Article / 1 Oct 2026
Corporate update: the latest corporate law developments October 2026
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In this month’s update we:
- explain why BADR claims need clear evidence of 5% voting rights;
- highlight the insolvency risks of intra-group IP transfers;
- review how informal exit letters can unintentionally settle warranty claims; and
- summarise the FCA’s latest comments on regulatory announcements and delayed disclosure.
BADR denied where shareholder could not prove 5% voting rights
The First-tier Tribunal’s decision in Katarina Poznic v HMRC [2026] UKFTT 1298 (TC) is a reminder that eligibility for Business Asset Disposal Relief (BADR) depends on satisfying the statutory conditions and being able to prove that those conditions were met. The Tribunal dismissed the taxpayer’s appeal after concluding that the shares she sold did not carry the voting rights required for BADR.
BADR conditions
BADR (previously Entrepreneurs’ Relief) provides a reduced rate of capital gains tax on qualifying disposals. In relation to a disposal of shares, the taxpayer must satisfy a number of conditions throughout the relevant qualifying period. One of those conditions is that the company must be the taxpayer’s “personal company”. Amongst other things, this requires the shareholder to hold at least 5% of the voting rights in the company.
Facts
The appellant, Katarina Poznic, appealed against an HMRC closure notice denying her claim for BADR on the sale of shares in StudioAnyo Architects Limited. She had originally been a director and shareholder of the company before later resigning as a director and becoming an employee.
Before Ms Poznic joined the company, James Cyril Walsh was the sole shareholder, holding one ordinary share. The company subsequently allotted 99 ordinary shares to Mr Walsh and 100 “B” ordinary shares to Ms Poznic. The company’s articles of association did not refer to the B shares. Nor were the rights attaching to those B shares set out in any shareholder resolution creating them. However, the company’s return of allotment (Form SH01) filed at Companies House recorded that Mr Walsh’s shares carried voting rights, whereas the B shares did not. Subsequent confirmation statements filed by the company also recorded that Mr Walsh was a ‘person with significant control’ over the company holding 75% or more of the voting rights.
Ms Poznic argued that, despite the Companies House filings, the two classes of shares effectively enjoyed equal voting rights and ranked equally. She contended that the filings were incorrect and did not reflect the true position. If that argument succeeded, she would have held the required proportion of voting rights and the disposal of her shares could potentially qualify for BADR.
HMRC maintained that the statutory records showed that the B shares carried no voting rights and that the personal company requirement had not been satisfied.
Decision
Ms Poznic’s appeal was dismissed and the Tribunal upheld the notice denying BADR.
The Tribunal said that the Companies House filings and company records provided prima facie evidence of the rights attaching to the shares. It found that Ms Poznic had not produced sufficient evidence to displace that evidence. In particular, the Tribunal noted the absence of any written resolution, minutes of a general meeting or other contemporaneous documentation showing that the B shares carried voting rights or that the rights attached to the shares differed from those recorded in the company’s filings.
The Tribunal also noted that, while she was a director, Ms Poznic had the opportunity to correct any inaccuracies in the company’s filings but there was no evidence that she or the company had done so. Having reviewed the available evidence, the Tribunal concluded that the company records accurately reflected the voting rights attached to the shares. As a result, Ms Poznic did not hold at least 5% of the voting rights and the company was not her personal company for BADR purposes.
Comment
The decision highlights the importance of ensuring that a company’s share rights are properly documented and consistently reflected in its statutory records. In this case, the articles made no mention of the B shares. That meant the Tribunal was able to use the other filings to rebut the shareholder’s argument that all the shares ranked equally for voting rights.
Gratuitous IP assignment was transaction at an undervalue
The High Court has held that the transfer of valuable software intellectual property (IP) by an insolvent company to another group company in exchange for a one-year licence of no practical value was a transaction at an undervalue. The decision in Garden House Software Ltd v Marsh & Ors [2026] EWHC 2184 (Ch) is a useful reminder that courts will scrutinise intra-group asset transfers closely where a company is in financial difficulty.
Transaction at an undervalue
Section 238 of the Insolvency Act 1986 enables the courts to unwind a transaction entered into by a company if, during a specified period before insolvency, it disposed of assets for no consideration or for consideration that was significantly less than the value of those assets.
Where the transaction is with a connected party, insolvency at the relevant time is presumed unless the contrary is shown.
