- The Guide has been prepared, on behalf of the CLLS Financial Law Committee, by a working party consisting of Geoffrey Yeowart (Chairman of the working party), Peter Brien, Richard Calnan, Armel Cates, Charles Clark, Kate Gibbons, Richard Levitt, Dorothy Livingston, John Naccarato, Alan Newton, Robin Parsons, Simon Roberts, Ian Sideris, Jonathan Shann and Graham Smith. The views expressed in the Guide are the personal views of working party members and do not necessarily represent the views of the law fi rms to which they belong.
- Paras 2.9 and 2.10 of the UK Listing Rules or Rule 10(b)5 of the US Securities Act 1933.
- FSA Handbook, GENPRU 2, s 2.2.159.
- FSA Handbook, BIPRU, ss 5.3 and 13.7.
- FSA Handbook, BIPRU, ss 5.2.2 and 5.4.11.
- The form of opinion letter sought from in-house counsel may differ from that which an external law fi rm may be required to give, because in-house counsel may have a greater knowledge of the company or the documents on which he or she is asked to opine.
- Opinions on withholding tax are less frequently requested and are given mainly in the case of structured fi nancial transactions or transactions involving the issue of securities.
- For comparative purposes, useful articles on this subject include G Yeowart, “Principles for Giving Opinion Letters on English Law in Financial Transactions” (2003) 5 Butterworths Journal of International Banking and Financial Law 164 (May); DW Glazer, “It's Time to Streamline Opinion Letters” Business Law Today November/December 1999; M Read, “Opinion Letters: An English Viewpoint”, City Solicitor c 1990; “Legal Practice – Share Acquisitions“, Law Society Gazette 30 June 1993; Joint Working Party of the City of London Law Society's Banking and Company Law Sub-Committees, “Opinion Letters: Practical Hints”, Law Society Gazette 7 September 1988; JM Lewis, “City Comment”, Law Society Gazette 18 November 1987; R Youard, “And If Yo u Want My Opinion…”, Euromoney September 1982; JJ Fuld, “Legal Opinions in Business Transactions – An Attempt to Bring Some Order Out of Some Chaos”, Business Lawyer April 1973.
- It is not appropriate to list examples as market practice may vary from market to market and may change with the passage of time.
- The Law Society's Practice Note on Confl icts of Interest (September 2011), para 3.5.
- Chapter 4 of the Code of Conduct.
- The opinion provider will rarely know to what extent the third party's own legal advisers have raised these issues with their own client. There may be a risk that the opinion provider's own client may ask or expect that certain issues not to be revealed or that, if they are revealed, they be treated in a minimalist way.
- An engagement letter may, for instance, include a proportionality provision to the effect that, where a client has a right to claim from the law fi rm and other advisers but its claim against the other advisers is subject to a limitation on liability, that will not increase the amount it can recover from the law fi rm.
- In the case of an issue of securities, the legal opinion has an additional purpose. If the managers or underwriters of the issue were sued by an investor alleging negligence in their handling of the issue because of a legal problem, the fact that they had received advice or a legal opinion addressing the point in question should assist them in demonstrating that they had not been negligent in that regard, provided that they had relied on the opinion and that it was reasonable for them to have done so.
- This is relevant for the purposes of the Regulation (EC) No 1346/2000 on Insolvency Proceedings and other legislation which uses the concept of COMI.
- The addition of the words “having made all reasonable enquiries” would be even more onerous, since it would extend to constructive knowledge.
- In the United States, such opinions are given only with respect to specifi ed contracts (usually listed in the opinion), only state that the agreement “will not breach or constitute a default under the agreement”, and are based on a customary practice understanding that the opinion provider is reading and interpreting all such agreements in accordance with their “plain meaning” as they would be interpreted under the law covered by the opinion (rather than the law under which the agreement would actually be interpreted).
- A statement that an agreement is legally binding means that it must not be void or voidable because, for instance, it is ultra vires, or is unauthorised or improperly executed, or a necessary consent is lacking, or it confl icts with applicable law, or can be rescinded for misrepresentation, duress, etc. A statement that an obligation is enforceable is generally accepted to mean that it is actionable before a court in the relevant jurisdiction. An agreement may be valid but not enforceable if, for instance, the agreement is stampable and has not been duly stamped.
- This is another example of the differences between English and US opinions practice. Under US practice a statement that obligations are “valid and binding” or “valid, binding and enforceable” is sometimes considered to be the equivalent of “enforceable in accordance with its terms”. Opinion providers often choose to make clear that an English opinion letter does not have that meaning.
- Ss 176A and 176ZA and para 99(3) and (4), Schedule B1, of the Insolvency Act 1986.
- For instance, the claims of an unsecured creditor of a company would rank behind claims of its preferential creditors and behind administration expenses or winding up expenses in the event of a company entering into an English administration or winding up. The claims of unsecured creditors of an English insurer would also rank behind the claims of policy holders in respect of “insurance debts”. In addition, a pari passu opinion would need to be qualifi ed if the relevant documents included limited recourse or subordination provisions or provided for money obligations which mature fi rst to be paid fi rst even after the occurrence of a default.
- S 860 of the Companies Act 2006 (where the chargor is an English incorporated company), or Part 9 of the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 (where the chargor is a limited liability partnership), or s 344 of the Insolvency Act 1986 (where the chargor is an individual or a partnership consisting of individuals) or the Bills of Sale Acts 1878 to 1890 (where the chargor is an unincorporated trader). The Companies Act requirement for registration of charges by overseas companies with a registered UK establishment has ceased to apply in relation to charges created on or after 1 October 2011.
- Where the document has been executed under a power of attorney granted by an English obligor, the opinion may also address the authorisation, execution and delivery of the power of attorney.
- Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome 1), Art 9.
- A law fi rm may, if it thinks appropriate, choose to take into account the practice of the jurisdiction in which the fi nancial transaction is taking place, as well as professional conduct rules. Thus, where a transaction is to raise funds in certain securities markets, a law fi rm acting for the issuer may be asked to give an opinion to non-client underwriters.
- Special rules apply to companies that are charities: s 42 of the Companies Act 2006.
- To give one example, a legal (as opposed to an equitable) mortgage over shares in an unlimited company is not normally taken, since this would otherwise involve the mortgagee (or its nominee) becoming the registered holder of the shares and being exposed under English law to unlimited liability for unpaid debts of the company (if it were to become insolvent).
- A reference to “British insolvency law” may be appropriate where the opinion relates to the Cross-Border Insolvency Regulations 2006 as this is a defi ned term in the Regulations (see Art 2 of Schedule 1).
Law and Financial Markets Review
Volume 6, 2012 - Issue 1