Understand Your Rights. Solve Your Legal Problems
Metalcorp is a metals and minerals group that operates production and mining facilities across Europe and Africa. Aluminium, metals and concentrates comprise its primary business areas, three primary business areas, with its bulk goods and ferrous metals segment also contributing around €254.8 million in sales in 2021. Company-wide sales revenue for the first half of 2022 rose 68% year on year to €511.1 million.
In early October 2022, Metalcorp announced that it could not afford the repayment of the bond (originally issued in 2017 for a period of five years) that was now due. Following the successful restructuring, this bond has now been extended by one year. Investors will receive interest of 8.5% for this additional year compared to 7% for the originally agreed term. A number of security mechanisms and termination rights have also been defined, in addition to mandatory partial repayments at the end of March and May 2023.
The new arrangement was approved by an overwhelming majority at a second creditors’ meeting in November 2022. The creditors, a majority of whom are private investors, had pooled their interests with the help of the Protection Association of Capital Investors (SdK), which submitted the relevant motions at the meeting. The agreement reached was subject to a one-month objection period that has expired without any objections raised. Metalcorp is also running another five-year bond (2021/26) for €300 million, on which the bondholders are advised by Kirkland & Ellis.
DMR Legal advised the bondholders of Metalcorp with a team comprising partners Dr Tobias Moser, Dr Thomas Ressmann and Dr Maximilian Degenhart, as well as associate Fabian Wirths.
Dr Tobias Moser, DMR Legal
Our team was representing a group of larger institutional investors mostly consisting of asset managers and pension funds. We worked closely with German investors organisation SdK, who was organising many private investors.
After the surprising default of Metalcorp, we started organising the bondholders and approaching Metalcorp for negotiations on the restructuring process. We held two investor conferences for the bondholders, sharing and explaining our analysis of the situation, and constantly negotiated terms with the company and their advisors and put them to votes in two bondholder meetings. In addition, we regularly exchanged views with another group of bondholders of the €300 million 2021/26 Metalcorp bond (WKN A3KRAP / ISIN DE000A3KRAP3).
The complexity of the restructuring negotiations resulted on the one hand from the prior event of default of Metalcorp, which had to be resolved, and on the other hand from the potential cross default regarding the €300 million 2021/26 bond. In addition, the issuer’s business model and the focus of its current activities in West Africa added to the complexity.
We therefore requested and reviewed confidential information in this regard, organised an on-site visit carried out by local partners and obtained and discussed a plausibility check of Metalcorp Group SA’s liquidity planning issued by an auditor.
Most unforeseen obstacles were related to the operational business in Africa. As the mining facilities for the Bauxite that Metalcorp was mining were in Guinea, Africa, political stability was an issue. After the military coup in Guinea in September 2022 that led to regime change, it was unclear if the new regime would honour existing contracts and licenses. In addition, a very important bauxite shipment was delayed several times, so we needed to conduct some on-site investigation. We hired a local law firm who organised a visit, helped us with legal documents and gave us detailed reports about the circumstances at the site.
From a procedural point of view, we had to contend with the fact that the company has its headquarters in Luxemburg and most of its management in Monaco, whereas the bond is issued under German law with most operational business done in Africa. This led to several challenges regarding communication, organisation and language barriers. We organised ourselves and made a restructuring plan as well as a timeline to deal with all issues in an orderly manner. Our experience with cross-border restructuring and a strong network in Europe and abroad helps us in these complex situations.
Internally, it is important to work as a team and assign tasks to all team members. Besides project management and coordination, drafting of documents and market know-how was essential to represent the bondholders’ interests as best as possible.
Our experience with cross-border restructuring and a strong network in Europe and abroad helps us in these complex situations.
When it comes to working with other advisors, we believe key to success (considering the short period of only 6 weeks we had from default until the second bondholders meeting) was a swift and transparent coordination and negotiation between all parties. In this case, the process was always transparent and negotiation professional. It certainly helped that all lawyers and financial advisors involved were known for their expertise in this area and knew each other from prior restructuring cases.
As bondholders’ counsel, we spoke daily with the company and their advisors and addressed the most pressing matter in an always professional but pragmatic way that led to a win-win for everyone. Metalcorp was given an additional year through the extension of the bond and thus enough time to negotiate a refinancing and address operational issues.
