Corporate Finance Law.

Corporate finance law covers the legal arrangements companies use to borrow, lend, invest, raise capital, refinance debt, and reorganise their financial affairs.

Transactions can range from a straightforward business loan to complex arrangements involving several lenders, investors, group companies and different forms of security.

The corporate finance solicitors listed on Solicitors.com may act for companies, banks, alternative lenders, investors, shareholders and directors. They can advise on the structure of a transaction, negotiate its terms, prepare the necessary documents and deal with completion and registration requirements.

When Might a Business Need a Corporate Finance Solicitor?

A business may require specialist corporate finance advice when:

• borrowing money from a bank or commercial lender;
• refinancing existing facilities;
• raising venture capital or private equity investment;
• funding an acquisition, management buyout or property transaction;
• granting security over company assets;
• providing or receiving a corporate or personal guarantee;
• restructuring a group of companies;
• renegotiating debt following financial difficulty; or
• repaying a facility and releasing existing security.

Early legal advice can help identify risks before financial terms become binding and ensure that the proposed arrangement is properly documented.

Negotiations With Banks and Other Finance Providers

A corporate finance solicitor can advise during negotiations with banks, building societies, investment funds, asset-based lenders and other finance providers.

The parties may first record the principal commercial terms in a term sheet, heads of terms or facility offer. Although parts of these documents may be non-binding, provisions relating to confidentiality, exclusivity, costs and governing law may create immediate obligations.

A solicitor can review the proposed terms and advise on matters including:

• the amount and purpose of the facility;
• interest rates, fees and default interest;
• repayment arrangements;
• financial and operational covenants;
• conditions that must be satisfied before funds are released;
• security and guarantee requirements;
• events of default;
• the lender's cancellation and enforcement rights; and
• the borrower's ability to repay early or obtain further finance.

Loan and Credit Agreements

A loan or facility agreement sets out the terms on which finance is made available and repaid.

Depending on the transaction, the agreement may provide for:

• a term loan;
• a revolving credit facility;
• an overdraft;
• acquisition finance;
• development or property finance;
• asset-based lending;
• invoice finance;
• bridging finance;
• mezzanine finance; or
• a loan between companies within the same group.

Solicitors can prepare, review and negotiate the facility documentation and advise both borrowers and lenders on their respective obligations.

Bank Facility and Security Documentation

A lender may require security over some or all of the borrower's assets. This gives the lender additional rights if the borrower fails to repay the loan or breaches the finance documents.

Corporate finance solicitors can prepare and review documents including:

• facility agreements;
• debentures;
• legal charges over land or buildings;
• fixed charges over specified assets;
• floating charges over changing classes of assets;
• share charges;
• assignments of contractual rights or insurance proceeds;
• charges over bank accounts;
• intercreditor and priority agreements;
• corporate guarantees; and
• personal guarantees and indemnities.

The solicitor should ensure that the documentation reflects the commercial agreement and that the required corporate approvals, signatures and registration formalities are completed.

Debentures and Company Security

A debenture commonly creates security over a range of company assets. It may contain fixed charges over particular assets and a floating charge over assets that change during the normal course of business.

The document may cover assets such as:

• property and land;
• plant and machinery;
• stock;
• book debts and receivables;
• bank accounts;
• intellectual property; and
• the company’s business and undertaking.

The effect of a debenture and the lender's enforcement rights can be significant. A company should understand which assets are being secured, which restrictions will apply, and what may happen following a default.

Legal Charges Over Property

Where business finance is secured against land or buildings, the lender may require a legal charge over the property.

The solicitor may need to investigate the title, deal with existing lenders, obtain consents, and complete registration with HM Land Registry and Companies House, where applicable.

Property finance can involve additional issues such as leases, planning permissions, environmental risks, development obligations and restrictions on the title. A corporate finance solicitor may therefore work alongside a commercial property specialist.

Registering a Company Charge

Many charges created by a UK-registered company must be delivered to Companies House for registration within the statutory period.

Failure to register a charge correctly and on time can have serious consequences. In particular, the security may be ineffective against a liquidator, administrator or other creditors, although the underlying debt may remain payable.

A corporate finance solicitor can:

• identify which security interests require registration;
• prepare or review the Companies House filing;
• deal with Land Registry or other asset-specific registrations;
• retain evidence of registration;
• register amendments or additional security; and
• record satisfaction or release when the debt is repaid.

Personal Guarantees

A lender may ask a director, shareholder or another individual to guarantee the company's obligations.

A personal guarantee can make the guarantor personally responsible if the company fails to pay. Depending on its wording, the lender may be able to pursue the guarantor without first exhausting all remedies against the company.

Guarantees may also be supported by security over the guarantor's personal assets, including their home.

Anyone asked to sign a personal guarantee should obtain independent legal advice. The solicitor can explain:

• whether the guarantee is limited or unlimited;
• the debts and liabilities it covers;
• whether it is continuing in nature;
• the circumstances in which payment can be demanded;
• whether interest, costs and expenses are included;
• how the guarantee can be released; and
• which personal assets may be at risk.

