Article / 28 Apr 2026

Banking and finance legal update: Q1 2026

Insight shared by:

Gateley Legal

In this quarterly update we:

  • review a High Court decision on undue influence in a parent-child assignment and the application of Etridge principles beyond guarantees;
  • consider Court of Appeal guidance on the statutory presumption of due execution of deeds;
  • summarise key ECCTA developments affecting Companies House, including identity verification delays and register changes;
  • examine recent Scottish authority on banks’ duties following notice of trusts; and
  • highlight lender impacts arising from the Renters’ Rights Act 2025 and recent case law on assignments by way of security.

Deed of assignment set aside due to undue influence of a parent over adult children

The well-known principles established in Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44 have recently been applied by the High Court, setting aside a deed of assignment after finding out that it had been entered into as a result of undue influence arising within a parent-child relationship.

In this case, the father, Gavin Watson, owed approximately US$727,000 in debts to the claimant, Robert Jewkes, under three separate loan agreements. Under an arrangement negotiated by the father, Mr Jewkes agreed to assign his rights under the loan agreements to Mr Watson’s two adult children, who were aged 22 and 24 at the time. The assignment deed required the children to make quarterly payments to Mr Jewkes. Only one payment was made before the payments ceased, and so Mr Jewkes sought to enforce the assignment directly against the children.

In response, the children argued that their apparent consent to the arrangement had been procured by their father’s undue influence.

The High Court found clear evidence of undue influence. The children had been placed under significant emotional pressure to sign the deed, were not given a proper explanation of its consequences, and were positively misled about the effect the document would have on them. In particular, the Court found that the children had been told their younger siblings would face homelessness should they refuse to sign the deed.

In addition to establishing actual undue influence, it was also found that presumed undue influence existed due to the nature of the parent-child relationship. Applying the principles in Etridge, the Court considered that while such a presumption may be capable of being rebutted, the threshold is high and was not satisfied in this case. Although the assignees were independent adults and not subject to their father’s day-to-day control, they were relatively young and inexperienced and remained under parental influence when making major decisions, particularly in relation to business and financial matters.

The claimant was also found to be on constructive notice that the transaction “required explanation”. The assignment was not commercially beneficial to the children, who were assuming substantial liabilities with little realistic prospects of recouping the sums from their father. Where there is constructive notice of undue influence, a lender should ensure that the vulnerable party has received independent legal advice prior to entering into such an arrangement. In this case, neither child was legally represented.

Despite the transaction not being a traditional guarantee, the Court noted that it shared key features which initiate the application of the Etridge principles. Its non-commercial nature, tripartite structure and lack of any real benefit to the children rendered the transaction voidable. The principles established in Etridge, and the more recent decision in One Savings Bank v Waller-Edwards [2025] UKSC 22, led to the deed of assignment being set-aside.

What are the key takeaway points?

  • Whilst the scenario would be an unlikely one for a commercial lender, it is interesting to see the Etridge principles being extended beyond a surety/ guarantee situation. This suggests that there could be other contractual arrangements where a lender could be deemed to have constructive notice of undue influence.
  • Lenders may wish to consider reviewing their policies on independent legal advice and, where relationships between the parties are non-commercial, extend ILA requirements beyond surety situations, for example, to priority arrangements.

Find out more

Jewkes v Watson and others [2025] EWHC 3319 (Ch) (22 December 2025)

Statutory presumption of due execution of deeds

The Court of Appeal recently considered whether a lease between a parent company and its subsidiary over a property, and an underlease of the same property between the subsidiary and the claimant, had been validly executed as deeds under section 44(2) of the Companies Act 2006.

Although the leases appeared to have been validly signed by the company secretary and sole director, in fact, an employee had written the director's name on the documents at the request of the director rather than the director signing them himself.

The Court of Appeal reversed the trial judge’s finding that the leases were duly executed under the statutory presumption in section 44(5) of the Companies Act 2006, which is intended to protect third parties. Section 44(5) states that, “in favour of a purchaser”, a document is treated as duly executed if it purports to be signed in accordance with the requirements of section 44(2), with “purchaser” defined as a purchaser acting “in good faith for valuable consideration”.

