Is a pre-emption agreement right for me?

In a time of great economic uncertainty, everyone is looking for a sense of clarity and stability.

When it comes to buying or selling a property, the idea of removing some element of risk from the process might seem appealing.

Pre-emption agreements can give a buyer exclusive access to buying a property putting them in a stronger position and ensuring that a seller gets some sense of who is going to be buying the property.

However, a pre-emption agreement is not a magic bullet to solve all your commercial property woes.

Such agreements require careful consideration and planning to be utilised effectively.

Types of pre-emption agreement

There are three main types of pre-emption agreements, each of which has a different degree of utility and suitability.

• First refusal: These agreements ensure that the potential buyer is approached before the property is put on the market to determine whether a sale can be made. The buyer has the right to refuse the sale if they wish and this will cause the property to become commercially available. The seller should not approach any other potential buyers until the person with whom they have made the agreement has refused the sale.
• Last refusal: This type of pre-emption agreement gives the buyer the right to match any offer made by a third party. If the offer is matched, the seller must accept this offer as per the terms of the agreement.
• Third party: This type of pre-emption agreement involves the property being sold for a price determined by a third party.

As the main trigger for a pre-emption agreement is the owner wishing to sell the property, pre-emption agreements can remain in place for a significant length of time.

Although pre-emption agreements my sound like a strong prospect, there are certain challenges they can present if you are uninformed.

Always seek professional legal advice when establishing a pre-emption agreement to ensure that it will work for you.

What are the risks?

As pre-emption agreements operate on an amount of goodwill, it is important to ensure that the particulars of the process are well defined within the contract to ensure both parties get a fair deal.

There is no definite end period for pre-emption contracts as default by law.

This is beneficial in the sense that pre-emption agreements can provide a degree of flexibility in when they are triggered.

However, if you do not wish the contract to run indefinitely, it may be necessary to impose your own time restrictions when establishing the contract.

In terms of timing, ensuring that the buyer has a set amount of time to accept or refuse the sale can help avoid the lengthy sale process that the contract was aiming to circumvent in the first place.

A buyer will need adequate time to consider their options but not so long that the seller is left in a state of uncertainty concerning whether the sale is proceeding.

A clear definition of the property is essential and should consider what to do if the owner wishes to gift part of or all of the property.

Facilitating how to handle disputes can also be a vital part of a pre-emption agreement.

It is worth remembering that a pre-emption agreement is designed to be of benefit to both buyer and seller and any agreement that fails to do this may cause problems in the long run.

Legal advice is essential for ensuring that your pre-emption agreements are making the buying and selling process as smooth as possible.

For further advice about pre-emption agreements, get in touch with our team today.

The prospect of having to deal with redundancy situations can be daunting for employers.

The law provides employees with a number of rights in a redundancy situation and, in order to avoid expensive mistakes, it is essential that employers and managers understand those rights.

Employees who are dismissed by reason of redundancy may be entitled to a statutory redundancy payment and may also be able to challenge the termination of their employment as an unfair dismissal. A successful claim for unfair dismissal means that you might be liable for costly compensation payments.

Here’s what you need to know about redundancy.

When is there a “redundancy” situation?

The legal definition of “redundancy” covers three types of situation:

• Actual or intended business closure.
• Actual or intended workplace closure.
• Reduction of workforce.

If fewer than 20 employees are being made redundant at one undertaking (work site) within a 90-day period, this is treated as a number of individual redundancy processes.

If more than 20 redundancies are proposed, this would be a collective redundancy situation.

In the latter situation, an employer must:

• Inform and consult appropriate representatives (these may be trade union representatives or, where no union is recognised, elected employee representatives).
• Notify the Secretary of State on form HR1.

This is called “collective consultation.”

It is important that the requirement for this is observed because a tribunal may award up to 90 days’ gross pay in respect of each affected employee where there has been a failure to collectively consult.

You may also be fined if you fail to notify the Secretary of State.

Redundancy and unfair dismissal

An employee who has sufficient qualifying service has the right not to be unfairly dismissed.

Redundancy is a potentially fair reason for dismissal, but whether it is fair or unfair to dismiss for that reason will depend on whether you (the employer) act followed a fair redundancy selection/ consultation process.

The process to be followed will vary based on the circumstances.

For a fair redundancy process, you will typically need to:

• Inform potentially affected employees of the business case for making redundancies and why their roles are at risk.
• Consider how to fairly select those to be made redundant, which typically involves putting employees with similar skillsets in a selection pool and applying measurable selection criteria to score employees.
• Consult with those at risk about the business case for redundancies and any ways they might think of whereby redundancies might be avoided.
• Consider whether the criteria or scores should be adjusted in response to any points raised in consultation.
• Give notice of redundancy to those employees with the lowest scores if no way of avoiding their redundancies has been identified (e.g. a suitable alternate role).
• Offer a right of appeal.