Corporate and Intercompany Guarantees

A lender financing one company may require guarantees from its parent company, subsidiaries or other members of the corporate group.

Before a company gives a guarantee or grants security for another company's debts, its directors should consider whether doing so is in the interests of that company.

The transaction may raise questions about corporate benefit, directors' duties, conflicts of interest, distributable reserves and the company's financial position. Appropriate board and shareholder approvals may be required.

Refinancing

Refinancing involves replacing or changing an existing finance arrangement. A company may refinance to obtain a better interest rate, extend repayment periods, free up working capital, consolidate debt, or support further growth.

The legal work may include:

• reviewing the existing facility and repayment terms;
• negotiating the new finance documents;
• obtaining redemption figures;
• coordinating repayment of the existing lender;
• releasing old charges and guarantees;
• granting replacement security;
• dealing with priority between lenders; and
• completing Companies House and Land Registry filings.

Careful coordination is often required to ensure that existing security is released only when replacement funds are available and the new lender's security can be completed.

Venture Capital and Equity Investment

A company seeking investment may issue shares rather than, or in addition to, borrowing money.

Venture capital and private equity transactions can require advice on:

• term sheets and investment proposals;
• legal due diligence;
• share subscription agreements;
• shareholders' agreements;
• company articles of association;
• different classes of shares;
• investor consent and veto rights;
• board representation;
• founder restrictions and service agreements;
• warranties and disclosures;
• anti-dilution protection;
• future funding rounds; and
• exit arrangements.

The company, its founders, and its investors may have different interests. Separate legal representation may therefore be appropriate.

Acquisition and Management Buyout Finance

Corporate finance solicitors may advise on funding used to acquire another company or business.

The finance may involve senior debt, mezzanine funding, equity investment, deferred consideration or loans from the sellers. Security may be taken over the acquisition vehicle, the target company and their assets.

The financial documentation must be coordinated with the share or business purchase agreement so that the acquisition and funding are completed at the same time.

Company Restructuring

A corporate restructuring can involve changes to a company's ownership, debt, assets or group structure.

Solvent restructuring work may include:

• creating or simplifying a corporate group;
• transferring assets or businesses between group companies;
• introducing a holding company;
• de-merging separate parts of a business;
• reorganising share capital;
• converting or capitalising debt;
• returning capital to shareholders; or
• preparing a business for investment, succession or sale.

Tax, accounting, employment, pensions, property and regulatory advice may also be required. Corporate finance solicitors will often work with the company's accountants, tax advisers, and other specialists.

Financial Distress and Debt Restructuring

A company experiencing financial difficulties should seek advice at an early stage.

More formal procedures can include:

• a moratorium;
• a company voluntary arrangement;
• a restructuring plan;
• a scheme of arrangement;
• administration; or
• another insolvency or rescue procedure.

Intercreditor and Priority Arrangements

Where more than one lender provides finance, the lenders may need to agree how their respective rights will rank.

An intercreditor, deed of priority or subordination agreement may regulate:

• which lender has first-ranking security;
• the order in which payments are made;
• restrictions on enforcement;
• the treatment of shareholder or group-company loans;
• turnover of payments received by a junior creditor; and
• control of insolvency or enforcement proceedings.

These arrangements can be complex, particularly where senior, mezzanine and shareholder funding are used together.

Corporate Approvals and Completion

Before entering into a finance transaction, the parties may need to approve the documents through board resolutions, shareholder resolutions or other internal procedures.

The solicitor may prepare and coordinate:

• board minutes and written resolutions;
• shareholder approvals;
• director and shareholder authorities;
• legal opinions;
• conditions precedent;
• signature and completion arrangements;
• Companies House filings; and
• post-completion registrations and notices.

Advice for Borrowers and Lenders

Borrowers and lenders have different commercial interests and will usually require separate legal representation.

A solicitor acting for a borrower will focus on the company's obligations, restrictions, costs, and exposure to enforcement. A solicitor acting for the lender will focus on the validity of the facility, the effectiveness of the security and the lender's ability to recover the debt.

Where a solicitor is also instructed to provide independent advice to a guarantor, that advice must be given separately and without a conflict of interest.

Finding the Right Corporate Finance Solicitor

Corporate finance overlaps with company law, banking, commercial property, tax, insolvency and regulatory law. The right solicitor will depend on the size and complexity of the proposed transaction.

When choosing a firm, consider whether it has experience of:

• the relevant type of finance;
• acting for borrowers, lenders or investors;
• transactions of a similar size;
• the business sector concerned;
• secured lending and registration requirements; and
• working with the company's accountants and other professional advisers.

If you are uncertain whether you require a corporate finance specialist, a commercial or corporate solicitor should be able to assess the proposed transaction and, where necessary, refer you to an appropriate lawyer.

Find a Corporate Finance Solicitor

Use Solicitors.com to find corporate finance solicitors who advise businesses, lenders and investors throughout England and Wales, or submit an enquiry through our Ask a Solicitor service.

Important: This guide provides general information about corporate finance law in England and Wales. It is not legal, financial, investment or tax advice. Businesses and individuals should obtain advice based on the terms and circumstances of the proposed transaction.