Also, we ensured that a potential cross default was avoided so that a going concern was ensured. In order to strengthen the bondholders’ position regarding early and final repayments, we negotiated a repayment schedule and additional collateral for the bondholders. We also were elected as joint representative, meaning we represent the whole bond until full repayment, and so we constantly monitor and have the right to request reports from the company.
DMR Legal is a rather young firm, but all of our partners have many years of experience in big law firms, restructuring consultancies or management roles. In addition, we have a strong focus on finance and restructuring cases, combining expertise, experience and a hands-on-approach with in-depth market knowledge. Our lawyers usually know the advisors and market standards and can thus get straight to the points that matter. All lawyers have international experience and we regularly advice on cross-border financing and restructuring cases.
Besides legal expertise and market knowledge, our experience in working with or in financial advisory firms as well as management experience helps us to identify the client’s commercial interest and put it in the centre of our advice. This helps us to better understand the client and find a solution that helps them not only legally but also commercially.
Finally, communicational and project management skills are very important when there are many different stakeholders with different interests who need to be all taken into consideration when negotiating a solution.
Our lawyers usually know the advisors and market standards and can thus get straight to the points that matter.
First, it means that an otherwise almost certain insolvency of Metalcorp Group was avoided and the chances for a full recovery increased significantly.
The negotiations did not only preserve the rights of the bondholders, but they resulted in a significant improvement of the bondholders’ position through mandatory partial repayments, participation in collateral, new security mechanisms, an interest step-up of 1,5% and a participation fee of 0.5% of their respective bond volume for participating bondholders. The negotiated down payments and additional fees and interest rate mean a significant de-risk and better commercial terms all bondholders.
The approval rate of 99,77% for the restructuring proposal – and even 100% for DMR overseeing the further developments as a joint representative of the bondholders – shows that true value was generated for everyone. Capital market reaction on the price of the bonds confirmed it.
Yes, we believe that there will a lot more issuers that will have problems with refinancing their bonds or repayments. The capital market is very different today compared to five years ago, which is the usual term for a bond in the German market. As interest rates skyrocket, refinancing becomes more expensive, and – as investors are more conservative with their money – in many cases even impossible. We advised four major bond restructurings in Germany in 2022, including Metalcorp. For 2023 we believe this number will double, as we already see increasing demand for restructuring advice. Soon there will be more clients seeking advice than lawyers with time available to give it.
We of course monitor the market closely and have both a longlist and a shortlist of companies who we believe will have problems repaying their debt in the near future. Unfortunately, we cannot give you any names, but industries under pressure – at least in Germany – include the real estate industry, the automotive industry, energy-intensive producing industries and the healthcare industries. In general, all industries where companies face operational issues (energy prices, real estate market stagnation, electronic mobility) in addition to the turned financing market and high interest rates after years of cheap money are likely to have some repayment issues soon.
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A major problem in refinancing or restructuring cases is that the debtor usually acts to late on the issue. Debtors usually think they will find a solution soon and often start too late with initiating the talks with their creditors. That is usually not a result of bad faith, but managers and CFOs are deep in their daily work and few of them have restructuring experiences. Good advice by lawyers can help to identify options early and take the necessary steps before an event of default has occurred and everyone is limited to trying to fix it instead of actively shaping a solution.
Finally, communication and organisational skills are very important as you usually face many different creditors, but also need to talk and negotiate with banks, shareholders, employees, directors and advisors all at the same time. Especially in larger refinancing or restructuring cases, professional advisors on the legal, financial and communicational side help to streamline the process and create value in stressful situations.
No. DMR Legal is a finance and restructuring firm and we advise on all sorts of financing instruments. That includes tradeable instruments such as bonds, German Schuldscheine or certificates, but also ’classic’ term loans, acquisition-/leveraged finance, venture debt and high-yield finance, real estate, project, asset-based finance, digital finance, crowdfunding and crypto finance. We advise creditors and debtors alike and can assist our clients in all kinds of critical situations such as insolvencies, out of court restructurings, self-administration, or restructurings under the new German StaRuG scheme. Our litigation department, specialising in finance and capital market disputes, assists in cases where a solution could not be found.
Founded in China in 2005, the Rainbow Agro group specialises in the production, marketing and distribution of crop protection products. It has spread its footprint to 80 countries across five continents and boasted a turnover of more than $1.5 billion dollars in 2021.