The Court of Appeal made three key points:

  • The protection only applies to a purchaser. It is not an automatic rule that anyone can rely on. In this case, the subsidiary could not rely on it, because the other party (the buyer under the underlease) was not trying to use that protection.
  • The purchaser must genuinely be acting in good faith. Here, the sole director knew that he had not personally signed the documents and that knowledge was attributed to the companies. The companies could therefore not say they were acting in good faith. The statutory protection is intended to protect purchasers who are unaware of defaults in execution, not those who know that the documents were not signed correctly. While in the circumstances, there was no need to decide whether constructive notice (as opposed to actual knowledge) of a defect in execution would prevent the presumption applying, the Court doubted that it would.
  • The claimant was not estopped from denying the validity of the leases. Even though there is a general principle that parties to a lease are estopped (prevented) from challenging a landlord’s title, the problem here was how the documents were signed, not who owned the property; therefore estoppel did not apply.

What are the key takeaway points?

  • Under section 44(5) the term purchaser includes a mortgagee and so is available for a lender to rely on (provided it is in good faith and giving valuable consideration (this might, for example, include lending)).
  • The statutory protection is helpful where execution is remote and so there is no clear way to know if the actual signatory did indeed sign the documents.
  • Whilst it is unclear at what stage such knowledge would be deemed not to be acting in good faith, it is best practice to raise any concerns about a signatory at the time of execution.

Find out more

South Bank Hotel Management Co Ltd v Galliard Hotels Ltd [2026] EWCA Civ 56

ECCTA: Companies House delays implementation of identity verification for filings

Companies House has published an updated Transition Plan, setting out revised timings for the implementation of key corporate law reforms introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA). A key introduction under ECCTA is the new mandatory identity verification requirements for those filing documents at Companies House (including Authorised Corporate Service Providers, such as law firms filing on behalf of clients). This requirement was previously scheduled to take effect in Spring 2026; however, under the revised timetable this is now postponed until ‘no earlier than’ November 2026.

This revised timetable is intended to allow Companies House to prioritise the identity verification transition period for company directors and persons with significant control (PSCs) and allows further consideration of stakeholder feedback on the practical operation of the new regime.

While the deferral may offer breathing space for businesses and professional advisers, these reforms remain a central element of the government’s wider efforts to combat economic crime and enhance corporate transparency. Organisations should therefore continue to monitor developments and prepare for implementation once a commencement date is announced.

What are the key takeaway points?

  • Companies House will not introduce identity verification for filings (which will include company charges) until November 2026 at the earliest.

Find out more

ECCTA outline transition plan for Companies House

Notices of security – account bank’s duties

The Scottish Sheriff Court has considered the circumstances in which a bank may owe duties to a third party after being notified that funds credited to a customer’s account are subject to a trust, and the extent to which a bank can continue to follow its customer’s payment instructions once such notice has been given.

Bibby Factors Ltd (Bibby) operated a factoring arrangement with its client, under which Bibby advanced funds in return for an assignation of the client’s receivables. The arrangement required the client’s customers to pay invoices into a designated bank account. Prior to the relevant payment, Bibby wrote to Bank of Scotland plc (the Bank) notifying it of the factoring arrangement and stating that incoming monies were held on trust for Bibby. Despite receipt of that notice, the Bank allowed payments out of the account shortly after funds were credited. The client subsequently entered administration, and Bibby sought recovery of the sums paid out, arguing that the Bank had breached duties owed to it as beneficiary of a trust.

The central issues before the Sheriff Court were whether, upon receipt of notice, the Bank owed duties (including fiduciary duties) to Bibby in respect of the funds, whether Bibby’s pleadings were sufficiently specific to establish that the Bank was on notice of a trust, and whether liability depended on proof of knowing receipt or dishonest assistance, or could arise simply from notice of an existing trust.

Sheriff Campbell rejected the Bank’s argument that it could not owe duties to a third party absent proof of knowing receipt or dishonesty. The Court held that, at least at the stage of relevancy, it was arguable that clear notice of a trust could impose obligations on a bank not to deal with the funds inconsistently with that trust. The Court also declined to strike out Bibby’s case as irrelevant, finding that the assertions regarding the content and timing of the notice were capable of supporting the existence of duties owed by the Bank to Bibby. As a result, the case could not be dismissed without the Court hearing the evidence and the action was allowed to proceed.

