Birch Services

28/02/2021

Geschäft muss im Lockdown nur halbe Gewerbemiete zahlen.

Ein Einzelhändler, der sein Geschäft aufgrund coronabedingter Schließungsanordnung nicht öffnen durfte, muss für das Ladenlokal nur 50% der Kaltmiete zahlen. In solchen Fällen sei von einer Störung der Geschäftsgrundlage auszugehen, die eine Mietzinsanpassung erforderlich mache, um die Belastungen zu teilen, entschied das Oberlandesgericht Dresden mit Urteil vom 24.02.2021.

Einzelhändlerin zahlte während coronabedingter Geschäftsschließung keine Miete
Die Beklagte, die einen Textileinzelhandel betreibt, hat die Miete für den Monat April 2020 nicht gezahlt. Sie beruft sich darauf, dass sie in der Zeit vom 19.03.2020 bis einschließlich 19.04.2020 ihr Geschäft coronabedingt nicht öffnen durfte. Sie ist der Ansicht, dass die Miete für den Zeitraum der Schließung auf "Null" reduziert sei und beruft sich dabei auf einen Mangel des Mietobjekts, hilfsweise auf Unmöglichkeit der Gebrauchsüberlassung höchsthilfsweise auf eine Reduzierung der Miete im Weg der Anpassung des Mietvertrages nach den Grundsätzen der Störung der Geschäftsgrundlage. Das Landgericht sah keinen Grund für die Einbehaltung der Miete und verurteilte die Beklagte zur vollständigen Zahlung.
OLG geht von Störung der Geschäftsgrundlage aus
Das Oberlandesgericht hat der hiergegen von der Beklagten eingelegten Berufung zum Teil stattgegeben. Zwar könne sich die Beklagte nicht auf einen Mangel des Mietobjekts oder die Vorschriften der Unmöglichkeit berufen. Infolge des Auftretens der Corona-Pandemie und der staatlichen Schließungsanordnung sei jedoch von einer Störung der Geschäftsgrundlage im Sinn von § 313 Abs. 1 BGB auszugehen, die eine Anpassung des Mietvertrages erforderlich mache.
Hälftige Reduzierung der Kaltmiete für Zeit der Schließung angemessen
Dazu sei eine Reduzierung der Kaltmiete für die Dauer der angeordneten Schließung auf die Hälfte geboten. Dies sei gerechtfertigt, weil keine der Parteien eine Ursache für die Störung der Geschäftsgrundlage gesetzt oder sie vorhergesehen habe. Es sei daher im vorliegenden Fall angemessen, die damit verbundene Belastung gleichmäßig auf beide Parteien zu verteilen.

OLG Dresden, Urteil vom 24.02.2021 - 5 U 1782/20

Vom Abgasskandal betroffene Fahrzeugkäufer haben keinen unionsrechtlichen Staatshaftungsanspruch gegen die Bundesrepublik Deutschland. Dies hat das Landgericht Frankfurt am Main 21.10.2020 entschieden. Weder habe Deutschland Unionsrecht unzureichend umgesetzt noch qualifiziert gegen Kontrollpflicht...

11/04/2018

Tax authorities are assisted by Pugachev case.

On the 11th October 2017, the Privy Council handed down a judgement in the case of Mezhprom v Pugachev which should send shivers down the spines of every fiduciary business as well as all families whose wealth is held in offshore trusts.

Sergei Pugachev was the founder of Mezhprom which was once Russia’s leading private bank. In due course, however, it got into financial difficulties and had to be bailed out by the Russian Central Bank.

Creditors of the bank included The Deposit Insurance Agency an arm of the Russian State. It claimed that Mr Pugachev had misappropriated the funds and settled them in five trusts in New Zealand with private trustee companies, of which his adviser and his wife, in New Zealand were directors. Mr Pugachev was the Settlor and Protector and he, and his partner and children were the Beneficiaries.

As Protector Mr Pugachev had extensive powers to block any decision of the Trustee, and if it did not do what he wanted, he could remove and replace it.

The decision of the Judge focused on the intention of Mr Pugachev at the time he created the trust. Did he intend to divest himself of control of the assets when he set up the trust and transferred the assets to his trustee? If not, then his role as Protector was ‘personal’ and not ‘fiduciary’.