Exclusivas Sarabia is a Spanish firm with a focus on the manufacturing and marketing of phytosanitary and nutritional products for large clients in the agricultural sector, as well as consumer-level products for orchards and gardens. Its portfolio includes insecticides, fungicides, herbicides and fertilisers.
Ecija advised Rainbow Agro with a team comprising partners Gabriel Nadal and Maite Mascaró, based in its Barcelona office.
IDEAL is a global, diversified family-owned business designing and manufacturing superior products for the electrical, lighting and infrastructure industries. CMD was previously owned by Rubicon, who created the business in 2001 through the integration of three separate companies. Today, its business portfolio includes workstation power, power distribution and ergonomic solutions for employee performance, with 158 employees between its Rotherham manufacturing unit and London showroom. Managing Director Jon Holding will remain in position following the acquisition, as will the rest of the existing management team.
Rubicon is a London-based investment partnership with a focus on the acquisition of complex industrial businesses across Europe and North America. CMD will be the sixth investment made through its Fund V, which also includes Amey’s utilities division.
Antony Cotton and Claire Rigby led Druces’ corporate team in advising IDEAL. Other members of Druces who supported Antony and Claire on the deal included Neil Pfister in respect of Intellectual Property, Paul White in respect of Tax and Adrian Footer in respect of Real Estate.
Curry Popeck Solicitors and Sorkin Brown Chartered Surveyors also advised the buyer, while Ryden LLP and Merrit & Co Solicitors advised the vendor.
The Langley Moor-based Skillion Business Centre plays a significant role in the local economy and its purchase by the London-based investor reflects a net initial yield of more than 8%. The property comprises a refurbished block with external yard areas and various small workshops.
Naylors Gavin Black partner Chris Donabe acted as the firm’s lead on the transaction. “Skillion Business Park was identified as suitable to our client’s requirements given the reversionary potential in the income, multiple asset management angles and the potential to engage further with existing occupiers to improve the income profile,” he said.
The CAD Trust is a joint initiative of the World Bank, the government of Singapore and IETA to establish a decentralised metadata system that is able to link, aggregate and harmonise all major carbon market registry data. It was officially launched at the Asia Climate Summit in December 2022. The aforementioned organisations are the founding sponsors of the CAD Trust and will collaborate with other governments and private sector entities in furtherance of the initiative.
The CAD Trust will provide an open-source metadata system to share information about carbon credits and projects across digital platforms, which will ease future integration of multiple registry systems. Using distributed ledger technology, the platform aims to create a decentralised record that will avoid double counting, increase trust in carbon data and enhance climate ambition. It hopes to provide and facilitate crucial infrastructure for the development of the next generation of carbon markets.
HFW’s team was led by partner Peter Zaman and included associates Rochelle Musgrove, Jefferson Tan, Russell Quek, Christopher Ong and Farah Majid.
Peter Zaman, HFW
There is no existing organisation in the world today whose objective for being set up is similar to that of the CAD Trust. As such, the main role HFW played at the early stage of this mandate was to guide the sponsors on the most suitable governance and corporate organisational framework for the CAD Trust. This involved recognising the quasi-public/private nature of the sponsors, as well as the various participant types who will be involved in the future activities of the CAD Trust and creating a balanced arrangement that accommodates the dynamics of the multitudes of interests arising from that. HFW coordinated the incorporation process for the CAD Trust in Singapore together with SLB.
The establishment of the CAD Trust is expected to be a critical enabling tool towards the achievement of net-zero climate goals as it will assist countries in implementing Article 6 of the Paris Agreement. This requires countries to track and report on the use of international credits through a registry system, and the CAD Trust system will assist in promoting high-integrity systems and digital linkages. The future of carbon markets involves establishing trust between the Paris Agreement markets and voluntary carbon programs. By helping reduce the risk of double counting, the CAD Trust will be an important tool towards building that trust.
HFW and SLB will continue to support the efforts of the CAD Trust as it starts to implement its objectives in 2023. The carbon market, in its second iteration, remains nascent with many new products, infrastructure tools and markets frameworks yet to be developed. The work on these things will continue in 2023 and HFW will no doubt continue to support its clients with such initiatives.
Sellerdeck is an Exeter-based firm that uses a range of innovative platforms to assist eCommerce businesses in speeding up sales and handling greater quantities of orders. Founded in 1996, the firm will retain CEO Josh Barling as its head following the acquisition.
