By Emma Woollard, Partner in the Wills, Trusts and Estates team at Prettys
As the COVID-19 epidemic continues to disrupt the nation and raise concerns about the health and the wellbeing of ourselves and of our loved ones, making a Will is naturally on the minds of many.
However, the current rules and restrictions on social distancing and isolation have posed some unprecedented challenges for Will writers and those wanting to get their affairs in order in response to the threats we are facing and future uncertainty.
Ipswich-based law firm, Prettys have explained how they have adapted their practices to prioritise the writing, reviewing and signing of Wills. Whilst following government guidelines on social distancing, they have ensured that the essential service provided by their Will writers is as accessible as possible to clients and families who may require it.
The challenges faced
Perhaps the biggest challenge faced under the current circumstances is the signing and witnessing of Wills in order for them to be deemed valid.
The Ministry of Justice has recognised the need for a period of relaxed rules. It has been discussed whether signings and witnessing could take place remotely, via video call technology. This would be an exception to the current requirement for all parties to be present in the room when signing.
The need for this becomes even more apparent, when the matter of deathbed Wills is brought into question, as those hospitalised and reaching end of life care with the coronavirus are unable to be with friends and family and those all important friends, neighbours or legal professionals who would normally act as witnesses.
In these cases, there is a plea for hospitals to also relax their rules around doctors, nurses or other members of staff witnessing patients’ Wills.
Although, there are fears that with a more relaxed standpoint, many vulnerable people could be taken advantage of, as the face-to-face interaction currently in place ensures the Will definitely outlines the client’s wishes.
An adapted service
The current challenges being faced by all businesses and services are causing a lot of disruption and change. This is certainly not ideal in situations where individuals and families are making important decisions about their affairs and, as a result, firms are putting measures into place to enable them to continue catering to client needs.
Upholding their duty of care and commitment to clients, the courts and the Law Society, Will writing solicitors must continue to provide their services throughout this challenging time. In order to do so and keep themselves and clients safe in the process, it has become important to use remote means of communication, such as telephone and video calls as well as email to take instructions.
From here, solicitors will be able to draft a Will in accordance with their client’s wishes and their timeline. In urgent cases, Wills can be turned around in a matter of hours and in less pressing cases, a one to two week deadline can be expected.
Signing your Will
Emma Woollard, Partner in the Wills, Trusts and Estates team at Prettys, explains how in cases where individuals are well but are self-isolating at home, the firm has had to be innovative in order to get Wills signed and validated.
The firm has always offered an at-home service whereby they go to clients’ houses, if they are unable to come to the office, and this has become the new norm for current signings.
Abiding by social distancing rules and ensuring staff and clients are put at no risk, Will signings are taking place through house windows, patio doors, either ends of a drive or corridors long enough to allow at least 2 metres distance. Although it is clear that there is no easy solution, this is an example of how the firm is ensuring clients can get their affairs in order by any means necessary.
Therefore, despite the challenges, solutions are still being found – some reassuring news for individuals or families without Wills in place who may be worried that it is too late.
Preparation rather than panic
Over recent weeks, not only has there been an increase in demand for Wills but also, their urgency. Under the current circumstances, this is understandable but individuals are being reminded that Wills are about preparation, rather than panic.
Whether you’re concerned about your own health, a loved one’s or if the pandemic has reminded you to review an existing Will, firms are advising that they are well-equipped to provide the service clients require. Therefore, rather than entering into a panicked decision, it is advised that you and your loved ones put thought into the following:
- Who will you appoint as an executor to administer your estate?
- If you have young children, who will you appoint as their guardian? And, what provisions will you make for them and what is the age at which you want them to receive their inheritance?
- If you are a cohabiting couple, what provisions will you be making for one another?
- Are any of the beneficiaries disabled or do they lack capacity? If so, should you consider creating a Trust in your Will?
This information will allow you to create a basic Will that can help you get your affairs in order without the process becoming too chaotic at a time already full of adversity.
With all that is going on, it is easy to become consumed by feelings of stress and panic. However, it is reassuring to see how firms are stepping up and making necessary adjustments to cater for their clients’ needs. Although it may be some time before we see changes to the law itself, Wills can still be written and signed in less conventional ways, allowing those in need to rest assured that, no matter what the future holds, their estates and affairs are safe.
Why You Should Take On Debt To Stop Dilution
By Blair Silverberg, CEO of Capital
Imagine an exciting space dominated by two major companies, each growing and developing at about the same pace. To get ahead, they keep raising more money, but interest rates are low and the global stock of wealth is at an all-time high, so there is unlimited money to raise. Soon enough, their employees are dealing with substantial dilution because each round of equity wipes out the growth in valuation between rounds. Both companies become unicorns and announce their IPOs, but employees are hardly seeing the payoff.