The importance of this distinction in the Judgement is fundamental. If ‘personal’, then in exercising his extensive blocking powers over the decisions of the trustee, he need only consider his own needs and requirements. If however, his intention at the outset was that the role of the Protector was ‘fiduciary’ then the Protector must, in exercising his powers, consider what was in the best interests of all the beneficiaries.

If the proper construction of the trust documentation was that Mr Pugachev intended that the role of the Protector was ‘personal’, then the trust was not a sham, it was a trust – but only a bare trust. As a bare trust, the assets were in the name of the trustees, but held to the order of Mr Pugachev. The beneficial interests in the trust assets remained with Mr Pugachev – and were, therefore, available to be seized by the bank Mezhprom to meet the claims of its creditors such as the DIA.

The Judge went on, if on a proper construction of the intention of Mr Pugachev at the time he set up the trust, was to divest himself of control of the assets, then following the Esteem case, he needed to find a common intention by both the trustees and the settlor to mislead, for it to be a sham.

The Judge looked to the divorce case of A v A for a precedent. A common intention can be construed where the trustee, although not obviously or deliberately out to mislead, had a ‘reckless indifference’ as to what was the intention of the settlor and went along with it to secure the business.

If this was the proper construction of the facts, then the test set by Esteem was satisfied and the trust as set out in the documentation was a sham and could be set aside as being void ab initio.

The Judge continued; if on a proper construction of all the circumstances leading up to the formation of the trust, Mr Purgachev had the intention to form the trust, the Protector’s powers were fiduciary and the trustee was not reckless as to the intention of Mr Pugachev in setting up the trusts, he would still set aside the transfer of the assets into the trust because they were transferred with the intention of defeating his creditors, so would be available to meet the claims of the creditors of the bank.

Mr Pugachev was defeated on all claims.

Some advisers say that the importance of this case is limited to its facts; Mr Pugachev, was Settlor, Beneficiary and a Protector with extensive reactive reserved powers. I do not agree.

This case, is dynamite for any third party, such as a tax authority. Tax authorities across the globe now know who is the Settlor, whether the Settlor is also a beneficiary and which trusts have a Protector under CRS.

All they now need to do, following the decision in the Pugachev case is to ask the Trustee for a copy of the Trust Deed. With this, they can identify the powers of the Protector and attack the trust on the basis that the Protector’s powers were personal to the Settlor, either directly or through his nominee which they can now glean from an objective interpretation of the trust deed. Before this case the tax authority would need to prove a common intention on behalf of the trustee and the settlor, to deceive.

I have for many years been wary of the office of Protector, and this case justifies my contention that the role of Protector puts the trust at risk of an investigation.

If you would like to hear about what we do for our clients or have comments about this article please get in touch below.

Garnham Family Office Services

Contact : [email protected]

11/04/2018

Amundi Asset Management

Aggressive tax optimisation: what is the best ESG approach?

Between 100 and 240 billion euro per year. This is what aggressive tax planning costs governments in lost revenue.

Such practices, designed to enable companies to avoid tax by using and abusing the legislation in place, have flourished in recent years. They have been supported by globalisation of communications and the growing dematerialisation of the economy. These practices have also become more complex and industrialised, with the help of tax advisory companies that are increasingly professionalised.

Companies today are therefore encouraged to create financial flows that enable profits to be transferred to zones with tax advantages, for example by creating companies that hold patents or brands or by using asymmetry between local legislation to benefit from double non-taxation.

Although these practices are usually legal, the size of the amounts in question makes them increasingly unacceptable in a context of austerity. For governments as much as people.

Aggressive tax optimisation practices therefore represent a risk for investors if international tax regulation changes.

Moreover, this is exactly what is happening at the European level with, for example, the implementation of a package of measures designed to strengthen fiscal transparency, such as the Common Consolidated Corporate Tax Base (CCCTB) or the fight against abusive tax rulings whereby companies manage, on an exceptional basis, to be subject to a particularly accommodating tax regime.

Similarly, implementation of the conclusions of the OECD working group on base erosion and profit shifting (BEPS) should soon affect companies that use aggressive tax optimisation. Asset management companies should factor this risk into their investment decisions, as a fiduciary responsibility.

