Latest Blog posts from BusinessLawfirm.co.uk

6 things to do now to protect your business from a Euro default

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The failure of Greece to form a government following elections has led to many believing that a Greek default and exit from the Eurozone is now more likely than not. If this happens, then it is probable that other countries in difficulty, such as Portugal, Italy and Spain, will soon follow, and possibly other countries too.

If you trade with any of these countries, then you should now be putting plans into effect to protect your business and minimise your exposure.

What a Euro default will look like

The problem is that there is no provision in any EU treaty for dealing with a country abandoning the Euro. Amazingly, no one considered that this would ever happen.

If the Eurozone countries cannot agree between themselves a treaty to set out an orderly departure procedure, then the most likely procedure will be that the country leaving the Euro will enact emergency legislation to do the following:

Change the legal currency from the Euro to a new national currency, and stop Euros from being legal tender;
Amend contracts so that all debts and future payment obligations are changed from Euros to the new national currency at a fixed exchange rate;
Put in place exchange controls to prevent Euros from leaving the country;
Provide for the national central bank to convert Euros to the new national currency possibly at the fixed exchange rate.

All this is likely to be enacted without notice and the above measures will take place immediately.

The new national currency is then likely to devalue rapidly. The process of converting Euros to the new currency could well be set at a slow speed to prevent too rapid a depreciation. This will lead to liquidity problems, and the prospect of many businesses failing due to a lack of cashflow. Other businesses will fail later due to the effects of the currency depreciation making their imports more expensive.

Measures to take

So what can you do now to help protect your business from this?

Carry out a risk assessment. If you rely on supplies from a high-risk country, look for alternative suppliers from safer countries. If you sell to a high-risk country, it’s time to revise your credit policies or credit control procedures. What would you do if payments suddenly dried up through no fault of your customers?
Try to avoid your contracts being affected by any emergency legislation. No one knows for sure how the foreign or UK courts will deal with this but you can minimise the chances of your contracts being affected by making sure they have the following provisions:

• that the contract is governed by English law;
• that English courts have exclusive jurisdiction;
• that the place of payments is stated to be in England;
• that, if payments are to be made in Euros, Euros are defined in the contract as the single currency introduced by the EU treaties and not the national currency.
Give yourself the chance to get out of the contract. Make sure there’s a provision in the contract that a Eurozone exit gives you the right to terminate the contract at your option.
Get as much security as you can: negotiate guarantees from parent companies or directors (if they are outside the high-risk countries), get letters of credit and/or insist on retention of title clauses in your contracts.
If you have Euro accounts in Eurozone countries, move them if you can to the safer countries, such as Germany or Austria, rather than leave them in the risky ones.
Avoid paying in advance for goods and services to firms in the high-risk countries.

We can review your contracts to ensure they are set up to minimise your risk to a Euro default. Call us on 0845 003 5639 or contact us here.

Gary Cousins
Business Solicitor

Going into business with friends or family? - Has your business got a ‘pre-nup’ agreement?

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We hear plenty about celebrity pre-nuptial agreements in the media. Whilst I’m not about to discuss the merits or otherwise of those, I do think there is plenty of merit in what could be called a business ‘pre-nup’. What I’m referring to is a shareholders’ agreement.

A shareholders’ agreement is an agreement between all or some of the members of a limited company. In such an agreement the shareholders can deal with issues which either aren’t covered by the articles of association of the company or by the law – primarily the Companies Act, - or they can vary what would otherwise be implied. The key point is that the shareholders can decide in advance how they want the company to be run and what should happen in certain situations.

You might think that a shareholders’ agreement isn’t necessary for friends or family members going into business together, but I couldn’t disagree more. I have heard of so many cases where former friends, colleagues and family members have gone into business together and don’t think they need an agreement because they are all in agreement about the business – until they aren’t!

To take the pre-nup analogy to its ultimate conclusion – when a corporate ‘divorce’ is looming because there is a major disagreement over something to do with the company, it’s so common to find that those people who were so sure that they all agreed in fact all have very different ideas about what should happen. If only they had treated going into business as exactly that rather than an extension of their friendship or family life, they might have been more objective about it.

Going into business requires a commercial approach. What each of the parties involved in the business venture needs to do is to identify their expectations and make sure they match those of the others. In some respects this is even more important when the business partners are already friends or related because there will be existing dynamics from that relationship which might adversely influence the business venture if not addressed right at the start. Unfortunately I tend to find that people in these situations can tend to be more reluctant to deal with the issue rather than more willing. The sad part about it is that when a dispute arises in such cases it can be all the more acrimonious. The result can be loss of previously longstanding friendships and bitter family feuds – not to mention the impact on the business.