This is happening right now in SaaS, meal delivery, ridesharing, and dozens of other spaces that you and their employees might not even realize.
What if it didn’t have to be like this? What if one company could get ahead without diluting their employees’ shares?
This is why most companies raise debt — and it’s only a matter of time until venture-backed companies do, too.
Why Dilution is Bad for Your Company
When the venture industry was small and companies like Google and Amazon went public after raising less than $50M, dilution was miniscule and thus not often a top concern for executives. The world has changed, with some companies raising billions before ever going public, but mindsets haven’t caught up.
The impact dilution can have on employee morale and retention can be substantial. When employees are first hired, they’re often excited to receive shares as part of their employment. But after repeated dilution, they’ll be asking HR, “Why aren’t my shares worth as much as they used to be? When will I get more?” Some companies start giving out bonuses and extra shares to placate everyone, but this can only go on for so long. Giving out more shares to combat dilution leads to more issues; those shares have to come from somewhere. Usually, these shares come from the founders, who eventually give up so many that they might only own 1% of their own company. That’s a major blow to those who worked so hard to get the company off the ground.
For employees, dilution means they may leave the company if they decide their shares are worth too little, especially if the competition can offer them a better deal. And if employees determine that this problem is industry-wide, they might leave the space entirely. The downside to tech becoming mainstream is that dilution has become unsustainable to employees and founders alike.
The Solution: Raise Debt
Companies are generally funded in one of two ways: equity financing or debt financing. Equity requires giving up a share of the company in exchange for capital. The biggest benefit is that this money doesn’t have to be repaid. Debt, on the other hand, does have to be repaid with interest. But while debt comes with a repayment obligation, it doesn’t come with dilution. Once the debt is repaid, the lender has no further involvement in your business. You aren’t selling a part of your business to get funding.
Understanding your capitalization options can be essential to getting ahead of the competition. When your competitors are raising equity to finance their business, they’re giving employees one fewer reason to stick around. If you raised debt instead, you could still offer employees valuable shares while receiving much-needed financing. You could also stand out from the pack by creating a candidate-friendly brand around prudent wealth creation. Once you start using debt intelligently, your access to credit capital expands, giving you a permanent head start over the competition.
Why don’t more companies raise debt?
Outside of tech, most companies do. It’s normal to raise debt once a company has a working concept. But the tech space hasn’t always looked the way it does today. Early on, it was so inexpensive to start technology companies that raising debt wasn’t necessary; equity financing was miniscule compared to the ultimate market value of these companies at liquidity events. Over the years, it’s become ingrained in tech culture to pursue equity funding, with such a heavy focus on raising the next round that many founders forget you even can raise debt.
But times have changed, and financing will, too. We saw this shift before with Mike Milken, who was a major player in the development of the high-yield bond market. In the early 1970’s, Milken noticed that risky turnaround businesses could be financed with “junk bonds” — bonds with higher interest rates than those offered to more creditworthy borrowers. He famously calculated that despite their higher default rates, the higher interest rates on these bonds produced sufficient compensation for the higher risk. This opened up financial capital to a group of companies previously financed only by equity and created a market that today is worth more than $2T. From the emergence of the high-yield bond market, we know how powerful access to debt financing can be. It gave rise to legendary investors and operators from Carl Icahn to T. Boone Pickens as well as iconic companies from Time Warner to Hilton Hotels and Safeway. For companies who have a kernel of a working business model, the benefits of debt financing are massive. Eventually, tech will go the way of all other industries, leaning on debt as a major source of financing.
Debt financing is one of the best alternatives to taking on equity, especially when trying to mitigate dilution. If you want to attract and retain top talent, then ensuring you don’t dilute their shares will go a long way. The transition to debt financing is coming. Soon, it’ll be common practice across the entire tech space. If you start using debt intelligently now, you’ll have a competitive advantage. You’ll be able to get one step ahead of the competition with access to capital that others refuse to utilize. This not only benefits your employees today, but also your entire organization in the long run.
Sterling rises above $1.37 for first time since 2018; UK inflation rises
By Elizabeth Howcroft
LONDON (Reuters) – A combination of heightened risk appetite in global markets and UK-specific optimism lifted the pound on Wednesday, as it strengthened to its highest in nearly three years against the dollar and five-month highs against the euro.
The dollar weakened against major currencies for the third straight session, helped by U.S. Treasury Secretary nominee Janet Yellen’s urging lawmakers to “act big” on spending and worry about debt later.
The pound rose above $1.37, hitting $1.3720 — its highest since May 2018 — at 1045 GMT. By 1136 GMT it had eased some gains and changed hands at $1.3687, up 0.4% on the day and up 0.2% so far this year.
Versus the euro, the pound hit a five-month high of 88.38 pence per euro, before easing to 88.51 at 1137 GMT, up around 0.5% on the day.