But taking these practices into account also raises moral questions. As a responsible management company, we should be interested in practices that mean companies benefit from a country’s riches without paying their fair share, circumvent legal requirements to contribute to government budgets and thereby question the role of public bodies in setting taxation levels. It is worth noting here that the governments most affected by these practices are emerging countries as they cannot turn to income tax of physical persons to rebalance their income.

We therefore wanted to put in place a specific analysis criterion for this question. As with other criteria used to measure companies’ Environmental, Social and Governance (ESG) performance, we used our data suppliers’ ratings to create a consensus on aggressive tax optimisation. This criterion covers more than 2,000 stocks in our reference universe. If this criterion meets a best-in-class policy, like all ESG criteria used by Amundi, a best-inuniverse calculation shows that the software and pharmaceutical industry sectors have the least good practices.

Finally, to put this criterion into perspective, we have developed an internal model to measure tax risk exposure, based on companies’ presence in risky countries. We have also analysed statistically the media controversy on this subject.

Although such approaches are limited by the quality of information available, they have enabled us to put in place a list of stocks that seem risky at first glance, to which we could then apply more detailed qualitative analysis.

10/04/2018

Blockchain in the Luxury Industry!

More than just a means to ensure cryptocurrency transactions are properly tracked, this technology opens up new possibilities for luxury brands

Cryptocurrency has been a topic of contention for investors and governing bodies alike since the first of its kind, Bitcoin, was launched in 2008. While the origins of this decentralised form of digital currency remains shrouded in mystery, its founding is attributed to Satoshi Nakamoto (a said pseudonym that the technology was developed under). Increasingly scrutinised by governments and regulatory authorities, trading of cryptocurrencies is now banned in several countries, including China and South Korea. Tech giants like Google, Facebook and Twitter have all already banned the advertising of virtual currencies on their respective platforms.

As the spotlight on this highly volatile exchange medium intensifies, so does interest in the technology behind it. A type of digital currency that makes use of cryptography to secure transactions, cryptocurrency is transferred directly from peer-to-peer without intervention from financial institutions or authorities. In order to make this entire process secure, a digital ledger known as blockchain is used. The blockchain serves to record and secure all transactions in blocks that linked to each other in a chain – hence the name – and is designed such that it cannot be modified.

The usefulness of blockchain in an industry where a product’s provenance is of utmost importance can no longer be ignored. Several luxury brands have already picked up on this, and Forbes has listed it as one of the luxury trends in 2018 to watch out for. Beyond sustainability issues, such a technology can also potentially serve to track entire product life cycles, clamping down on counterfeiting issues.

Going Green

Many luxury brands are starting see the importance of adopting sustainable business practices. Besides being a socially responsible move, this also comes at a time where consumers are becoming increasingly conscious of where their luxury purchases are coming from. In fact, according to market research firm Mintel, 58 per cent of Chinese consumers surveyed indicated that they were willing to pay more for ethical brands and that it made them happy to do so.

Blockchain enables this process of sustainability to be more transparent to consumers. As a digital ledger, it is able to track the entire life cycle of each product – from sourcing to production. Big luxury brands like De Beers are already jumping on the bandwagon, having already announced its blockchain initiative that will span the diamond value chain. In doing so, the brand will be able to assure its consumers that all its registered diamonds are sustainably sourced.

“Diamonds hold enduring value and represent some of life’s most meaningful moments, so it’s essential to provide assurance that a diamond is conflict-free and natural. By leveraging blockchain technology, we will provide an additional layer of assurance to consumers and industry participants, with every diamond registered on the platform having a record as everlasting as the diamond itself,” explains CEO of De Beers Group Bruce Cleaver in a statement.

“We are very excited about this initiative and the benefits it could deliver across the diamond value chain, from producers through to retailers and consumers,” he adds.

Ensuring Authenticity

Another problem plaguing the luxury industry now is that of counterfeiting. In 2017, the global market in counterfeit goods was said to be valued at over US $460 billion. In the European Union alone, the clothing, footwear and accessories industry loses around €26.3 billion euros (about US $27.7 billion) of revenue annually from counterfeit goods. The situation is so severe that special anti-counterfeiting police units have been set up in some territories to deal with the issue. While authorities are coming down hard on perpetrators, loss in consumer confidence is something that is much harder to address – especially in the second-hand market or online marketplaces.

