Corporate Law Update: 22 - 28 July 2023
- A company’s directors came under a duty to consider the company’s creditors when HMRC raised a potential challenge to a tax mitigation scheme
- The BVCA publishes its annual survey of the performance of independent UK-managed private equity fund returns
- The FRC publishes a report on ESG data distribution and consumption, the second in its series focussing on company ESG data
The High Court has considered the point at which the directors’ duty to consider the interests of creditors arose in the context of a tax mitigation scheme that ultimately failed.
In doing so, the court considered the Supreme Court’s recent guidance in BTI v Sequana  UKSC 25 and applied it to the circumstances of the case.
The scheme in question was designed to ensure that the company was not required to make PAYE payments or National Insurance Contributions (NICs) to HM Revenue & Customs (HMRC). However, it was clear that, if the scheme was ineffective, the company was substantially insolvent.
The judge held that the directors of the company had become aware, or ought to have become aware, that there was a real risk to the effectiveness the scheme, and that the company may well have been insolvent, once HMRC notified the company that it was challenging the scheme. It was at this point that the directors became obliged to consider the company’s creditors.
The British Private Equity and Venture Capital Association (BVCA) has published its annual Performance Measurement Survey for 2022, in which it surveys returns generated by independent UK-managed funds that raised capital from third-party investors.
The report states an overall industry internal rate of return (IRR) of 14.7% p.a. since 1980 and 19.7% p.a. since 2013. The total multiple of money (MoM) unrealised return was 1.81x since 1980 and 1.84x since 2013. Across the entire industry, investors obtained 1.34x realised returns since 1980.
Over a ten-year horizon, private equity provided a return of 17% p.a., compared with a return of 6.5% p.a. achieved by the FTSE All Share index.
The Financial Reporting Council (FRC) has published a report on how environmental, social and governance (ESG) data is distributed to and consumed by investors.
The purpose of the report is to find ways to optimise the flow of ESG data from companies to investors.
The report is the second stage in the FRC’s project looking at ESG data. In August 2022, the FRC published a report on ESG data production, in which it provided recommendations to companies on how best to produce ESG data for investors.