The pound’s recent strengthening can be attributed in part to relief among investors that the impact of Brexit has not caused the chaos some feared, as well as a lessening of negative rates expectations, said Neil Jones, head of FX sales at Mizuho.
“Going into early 2021, there was a bearish sentiment building into the pound on the Brexit deal, in terms of maybe it had a limited reach, and then secondly an expectation of negative rates and so to some extent the market has been cutting down on sterling shorts because neither of those things have been quite so apparent as they were,” he said.
Bank of England Governor Andrew Bailey said last week that there were “lots of issues” with cutting interest rates below zero – a comment which caused sterling to jump.
The UK’s progress in rolling out vaccines is also seen as a positive for investors, Jones said.
Currently, the United Kingdom has vaccinated 4.27 million people with a first dose of the vaccine, among the best in the world per head of population.
“Further progress in vaccinations (a pick-up in the daily rate) by the time the BoE MPC meeting takes place on 4th February may prove enough to hold off on any additional monetary easing,” wrote Derek Halpenny, head of research for global markets at MUFG.
Inflation data for December showed that prices in the UK picked up by more than expected in December, to a 0.6% annual rate.0.6
Inflation has been below the Bank of England’s 2% target since mid-2019 and the COVID-19 pandemic pushed it close to zero as the economy tanked.
(Graphic: CFTC: https://fingfx.thomsonreuters.com/gfx/mkt/oakpeyayxpr/CFTC.png)
(Reporting by Elizabeth Howcroft, editing by Larry King)
Euro sinks amid broader risk rally against dollar
By Ritvik Carvalho
LONDON (Reuters) – The euro struggled to join a broader risk rally against the dollar on Wednesday as analysts said the risk of extended lockdowns in Europe to combat the spread of COVID-19 and the continent’s lag in a vaccine rollout were weighing on the currency.
Down 0.1% against the dollar at $1.2117 by 1130 GMT, Europe’s shared currency had only the safe-haven Swiss franc and Sweden’s crown for company in resisting a broad rally against the greenback by the G-10 group of currencies.
“We’re getting more headlines that the current lockdowns will be extended further, which could mean that the euro zone would be flirting with a double-dip recession before long,” said Valentin Marinov, head of G10 FX research at Credit Agricole, noting Europe’s lag in rolling out a coronavirus vaccine compared to the United States and Britain.
“So all of that plays into the story that tomorrow’s ECB meeting, while uneventful in terms of policy announcements, could convey a relatively dovish message to the market. On top of that, President Lagarde could once again jawbone the euro, so the euro is kind of lagging behind.”
Marinov also noted price action in the pound, which hit $1.3720 – a 2-1/2-year high – and 88.38 pence – its highest since May 2020 against the euro – as a contributing factor to euro weakness. [GBP/]
There was also focus on a story by Bloomberg News, which reported the European Central Bank was conducting its bond purchases with specific yield spreads in mind, a strategy that would be reminiscent of yield curve control.
Elsewhere, the risk-sensitive Australian dollar gained 0.4% to $0.7727. The New Zealand dollar, also a commodity currency like the Aussie, gained 0.25% to $0.7133.
While the world will be watching Joe Biden’s inauguration as U.S. president at noon in Washington (1700 GMT), traders were more focused on his policies than the ceremony.
U.S. Treasury Secretary nominee Janet Yellen urged lawmakers at her confirmation hearing to “act big” on stimulus spending and said she believes in market-determined exchange rates, without expressing a view on the dollar’s direction.
The index that measures the dollar’s strength against a basket of peers was up almost 0.1% at 90.510. The euro forms nearly 60% of the dollar index by weight.
It also fell 0.1% against the Japanese yen to 103.81 yen per dollar.
While the dollar has perked up in recent weeks on the back of a rise in U.S. Treasury yields, investors still expect the currency to weaken.
“We remain bearish U.S. dollar, and expect the downtrend to resume as U.S. real yields top out,” said Ebrahim Rahbari, FX strategist at CitiFX.
“Continued Fed dovishness remains important for our view, in addition to global recovery, so we’ll watch upcoming Fed-speak closely.”
Positioning data shows investors are overwhelmingly short dollars as they figure that budget and current account deficits will weigh on the greenback.
(Graphic: Dollar positioning: https://fingfx.thomsonreuters.com/gfx/mkt/oakveyombvr/Pasted%20image%201611132945366.png)
UBS Global Wealth Management’s chief investment officer Mark Haefele reiterated a bearish view on the dollar, saying that pro-cyclical currencies such as the euro, commodity-producer currencies, and the pound would benefit “from a broadening economic recovery supported by vaccine rollouts”.
The cryptocurrency Bitcoin fell 4%, trading at $34,468.
(Reporting by Ritvik Carvalho; Editing by Angus MacSwan)
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