Company Law Archives - Palmers Solicitors
Palmers Solicitors

Company Law

Are your partnership or shareholder agreements up to date?

Are your partnership or shareholder agreements up to date?

If your business is run as a partnership or you have shareholders with a financial interest in your company, it is important to put in place a formal, legally binding agreement.

Matthew Johnson, an Associate with Palmers Solicitors who specialises in company law, explained: “Whilst no-one goes into business expecting things to go wrong or disputes to occur, having a partnership or shareholder agreement in place provides certainty and peace of mind for all concerned.

“The main purpose of a partnership agreement is to protect the partners’ investment in the firm and to establish a fair relationship between them.

“It defines the share of the profits (and losses) along with the responsibilities and rights for each partner.”

A partnership agreement sets out detailed and practical rules for the firm and its partners, and will generally cover the following:

  • Business and partner details
  • The amount of capital invested by each partner
  • The percentage of business ownership by each partner
  • Job description and details of what each partner will bring to the business
  • Decision making, profit sharing and voting rights
  • Wages, expenses and holiday entitlement
  • Liability sharing
  • Finance matters and cash management
  • Illness or incapacity contingency
  • New partner terms and conditions
  • Retirement, dismissal, partner exit planning and business dissolution

Shareholder agreements

Matthew continued: “A shareholders’ agreement sets out the relationship between the shareholders, how the business will be run and what happens if difficulties arise.

“Unlike Articles of Association which are governed by corporate law, a shareholders’ agreement is dealt with under contract law. It is a private document and so does not need to be registered with Companies House or made public.”

A shareholders’ agreement deals with some or all of the following matters:

  • Purpose of the company
  • Matters requiring unanimous consent
  • Matters relating to shares
  • The appointment of directors and their responsibilities
  • Company finance
  • Dispute resolution
  • Powers held by shareholders
  • Exit strategies for shareholders

A member of our contract law team will be able to provide you with advice and help you to draw up the agreement, ensuring that it is legally binding and provides the necessary protection for you and your business.

What happens if there is a dispute with a partner or shareholder? 

Disagreements can occur in any partnership or business with shareholders.

The good news is that having an agreement in place will provide a pre-agreed ‘route map’ which will provide all parties with procedures for settling disagreements.

If your business is dealing with a dispute involving either a partner or shareholder, it can be helpful to have expert legal support and our specialist dispute resolution team will be able to advise you on the most appropriate and cost effective way to successfully overcome any issues.

To find out more about partnership or shareholder agreements, please contact us.

Businesses face legal action over unpaid business rates

Businesses face legal action over unpaid business rates

Local authorities have begun to take legal action against businesses that fail to pay their business rates bills.

A new report from property consultancy Colliers has shown that an increasing number of businesses have begun to receive letters demanding payment and/or a court summons.

In response, many businesses have started to appeal their business rates assessments on the grounds of a Material Change of Circumstance (MCC) to their business operations as a result of the Coronavirus crisis.

Data shows that around 183,000 businesses began the appeal process in the six months between 1 April and 30 September 2020. That is equivalent to 1,000 appeals per day.

John Webber, Head of Business Rates at Colliers, said: “It is ironic that the Government is preventing private landlords from taking recovery action against tenants not paying rent, while at the same time turning a blind eye to billing authorities acting on recovery action as if COVID-19 didn’t exist!”

Although businesses operating in the retail and leisure sectors were granted a business rates holiday during lockdown, office occupiers and some other businesses have not been given the same support.

John Webber added: “We appealed to the Government to introduce a business rates holiday for the period of lockdown and to introduce some reliefs for the disruption to businesses seen since.

“In the meantime, we have been negotiating on our clients’ behalf with local billing authorities requesting them to show leniency to businesses that are struggling to pay their bills. We are finding that attitudes vary greatly depending on where businesses are based and the attitudes of the individual billing authority.

“There is a total lack of consistency – some clients for example with properties across boundaries find they are granted reliefs for some of their properties by certain local billing authorities but not from others.

“And recently there has certainly been a step-up of enforcement activity via the courts. We believe we’ll see more court summonses and enforcements as we go forward.”

Jeremy Sirrell, a Partner with Palmers, said: “When a business is affected by economic uncertainty, it is better to address financial concerns early on, rather than allowing the problem to escalate.

“If cash flow is a significant issue, businesses need to ensure that late or missed payments from customers are being chased and managed properly.

“In some circumstances, a missed payment from a major customer can be the difference between survival and ceasing trading, so if business owners are concerned about late payment issues they should seek prompt legal advice rather than defaulting on business rate payments which leaves them open to legal action.

“Palmers offers a Commercial Debt Recovery Scheme to help businesses manage the recovery of their debts and to keep legal costs proportionate. Often a strongly worded solicitor’s letter is all that is needed to recover the outstanding payment but where this fails mediation and other alternative dispute resolution (ADR) procedures can be effective in recovering outstanding business debts. As a last resort, formal recovery action can also be taken.”

For support with business disputes and alternative dispute resolution, please contact us.

Companies House to resumes strike off process

Companies House to resumes strike off process

Companies House has resumed the voluntary strike off process, meaning that any business which had applied to be struck off prior to the Covid-19 pandemic will be removed from the official company register, starting this month.

The news comes after temporary easement measures were imposed in April, pausing all strike off activity to “relieve the burden on businesses” and to “protect creditors and other interested parties who may have had difficulties in registering an objection”.

Commenting on the resumption of services, Stuart Morgan, Intelligence and Enforcement Service Owner at Companies House, said: “Our priority has always been to relieve the burden on businesses which have been struggling during these unprecedented times.