You are advised to take step-by-step guidance on adopting a fair procedure and to manage the risk of resulting employment tribunal claims.

In certain circumstances, selection of an employee for dismissal on grounds of redundancy will be automatically unfair, such as selecting an employee for a reason connected to pregnancy.

Indeed, pregnant employees, mothers on maternity leave and some recent pregnancy returners are entitled to be offered any suitable alternate roles even if they may not be the best candidate for the role or where others in the same redundancy selection pool have higher redundancy selection scores.

Section 105 of the Employment Rights Act 1996 prescribes various grounds that will make a redundancy dismissal automatically unfair and you should seek specific legal advice to minimise the risk of employees making redundancy selections any of these grounds.

Careful consideration should be given to any redundancy selection criteria used to ensure they are not discriminatory.

For example, using attendance as a criterion could discriminate against those on maternity leave or who have disabilities.

Offering voluntary redundancy only to employees whose age makes them eligible for early retirement could give rise to age discrimination claims.

However, a voluntary redundancy offer made to all employees could include an early retirement package for certain age groups.

Alternatives to redundancy

A redundancy should never be a foregone conclusion.

You should always consider at the outset whether compulsory redundancies can be avoided.

As a first step, you should consider restrictions on recruitment, overtime, hours given to staff whose hours are not guaranteed, and the use of contractors/agency workers.

Some employment contracts allow for workers to be laid off/put on short-time working where there has been a diminution in work with a guaranteed fall-back rate of pay.

If these avenues are not available or sufficient, you might consider inviting employees to:

• Apply for alternative vacancies.
• Volunteer for redundancy.
• Consider early retirement under the pension scheme, if applicable.

Alternatively, where contractual terms allow, it may be appropriate to temporarily lay off employees or reduce their working hours, for example where there is a diminution in work which it is hoped might be very temporary. Such employees may be contractually entitled to a guaranteed fall-back rate of pay.

However, you must be aware that this, in itself, could quite quickly entitle employees to claim a redundancy payment.

Redundancy payments

Employees with at least two years’ service are entitled to a statutory redundancy payment if they are dismissed by reason of redundancy.

Statutory redundancy pay is calculated according to a formula set out in section 162 of the Employment Rights Act 1996, which is based on age, length of service (a maximum of 20 years’ service can be taken into account) and pay (there is an upper limit on the amount of a ‘week’s pay’ that changes annually in line with the Retail Prices Index).

In addition to a statutory redundancy payment, employers should consider whether or not employees are entitled to an enhanced redundancy payment.

This entitlement could be expressly included in contracts of employment or incorporated by being set out in another document, such as a redundancy policy in a staff handbook.

Employment law advice with Palmers Solicitors

The specialist employment team at Palmers Solicitors can, at an early stage, assist you in mapping out a fair redundancy process and provide assistance with implementing that process, including providing template letters where required.

With our help, you can embark on a redundancy process with confidence, knowing that you have taken steps to effectively manage the risks and to put your business in the best possible position to swim through the mire of procedure, legislation and case law.

For tailored advice on redundancy law, contact us today.

Becoming a company director for the first time is an exciting step, but one that must be taken with caution.

Directors carry a heavy responsibility – running a company involves key decision-making that must take into account the long-term consequences of decisions, the interests of employees, the interests of the shareholders, the company’s relationships with its suppliers and customers, and the impact of decisions on the community and the environment.

With corporate social responsibility becoming increasingly important, directors often have to balance what may be conflicting factors in making a decision, such as an environmental consideration that is at odds with shareholders’ interests.

Here’s what you need to know about the role of a company director and what your legal duties are towards the company.

What is a company director?

The director/s run the company on behalf of the shareholders and have a number of legal duties towards the company.

All private limited companies must have at least one director.

The role of the director is defined by case law and confirmed by the Companies Act 2006.

Effectively, a director should always act in good faith and in the interests of the company as a whole by declaring any conflicts of interest and not making personal profits at the expense of the company.

Apart from making business decisions, the directors are responsible for preparing and delivering documents on behalf of the company to Companies House and HM Revenue & Customs (HMRC), such as the company’s accounts and the annual return.

Directors’ duties

Since directors have the power to take important business decisions on behalf of the companies they control, they have duties imposed on them to protect the interest of these companies.

