Strand. London. WC2A 2LL
B e f o r e :
| CORPORATE DEVELOPMENT PARTNERS LLC
|- and -
|E-RELATIONSHIP MARKETING LIMITED
Mr James Barker (instructed by Wedlake Bell) for the Defendant
Hearing date: 13 December 2006
Crown Copyright ©
MR JUSTICE RIMER :
"During the course of this program it is quite possible that independent of our efforts other companies or their representatives will contact you with an interest in acquisition, divestiture, merger, joint venture, license agreement or financing transaction. To maximize the likelihood of a successful outcome CDP will handle the screening and preliminary evaluation of each contact or inquiry and assist in the administrative and logistical aspects of keeping the negotiating process moving." (My emphasis)
"The contingent portion of your obligation is the Transaction Fee which is paid in connection with each completed strategic acquisition, merger, joint venture or divestiture (any one of which is defined as a 'Transaction') that involves E-RM and any company which we have contacted on your behalf or which was referred to us for handling by E-RM (any one of which is defined as a 'CDP Prospect')."
"… would directly impact on the purchase price with Red Eye as it is contingent on not exceeding our negative net assets position per budget and as our work with you was unbudgeted it is coming straight off our PBT. … In an ideal world what we would like the outcome to be is that you agree to reduce fees as proposed and that we put on hold the ongoing program until either the Red Eye deal goes away or happens. … If it goes away we would then restart and pay at least the £5K retainer for the next two months."
"(a) Red Eye International Limited (or its parent company Red Eye International Holdings PLC) are collectively referred to as Red Eye ('Red Eye'). Red Eye is a CDP Prospect. A Transaction Fee involving any CDP Prospect will be computed according to Clause 2(a) above with the exception of Red Eye. The Red Eye Transaction Fee ('Red Eye Transaction Fee') is computed upon the closing of each Transaction involving E-RM and Red Eye and is equal to the aggregate of: 2.5% on the first £1 million, 2.0% on the next £1 million, 1.5% on the next £1 million, 1.0% on the next £1 million, and 0.5% on the balance of the Transaction Value. The Transaction Value is based on any amounts paid or committed for stock or assets (including all operating and intangible assets necessary to the operation of the entity to which the Transaction applies without regard to the exact legal ownership of the said assets), plus the value of any interest-bearing debt and non-interest-bearing long-term liabilities assumed by the buyer and any current assets retained by the seller as part of the consideration. The Red Eye Transaction Fee shall never be less than £25,000 plus VAT ('Minimum Fee')."
Sections 151 to 153 of the Companies Act 1985
"151 Financial assistance generally prohibited
(1) Subject to the following provisions of this Chapter, where a person is acquiring or is proposing to acquire shares in a company, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place.
(2) Subject to those provisions, where a person has acquired shares in a company and any liability has been incurred (by that or any other person), for the purpose of that acquisition, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.
(3) If a company acts in contravention of this section, it is liable to a fine, and every officer of it who is in default is liable to imprisonment or a fine, or both.
152 Definitions for this Chapter
(1) In this Chapter -
(a) 'financial assistance' means –
(i) financial assistance given by way of gift,
(ii) financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier's own neglect or default, or by way of release or waiver,
(iii) financial assistance given by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement any obligation of another party to the agreement remains unfulfilled, or by way of the novation of, or the assignment of rights arising under, a loan or such other agreement, or
(iv) any other financial assistance given by a company the net assets of which are thereby reduced to a material extent or which has no net assets; …
153 Transactions not prohibited by s 151
(1) Section 151(1) does not prohibit a company from giving financial assistance for the purpose of an acquisition of shares in it or its holding company if –
(a) the company's principal purpose in giving that assistance is not to give it for the purpose of any such acquisition, or the giving of the assistance for that purpose is but an incidental part of some larger purpose of the company, and
(b) the assistance is given in good faith in the interests of the company. …
"… namely that the resources of the target company and its subsidiaries should not be used directly or indirectly to assist the purchaser financially to make the acquisition. This may prejudice the interests of the creditors of the target or its group, and the interests of any shareholders who do not accept the offer to acquire their shares or to whom the offer is made."
"There are two elements in the commission of an offence under s 54 [the predecessor of section 151]. The first is the giving of financial assistance and the second is that it should have been given 'for the purpose of or in connection with', in this case, a purchase of shares …. There is no definition of giving financial assistance in the section, although some examples are given. The words have no technical meaning and their frame of reference is in my judgment the language of ordinary commerce. One must examine the commercial realities of the transaction and decide whether it can properly be described as the giving of financial assistance by the company, bearing in mind that the section is a penal one and should not be strained to cover transactions which are not fairly within it."