“In reaching this decision, we have aimed to strike the right balance between supporting both companies and creditors. We have listened to our customers and stakeholders and we believe now is the right time to resume voluntary strike off action.”

He added: “This may result in a large number of companies being struck off the register over a short period. However, these figures should not be misinterpreted as they are a direct result of the easements we put in place and will include companies that applied before the coronavirus outbreak.”

Matthew Johnson, an Associate Solicitor with Palmers who specialises in Company Commercial Department, said: “In practice, this means that any company due to be struck off before July 2020 will be removed in a phased approach over the next four weeks, providing no objection is received.

“Companies that applied to be struck off after July 2020 will be removed after the backlog has cleared.”

The compulsory strike off process, meanwhile, will resume from 10 October 2020. This means that Companies House can manually remove companies from the register if it believes they are no longer trading. This could be triggered by outstanding documents, no response to communications or if a company has no directors.

“To suspend the compulsory strike off process, you must file your outstanding documents or contact Companies House urgently.”

For business, secretarial or insolvency advice, please get in touch with our expert team.

Coronavirus – Suspension of director liability for wrongful trading

Coronavirus – Suspension of director liability for wrongful trading

The Government has announced important changes to UK insolvency law that suspends director liability for wrongful trading.

Seeking to provide reassurance to business directors in light of the ongoing COVID-19 pandemic, the Government has retrospectively suspended restrictions around wrongful trading from the 1 March 2020 for three months

Under English law, where a company continues to trade, even in the face of unavoidable insolvency, the company’s directors can be found personally liable for the losses suffered to creditors as a result, potentially leading to a court-ordered contribution to the assets of the insolvent company.

By suspending the rules, directors of struggling business who continue to operate, in the full knowledge that they face the prospect of insolvency, will not be penalised for doing what they can to keep their business operational.

Business Secretary Alok Sharma announced the changes and said they would offer a ‘breathing space’ for companies undergoing a rescue or restructure process to help them avoid insolvency.

On top of this suspension, the Government will also introduce new emergency legislation that will:

  • Create new restricting ‘tools’, including a moratorium, for companies giving them a holiday from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure.
  • Introduce a new restructuring plan, that binds creditors to that plan;
  • Allow companies to buy essential supplies while attempting a rescue or restructure.

The Government hopes that by taking these measures they can reduce the number of contract cancellations, supply chain issues and a wide range of other issues that are affecting the UK economy.

Contact our corporate insolvency team today.

Understanding a director’s duties

Understanding a director’s duties

The position of company director holds a certain amount of prestige and kudos. But with the title comes significant responsibility, including numerous legal duties which may trip up the unwary businessperson.

Here, Matthew Johnson, an Associate Solicitor with Palmers, explains what every company director needs to know:

Directors owe numerous duties to a company.  These duties were developed by the courts over a long period of time before some were enshrined in the Companies Act 2006 (CA 2006). The duties of a director set out in the CA 2006 sections 171-177 are often known as the general duties.

The general duties include the duty to promote the success of the company, the duty to exercise independent judgment, the duty to exercise reasonable care, skill and diligence, the duty to avoid conflicts of interest, the duty not to accept benefits from third parties and the duty to declare interests in proposed transactions or arrangements. It is a criminal offence to fail to declare an interest in existing transactions or arrangements.

The general duties are not exhaustive and directors should be aware of other legislation that may apply, such as in an insolvency situation where liability can arise for wrongful trading, fraudulent trading and transactions carried out at an undervalue or where a preference is given.

Potential liability arises for a director under sector-specific legislation, e.g. unsolicited marketing communications where the Information Commissioner’s Office has the power to fine directors in addition to companies for nuisance calls and messages.

If a director breaches one or more of the general duties he may leave himself open to a civil action from the company with the possible consequences of damages or compensation, restoration of the company’s profits and an account of profits made by the director.

For advice on Directors’ Duties and all aspects of business law, please contact us.

Is your business ready for GDPR? Act now or face a hefty fine

Is your business ready for GDPR?  Act now or face a hefty fine

The General Data Protection Regulation (GDPR) is just a few weeks away – and fines for non-compliance are alarmingly high, which is why businesses need to act now to ensure they are fully compliant ahead of 25 May 2018.

Matthew Johnson, an Associate Solicitor with Palmers, who specialises in Commercial Law, warned: “From this date, the Information Commissioner’s Office (ICO) will have the power to issue fines of up to four per cent of global turnover, or €20 million, whichever is higher, for non-compliant businesses that have serious data breaches.”

“The GDPR poses a number of challenges for businesses relating to the ways in which they collect, store and handle any personal data they hold.

“These changes apply regardless of whether that data belongs to clients, consumers, employees, suppliers or vendors.”

All businesses must be able to demonstrate how they meet the GDPR’s new ‘Six Principles when using personal data. The data must be:

  1. Processed lawfully, fairly and in a transparent manner
  2. Collected for a specific, explicit and legitimate purpose
  3. Adequate, relevant and limited to what is necessary
  4. Accurate and kept up to date
  5. Kept for no longer than is necessary
  6. Kept secure

Matthew added: “Ahead of the GDPR’s introduction, it is important that businesses review and record the data they hold, how they obtained it and what they use it for. On top of this, they will need to check how secure the data is, who has access to it and whether it has ever been transferred outside of the business.

“As a minimum, with effect from 25th May 2018, businesses will need to tell clients and customers that they hold their data, when the data is collected. These individuals should also be given access to a privacy notice.”

“The rules governing the GDPR are complex and confusing. Falling foul of them can have drastic consequences for businesses of any size.”

If your business is not already fully prepared for GDPR, you should seek urgent advice on compliance, so contact our team now for affordable solutions, guidance and documents.