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Safeguarding sensitive business information is crucial at all stages of a company’s journey, especially during pivotal moments such as acquisitions, sales or mergers.

In these situations, confidentiality and non-disclosure agreements (NDAs) are essential tools for protecting your business’s valuable assets and securing its competitive advantage.

However, without solid and enforceable confidentiality measures in place, business owners may find themselves vulnerable to risks that could compromise the integrity and value of their business.

What to consider in an NDA?

Key business transactions often involve sharing sensitive information, including:

• Financial statements
• Legal commitments
• Strategic business plans
• Unique technologies
• Undisclosed partnerships

The essence of your business’s value is entwined with these critical pieces of information. Sharing this kind of information without a safeguard can threaten not just the transaction but also the competitive position of the business involved.

NDAs act as a protective barrier, enabling the safe exchange of vital information under the assurance that it remains confidential and legally shielded from unwarranted exposure.

Finding the perfect balance between openness and security is critical. Over-sharing can jeopardise a deal while appearing too reserved might deter potential partners.

NDAs help delineate the boundaries of what’s confidential and who’s privy to it, fostering a productive environment for due diligence and collaboration without risking your strategic interests.

Legal protection and enforcement

Enforcing NDAs and confidentiality agreements adheres to specific legal standards, including mutual agreement, value exchange, intent to create legal relations, and clear terms.

Should a breach occur, the aggrieved party has several legal avenues to pursue, from cease-and-desist letters to court-ordered injunctions, damages, profit recovery, and indemnities against third-party claims.

Initiating legal action requires presenting a compelling case of breach and impact, with the proceedings typically launched in the High Court or County Court, based on the case’s complexity.

It’s crucial to note that NDAs cannot be used to conceal illegal activities or prevent whistleblowing. Their enforceability can also be contested if deemed overly broad or unreasonable.

In scenarios where confidentiality is of utmost importance, parties may seek a court-issued confidentiality order to protect sensitive information disclosed during legal proceedings.

Setting up an NDA

The intricate nature of business acquisitions introduces various risks, including technological, staff, and cultural integration challenges.

Confidentiality agreements are vital in managing these risks by guarding against premature deal disclosures, which could unsettle employees, alienate customers, or invite competitors’ interference.

Moreover, NDAs and confidentiality agreements encourage innovation and collaboration, providing a secure foundation for businesses to explore new ventures and partnerships while protecting their intellectual assets.

You must seek independent legal advice during a transaction to ensure that your interests are properly protected by the right confidentiality measures.

For guidance on crafting NDAs or confidentiality agreements for your next business transaction, please don’t hesitate to get in touch with our expert team.

In short, you may face delays or difficulties in applying for probate and distributing assets according to a Will or rules of intestacy.

When someone passes away and you become responsible for administering their estate as their Personal Representative (PR), you may become liable to pay Inheritance Tax (IHT) on their assets.

This will be due on the total value of the deceased person’s estate if this totals more than £325,000, unless certain exceptions apply which can reduce the IHT due, including if the deceased person:

• Leaves money to charity in their Will
• Passed on certain business assets
• Leaves assets to their spouse
• Leaves a first or main home to their children or grandchildren
• Gave away assets seven or more years before their death

You’ll need to work out the value of the deceased person’s taxable estate to calculate if IHT is due.

You must do this and pay the IHT due by the end of the sixth month after the person has died, otherwise HM Revenue & Customs (HMRC) will add interest onto the sum due.

How IHT is paid

If IHT is due on an estate, it can be paid in a number of ways, including:

• From the deceased person’s bank account using the Direct Payment Scheme
• By you or a relative from your own bank account
• Using the British Government Stock Scheme
• Through the transfer of national heritage property
• Through a trust
• Via a commercial loan secured against the assets within the estate

HMRC will expect that you pay IHT before applying for probate, which gives you the legal right to administer a person’s estate and sell or distribute assets.

However, in certain circumstances, you may not be able to do this.

This might be because of:

• Poor liquidity – If the deceased person had a range of assets but little cash, then most of the value of their assets will be tied up and not readily available to pay IHT without being sold, which can’t be done without probate.
• Complex estate valuation – Valuing an estate accurately can be a complex process, especially if it includes unique or hard-to-value assets such as antiques, artwork, or shares in private companies. This complexity can lead to delays in calculating the exact IHT due, making it difficult to pay the tax within the six-month window after the deceased’s death.
• Disputes over the Will or estate – Disputes or challenges to the Will can delay the process of settling the estate, including the payment of IHT. Such disputes may need resolution before proceeding with probate, and this can significantly delay the process, making it challenging to pay IHT on time.

If this applies to you, or you can’t pay IHT for any other reason, you must take steps to alert HMRC of this fact.

First steps

If you can’t pay the IHT due on a deceased person’s estate, then it’s critical that you approach HMRC and explain this as soon as possible.

This is because interest at a high rate will be added on to any IHT that is unpaid or paid late.

HMRC may recommend that you make every practical effort to explore ways to raise funds to pay the IHT due. It may also permit you to pay the IHT due against certain assets within the estate in instalments.

If you’re struggling to pay IHT, it’s also important that you stay updated on changes to your obligations and how this may impact your probate application.

Upcoming changes

Following the Chancellor’s 2024 Spring Budget, it is becoming easier to obtain a ‘grant on credit’ for Inheritance Tax.

Under current regulations, PRs of a deceased person are required to pay IHT due on the estate before applying for probate. This currently includes taking out commercial loans if needed.

