UK Law and Practice Contributed by: Fergus Wheeler, Paul Yin, Tracy Liu and Medha Vikram, Latham & Watkins
HM Treasury, through the Office of Financial Sanctions Implementation, enforces financial sanctions, including asset freezes on designat - ed persons and restrictions on investment and financial services. Foreign investment in UK private credit funds is only allowed if it does not come from sources on the UK financial sanctions lists or violate UK sanctions. 2.4 Compliance and Reporting Requirements UK FCA-regulated private credit funds must comply with various regulatory and report - ing requirements. Generally, the UK regulatory regime requires: • compliance with rules for senior managers and material risk takers; • compliance policies for risk management, market abuse, conduct and staff training; • maintenance of regulatory capital; and • reporting on FCA metrics related to regulatory compliance. UK-regulated lenders or those registered with the FCA for AML purposes have ongoing AML reporting obligations. In 2024, private credit firms particularly focused on governance and valuation processes due to FCA scrutiny, aiming to address subjectivity, potential conflicts of interest and misalignments in net asset value (NAV) calculations, asset valu - ations and data availability. 2.5 Club Lending and Antitrust While UK antitrust enforcers have not brought enforcement actions focused on private cred - it, co-ordinated lending has the potential to raise antitrust enforcement risk because of the
increasing prevalence of intercreditor disputes and general regulatory scrutiny on private capi - tal. There has, however, been some case law in the US. In the mid-2010s, private plaintiffs brought antitrust claims against private equity sponsors for “clubbing deals,” which were alleged to have reduced the competitive intensity of lending. Plaintiffs alleged that some of the largest pri - vate equity firms depressed take-private prices through a code of conduct or “club etiquette” among sponsor groups. Under US antitrust laws, restructuring discus - sions that occur within the context of a formal bankruptcy proceeding are potentially immune from antitrust liability. See United Airlines, Inc. v U.S. Bank N.A., 406 F.3d 918, 921 (7th Cir. 2005). Even outside formal court led restructur - ings, more recent US antitrust cases have distin - guished between enforcement of existing debts and prospective lending. One court observed that efforts “maximizing the creditors’ ability to collect an outstanding debt” potentially differed from cases in which courts applied Sherman Act liability that “involved creditors who agreed about whether or on what terms to extend cred - it in the future”. CompuCredit Holdings Corp. v Akanthos Capital Management, LLC., 916 F. Supp. 2d 1326, 1330 (N.D. Ga. 2011). Although US case law is not binding on English courts, an English court may draw on such US case law should similar claims arise in England. 3. Structuring and Documentation 3.1 Common Structures Structures Common structures include:
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