The decision serves as a warning to banks and lenders that receipt of notice asserting a trust over funds may require careful consideration before continuing to execute customer payment instructions. The case underlines the importance of clear notification mechanics in factoring and receivables finance structures, and the potential exposure of account holding banks where such notices are received but not acted upon. It also suggests that Scottish courts may be willing to scrutinise the interaction between traditional banking mandates and third party proprietary claims over account funds closely.

What are the key takeaway points?

  • Banks who receive notice of factoring arrangements and/ or trusts over accounts they provide must not disregard such notices and should instead seek legal advice prior to allowing payments out of such accounts.

Find out more

Bibby Factors Ltd v Bank of Scotland plc [2026] SC EDIN 9 (Edinburgh Sheriff Court)

Companies can no longer choose to hold register of members online at Companies House

The Economic Crime and Corporate Transparency Act 2023 (Commencement No.7) Regulations 2026 came into force on 26 January 2026. These regulations brought in section 49 of ECCTA, removing the ability for private companies to rely on the Companies House central register as an alternative to maintaining a local register of members. As a result, all companies are now required to keep their own register of members. Transitional arrangements apply to companies that had previously opted to use the central register.

The new register of members must include all information that would have been included in a register of members if the company had never used the Companies House central register at all. Where dates are missing when a company comes to create its new register of members, the company can rely on the dates recorded at Companies House.

It should be noted that failure to maintain a compliant register of members is an offence under the Companies Act 2006 and prior reliance on the central register is no defence for non-compliance.

Section 49 had originally been expected to come into effect at the same time as other amendments affecting local and central registers, which took effect on 18 November 2025.

What are the key takeaway points?

  • Since the central registers came into being, comparatively few companies have elected to use them to hold their register of members online, and so the impact will be minimal.
  • Lenders (or their lawyers) should continue to require a certified copy of the register of members for any obligors as part of a transaction’s due diligence. Amongst other matters, this is particularly important when checking shareholder resolutions have been passed by the correct people and ensuring security over shares is taken over the correct assets and granted by the correct shareholders.

Find out more

The Economic Crime and Corporate Transparency Act 2023 (Commencement No.7) Regulations 2026

Renters’ Rights Act 2025 – implications for lenders

The Renters’ Rights Act 2025 received Royal Assent on 27 October 2025 and represents the most significant reform of the private rented sector in England in decades. The changes will be implemented in stages, with the most immediate and impactful reforms taking effect from 1 May 2026.

From 1 May 2026, assured shorthold tenancies (ASTs) will be abolished entirely. All existing ASTs will automatically convert into assured periodic tenancies (ATs), and all new assured tenancies must be periodic, with rent payable monthly (or more frequently). Fixed terms will no longer be permitted, and any fixed term provisions will be unenforceable.

Finance documents referring to ASTs should allow for conversion to ATs, and the agreed form of ASTs in the finance documents need to allow for replacement of the agreed form by an AT. Lenders may also wish to ensure that borrower landlords cannot amend tenancy terms without consent.

The Act abolishes section 21 “no fault” evictions, meaning landlords (and receivers) will need to rely on statutory grounds for possession under section 8 of the Housing Act 1988. While new grounds are available (including sale by a mortgagee), possession will generally take longer and require evidence of compliance with statutory requirements.

Although this is not expected to materially affect drafting on real estate finance transactions, lenders should be aware that enforcement timelines may lengthen, particularly where compliance gaps exist or claims are defended.

Courts will not grant possession unless the landlord has complied with key obligations, including tenant deposit protection and (once introduced) registration on the private rented sector (PRS) database. While non compliance can be remedied before a hearing, lenders should consider whether loan documentation adequately supports access to compliance evidence, especially where enforcement is contemplated.

From 1 May 2026, contractual rent review clauses will be ineffective for ATs. Rent increases will only be possible following statutory notice or tribunal determination. This reduces rental income flexibility and may affect cash flow assumptions, particularly for highly leveraged portfolios, though it is unlikely to require extensive drafting changes beyond reliance on general “compliance with laws” undertakings.

Landlords will be required to provide tenants with a written statement of terms before letting and, from late 2026, must register both themselves and their properties on the PRS database and join the Landlord Ombudsman scheme. Failure to comply can result in financial penalties.