Created with the intention to reduce fraud, companies like Everledger have leveraged the blockchain technology as a solution to these woes. In the diamond industry, the blockchain will replace the paper certification process, allowing consumers to determine the provenance of any diamond. This is also being applied to the wine industry, with the company tracking bottles of wines based on hidden codes that are given to them by vintners so as to prevent counterfeiting and mishandling. Applications in the art trade are currently being explored.

Boosting Consumer Security

Beyond that, blockchain can also be used as a security measure of sorts for luxury products. With its tamper-proof ledger, all transactions made in relation to the product will be recorded in the blockchain that acts as the item’s “passport”. Besides recording its journey from production to store, it can also trace the item as it changes hands. This acts as another layer of security in the event of goods being stolen. Should an item be stolen, the owner can record this in the blockchain. So, if this stolen item should be resold, the new owner would be able to see this in the blockchain, and notify relevant authorities that the seller unlawfully acquired the said item. This is especially relevant in the second-hand market, or those dealing in vintage pieces. Firms like China-based VeChain are already providing such applications of blockchain.

Blockchain is by no means a new technology, but its myriad of applications outside of trading cryptocurrency are only just beginning to see light. With a non-editable and public ledger as its key selling point, blockchain can offer everything from increased consumer confidence to product transparency.

Interestingly, while all transactions on the blockchain are visible to the public, the owner of each blockchain is pseudonymous. This may open up new possibilities for consumers looking to keep ownership information confidential while securing their possessions. Given all its benefits, it will certainly be interesting to see how brands in the luxury industry can leverage this technology in the long run. We’re definitely keeping our eyes peeled.

Published on April 4, 2018 under DIGITAL CONSUMERS

09/04/2018

The Ministry of Foreign Affairs is advising Dutch traveling to China to only take 'empty' phones and laptops, with no sensitive data, with them.

Data on these devices may be 'drained' remotely. This warning now also applies to Russia, Iran, and possibly Turkey, insiders told the Volkskrant.

Last week 165 Dutch companies and knowledge institutions that are accompanying Prime Minister Mark Rutte on a trade visit to China this week, received a letter from the Ministry with these instructions. "The Chinese government will want to know everything about you and your company or organization", the Ministry wrote. "You can therefore assume that all computers and telephones entering China will be continuously monitored to obtain this information."

The Ministry gave 13 tips on how information can be protected. One of these is to take 'empty' devices along. "Only put information on your computer that you really need. Delete the rest." Laptops should be equipped with updated security software, preferably a start-up password and an account password, and an encrypted hard drive. The Dutch entrepreneurs are also strongly advised not to switch their Dutch phones on in China at all, instead buying a local phone with a prepaid SIM card. And they should not use USB sticks they receive as gifts. "These gadgets can be infected with spyware to keep an eye on your computer, steal information or passwords, and even take over the computer."

Officials going on the trade mission also received new phones from the government, with extra protection and unnecessary apps and documents deleted. "Really important documents are only printed", an official said to the newspaper. Anonymous officials told the newspaper that the current safety instructions are much more intense than previous ones. Officials who traveled to China or Russia three years ago did not receive a new government phone or such alarming warnings, they said.

Government information service RVD would not comment to the Volkskrant about the specific safety instructions for officials going on the trade mission. "Different conditions apply to each trip", was all the RVD would say.

These safety instructions will also apply after the trade mission to China, and also for several other countries, insiders told the newspaper.

05/04/2018

ICO financing for Start-Ups in Switzerland.

Initial coin offerings (ICOs) or token sales as alternative financing methods continue to generate increasing interest in particular in Switzerland. Initial coin offerings conducted out of Switzerland between January and October 2017 raised between $550 and $650 million, which represents approximately one quarter of the volume of ICOs worldwide (including four of the 10 biggest ICOs so far). In our view, despite certain legal and regulatory challenges, ICOs have to be considered as a potentially attractive financing method, in particular for startups, as certain disadvantages of traditional financing methods may be avoided or mitigated.

Typical disadvantages of traditional financing methods

The key traditional financing methods for startups are: issuance of additional (ordinary or preferred) share capital, loans (including profit participating loans) and bonds. Taking the view of startup entrepreneurs, however, these funding methods may have certain disadvantages.

