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In association with Radius Law, we bring you the latest commercial news for in-house lawyers. This month’s edition covers:

• Corporate & Commercial
• Data Security
• Advertising & Marketing
• Employment
• Competition
  

Corporate & Commercial

Decisions by sole director companies

In our July bulletin we reported on the High Court ruling¹ that decisions of sole director companies may not be valid where they are using Model Articles.  This is because 11(2) of the Model Articles states that the quorum of directors ‘must never be less than two’.  This ruling has been criticised as many commentators consider that Article 11(2) is disapplied by the effect of Article 7(2) of the Model Articles which suggests that decisions by sole director companies are nevertheless valid.

A more recent High Court decision² concerning a sole director company with Model Articles ruled that the sole director’s decisions were valid but distinguished it from the earlier decision, noting that unlike the earlier case there had never been a greater number of directors than one and there had not been any modifications to the Model Articles.

See News analysis: Decisions of sole directors—where are we now? (Re Active Wear Ltd)
See Practice Note: Directors’ decision-making—written resolutions and decisions by sole directors

A duty to creditors?

The Supreme Court has determined³ that, when a company becomes insolvent, or when it approaches or is at real risk of insolvency, the company’s directors must start to take the interests of the company’s creditors into account (the creditor duty being a modification of directors’ general duty to promote the success of the company). Balancing the creditor duty against the interests of shareholders is in effect a sliding scale whereby the more precarious the financial position the greater the weight that the directors should give to the creditors’ interests. Where a company’s insolvent liquidation or administration is inevitable, directors must rank the interests of creditors as paramount.

See News analysis: Directors’ duty to consider the interests of creditors (BTI v Sequana)
See Practice Note: Directors’ duties: companies in financial difficulties

 Reform for UK Small Businesses

The UK Government has for certain reporting purposes. Since Monday 3^rd October, the government’s starting assumption is that businesses with fewer than 500 employees should be exempt from some ‘reporting requirements and other regulations’ (previously the threshold was fewer than 50 employees). The new threshold will apply to all new regulations under development as well as existing regulations that are reviewed, including retained EU laws. The government said that it planned to consult on further extending the threshold to 1,000 employees at a future date, once the impact of the current extension is assessed.

See: Government announces that thousands more small and medium-sized businesses will qualify for reporting and regulatory exemptions

Claims for Deceit

The case of MDW Holdings v Norvill⁴ provides guidance to approaching assessment of compensation for deceit.

The Court of Appeal decided that a claimant’s entitlement to compensation will vary depending on whether they would have proceeded with the transaction if they had known the truth.

If they would not have proceeded, they will be entitled to the difference between the price paid and the actual value plus any additional losses that they suffer.

If, however, they would have proceeded with the purchase, the compensation will be limited to the difference between the price paid and the actual value.  They will not be entitled to any additional losses.

See News analysis: The importance of distinguishing between the measure of damages in a breach of warranty and deceit claim (MDW Holdings v Norvill) (12/7/22)

See Practice Notes:

• Contract disputes—key and illustrative decisions
• Contractual damages—general principles
• Damages in tort claims—recovery and assessment
• The tort of deceit
• Misrepresentation—damages as remedy

Data security

Tiktok to face potential £27m Fine.

Marking what will be the largest fine the Information Commissioner’s Office (ICO) has ever issued, TikTok has been .

Though only a provisional measure, the notice of intent provides that TikTok has breached UK data protection laws by processing the data of children under 13 years of age without the appropriate consent from parents, processing special category data without the legal grounds to have done so, and failing to have provided proper information to its users in a transparent and concise manner.

See:

See Practice Notes:

• The UK General Data Protection Regulation (UK GDPR)
• The Data Protection Act 2018 and the UK GDPR
• Lawful basis for personal data processing
• UK GDPR—sanctions and enforcement
• Children and data protection law

Changes to Personal Data Transfers outside the UK

Since 21^st September UK businesses are no longer permitted to use the old EU standard contractual clauses (SCCs) for any new arrangements to transfer personal data from the UK to jurisdictions without an adequate level of protection under the UK General Data Protection Regulation. Instead, businesses must now use the . Any such data transfer arrangements that existed before 21^st September must be changed to the IDTA, UK Addendum or other lawful data transfer mechanism by the 21^st March 2024.

See News analysis:

• New UK standard contractual clauses for personal data transfers
• Comment—UK international data transfer tool enters with a whimper
• UK data transfers guidance coming soon, ICO says

See Practice Notes:

• UK GDPR—2022 standard contractual clauses (SCCs) for the transfer of personal data outside the UK—International Data Transfer Agreement (IDTA)
• UK GDPR—transfers of personal data internationally and to international organisations   

See Precedent: UK GDPR—2022 standard contractual clauses (SCCs) for the transfer of personal data outside the UK—Addendum to 2021 EU SCCs

Draft Employee Monitoring Guidance published by the ICO for consultation

The UK Information Commissioner’s Office (‘ICO’) has launched a  on its .

The guidance addresses how to lawfully monitor workers, the use of automated processes in monitoring tools, data protection considerations for different types of monitoring, and the use of biometric data for time and attendance control. The consultation closes on 11 January 2023.