The directors’ duties are designed to ensure that the company comes first. Directors must act in the interests of the company and not in the interests of any other party, including shareholders.

The Companies Act 2006 codifies the seven duties of a director:

1. Promote the success of the company: ‘Success’ is not defined in the Act, but Government guidance suggests that for a commercial company, success would be a long-term increase in value.
2. Avoid conflicts of interest: This duty makes it easier for a director to enter into a transaction with third parties by allowing directors who are not subject to any conflict to authorise the transaction, provided that certain requirements are met.
3. Act within powers: A director must only act in accordance with their powers, which normally originate from the company’s constitution, i.e. its memorandum and articles of association.
4. Do not accept benefits from third parties: This means a director cannot accept a benefit from a third party that arises because they are a director or because they take, or do not take, a particular action as a director.
5. Exercise independent judgement: This duty is not infringed if a director acts in accordance with an agreement entered into by the company or in a way that is authorised by the company’s constitution.
6. Declare an interest in a proposed transaction or arrangement: When a director has a direct or indirect interest in a proposed transaction, they must disclose the nature and the extent of this interest to the board, before the company enters into the transaction.
7. Exercise reasonable care, skill and diligence: Directors must exercise reasonable care, skill and diligence using the general knowledge, skill and experience reasonably expected of a person carrying out a director’s functions (the “objective” standard) and their own general knowledge, skill experience (the “subjective” standard). The effect of the subjective test is that a director who has more experience, knowledge and skill must use a level of diligence in carrying out their duties that reflects their more advanced expertise.

Who can be a director?

A director must be 16 or over and not be disqualified from being a director. Directors do not have to live in the UK, but companies must have a UK registered office address.

At Palmers, our company and commercial solicitors can help you understand your duties as director, and ensure you remain compliant with the law.

For help with all aspects of company governance, contact our company and commercial law specialists today for expert advice.

Very few people go into business expecting things to go wrong.

However, sometimes life gets in the way and business partners fall out or personal circumstances change. What happens then in the context of a company?

The absence of an agreement between shareholders often results in costly disputes over what rights each person has and how the company is run, valued or funded.

Failure to document arrangements properly can hamper growth, and problems can arise if one party wants to exit the company or on the death of a shareholder.

A shareholders’ agreement provides clarity and peace of mind to all shareholders about what can and cannot be done and what happens when things go wrong.

What is a shareholders’ agreement?

A shareholders’ agreement is exactly that – an agreement between the shareholders of a company.

It sets out the relationship between the shareholders, how the business will be run and what happens if difficulties arise.

Shareholders’ agreements supplement the Articles of Association.

Unlike the Articles of Association which are governed by corporate law, they are governed by contract law and may be amended and ended by simple agreement. Also, unlike the Articles of Association, the shareholders’ agreement is a private document, so does not need to be registered with Companies House or made public.

Why should you have a shareholders’ agreement?

Shareholder deadlock (particularly if accompanied by director deadlock) can paralyse a business.

How shareholder disputes and deadlocks are dealt with can often be resolved and negotiated by careful review and consideration of the Company’s Articles of Association or a written shareholders’ agreement, provided that (i) the Articles have properly been considered and drafted at the start of the relationship and (ii) a shareholders’ agreement exists.

A well-drafted shareholders’ agreement can set out strategies to help resolve shareholder deadlock or deal with the issues that arise when a shareholder decides to sell their interest in the business.

When there is no shareholders’ agreement, contentious scenarios are more likely to arise.

Additionally, there are many situations where the shareholders will not be happy with the standard voting rights in accordance with shareholdings.

For example, a company may be reliant on the skills and knowledge of a minority shareholder, or that shareholder may have lent money to the company.

A shareholders’ agreement provides a more equal distribution of power and protects minority shareholders.

What should be contained in a shareholders’ agreement?

A shareholders’ agreement sets out detailed and practical rules for the company and its shareholders, and should cover:

• Purpose of the company: What is the company’s business plan and what are the expectations of the shareholders?
• Matters requiring unanimous consent: A shareholders’ agreement should explain clearly which decisions can only be made with unanimous consent and in which matters minority shareholders will have veto rights.
• Shares: What are the terms regarding the distribution of any new shares? Consider also what will happen if a shareholder dies, sells their shares or becomes incapacitated.
• Directors: Decide who can appoint and remove directors to the company, as well as which rights of management are delegated to the directors.
• Finance: Set out how the company will be funded and whether there will be an allotment of new shares to raise capital.
• Exit strategies: It is important to outline what provisions will be made when a shareholder wishes to exit, such as whether existing shareholders will have first right of refusal on the shares.
• Dispute resolution: How will disputes be resolved? Will a third party be appointed to arbitrate? Make sure you have clear strategies in place to help to minimise animosity during a dispute.
• Defining the power of shareholders: To what level can individual shareholders act on behalf of the company without consultation and agreement? How can shareholders be prevented from competing with the company and poaching clients or staff?