ClearCourse is a leading group of innovative technology brands with a focus on integrated software and payments solutions. Its acquisition of Sellerdeck will strengthen its retail division and expand its footprint in the eCommerce space.
Sellerdeck CEO Josh Barling lauded the deal: “At a critical time for our growth, we stand to benefit immensely from working with the group’s warm and highly capable team, with its impressive experience of integrating ecommerce systems,” he said. “Integration with a diverse set of businesses brings us some promising new opportunities to add value to our customers and give them the best software solutions they need to run successful businesses.”
Debbie Franklin, ACA CTA FCCA, Director of Tax at Peplows Chartered Accountants
Peplows is a firm of chartered accountants, chartered tax advisors and business consultants based in the South-West. It is precisely this combination of accounts, tax and business expertise which led Josh Barling to appoint the firm for ongoing services in June 2021.
Sellerdeck had a strong reputation, a proven product offering and was in a sound financial position when it was approached by ClearCourse. It was vital that this was accurately reflected in the deal and the value of the business.
Our specialist corporate team were involved from the outset, liaising with the solicitors on the initial heads of terms. We advised on the tax implications of the sale and assisted with the due diligence from both a financial and tax perspective. We then worked closely with the solicitors on the share purchase agreement.
Peplows is a well-established, award-winning firm with a strong reputation in the area. Our team are adaptable, resilient and focused with a commitment to providing tailored solutions to our clients. Having worked with the seller prior to the transaction, we had a comprehensive understanding of the business.
The ultimate aim of many businesspeople is to build a company that has value, so that it can be sold or transferred at some point. Helping businesses get to this position is what we do. We have a tried and tested methodology to address the many issues that need to be considered when preparing a business for sale.
Successful transactions require a range of expertise and experience and the tax implications of any deal are often one of the most important aspects. As chartered tax advisors as well as chartered accountants, we were well-placed to provide the specialist advice required. It is only with this extensive and up-to-date tax knowledge that the tax liability of the entire deal can be kept to a minimum.
Client manager Lauren Wade was a key member of the corporate team, providing details on the financial condition, background, operations and contractual obligations of Sellerdeck.
Sellerdeck CEO Josh Barling commented: “Our finance management has greatly improved since appointing Peplows, from problem solving to thought leadership. The due diligence would not have been possible without Peplows’ involvement and at every point I felt comfortable to personally warrant the information they provided.”
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When due diligence is done well it will establish a comprehensive, reliable and up to date account of the subject to allow informed decisions to be made by those considering any potential transaction or relationship.
As with all other areas of our operations, we provide an extremely personal service to help ensure our clients reach their specific goals. However, we know from experience how important it is to collaborate with all parties involved to avoid potential obstacles and ensure a timely outcome.
The success of our approach and service overall has led to our continued appointment during the onboarding process, providing monthly management accounts and ongoing support to the team. For further details regarding our unique service offering and corporate expertise, visit our website.
Machado Meyer Advogados acted as advisor to Lojas Le Biscuit.
Casa & Video Brasil is a prominent retailer of home appliances in Brazil. The firm’s product offering includes furniture, electronics, toys, smartphones and products in a range of other markets, including health and beauty.
Lojas Le Biscuit SA is a multichannel integrated distribution platform with a portfolio of diversified products that it brings to market at competitive prices. Its network of Brazilian retailers is extensive.
Cescon Barrieu advised Casa & Vídeo Brasil and Akangatu FIP Multiestratégia with a team comprising partners Luciana de Castro Mares Torres, Daniel Laudisio, Isabela Bagueira Leal Coelho do Val, Marcos Prado, Renato Batiston and Ricardo Gaillard, together with associates Maria Julia Argollo, Nathalia Rabello, Camila Kneitz, Daniel Paiva, Thales Lima and Thales Lemos.
Luciana de Castro Mares Torres, Cescon Barrieu Advogados
The transaction involved two relevant retail players, which required extensive and specialised discussions on all working fronts of the deal, such as the due diligence, antitrust and real estate matters and the M&A transaction documents.
Also, the structure of the transaction was based entirely on the companies’ shares by means of corporate restructuring. As Le Biscuit is registered as a public company, these facts also brought certain complexities to the deal.
The team had a leading role in the transaction given all the different and detailed working fronts of the deal, such as the involvement of three different legal advisors as well as financial and auditing advisors and the various specialised areas involved as mentioned above, which required efficiency, objectiveness and a very careful oversight of all of the working groups. Another crucial requirement was the ability to deal with the adversities and tough negotiations that a deal of this kind brings to the table.