See:

See Practice Notes:

• The UK GDPR and DPA 2018: key data protection issues for employment lawyers
• Monitoring staff, IT and communications systems in the workplace
• Data processing in the employment relationship
  

The ICO’s new name and shame policy

The ICO it has reprimanded seven organisations for repeatedly failing to respond to data subject access requests under Data Protection law. The ICO further provided that it has written to ‘thousands of organisations asking that they do more to resolve complaints involving access rights’.

The Information Commissioner, John Edwards, confirmed that ‘naming and shaming organisations that fail to comply is a new way for the ICO to work’ and ‘it’s going to become more common’.

See News analysis: Virgin Media and UK Ministry of Defence slammed for data access missteps

See Practice Note:

• Rights of data subjects
• Handling data subject requests—overview

‘Biggest cyber risk is complacency’

The . The ICO found that Interserve had failed to follow-up on an initial suspicious activity alert, had relied on outdated software systems and protocols, failed to provide adequate staff training, and failed to carry out sufficient risk assessments.

Following this, the UK Information Commissioner stated that ‘the biggest risk businesses face is not from hackers outside of their company, but from complacency within their company’.

See News analysis:

See Practice Notes:

• Cybersecurity breach notification requirements
• Cybercrime—issues, threats and vulnerabilities
• The UK General Data Protection Regulation (UK GDPR)
• Data processing in the employment relationship
• The UK GDPR and DPA 2018: key data protection issues for employment lawyers

Advertising & Marketing

The ASA holds HSBC climate adverts as leading

Two HSBC sustainability-focused adverts have been held by the Advertising Standards Authority to mislead customers. Each of the adverts highlighted both HSBC’s involvement with and significant funding to clients of which are transitioning to net-zero emissions but omitted to mention the organisation’s considerable contribution to rising emissions.

See:

See Practice Notes:

• Advertising law and regulation
• Environmental claims in advertising
• Business protection from misleading marketing

Employment

ACAS - new guidance on suspension

New concerning suspension from work has been published by ACAS. The guidance provides that the circumstances of each individual disciplinary case should be considered before committing to suspension; it should not be used to discipline employees and should not automatically follow as part of a process. Furthermore, it is emphasised that employees should only be suspended if it is believed necessary to protect the person under investigation, other staff, the business, or the investigation.

See Acas publishes new guidance on staff suspension from work,

See Practice Note: Dismissing fairly for conduct reasons

Changes to right to work checks

The temporary adjustments to the right to work process introduced under the Government’s response to Covid-19 have been revoked. Since the 1^st October 2022, employers will need to conduct one of three right to work checks before employment can commence: an online check using the Home Office online service, a check using Identification Document Validation Technology through certified digital identity service providers, or a face-to-face manual check using original documentation.

See: Home Office ‘updates’ right to work and rent guidance for end of adjusted checks,

See Practice Note: Right to work checks: how to conduct the check

Employer not liable for horseplay

The Court of Appeal have held in Chell v Tarmac Cement and Lime Limited⁵ that an employer was not responsible for a misguided practical joke performed by its employee that left another person with personal injuries. The court decided that the risk of injury was not reasonably foreseeable and that holding expectations of an employer implementing a risk assessment process for everyday misbehaviour was unrealistic.

See News analysis: Vicarious liability for, and risks assessing against, employee’s horseplay? (Chell v Tarmac Cement)

See Practice Note: Liability of employers for the acts of their employees and others  

Competition

Are ‘Most Favoured Nation’ clauses lawful?

Most Favoured Nation clauses (‘MFNs’) limit the price at which a supplier can offer a product through alternative sales channels and have been in the spotlight since the Competition and Market Authority (‘CMA’) levied a £17m fine on Compare the Market for its use of wide MFNs in 2020.

A wide MFN is where a supplier is restricted from charging lower prices through any other sales channel, whereas a narrow MFN only restricts a supplier from charging lower prices on its own website.

Since the Compare The Market decision it has generally been understood that wide MFNs are unlawful whereas narrow MFNs are acceptable. The new UK Vertical Agreements Block Exemption Order (‘VABEO’) emphasised this view by expressly listing wide MFNs as ‘hardcore restrictions’.

In August, however, the Competition Appeal Tribunal (‘CAT’) set aside the CMA’s infringement decision on Compare The Market. The CAT said that the CMA had failed to show that the wide MFNs had any appreciable anti-competitive effects.

Businesses cannot however relax and assume that Wide MFNs are now permitted.  The actions by Compare the Market pre-date the new VABEO which, as noted above, expressly lists wide MFNs as a hardcore restriction. This means that the CMA is no longer required to demonstrate an adverse effect on competition.  Only time will tell whether the CMA adjusts its approach in the light of the CATs ruling.

See: BGL (Holding) Limited & Others v CMA [Archived]

See Practice Note: The Competition Act 1998 (Vertical Agreements Block Exemption) Order 2022  

Price Fixing

The CMA fines of over £2 million against Rangers Football Club, JD Sports, and Elite Sports for illegal price fixing. Elite sold replica Rangers shirts for £60 but when JD sports undercut Elite’s price by £5, the three parties colluded with one another and came to an understanding that JD would raise their retail price to better-align with that of Elite.

See: Rangers Football Club merchandise (50930) [Archived]

Cases, laws, decisions referred to in this Bulletin

Disclaimer

Nothing in this Bulletin, or on the associated website, is legal advice. We have taken all reasonable care in the preparation of this Bulletin, but neither we nor the individual authors accept liability for any loss or damage (other than for liability that cannot be excluded at law).