The issuance of additional share capital leads to founder dilution. Even if the shares can be issued with a low nominal value and a high share premium, minimising dilution, the issuance of additional shares still increases the administrative requirements (for example, more complex procedures for convening and conducting general meetings of the shareholders), which makes the management of the startup more cumbersome.

Loans are generally difficult to obtain for startups and often do not match their needs (for example, repayment of nominal amount and fixed interest irrespective of the performance of the startup, restrictive covenants or administrative burdens).

Bonds, which are in principle loans split into equal parts with equal terms, have similar disadvantages for startups as loans. Some of

these disadvantages may be avoided by the issuance of so-called hybrid bonds (that is, subordinated, perpetual bonds with the right of the issuer to postpone or not pay the interest). However, if at all, startups will usually have to issue straight bonds with a fixed interest and a repayment at maturity to generate interest in the market.

ICOs as a potential alternative financing method

According to a definition by the European Securities and Markets Authority (ESMA), in an ICO, "a business or individual issues coins or tokens and puts them for sale in exchange for fiat currencies, such as the Euro, or more often virtual currencies, for example, Bitcoin or Ether".

In Switzerland, depending on the rights assigned to a token in the terms of the token sale, FINMA (the Swiss Financial Market Supervisory Authority) distinguishes three categories of tokens: payment tokens, utility tokens and asset tokens. Tokens used as financing instruments are considered asset tokens if they represent legal claims or assets such as a debt claim against or equity participation/membership right in the issuer (sometimes called the `organiser'). By issuing an asset token in an ICO, the above disadvantages of traditional financing methods for startups may be (partially) mitigated.

Tokens can be structured in a way that investors are not entitled to equity and thus do not dilute the founders. Furthermore, given the flexibility in structuring the debt represented by the token, the specific needs of a startup can be taken into account (for example, no claim for repayment of a nominal amount but rather a share in future earnings or future cash flows). Unlike loans, but similar to listed bonds, tokens are in principle freely tradable on crypto exchanges, which has the potential to increase the value of such tokens and reduces the threshold for investors to invest as they are not locked in until a certain maturity date. It should be noted that crypto exchanges will likely become subject to elevated scrutiny by regulators in the future as more tokens qualify as securities. However, the issuance of tokens as such is (still) substantially less regulated than the issuance of listed bonds (which are typically not available as a financing instrument for startups) and based on the figures for 2017 there seems to be a bigger and more liquid market for tokens than for bonds.

Regulatory and legal challenges

As ICOs are a rather new financing method, various legal (for example, with regard to the transfer of tokens and the underlying entitlements) and regulatory uncertainties exist which will need to be taken into account when considering an ICO.

With regard to financial market regulation, various topics have been clarified by a guidance paper published by FINMA on February 16 2018. The Swiss Financial Market Supervisory Authority reiterated its earlier position that it will apply a principlebased, technology-neutral approach and consider proposed ICO projects on a case-bycase basis: (i) `Payment tokens' (or `cryptocurrencies') are solely intended to be used as currency and represent no claim against the issuer. Such payment tokens have to comply with anti-money laundering regulations but are not treated as financial securities. (ii) `Utility tokens' are intended to provide access to an application or service of the issuer and are not treated as financial securities if they are actually usable in this way at issuance (which will narrow their field of application according to the expected practice of FINMA). (iii) `Asset tokens' are treated as equity or bond instruments if structured that way. Therefore, asset tokens are subject to securities law requirements as well as civil law requirements under the Swiss Code of Obligations (in particular the duty to issue a prospectus). The specific requirements will need to be assessed on a case-by-case basis.

Outlook

In our view, ICOs have the potential to become an important financing method for startups.

Nevertheless, regulatory developments will need to be monitored, given the warnings issued by financial market supervisory authorities in various jurisdictions cautioning investors on the potential risks of ICOs. Not least because of this, best market practices in the form of self-regulation should be promoted in order to prevent fraudulent transactions and exuberant governmental regulation.

www.swissfundingforum.ch

05/04/2018

EU to Regulate Crowdfunding

The European Commission wants to facilitate crowdfunding platforms to scale up and engage in cross-border activities by establishing a new regime for “European Crowdfunding Service Providers”.

