- with readers working within the Law Firm industries
- within Intellectual Property topic(s)
- with Senior Company Executives and HR
This week:
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HMRC is consulting on changes to the way in which distributions and capital repayments by companies are taxed
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The FRC publishes a mythbuster on auditors’ responsibilities in relation to statements under Provision 29 of the UK Corporate Governance Code
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The court interprets a deadline in a contract based on a definition of “Banking Days” that referred to multiple jurisdictions
HMRC consults on taxation of returns of value
HM Revenue & Customs is consulting on the way that returns of value to shareholders – specifically, distributions (such as dividends) and capital repayments – are taxed.
The proposals focus on taxes payable by individual and trust shareholders (principally, income tax and capital gains tax), rather than on corporation tax. However, the reforms would affect various corporate transactions, including share buybacks, reorganisations and demergers.
The consultation closes on 14 September 2026.
FRC publishes guidance on auditors’ responsibilities in relation to internal controls statements
The Financial Reporting Council (FRC) has published a mythbuster on the responsibilities of auditors in relation to statements included in a company’s annual report under Provision 29 of the UK Corporate Governance Code.
Provision 29 was introduced in the 2024 version of the Code. It applies to financial years of companies that adopt the Code which begin on or after 1 January 2026.
In short, Provision 29 requires a company’s board to monitor the company’s risk management and internal control framework and, at least annually, carry out a review of its effectiveness and to report on the effectiveness of those controls in its annual report.
The new mythbuster clarifies the intersection of this statement with the duties of a company’s auditor, noting that the auditor will read any Provision 29 statement in an annual report to consider whether it is materially inconsistent with any financial information, but that the auditor’s opinion on a company’s financial statements will not extend to a Provision 29 statement.
The mythbuster also clarifies the extent to which a Provision 29 statement covers information which an auditor is required to obtain to understand a company’s system of internal control so as to identify and assess the risks of material misstatement of the financial statements.
Court interprets definition of “Banking Day” that referred to multiple jurisdictions
The High Court has examined the meaning of the words “Banking Day” in a contract that defined that term by reference to multiple jurisdictions across different time zones.
What happened?
Songa Product and Chemical Tanks IV AS v Gardsea Shipping Inc [2026] EWHC 1559 (Comm) concerned a contract for the sale of a ship.
The contract required a significant portion of the purchase price to be paid into escrow, then released to the seller within “three Banking Days” after a notice of readiness was given.
It defined “Banking Days” as “days on which banks are open both in the country of the currency stipulated for the Purchase Price … and in the place of closing stipulated in Clause 8 … and United States of America, Canada, United Kingdom, Switzerland, Turkey, [UAE], Greece, Norway…”
(The stipulated currency was United States dollars and the place of closing was Norway.)
The notice of readiness was given on 2 September 2022, which (given weekends and bank holidays) set a deadline date of 8 September 2022 for releasing the escrow sum.
The sum had not been released by midnight in Norway at the end of 8 September 2022. At 12.09am on 9 September 2022 (Norway time), the seller exercised its right to terminate the contract.
The escrow was eventually released before midnight in Hawaii at the end of 8 September 2022, by which time it was well into 9 September 2022 in Norway.
The buyer claimed that this had satisfied the requirement to make payment on 8 September 2022. It argued that the contract allowed payment at any time, provided that, at the point of payment, it was 8 September 2022 in at least one of the places specified in the definition of “Banking Days”.
What did the court say?
The court disagreed, finding that the escrow sum had not been released in time and the seller had been entitled to terminate the contract.
The judge found that the term “Banking Days” had been included in the contract to decide which days counted when calculating the deadline for releasing the escrow sum. However, it did not define what was meant by a “day” or alter the normal meaning of that word.
On the buyer’s interpretation, a day would have begun at midnight in the most easterly territory (in this case, the UAE) and ended at the following midnight in the most westerly territory (in this case, Hawaii). That would have created a “day” of 37 or 38 hours (depending on the time of year).
The judge noted that, although the parties would have been free to define a “day” in this way (had they wanted to), they did not do so, and an ordinary meaning needed to be ascribed to the word. Common sense did not suggest that a single day could be 38 hours long.
Moreover, the buyer’s interpretation would have meant that a subsequent day (e.g. 9 September 2022) would have begun before the previous day (e.g. 8 September 2022) had ended, resulting in periods of time when a payment could be said to have been made on two dates. This was, in the court’s view, “not likely to produce certainty in general”.
In this case, the sensible interpretation was that the escrow sum needed to have been released by midnight in the place at which the obligation to do so had to be performed. This was Norway. That had not been done, and so the seller had been entitled to terminate the contract.
What does this mean for me?
Contractual interpretation cases always stand on their own facts, but the decision in this case makes sense and is likely to influence similar cases in the future.
Although not a firm rule of law, the principle that time is measured by reference to the place at which an action or obligation falls to be performed is well established.
Parties and their advisers should bear this in mind when negotiating a commercial contract that may involve multiple jurisdictions. Dates, times and periods are used for a variety of purposes, including making payments, giving notice of a claim or termination, or disputing calculations.
In these cases, parties should consider carefully whether they intend to tie periods and deadlines to a particular jurisdiction, or rather to allow the courts to decide the matter on a case-by-case basis.
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