdings, Imports, Group, International, and Services are now no longer on the list.).

2.   If your proposed name contains a “sensitive” word or expression (eg the word Scottish, English, British, etc) you must get prior approval from the Secretary of State. Likewise, if your name might indicate a connection to a public authority. The recent changes in the law referred to above have also reduced the list of sensitive words and expressions that require prior approval.

3.   Names that are offensive or use of which would constitute a criminal offence cannot be used.

4.   The names of most private limited companies must either end in “Limited” or “Ltd”. You can, however, apply to leave “limited” out of your name if the company is limited by guarantee and it fulfils certain conditions.

5.   You are prohibited from using the name of a previously insolvent company. You also cannot use a similar name to a previously insolvent company for a period of five years from the date of the first company’s insolvent liquidation.

What is the Law in your Life?

5 things you need to know about Irritancy in a Lease:

1.   An irritancy or forfeiture clause is a contractual termination clause whereby the lease will come to an end if certain prescribed events occur.

2.   The landlord's ability to terminate a lease is now controlled by statute in the event of non- payment if rent and breach of obligations assumed by the tenant.

3.   Statute the now provides for periods of notice to be served by the landlord under threat of irritancy. Care should be taken with the service of such notices.

4.   If a head lease is irritated, any derivative sub-leases also fall unless protection for sub- tenants has been pre-negotiated.

5.   Secured creditors or insolvency practitioners are not protected unless there is express provision to this effect in the lease.