An understanding of the statutory provisions, the common law provisions and the company’s Articles are all required when drafting such an agreement, along with a clear understanding of the common issues that could arise within the company and the range of possible solutions that could be included.

Prepare for future disputes with a shareholders’ agreement

Disputes internally within a business can be challenging and even have the potential to destroy a good business if not properly dealt with.

At Palmers, we can advise you on how your company might benefit from a shareholders’ agreement and can draft an agreement appropriate to the needs of your company.

If a dispute arises, we can help you implement the dispute resolution strategies laid out in the shareholders’ agreement, ensuring you can resolve matters amicably and get back to running your business.

A shareholders’ agreement is essential for managing future business disputes and protecting the value of your business interests.

For tailored advice on shareholders’ agreements and dispute resolution, contact our company and commercial law specialists today.

Preparing for the arrival of a new child is an exciting time – and at Palmers, we know that you will be keen to spend quality time with the newest member of your family.

However, understanding legislation around paternity leave can be difficult.

Here’s what you need to know about your paternity leave rights as a father-to-be.

Am I eligible for paternity leave?

You can potentially receive paternity leave if you are one of the following:

• The child’s biological father.

• The spouse, civil partner or partner of the mother (or adopter).

• The child’s adopter.

• A parental order parent if you are having a baby via a surrogacy arrangement.

However, there can be gaps in eligibility in some cases, so you should always speak to an employment law expert for advice.

To be eligible for statutory paternity leave, you must:

• Be classed as an employee.

• Provide the correct notice.

• Be taking time off to look after their child or the mother/other parent.
• Not have already taken shared parental leave in respect of the same child.

• Have the required degree of responsibility for the child’s upbringing.

• Have been employed by your place of work for at least 26 weeks at any point during the qualifying week.

• Remain with the same employer or an associated employer until the baby is born/placed for adoption (as applicable).

If your baby is born early, the qualifying week is still based on the baby’s due date.

The qualifying week is the 15^th week before the baby is due unless the employee is adopting the child. If you are adopting from within the country, the qualifying week will be the week in which the employee is notified that they have been matched with a child.

What statutory paternity leave can I receive?

You can choose to take two weeks period of paternity leave or two one-week periods of paternity leave.

This amount is the same even if you have more than one child, such as twins.

Unless there is a change of circumstances, the start date must be one of the following:

• The actual date of birth/placement.

• A specified number of days after the birth/placement.

• A set date which is after the expected date of birth/expected week of placement.

Paternity leave must usually be taken within 52 weeks of the child’s birth, placement, but there are cases where this period can be shorter.

What notice must I give?

Notice must be given before the qualifying week, or as soon as reasonably practicable if this deadline cannot be met. Your employer may request that you give notice in writing.

Your notice should contain a declaration that you meet the eligibility requirements for paternity leave and confirm that you expect to have responsibility for the child’s upbringing.

The effects of taking paternity leave

During paternity leave, you are entitled to benefit from your usual contractual terms except for those terms relating to remuneration

After paternity leave, usually, but not always, you have a right to return to the same job that you were employed to do immediately prior to taking the leave

You should not be subjected to detriment or dismissed because they have taken or sought to take paternity leave.

What pay am I entitled to?

Subject to your being on payroll earning at least £125 per week in an eight-week period ending with the qualifying week, whilst on paternity leave you will be entitled to Statutory Paternity Pay (SPP) at either £187.18 per week or 90 per cent of your average weekly earnings, whichever is lower.

Your employer may choose to pay you a rate above SPP.

Antenatal/Adoption Appointments

You are entitled to unpaid leave before your baby is born if you are accompanying a pregnant person to antenatal appointments. This is allowed if you are:

• The father.

• The expectant mother’s spouse or civil partner.

• In a long-term relationship with the expectant mother.

• The intended parent if you are having a baby via a surrogacy arrangement.

Similarly, there is also entitlement to time off to attend certain adoption appointments.

You may also qualify for Shared Parental Leave. This can not only extend the amount of time you are eligible to take off work, but the paid leave you are entitled to as well.

Additionally, your employer may offer you a more generous package of parental leave and pay.

What if I lose my baby?