We were able to bring our extensive experience in M&A transactions, especially those involving publicly held companies and those within the retail sector. These usually require dedication on many different fronts of the deal because of the number of companies, their subsidiaries and branches, as well as all their activities.
It is also important to highlight teamwork in this deal. Due diligence, antitrust and real estate teams were in high demand during the transaction due to its. This is something that Cescon does with preeminence and that we are proud of.
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A transaction that involves several important fronts, as well as many relevant parties involved in the negotiation, usually requires a very careful oversight of all the different works as they take place on a very tight schedule.
Our team worked brightly as a group in order to divide and complete their tasks, achieving a successful signing of the transaction.
According to KKWR, the essence of the agreement is a joint project for the implementation of the LiveBank Cloud solution, which utilises cloud technology based on a SaaS model. The solution incorporates a number of enhancements including digital document exchanges, screen-sharing capabilities, and the ability to file shared documents. The solution will also allow ING customers to receive advice remotely from bank specialists in addition purchasing a number of bank products without being physically present at a branch. The products to be made available online will include mortgages.
Based in Krakow, Ailleron is a software firm that provides IT and technology services with a focus on software development services for financial institutions including banks, fintech firms, leasing companies and other entities. Its agreement with ING Bank will include Operator Chmury Krajowej as a party to the project, providing the cloud platform and ensuring the compliance of relevant cloud services with regulatory requirements.
KWKR advised Ailleron with a team comprising managing partner Michal Konieczny, equity partner Wieczorek and associate Gabriela Kocurek. KWKR previously advised Alleron on the sale of its majority stake in Software Mind to Enterprise Investors.
Michal Konieczny, KWKR
Our role was to ensure that Ailleron’s interests were adequately safeguarded, taking into account Ailleron’s internal standards while also bearing in mind ING’s requirements for the project qualified as a regulated outsourcing.
The other important task of our team was to support Ailleron in developing the model of future cooperation in a tripartite relationship between Ailleron, Operator Chmury Krajowej and ING which would be acceptable for each party. Our role was to take care of the proper and precise identification and division of duties and responsibilities within this relationship, taking into account ING’s requirements and the positions of each party. During the negotiations, our team also supported the dialogue between the three parties. There were contentious issues during the negotiations, but we managed to reach a compromise.
Legal services for IT implementations, both in the on-premise and cloud models, is one of the our leading specialisations. For years, we have been advising our clients in this area and supporting them in the process of negotiating IT implementation agreements and contracts for the provision of services in the SaaS model. We also have great experience in providing legal services for projects in the FinTech sector, including those covered by industry regulations of the financial sector.
Thanks to many years of cooperation with our clients in the field of IT implementations, we have a good understanding of the technical aspects of the implementation projects and we accurately identify business risks. It is these competencies that enabled our team to provide Ailleron with comprehensive support during the contract negotiation with ING.
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The use of cloud technology in the financial sector is widespread around the world. In Poland, due to specific regulatory requirements for such implementations, this progress is not as fast as in other western countries. However, the polish financial industry is now seeing greater interest in cloud-based IT product implementations. The transformation of banking products towards cloud outsourcing is only just gaining momentum, hence we anticipate that more such projects will emerge in 2023.
Equinox is a Leeds-based IT firm that provides software for law firms which specialise in intellectual property. Founded in 2006, it has since grown to supply almost 250 organisations across 25 countries. Its team comprises tech experts in a variety of professional disciplines, with specialists in development, data management and support. Equinox will continue to operate in Leeds with its full team following the acquisition.
Questel is a global legal technology company headquartered in France. It provides technology solutions for IP professionals, with a service portfolio comprising the entire innovation and IP life cycle. With its acquisition of Equinox, Questel will be able to further expand its share of the international IP management market.
Questel CEO Charles Besson described his excitement at the prospect of the Equinox merger: “Equinox is experiencing strong traction in Europe and we are looking forward to bringing this state-of-the-art solution to law firms around the world. Alongside this acquisition, Questel is on track to become the global leader in the IP Management System market.”