However, in recognition of the issues this could cause for PRs, the Chancellor has announced that PRs will no longer be required to take this step before applying for a ‘grant of credit’ – meaning probate is granted on the understanding that IHT will be paid later, when assets from the estate have been sold.

For advice on applying for probate and managing Inheritance Tax liabilities, please contact our team today.

The Insurers Fraud Bureau (IFB) has put out a warning to drivers who may be considering placing themselves as a named driver on someone else’s vehicle insurance policy when in fact they are the main driver.

This is typically as a result of the rising cost of insurance, leaving many drivers, usually young drivers, unable to afford their own insurance with themselves as the principal driver.

Instead, another person, very often the parent, will take out an insurance policy, naming themselves as the principal driver and the real principal driver simply as a named driver.

This is known as ‘fronting’. It has become much more commonplace – with recent publicity revealing quotes as high as £8,000 per year for a new driver, and an average of £1,533.

Is fronting allowed?

A deliberate lie in order to obtain insurance is a form of fraud and the results of such a fraud could be:

That the policy is declared null and void, leading in turn to a possible prosecution to driving without insurance; or

The insurance company may refuse to pay out on a claim in the event of an accident and indeed may itself consider a prosecution for fraud against the policy holder.

Often drivers, particularly parents who wish to assist their children, do not appreciate the importance of being accurate when giving information to their insurance company.

As the practice of putting children on as named drivers has become so common, people do not consider it unusual when in fact, the named driver becomes a principal driver – and may not appreciate the implications of this on an existing policy.

What do drivers need to know?

If a driver or policy holder is accused of fronting, then they need to make sure that they are clear in what they have said to the insurance company.

In particular, drivers will need to be clear on the actual use that the car has been put to, including who the true principal driver of the vehicle is.

This may mean (but would not necessarily be exclusively confined to) the person who drives the car most, which may be most often or most miles.

Of course, it is very difficult for anyone to know that information outside of the policy holder or named driver themselves, but a giveaway might be, for example, where a named driver on someone else’s policy has an accident on the way to their work.

Someone who is using the car everyday to drive to and from work is almost certainly a principal driver and not a named one.

Perhaps part of a solution might be for insurers to reconsider the way they accept young drivers either as principal drivers or as named drivers.

Additional questions may better indicate the intended drivers and make the policy terms clearer, particularly to policy holders.

They may also provide the insurance company with additional information they can use to check up on in the event of a claim.

Ultimately, however, the responsibility currently lies with the drivers and policy holder to ensure they are remaining compliant with the terms of their insurance policy – regardless of how common the practice is now becoming.

To speak to Jeremy Sirrell and our Road Traffic Offences team, please contact us

Entering into a financial loan agreement or granting security/guarantee create legal obligations to comply with the terms of the agreement – with potentially significant risks for those liable if repayments are not made.

Due to this potential for risk, lenders often require borrowers to seek independent legal advice and fully understand the agreement they are entering into.

In certain circumstances, lenders will typically require evidence that all borrowing parties or those granting the security/guarantee have sought this advice in the form of a certificate.

Why?

The lender needs to ensure that the individual understands the financial risk they are taking, that they are not being pressured into the agreement and that there is limited risk that the security/guarantee being guaranteed to will be challenged on the grounds of duress.

This is beneficial to both parties, as the lender is less likely to face accusations of irresponsible lending and the individuals are more likely to carefully consider whether they can and should take on the debt and or grant the security/guarantee.

Who needs a certificate?

The typical circumstances in which parties will need to seek and prove independent legal advice:

• Entering into a joint loan such as a mortgage;
• Offering personal assets as security against a business loan;
• Someone is guaranteeing the obligation of someone who is borrowing money from a lender.

These scenarios involve increased personal risk as opposed to traditional, single borrower loans.

For example, when two or more people take out a joint loan, they typically become jointly and severally liable to make repayments unless stated in writing otherwise.

This means that, if one party fails to pay their portion of the loan, the lender may pursue the other borrower for the full amount.

Similarly, company directors may take out a ‘secured’ loan – one which offers a larger borrowing potential because the borrower as used their personal assets to assure repayment.

If someone in this position had doubts over whether they could make appropriate repayments and failed to understand the risks, their assets could be at significant risk.

How to access independent advice

It is absolutely normal to be asked to obtain legal advice before proceeding with certain types of loan.

It is possible to obtain a certificate of independent legal advice from any qualified Solicitor, licenced Conveyancer or qualified Legal Executive.

The costs will vary depending on the instructed firm or provider, but should not usually exceed £1,000 (plus VAT and disbursements).

What will independent loan advice involve?

The process of obtaining independent legal advice will involve each borrower or grantor of the security/guarantee individually meeting with a solicitor without the presence of any other party or borrower. Some lenders will permit this can be done in-person or via video call.

The solicitor can explain the legal and financial implications of the proposed agreement and safeguard the lender or other borrowers from accusations of undue influence.

Following the meeting, the solicitor then provides an Independent Legal Advice Certificate, which will be sent directly to the lender.

This will assure the lender that the individual has been made aware of the risks and is still willing to sign the agreement of their own will.

We can provide impartial, straightforward advice to anyone considering taking out a loan where there is increased risk to their personal assets.

Contact Dashna Morarji-Sagoo by emailing DashnaMorarji-Sagoo@palmerslaw.co.uk or calling 01375 484443 or BJ Chong by emailing BJChong@palmerslaw.co.uk

The contents of this article are intended for informational and educational purposes only.