You can still get Paternity Leave and/or Pay if your baby is:

• Stillborn from 24 weeks of pregnancy.

• Dies after having been born alive at any point during the pregnancy.

You can take any leave you booked before losing the baby. If you have any un-booked paternity leave remaining, you can book it and take it within 8 weeks of the death.

You may also be eligible for Statutory Parental Bereavement Pay and Leave.

Other leave you may be entitled to

You may also be entitled to up to 18 weeks’ unpaid Parental Leave per child until they reach the age of 18 (a maximum of 4 weeks per child in any one year)

Other leave you may be eligible for include:

• Neonatal Care Leave and Pay – This applies if your baby needs specialist neonatal care after birth.
• Dependents Leave – This is reasonable unpaid time off work to deal with certain unexpected family emergencies, e.g. to arrange care for a dependent or to deal with an unexpected childcare breakdown.
• Carers’ Leave – You may take one week’s unpaid leave per annum to provide or arrange care for a dependent with longer term care needs due to an illness or disability.

Understanding and taking Paternity Leave

If you are unsure about your statutory rights or your employer’s family leave policies, it is best to talk to a legal expert.

We can ensure that you receive the leave, pay, and benefits you are entitled to – leaving you free to focus on crucial bonding time with your newborn.

For further guidance on paternity leave, get in touch with a member of our team today.

In recent years there has been a significant increase in legal claims issued by disappointed beneficiaries, seeking to challenge the validity of a family member’s Will after they have died (this area of law is known as ‘Contentious Probate’).

These challenges often come about because someone has been left out of a Will or not received the inheritance they were expecting.

It may be the case that the Will was made in circumstances where the Testator was suffering from a mental illness or was subject to control or influence by a third party.

In these circumstances it is possible to seek to have the Will set aside and a previous Will admitted to Probate (if one exists, failing which the estate will be administered on the basis that the Deceased died intestate).

Here’s what you need to know about contesting a Will.

On what grounds might a Will be contested?

A Will can be contested on a number of grounds, including:

• Lack of capacity: This is when the person making the Will (testator) isn’t able to understand the implications of the Will due to an impairment or disturbance of the mind (for example due to dementia).
• Lack of formalities: If a Will has not been signed by witnesses or in the presence of witnesses, it may be invalid.
• Lack of knowledge and approval: If the testator is believed to have been unaware of (or not understood) the content of the Will, this could be grounds for contesting the Will.
• Undue influence: This refers to malign influence on the testator to the extent that they were not acting of their own free will or were afraid of acting on the contrary.
• Fraudulent Calumny: When a person has made false misrepresentations to a testator which “poisons their mind” against another so that they are excluded from the Will.

One of the most serious grounds on which a Will might be contested is forgery.

Forgery

A forged Will might be one that has knowingly not been created according to the legal procedure, or an earlier Will that is put forward after the latest version has been hidden or destroyed.

In rarer cases, a Will may even have been forged completely in a way that vastly differs from the deceased’s wishes.

It can be difficulty to identify if a Will has been forged.

However, some tell-tale signs include:

• Out-of-character terms.
• A signature that is markedly different from the deceased’s usual handwriting.
• The Will being found unexpectedly by someone who stands to benefit.

If you think someone has forged a Will, it is vital to speak to a solicitor as soon as possible.

How to contest a Will

If you believe that a loved one’s Will is not an accurate reflection of their wishes, you may wish to challenge the Will.

It is recommended that you do this through an experienced solicitor, who can assess your position and identify the most suitable grounds for your claim.

A solicitor will also advise on gathering evidence to support your claim and challenging presumptions usually made by other parties, such as whether the testator had capacity to make their Will.

Although there is no statutory time limit for challenging the validity of a testator’s Will, it is important to act swiftly to avoid the estate being administered and assets being disposed of before you can contest.

Contentious Probate services with Palmers Solicitors

At Palmers, we understand that losing a loved one is an extremely difficult time. We also understand that this can be exacerbated if you feel the need to dispute the Will.

We know that Contentious Probate matters are of high emotional, financial, and sentimental importance to people, particularly where there are competing views as to the Deceased’s wishes and where high-value inheritances are at stake.

Our expert team has extensive experience in all aspects of contentious probate and can ensure that you receive clear, decisive advice.

We also offer mediation services to help you resolve disputes in a more timely, cost-effective and amicable manner.

Our expert contentious probate team include ACTAPS accredited members, meaning they possess a high level of expertise and experience in dealing with contentious trusts and probate disputes.

If you believe that a relative’s Will may be invalid, it is essential to seek legal advice as soon as possible. Contact us today for more information.