Downton Abbey – so much potential

Gaining commercial awareness isn’t just about reading the FT, corporate lawyer Victoria Symons finds that the latest series of Downton Abbey is a lawyer2B’s dream.

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Source: Photo by Richard Munckton

Downton Abbey

Is it just me, or is Downton Abbey so much more fun to watch as a lawyer (or Lawyer 2B!). Eye candy aside, the majority of characters in isolation would keep a multi-disciplinary law firm going for some time and the potential of acting for the whole family would see one right through the recession and out the other side again.

That’s the joy of acting for landed estates, there are so many complexities and so many nuances to consider. Lets take it from the top:

Firstly, you’ve got the grand old dames, the Dowager Countess, Mrs Crawley and, new on the scene, Martha Levinson (Shirley MacLaine for any of you still playing catch up). Their vintage may put them past the ideal age for advantageous tax planning but with all the changes going on around them a health check of their wills may well be in order. It would also be sensible (if not politic) to raise the thorny question of enduring powers of attorney while they still have their wits about them.

Then there’s the power-house itself, Lord and Lady Grantham. Hitherto a rock in any storm, Lord Grantham’s short sighted investments are threatening to bring an end to life at Downton Abbey (though surely not – a good series is never forced to change its title half way through and ‘Downton House’ lacks the same ring). Its time for a serious financial and legal review to ring-fence those assets while they still can. Not to mention the possibility of an individual voluntary arrangement being negotiated on the horizon.

Lady Mary and Matthew offer rich pickings too. It may be too late for a pre-nup, but the Supreme Court has indicated that a post nuptial agreement may be given equal regard by the Courts, if falling short of giving them full legal effect. Matthew’s likely inheritance c/o Lavinia’s father also means its time to sit down and start planning their own family’s future. Setting up new family trusts may have lost much of its appeal in the new tax regime, but the use of an LLP to hold family assets in a tax efficient manner could be worth further thought.

And never write off the younger generation. Lady Edith and Lady Sybil may not be central to the plot currently, but my money would be to keep a close eye on both: their entrepreneurial spirit shown in the last series could make them real players in business and goodness knows there’s potential to generate money out of an Estate such as this. That is, assuming Lady Sybil can avoid being implicated under any terrorism charges in the meantime.

And that’s just the immediate family. What about all those staff? It’s a fair guess nobody has ever produced those summary terms of employment each employee is entitled to, nor thought about getting the appropriate opt-outs from the Working Time Regulations.

So much to consider and so much potential. I blame the ‘new world’ for turning an excellent drama series into an exercise in business development opportunities. Shame on me.

And so to last week’s episode…

Matthew’s announcement that he was finally prepared use Reggie’s inheritance to bail out Lord Grantham may have come as no surprise in terms of plot, but one wonders if he really appreciates the complexities of investing in a business? As a lawyer himself, one would have hoped that Matthew had the foresight to raise the right questions before stumping up the cash, but as ever it was left to Carson to flag the obvious: how was the Estate to be managed going forwards?

The first step before investing in any business is to carry out due diligence. This is a simple fact finding process which allows an investor to gather a full understanding of what he is proposing to invest in. The fact that Lord Grantham’s current financial difficulties are largely of his own making needn’t have put Matthew off investing, but coupled with the fact that he appears to be sole decision maker for the family, alarm bells should have been ringing. Any lawyer worth their wages would have recommended reviewing the paperwork before, not after, funds had been advanced. In this way, issues such as control and the use of Matthew’s money could have been flushed out, and the family (still in dire need of a lifeline) would have been far more receptive to any suggestions as to change in the way the Estate is managed.

Of equal importance prior to investing is to suss out the most appropriate investment structure. The arrangements here are more in the nature of a joint venture (or “JV”), rather than a loan, but even JVs come in several different shapes and sizes. At a basic level, a JV can be contractual (preferably in writing but an oral contract is equally enforceable if more difficult to evidence). English law implies very few terms into contracts, so parties to a contractual JV need to carefully consider and legislate for each scenario to be addressed (eg the decision making process, controls on expenditure and future fundraising requirements).

Importantly, a contractual JV will only (save for limited exceptions) bind the parties to that contract. Given the feisty nature of this family, Matthew may well prefer to bind in the wider family members, and to do so he could consider some form of special purpose vehicle (or “SPV”). The most common form of SPV is a limited company or a limited liability partnership, both of which can be efficient mechanisms through which to administer a family business and ultimately pass ownership down through the generations. Historically, an off shore entity may have been attractive but this is less likely to be the case given the recent changes in stamp duty land tax on high value residential property.

The point is that by taking advice at the right point, the difficulties Matthew is now facing could have been avoided. There is no shame in the fact that the Estate could be better managed (personally, I’d avoid the reference to ‘mismanagement’ when presenting the situation to Lord Grantham); the question is, is Lord Grantham’s pride to great to allow him to seize the opportunities Matthew’s money could open up for him.

Tune in for next week’s instalment…