The new regime is set out in a proposal for a Regulation on European Crowdfunding Service Providers (ECSP) for Business (“Crowdfunding Regulation”). Platforms will have the option of applying for a single EU-wide authorisation to exercise crowdfunding activity, or continuing to operate under national rules. The Crowdfunding Regulation applies to lending-based and investment-based crowdfunding.

Overview

At the moment crowdfunding is primarily regulated at domestic level. While some member states apply the current financial services framework to crowdfunding service providers (“CSPs”), others allow them to operate under exemptions from that framework.

Moreover, member states are increasingly implementing bespoke national frameworks to cater specifically for crowdfunding activities on local markets. As a result, the existing rules diverge as regards the operating conditions for crowdfunding platforms, the scope of permitted activities and the licencing requirements.

The Commission is concerned that the divergent national rules applicable to crowdfunding are inhibiting the growth of cross-border crowdfunding activity and is seeking to specifically regulate business crowdfunding at the EU level.

The Crowdfunding Regulation would give CSPs the ability to opt for a single EU-wide regime regulating authorisation, organisational, operational and supervisory requirements. Its overall aim is to broaden access to finance for smaller firms, in line with the Commission’s priority of establishing a Capital Markets Union (“CMU”) in order to increase and diversify the sources of funding to the EU’s economy.

Scope

The Crowdfunding Regulation applies to both lending-based and investment-based crowdfunding. It does not apply to crowdfunding services that are provided to consumers, MiFID firms, crowdfunding services provided in accordance with member states’ national laws or crowdfunding offers with a consideration of more than EUR 1 million per crowdfunding offer.

Organisational and Operational Requirements

The Crowdfunding Regulation sets out requirements regarding the provision of crowdfunding services, effective and prudent management, complaints handling, conflicts of interest, outsourcing and client-asset safekeeping.

Pursuant to these requirements, CSPs are permitted to exercise discretion on behalf of clients with respect to the parameters of clients’ orders provided they take all necessary steps to obtain the best possible result for their clients and comply with disclosure requirements. However, they are prohibited from paying or accepting any benefits for routing investors’ orders to a particular crowdfunding offer.

CSPs are also prohibited from:

having any financial participation in any crowdfunding offer on their crowdfunding platforms; or
accepting as their clients any of their shareholders holding 20% or more of share capital or voting rights, managers and employees or any person directly or indirectly controlling crowdfunding platforms; or
holding client funds or providing payment services unless authorised to do so under the Payment Services Directive 2015/2366. Alternatively, they must put in place arrangements to ensure that project owners accept crowdfunding offers or any payments by means of an authorised payment service provider.
Authorisation and Supervision

The European Securities and Markets Authority (“ESMA”) is to be responsible for authorising and supervising CSPs.

The Crowdfunding Regulation sets out a list of information that an applicant must provide when seeking authorisation as a CSP, which includes, among other things, a programme of operations, a description of governance, risk procedures, data processing systems, business continuity arrangements, a description of outsourcing arrangements and information about management.

This information is intended to ensure that ESMA is informed about the services that the applicant intends to provide, and able to assess the quality of its management and its internal organisation and procedures

ESMA must decide on an application for authorisation within two months of receipt of a complete application and notify the applicant within five working days after taking that decision.

ESMA must establish and maintain a publicly available website of all European CSPs.

Transparency and Knowledge Requirements

CSPs must provide their clients with appropriate information regarding the nature, risks, costs and charges of crowdfunding services. They must also carry out an entry knowledge test of their prospective investors to ensure their knowledge of investment. CSPs must explicitly warn prospective investors whenever the crowdfunding services provided are deemed as inappropriate for them.

CSPs must provide prospective investors with a Key Investment Information Sheet (“KIIS”) which sets out material information about the crowdfunding project owners, the investors’ rights and fees, the type of securities offered and loan agreements, as well as risk warnings. The project owner is responsible for drawing up the KIIS, however, the CSP must ensure that it is complete.

The Crowdfunding Regulation also sets out provisions governing bulletin boards, which permit direct interactions between investors, record-keeping and marketing communications.

Next Steps

The Crowdfunding Regulation must now be considered by the European Parliament and by the Council of Ministers and may be subject to change. The Commission is seeking to have the Crowdfunding Regulation adopted by mid-2019. It will apply 12 months from the date that it enters into force.