Article / 1 Mar 2026
In this month’s update we:
In South Bank Hotel Management Company Ltd v Galliard Hotels Ltd [2026] EWCA Civ 56, the Court of Appeal served an important reminder of the strict formalities required for the execution of deeds by companies. The case highlights how apparently routine informal practices – a personal assistant signing on a director’s behalf – can unravel major commercial arrangements many years later.
The Companies Act 2006 (the Act) sets out the three ways in which a company can validly execute a deed document, namely:
In order to protect third parties dealing with companies, the Act provides a statutory presumption of due execution. This operates so that, in favour of a purchaser acting in good faith for valuable consideration, a deed is deemed to have been duly executed if it purports to be signed in accordance with the above rules. So, a counterparty may assume that a deed has been duly executed by a company and need not investigate whether appropriate internal authorisations have been obtained.
The case arose from the development of a large hotel complex near Waterloo Bridge in London. The claimant, South Bank Hotel Management Company Limited, was the vehicle through which investors acquired long leases of individual hotel rooms.
As part of a corporate restructuring carried out in 2008, two of the group companies involved in the development entered into two key documents: a 999-year lease and a 15-year underlease. Both documents, executed as deeds, stated that they were signed by two authorised signatories: Mr Conway, who was the sole director of each company, and another individual who was the company secretary. It later transpired that Mr Conway had not actually signed the deeds. Instead, his personal assistant had written “S Conway” on them at his request. Apparently, Mr Conway frequently asked his PA to do this because he “felt that he did not have time to do so” and he believed, mistakenly, that this was a valid way to execute the deeds on behalf of the companies.
South Bank later challenged the validity of the deeds, arguing that they had never been properly executed. When the High Court rejected that argument, South Bank appealed.
The Court of Appeal held that the deeds were not properly executed as the companies had failed to comply with the specific formalities set out in the Act.
The companies argued that, even if the execution was defective, the statutory presumption should apply. But the Court of Appeal rejected this argument. A key part of the Court’s reasoning related to knowledge. Because Mr Conway was the sole director of both the companies involved, his knowledge – specifically, that he had not actually signed the deeds – was attributed to the counterparty in each case. That meant that they could not be said to have acted in “good faith”, as required by the statutory presumption, because they knew the signatures were not genuine. The presumption is designed to protect those who do not know that “the position is otherwise than it purports to be”, not those who are aware that execution is defective but proceed regardless.
The Court also clarified that the statutory presumption operates “in favour of a purchaser”. It is intended to be a shield for a purchaser to rely on a deed’s validity, not a tool for a company to force an invalidly executed deed on a purchaser who wishes to reject it.
So, the Court held that the lease and the underlease were ineffective as legal deeds.
The case is a reminder that, when it comes to deeds, execution formalities matter. Even sophisticated parties and long‑running commercial arrangements are vulnerable if the relevant requirements are not followed to the letter, and transactions completed many years ago may still be challenged if execution defects subsequently come to light. In addition, the statutory presumption will not protect a party that knows, or is presumed to know, that documents have been improperly executed.
If a director will not be available to sign a deed (either in wet ink or electronically), a formal power of attorney should be used – which must itself be properly executed by the company.
In Abraaj Investment Management Limited v KES Power Limited [2026] EWHC 65 (Comm), the High Court stepped in to save an assignment of a debt by way of security. The Court used the legal doctrine of estoppel to fill a gap in a chain of title where all the parties had acted on a shared, but mistaken, assumption that the missing link existed.
An assignment by way of security is a common way to back up a loan. It involves a borrower transferring (or “assigning”) its right to receive a debt to its lender. If the borrower fails to pay back the loan, the lender can step in and collect that debt directly. Importantly, it is only the person that owns the debt (or the right to receive it) that can assign it. An assignment will usually be ineffective if the incorrect entity purports to enter into it.
But, in some limited circumstances, the doctrine of “estoppel by convention” may save an otherwise ineffective assignment. This is a legal safety net that applies when two parties act based on a shared (but technically incorrect) understanding. If one party relies on this shared mistake, it would be unfair to let the other party avoid their agreement by relying on their mistake; the court will stop (or “estop”) them from doing so.