A statutory defence may apply if the company acted in good faith, for the purpose of carrying on its business, and had reasonable grounds for believing that the transaction would benefit the company.
Facts
The claimant in this case, Garden House Software Limited (GHSL), had acquired claims from the liquidator of Serisys Limited, a company that was wound up in 2019 after insolvency proceedings. Before the winding up, in 2017, Serisys had assigned all its IP, including rights in the “Adypt” financial-services software platform, to a newly incorporated Hong Kong group company, Serisys Asset Holding Limited (SAHL).
The assignment transferred the IP in return for a one-year, non-exclusive and non-assignable licence to use the software. GHSL challenged the assignment, arguing that the IP was valuable and that the licence received in exchange was effectively worthless. GHSL sought relief on a number of grounds, including that the assignment was a transaction at an undervalue.
SAHL and the Serisys directors argued that the transfer formed part of a legitimate group restructuring intended to consolidate IP ownership and facilitate future licensing opportunities. They also claimed that the company’s own share of the IP had little or no independent value.
Decision
The Judge found in favour of GHSL. The Court concluded that the one-year licence conferred no meaningful value on Serisys. Serisys’s business consisted of developing the software and, following the transfer, it had no independent business in which to use the licence. Because the licence was non-assignable and of no practical benefit, its value was effectively nil.
By contrast, the Court found that the IP had substantial value, assessed at just over £2 million at the date of the assignment. The Court rejected the defendants’ argument that a jointly owned or partially owned interest in the software was valueless simply because it could not readily be exploited independently. The Judge held that a share in a valuable asset still possessed realisable value.
The Court therefore held that Serisys had transferred assets worth about £2 million in exchange for consideration that was effectively worthless, satisfying the statutory test for a transaction at an undervalue. Serisys was presumed insolvent because the transaction was with a connected party and the defendants had failed to rebut that presumption.
Comment
The case highlights the risks of moving IP (or other assets) around a corporate group when a company is under financial pressure. Directors may regard centralising IP ownership as commercially sensible, but the courts will assess the transaction from the perspective of the transferring company and its creditors, not the wider group.
Valuable IP must be properly assessed before any intra-group transfer takes place. If a company receives only nominal or commercially insignificant consideration, particularly when insolvency is looming, the transaction may later be challenged and unwound. Contemporaneous evidence of asset values should be maintained, together with the rationale for the transfer and the specific benefit expected to accrue to the transferring company itself, rather than simply to the group as a whole.
Silent settlement: exit letters compromise warranty claims without express wording
In Evans & Ors v JNP Group Consulting Engineers Ltd [2026] EWHC 2175 (Comm), the High Court held that retirement letters between a company and its departing shareholder-directors prevented the company from pursuing warranty claims against them successfully, even though the letters did not expressly say that those claims had been settled.
The case illustrates why exit documents should state clearly whether existing claims are being settled or preserved. It also serves as a reminder that contractual documentation does not need to use the words “full and final settlement” to have that effect.
Facts
The dispute arose following the 2016 merger of two civil engineering LLPs into a new company, JNP Group Consulting Engineers Limited (the Company). The claimants, Stuart Evans, Michael Walters and John Wood (the Shareholders), were former members of one of the LLPs and they had transferred their business to the Company under a business purchase agreement (BPA). Following the restructuring, they became shareholders and directors of the Company.
Relations between the Shareholders deteriorated and all three individuals retired during 2018. On retirement, each of the Shareholders entered into a letter with the Company (Retirement Letters) setting out the financial arrangements relating to their departure. The Retirement Letters dealt with matters such as directors’ loan account balances, salary, pensions, dividends and shareholdings. They also identified the total amounts to be paid to each Shareholder and the timeframe for payment.
The Shareholders subsequently brought claims against the Company for sums that they alleged they were entitled to on their retirement, but which had not been paid. The Company denied liability, arguing that all amounts due had been agreed in the Retirement Letters. The Company also counterclaimed, alleging that the Shareholders had breached warranties in the BPA relating to the recoverability of debts assigned to it during the reorganisation.
A key issue was whether the Retirement Letters had already settled the Company’s competing claims.
Court’s decision
Ultimately, neither the Company nor the Shareholders succeeded, with the Court dismissing both the Shareholders’ claims and the Company’s counterclaim in full.