The Decent Homes Standard will be extended to the private rented sector from 2035. While this is not an immediate concern, lenders may wish to understand how borrower landlords plan to fund future compliance, particularly for older stock.

Penalties for non-compliance include Rent Repayment Orders (RROs) which may extend up to two years of rent and can be granted for a number of offences created by the Act. This means if landlords are in breach, tenants can apply for the refund of rental income. RROs are also to be extended to superior landlords. In addition, there are financial penalties: the maximum civil penalty for a breach is £7,000 and for an offence is £40,000. A breach is where a local authority has the option to fine only. An offence is where there is an option to prosecute or impose a penalty. If there were breaches in respect of multiple properties such fines could be issued multiple times (e.g. breaches in multiple flats in a block).

What are the key takeaway points?

  • ASTs will disappear from 1 May 2026. Lenders should ensure finance documents and agreed tenancy forms accommodate ATs.
  • Possession and enforcement may take longer following the abolition of no fault evictions, increasing the importance of landlord compliance.
  • Rental income flexibility is reduced, with statutory controls on rent increases potentially affecting cash flow assumptions.
  • New registration, disclosure and penalty regimes increase compliance risk; lenders may wish to require evidence of compliance as part of funding and ongoing monitoring.

Find out more:

Renters’ Rights Act 2025

Assignment by way of security effective despite wrong party signing

The High Court has held that an assignment by way of security was effective even though granted by the wrong company on the basis of estoppel by convention.

The assigned receivable was fees due under a consultancy services agreement (CSA) owed to Abraaj Investment Management Limited (AIML) by Kes Power Ltd (KESP). However, the security assignment of the receivable to the lender, Mashreq, was made by AIML’s holding company, Abraaj Holdings (AH). The key issue therefore was whether the assignment was valid despite being made by the wrong group company. AIML assigned its rights to the receivable to a third party and Mashreq then asserted its rights. The Court looked at whether Mashreq or the third party was entitled to the receivable.

Mashreq argued that there had been an implied assignment of the debt from AIML to AH before AH assigned it to Mashreq. The Court disagreed and held that there had been no implied assignment. The judge said that in a case where an equitable assignment was said to have arisen not on the basis of a contract, but rather from a communication from the assignor to the assignee or a direction to the debtor, it was necessary for the assignor’s intention to be “plain” or for there to be a clear expression of an intention to make an immediate and irrevocable transfer. Here there was no real direct dealing between AIML and AH which could only be explained by an implied assignment, because they were functioning as a single unit.

Mashreq also argued that the notice of assignment, which KESP acknowledged, created an independent debt obligation such that KESP was obliged to pay the receivable to AH even if the assignment from AIML was not valid. The Court held that no independent debt obligation had been created, a key point being the lack of consideration from KESP which did not get any commercial advantage from the provision of the Mashreq facility. The judge said that the most obvious purpose of the notice was to satisfy the requirements for a legal assignment under section 136 of the Law of Property Act 1925.

However, the Court found that Mashreq could rely on estoppel by convention. Mashreq, AH and AIML entered into the documentation on the basis of a common assumption that the receivable from KESP had been validly assigned to Mashreq so as to create effective security. The parties’ conduct here crossed the line sufficiently to demonstrate that they expressly shared the same understanding, because AIML and AH at all times conducted themselves on the basis that the condition precedent to the extension of the Mashreq facility had been satisfied by the assignment. Even if the test for estoppel by convention had not been met, AIML’s failure to raise the error and object to the purported assignment meant that the conditions for estoppel by acquiescence would have been satisfied.

What are the key takeaway points?

  • It is critical that lenders taking security over receivables conduct thorough due diligence to establish which entity is entitled to the receivable. This may not be clear where there are multiple companies acting together in a group.
  • As ownership of secured assets is a matter of fact, there will usually be an assumption about this in any legal opinion.
  • In this case, estoppel rescued the assignment; however this is unusual and should not be viewed as a substitute for proper due diligence on the assignor and making sure that the correct entity grants the security.

Find out more

Abraaj Investment Management Ltd (in Liquidation) v KES Power Ltd [2026] EWHC 65 (Comm)

Get in touch

For more information on any of the topics mentioned in this article, contact our experts below or meet our team here.