Lawyer Monthly had the pleasure to speak with Andrew Pollard at Ahead Business Consulting to give us some further insight into this transaction:
Equinox is a well-known provider of intellectual property management software (IPMS) for IP law firms. They provide the administrative backbone for over half the firms in the UK and many others around the globe. Based in Leeds, with around 40 staff, they have developed and marketed a package that increases efficiency and reduces errors by combining workflow, document management, billing, reporting, renewals and a client portal.
Questel delivers intellectual property solutions across the entire innovation lifecycle to more than 20,000 clients and 1.5 million users across 30 countries. They offer a comprehensive software suite for searching, analysing and managing inventions and IP assets together with services supporting the IP lifecycle, including prior art searches, patent drafting, international filing, translation and renewals.
There is clear synergy. Equinox needed a global partner to drive overseas sales and understand local requirements. They also need to leverage integrations with third party products to provide clients with a seamless service. Questel’s portfolio lacked a compelling IPMS offering suitable for law firms and had a small UK client base. Together, and with Equinox’s proven technology development speed to market, there is a great opportunity to become a dominant global provider.
We at Ahead Business Consulting were already working with Equinox before the merger to help them improve their strategy and performance, to bring greater clarity, focus and effectiveness. Equinox had asked Ahead Business Consulting to improve their project delivery for larger clients. We overcame that delivery challenge, but the question remained as to whether Equinox had what it took to deliver in this space – strong project management, robust core offering, ability to contain the cost of customisation, relationship management to manage against scope-creep and sufficient cash flow to fund the period before the client moved to a SaaS payment model.
Over the next quarter we helped upgrade the management information, splitting the P&L between the smaller law firms who took the off-the-shelf product and the larger firms looking to replicate unique internal processes and interface to other bespoke systems. We trained on sales and practical project management, revisited the contractual terms and advised on the organisation structure. Above all we focused attention on the four things that really mattered: small firm sales, staff, service and large firm delivery. Structured as meta-projects, these four areas became pivotal in moving to a robust management structure.
We at Ahead Business Consulting were already working with Equinox before the merger to help them improve their strategy and performance, to bring greater clarity, focus and effectiveness.
The evidence was clear – a sharper focus on the sales process for small firms and a modular build for large firms could create significant growth in current markets. But international growth in the US, most of Europe and the Far East would need a partner. The IP technology sector was consolidating fast – Equinox could not risk being in direct competition with a billion-dollar corporate.
We co-created the acquisition strategy with the Equinox directors. We documented the red lines for them, how we saw the valuation, the way we would pitch the company and the potential acquirers. Knowing that due diligence would be needed later, we kick-started the preparatory work to streamline the transaction and maximise value.
Our work fell into three phases. In phase 1 we identified the immediate challenges, set the strategy, and implemented it. Without making significant changes to the operation of Equinox, the company would not have shown its true value. The Equinox board would have lacked the information, analysis and support to make a decision to be acquired.
In phase 2 we acted as intermediary between Equinox and potential buyers. This freed up management time and created negotiating space. A negotiating intermediary can have frank conversations, signal direction and pause to collect information which the management team would feel necessary to provide immediately.
Due diligence is a project in its own right, which typically requires the creation of a lot of material. We managed this process, creating forecasts, planning, providing analysis and ensuring the information provided was complete, timely, without conflict and accurate.
The biggest challenge is about the people. Equinox is a young management team, selling a company for the first time that they have nurtured for 15 years. It is incredibly emotional and stressful, but at the same time they needed to focus on the key indicators that drive their valuation. Together with Ward Hadaway and Azets, we managed to dial down the stress through good planning, strong communication and pragmatic advice.
Managing expectations is also key. Complex deals take time, especially with an overseas acquirer and turbulent financial times. There are several stakeholder groups to consider, including Equinox’s wider shareholders and staff. In our strategy work we wrote down a core value: “Equinox is a totally cool place to work”. That ethos is central to the way management behave and drives the culture. It is vital that the way the deal was set out preserved that ethos.
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Over the next few years, we expect widespread consolidation in the broad innovation space. Market research has predicted growth of threefold between 2021 and 2028, driven by a combination of a continued rise in patent filings and the rising costs and risks associated with inefficient IP management.
For Questel and Equinox, we see a very bright future. Many competitor IPMS products are close to their end of life, with providers struggling with rising costs of maintenance and a reluctance to deliver new features. Corporates with in-house IP divisions and law firms will face rising IT and staff costs, making it increasingly sensible to seek efficiencies. With the global backing of Questel, we think the Equinox software will grow from being the largest UK law firm IPMS to a top five provider for law firms and small corporates globally.