Of most interest was the Court’s finding that the Retirement Letters had settled the Company’s breach of warranty claims. This was despite the absence of wording commonly found in formal settlement agreements. The Retirement Letters did not state that they contained the entire agreement between the parties, nor did they expressly release either party from claims or say that the arrangements were in full and final settlement of all claims.
Nevertheless, the Court concluded that the Retirement Letters constituted a complete settlement of the parties’ financial relationship on retirement.
The Judge emphasised that the question was not whether the Retirement Letters used particular legal wording, but what a reasonable person would understand the letters to mean when read in their commercial context. Several features were important in this regard, including that:
- the Retirement Letters comprehensively addressed the financial consequences of retirement;
- the Retirement Letters specifically addressed deductions for aged debts transferred to the Company under the BPA. Those debts were also the subject of the subsequent warranty claims. The Company had, therefore, dealt expressly with the issue during the retirement process without reserving its rights; and
- none of the payments promised by the Company were stated to be subject to set-off, future claims or unresolved liabilities.
The Judge also considered commercial common sense. It would make little sense for departing shareholders to agree retirement terms fixing the sums payable to them while remaining exposed to substantial known claims. Equally, it would make little sense for the Company to negotiate comprehensive departure arrangements while silently preserving significant warranty claims of which it was already aware.
The Court dismissed the Shareholders’ claims for additional payments on the basis that many of those claims had also been compromised by the Retirement Letters. Common sense dictated that the Retirement Letters were intended to settle all outstanding balances between the parties upon retirement.
Comment
Many owner-managed businesses use relatively informal documentation when shareholders, directors or senior employees leave. The focus may be on practical issues such as loan account balances, share transfers and deferred payments, rather than on whether all potential claims have been addressed expressly. This decision demonstrates the risk of that approach.
A court will consider the commercial context of each case and may conclude that exit documents settle all claims between the parties even if they do not contain any express release wording. If the parties intend specific claims to survive, they should preserve them expressly. Otherwise, the documents may be interpreted as resolving those claims, whether or not that was the parties’ intention.
FCA market bulletin: regulatory announcements and delayed disclosures
The Financial Conduct Authority (FCA) has recently published Primary Market Bulletin 65 (PMB 65), covering a range of primary markets updates. Of particular interest to listed companies and their advisers will be the FCA’s views on regulatory announcements being used as marketing materials and the FCA’s review of delayed disclosure of inside information.
Language in regulatory announcements
The FCA has seen an increasing number of regulatory announcements containing language that is “vague, exaggerated and flamboyant”, and in some cases resembles marketing material rather than regulated information. The regulator is particularly concerned when companies publish announcements more frequently than appears justified by their content, label announcements as inside information when they are not, or make announcements against a backdrop of significant share price movements.
Examples cited by the FCA that have raised concerns include:
- unnecessary minor updates on the progress of already announced commercial transactions;
- repeated and detailed updates on favourable market conditions that are already in the public domain; and
- issuers using sensationalist language in regulatory announcements of the type normally reserved for promotional activity.
The FCA accepts that regulatory announcements may contain material other than regulated information. However, UKLR 1.3.3R requires issuers to take care when preparing and releasing regulatory announcements. Content that strays too far from regulated information may mislead investors and breach the UK Listing Rules. In the most serious cases, it may also raise concerns under the UK Market Abuse Regulation (UK MAR).
Where announcements fall short of the required standard, the FCA will consider taking action.
Delayed disclosure of inside information
PMB 65 also includes a report on the FCA’s continuing review of delayed disclosure of inside information notifications under Article 17(4) UK MAR. That provision permits an issuer to delay disclosure of inside information to the public only if specified conditions are met.
Encouragingly, the FCA found no widespread or systemic failures in the operation of the delay regime. However, it identified some practices in the handling of inside information that could be improved. These include the following:
- issuers automatically treating financial reporting information as inside information until its scheduled publication date (without assessing it on a case-by-case basis);
- issuers failing to reassess whether information remained inside information during any prolonged delay period;
- misunderstandings about what actually amounts to inside information; and
- over-reliance on automated processes that may trigger regulatory steps, such as creating insider lists and sending notifications, without having appropriate controls in place and without opportunities for human oversight of underlying assumptions.
The FCA will continue to monitor delayed disclosure notifications and may provide further updates, where beneficial.
First published in Accountancy Daily.
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