The borrower in this case was the parent company of a large private equity firm that owed a significant amount of money to another borrower. To secure an extension on this borrowing, the parent agreed to give the lender a security interest in a debt it owed of approximately US$37m.
The assignment agreement was in the name of, and signed by, the parent. But, actually, the debt was owed to its subsidiary. So, the parent was effectively trying to give away something it didn’t own.
Years later, after the private equity group went into liquidation, the liquidators for the subsidiary argued that the assignment was invalid because it had been signed by the wrong group company.
The Court held that, as a matter of strict law, there had been no valid assignment of the debt to the lender. There was no express assignment from the subsidiary to the parent and no basis for implying any such assignment. Therefore, the parent had no right to receive the debt which it could then assign to the lender.
However, the Court went on to hold that the subsidiary was estopped from denying the effectiveness of the assignment. The Judge effectively used estoppel to fill the gap created by the missing link in the chain of title. Key factors in the Judge’s decision were:
Accordingly, the Court held that the assignment was effective.
Although estoppel rescued the transaction in this case, it will not always do so and any attempt to rely on it is likely to be risky and expensive. It is an uncertain, fact-specific remedy that is heavily dependent on evidence of shared assumptions and reliance. In any transaction, proper due diligence should establish the true owner of the assets involved. This is particularly relevant in the case of a group where numerous separate legal entities may be treated by those involved as a single amorphous whole.
The Financial Conduct Authority (FCA) has announced fines against two individuals for insider dealing relating to trading in AIM‑listed shares. The total fines of over £100,000 were more than 10 times the profit made by the individuals from the unlawful trading, highlighting the punitive consequences of breaching the requirements.
The FCA oversees the UK’s civil regime of insider dealing via the UK Market Abuse Regulation (UK MAR). The regime is built around the concept of “inside information”, being information which:
Article 14 of UK MAR makes it unlawful to deal in shares whilst in possession of inside information, or to recommend or induce someone else to deal on the basis of such information. It also prohibits the unlawful disclosure of inside information.
The FCA can pursue breaches of UK MAR, imposing unlimited financial penalties, disgorgement of profits and public censure. In serious cases, insider dealing may also constitute a criminal offence, carrying the risk of imprisonment. For listed companies and their directors, the reputational consequences of a breach are often as significant as the legal ones. Directors are particularly exposed because they routinely have access to inside information.
The fines arose out of trading in shares of Bidstack Group plc, an advertising technology company formerly admitted to trading on AIM.
In December 2021, Bhavesh Hirani was the interim CFO of Bidstack. As a result, he had access to confidential, price‑sensitive information concerning a major forthcoming commercial deal between Bidstack and a large video game publisher. Before the deal was announced to the market, Mr Hirani disclosed this inside information to an associate, Dipesh Kerai. Mr Hirani then opened and operated a trading account in Mr Kerai’s name. Together, they purchased around 1.3 million Bidstack shares while in possession of the inside information. When the deal was publicly announced, Bidstack’s share price increased by more than 125% and Mr Kerai realised profits of over £9,000.
The FCA was alerted to the trading through Suspicious Transaction and Order Reports (STORs) submitted by a regulated firm.
The FCA concluded that both individuals had breached Article 14 of UK MAR by engaging in insider dealing and, in Mr Hirani’s case, the unlawful disclosure of inside information.
It imposed penalties of:
In each case, the final penalties imposed had been discounted by 30% through settlement.
In announcing the outcome, the FCA emphasised that the individuals had exploited information “other investors couldn’t have known” and reiterated its commitment to taking action against anyone who undermines trust in UK markets.
The market abuse regime is designed to ensure that there is a level playing field for everyone who might be interested in buying shares in public companies, so everyone has access to the same information, and no one can take unfair advantage of information affecting share price which is not publicly available.
The FCA’s action in this case shows that it will rigorously enforce the rules to help maintain integrity in the UK’s markets. It also highlights the importance of STORs as a source of intelligence when identifying and pursuing potential breaches.
First published on Accountancy Daily.
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