We help businesses all over the UK boost their potential. We resolve problems, unlock new thinking and bring ideas to life. We focus on the power of people to achieve change for better. This year we expect half of our engagements will require external investment or acquisition to achieve change. A proportion will be acquisitions, while others will be equity or loan investments. The mix will be governed by market conditions, but in all cases Ahead Business Consulting will bring fresh focus and new insights.
As we enter 2023, it is interesting to speculate about which trends we will see emerging in the Scottish litigation market in the coming year. From insolvencies and class actions to changes to legal regulation and the availability of litigation funding, we anticipate these five trends in 2023.
Starting with the most obvious, we are expecting to see a marked increase in insolvency litigation.
The ‘tsunami’ of insolvencies that was anticipated following the pandemic has not yet materialised, and while London is starting to see bigger waves in that practice area than it did last year, Scotland is yet to see as significant an increase in cases.
It is likely that this will change in the year ahead and there are signs that it is already starting to do so. This may be driven by larger insolvencies which cause ripple effects in the market, but the real uptick in cases may be in relation to the conduct of directors during the pandemic. Scotland is already seeing a rise in claims against directors either by insolvency practitioners, creditors or shareholders and it seems clear that this trend is likely to continue.
Beyond insolvency litigation, we predict that claims against directors are also likely to rise.
In 2022, we saw several petitions made by shareholders seeking relief from unfairly prejudicial conduct under section 994 of the Companies Act. Those sorts of claims, combined with derivative proceedings, are likely to be a feature of the legal landscape in 2023 as well.
While the pandemic may be responsible, it is interesting to reflect on the reasons for the increased claims in these areas. Financial pressure on businesses or the individuals in charge can lead to people behaving in a way that they otherwise would not, and occasionally the decisions taken when under that sort of pressure can be open to criticism. So, even beyond insolvency, company directors need to be mindful of the prospect of claims in the coming year and early advice will often be key to protecting their position.
In London and across much of Europe, class actions are becoming a big feature of the legal market and are the focus for some of the top litigation funding providers. In Scotland, group proceedings (our equivalent of class actions) have been slightly slower to take off.
While there are successful examples to point to, there is an opportunity for growth in this market in the coming year. Of course, being willing to pursue class actions for clients and being able to service them are different things; many firms will not have the size nor resources to properly service proceedings of this kind. Therefore, where an opportunity arises, it will likely be the bigger players in the Scottish market that are involved.
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Recently, there has been an increase in the availability of litigation funding in Scotland, which has had knock-on effects in the type of claims that we see in this jurisdiction.
Professional negligence claims provide a good opportunity for funders where the defender is insured and, therefore, a return guaranteed in the event of success. These sorts of claims, against a broad range of professionals, have long been a feature of the funding market in England and Wales, but we may see it emerge in Scotland this year too.
Yet the challenge in Scotland is value. Generally, the litigation funding market still struggles to service the mid-market and the very high-value claims, which often arise south of the border, appear more infrequently in Scotland.
Finally, there will be changes to legal regulation in Scotland in 2023, depending on how quickly the proposed changes are adopted. We anticipate that the majority of changes in the Roberton Report on the review of legal services in Scotland will not be implemented. However, two changes will be particularly important.
First, at the end of 2021, the Law Society was authorised as an approved regulator for Alternative Business Structures (ABSs) in Scotland. The Scottish Government is now determined to increase ABSs in Scotland, allowing solicitors and non-solicitors to set up in business together to increase competition and choice for consumers in the Scottish legal market.
Secondly, the reform of legal regulation will see the Scottish Legal Complaints Commission maintain its role in service complaints, with the Law Society and Faculty of Advocates continuing to deal with conduct issues. However, crucially, it appears that some of the criticisms of the current system have been taken on board and the hope is that the legislation will allow regulators to focus more on consumer experience and outcomes than on the process itself.
All in all, 2023 has the potential to be a very busy year for Scottish lawyers and for those quick to embrace the changing legal market there are real opportunities to be explored.
Richard McMeeken, Partner and Solicitor Advocate
Quartermile Two, 2 Lister Square, Edinburgh EH3 9GL
Tel: +44 0131 247 1035
Richard McMeeken is a partner and solicitor advocate in the commercial litigation team at independent Scottish law firm Morton Fraser.
