Corporate law update: 2 - 8 May

This week: 

• The court finds that an equity term sheet was legally binding, and that warranties in a management warranty deed also amounted to representations

• Draft legislation contemplates changes to the UK’s beneficial ownership registers that will make trust information more publicly available

• Other items of interest

Term sheet was legally binding, and warranties were also parallel representations

The High Court has held that a term sheet between a buyer and selling managers contained legally binding and enforceable obligations. It also found that warranties given by management reflected parallel representations, and that the buyer was entitled to bring a claim in misrepresentation.

The case sets no new law, but the facts are interesting and provide some useful pointers and salutary warnings for commercial counterparties.

What happened?

Hoffman v Finalto Group Ltd [2026] EWHC 921 (Comm) concerned the sale of an online brokerage platform, in which the managers of the business would take equity in the top company of the new acquisition structure.

The terms of the sale were set out in an equity term sheet between the managers and the buyer. The managers’ equity participation was to be detailed in definitive equity documents after the buyer set up the new structure.

The parties entered into a sale and purchase agreement (SPA), the managers gave warranties in favour of the buyer in a management warranty deed (MWD), and the sale completed. However, in the event, the documents were never finalised, the new structure never materialised, and the managers were not allotted their shares.

The managers claimed against the buyer, arguing that the term sheet was legally binding and that the buyer had been contractually obliged to incorporate the new top company and cause the shares to be issued to management.

The buyer argued that the term sheet was not legally binding and that, even if it had been, any obligation to cause the shares to be issued was conditional on the top company being established and the equity suite being finalised.

The buyer also counterclaimed against the managers, alleging that the managers had knowingly given certain untrue warranties in the MWD. The buyer was unable to recover any substantive sum for breach of contract due to contractual limitation caps in the MWD. However, it argued that the warranties also amounted to representations that were not covered by those liability caps and so counterclaimed against the managers for fraudulent misrepresentation.

The term sheet

The court found that the term sheet created enforceable contractual obligations.

The term sheet had stated that it was “legally binding on the parties, subject to a definitive agreement”. The buyer claimed this created a condition, such that any obligations in the term sheet would come into effect only when the “definitive agreement” was concluded.

The court, however, found that the effect of this wording was to create binding obligations that would simply be superseded by any subsequent definitive agreement. The buyer’s interpretation would effectively have deprived the term sheet of any real legal effect (as it would effectively be superseded immediately upon coming into force), which jarred with the statement that it was legally binding.

Other factors in the court’s decision included that the term sheet used obligatory language, such as "shall own" and "will be reflected", and the commercial context.

Were the warranties also representations?

This is now a developed line of case law concerning whether warranties given in connection with the sale of a business can also amount to representations.

In a nutshell, the prevailing view is now that:

• a warranty cannot itself amount to a representation, because representations are statements made before a contract is entered into, whereas warranties are statements made in the contract itself; but

• a warranty can reflect the substance of a representation that was made before the contract was signed, although whether the representation was indeed made will always be a question of fact.

In essence, the court endorsed this approach, noting that the precise position will always depend heavily on the circumstances of each individual case.

Here, the warranties did also constitute representations. The statements were informational in nature and, although they did not precede the MWD, they were seen in draft before the SPA was signed.

In addition, the MWD contained language suggesting that representations had been made. For example, the MWD stated that no party had entered into the transaction documents on the basis of any representation, warranty, undertaking or other statement that was “not expressly incorporated into” the MWD or any other transaction document. The judge took this to mean that representations could have been made that did appear in the MWD (in the form of warranties).

Moreover, the MWD excluded liability for innocent or negligent misrepresentation, but not for fraudulent representation. Again, the judge took this as an acknowledgement that representations may have been made, but that the managers would accept liability only if they had been fraudulent.

What does this mean for me?

The general take-away on both points of argument is that it is critical to use clear and unambiguous language when drafting legal documents.

Had the parties intended for the term sheet to be of no legal effect, or for any legal effect to be postponed until conditions were met, it would have been possible to state precisely that in the term sheet. By including language indicating that the term sheet contained binding terms, the parties effectively steered the court into finding binding contractual promises.

The finding that the managers had given representations may surprise some, but it is important to see this case in context. The decision turns on the specific wording of the MWD in this case and may not apply in all scenarios.

Warrantors who wish to rule out the possibility of misrepresentation claims should not only include provisions that rule out all forms of pre-contractual statement, but also statements that the parties have not relied on any pre-contractual statement in entering into the transaction documentation.

In doing so, it is critical to ensure that these entire agreement clauses and non-reliance statements are worded appropriately to avoid any inference that representations may have been made.

Access the court’s decision in Hoffman v Finalto Group Ltd [2026] EWHC 921 (Comm) that an equity term sheet was binding and that warranties also amounted to representations

Changes to beneficial ownership to make trust information more publicly available

The Government has recently published two pieces of draft secondary legislation that, if approved, will significantly increase public access to certain information held in government registers on the beneficial owners of trusts.

Currently, under the UK’s Register of Overseas Entities (ROE) regime, details of certain trusts that sit within the holding structure of registrable overseas entities must also be filed at Companies House.

This information is theoretically publicly available. However, access is on application only and subject to certain tests. These include providing the name of the specific trust in question. Moreover, if any trust information relates to a minor (someone below the age of 18), Companies House will withhold all the information on the trust. In practice, these limit access to trust information.

Under draft regulations, the requirement to provide the name of a trust would be removed, and Companies House would be able to continue to withhold information on minors but disclose other information regarding a trust. Collectively, these measures would significantly expand the ability to access information on trusts registered in the ROE.

Separately, under the UK’s Trust Registration Service (TRS), certain types of trust are required to register with HM Revenue & Customs. This includes trusts that have no UK trustees but which acquired registered land in the UK on or after 6 October 2020 – so-called “type C trusts”. Currently, information on type C trusts is not publicly available by any means.

Under draft regulations, the requirement to register with the TRS would be expanded to type C trusts that acquired registered land before 6 October 2020 and still hold that land, and access to information on type C trusts would become publicly available (subject to meeting certain tests). Again, this would significantly broaden access to trust information.

You can read our colleagues’ in-depth piece for more information on the proposed changes to trust information in the UK’s beneficial ownership registers.

Access the draft Register of Overseas Entities (Protection and Trusts) and Limited Liability Partnerships (Application of Company Law) (Amendment) Regulations 2026

Access the draft Money Laundering and Terrorist Financing (Amendment) Regulations 2026 (opens PDF)

Other items this week

• Proposed directors’ duties legislation fails. In July 2025, we reported that legislation had been introduced into Parliament, in the form of the Company Directors (Duties) Bill, that would require company directors to place much greater emphasis on employees and the environment when discharging their duties. With Parliament now in recess, the Bill has not succeeded. The proposed legislation was introduced as a Private Member’s Bill, rather than Government-sponsored legislation, and so its chances of success were low from the outset.

  Read more about the failed Bill to extend directors’ duties in our previous Corporate Law Update

• EU consults on CSRD requirements. The European Commission is consulting on two delegated regulations relating to sustainability reporting standards under the EU Corporate Sustainability Reporting Directive (CSRD). The first regulation would simplify reporting for entities within the scope of CSRD. The second regulation would (broadly speaking) set out voluntary reporting standards for smaller companies outside the scope of CSRD and for smaller value chain partners. The consultation closes on 3 June 2026.

  Access the European Commission’s consultation on draft regulations on revised sustainability reporting standards