Many disputes could be avoided by taking legal advice and drawing up a shareholders’ agreement. So my advice would be to take advice on the sorts of issues that might need to be addressed and have it documented in a shareholders’ agreement. Treat the business venture like a business and keep your friendships and family relationships intact!

Sue Mann

Commercial Solicitor, Birmingham

Licensing Changes in Force 25 April 2012

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New and significant changes to the Licensing Act 2003 came into force on 25 April 2012, as a result of implementation of some parts of the Police Reform and Social Responsibility Act 2011. The remainder, including Early Morning Alcohol Restriction Orders, the Late Night Levy, and the power for licensing authorities to set their own fees, are likely to come into force in the autumn 2012 or spring 2013, as a major redrafting of the Statutory Guidance is required.

The changes are:

1. Licensing authorities and Health authorities become Responsible Authorities which means they are now able to object to new applications as well as take an existing Premises Licence to a formal Review.

2. Anyone, wherever they live or operate, are now able to object to a new application or take a Premises Licence or Club Premises Certificate to a Review, not just those "in the vicinity".

3. Licenisng Authorities have to advertise all applications on their websites.

4. a significant increase in the maximum fine for persistently selling alcohol to under age persons from £10000 to £20000

5. increasing the period of voluntary closure for persistent underage sales, as an alternative to a criminal conviction and fine, from 48 hours to a maximum of 336 hours (14 days)

6. when considering applications at a hearing it is no longer necessary for the licensing authority to establish before imposing conditions that they are necessary to prevent the licensing objectives being undermined, they will only have to decide that they are “appropriate”.

7. Temporary Event Notices have a new procedure for those (late notices) served no earlier than 9 working days and no later than 5 working days before an event, the current cut off being 10 working days for all Notices. The down side is that not only the police but environmental health may also object, and that for the first time conditions may be imposed on Notices.

Nigel Musgrove
Licensing Law Specialist
0845 003 5639

The importance of legal time periods for your business – not just the Home Secretary!

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Working out time periods in legal documents can be tricky. We have seen this highlighted very publicly in the case of Abu Qatada where there is currently some doubt as to whether the Home Secretary acted a day too soon to avoid a legitimate appeal being lodged. It may be some time before a ruling is given, but the consequence if Theresa May got it wrong by just one day is a potential delay of several months – not to mention the adverse publicity for the government.

It is just as important for businesses to be aware of the need to check time periods in business contracts and calculate carefully how they will apply. Even without the added complication of apparent discrepancies between English and French versions of the court’s decision which have been mentioned in the Abu Qatada case, care is needed when interpreting contractual and other time limits.

Many business agreements specify periods for certain actions such as the delivery of goods, the performance of a service, the payment of money, the delivery of a notice and so on. The consequences of not meeting those deadlines could be just as serious for your business and part of the answer is in ensuring that you have understood the time period correctly.

You might think that a requirement to deliver a notice by a specific date is pretty clear. But seemingly slight – or you might even think insignificant - variations in the wording of the obligation can make a difference as to the time by which you have to serve that notice. For example, if the notice has to be received before a specific date that date is arguably excluded and if you serve it on that date it could be validly rejected. If you have to give a number of clear days’ notice you need to bear in mind that the date you send the notice and the date it is received are not counted. If in addition it has to be served in a particular way, such as by first class post, you will have to add on any time specified as allowed for service by that method.

If you don’t serve a notice in time you could find that your business is locked into an agreement for another term or conversely that you have missed out on renewing a lucrative contract for another term. If the time period in question relates to delivery of goods or performance of a service you might not only have an unhappy customer, but there might be financial or other consequences such as the contract being suspended. If the contract also makes the time of fundamental importance any failure to meet the deadline could result in cancellation of the contract. A failure to pay in accordance with the contractual deadline might have similar consequences or could result in your business incurring interest charges.

The moral of the story is to make sure that you properly understand the time limits that apply to all your business contracts. If you are in any doubt– as the Home Secretary may have learnt the hard way – then take legal advice.

Sue Mann

0845 003 5639

Commercial Solicitor, Birmingham

Tackling the stresses of running a business

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Running a business is stressful; there’s no doubt about that. But new research from business insurer Hiscox suggests that, in spite of increased physical and mental stress, UK SMEs are determined and up for new challenges.

According to their SME Health Check research commissioned amongst 502 business leaders in businesses with up to 249 employees, 45% were more stressed than a year ago and 77% reported suffering ailments like lack of energy, headaches and anxiety. That’s the bad news. The good news is that 50% of business owners expect their business to grow compared to just 15% who expect it to contract.

As a business owner myself, I’ve experienced all of the ailments mentioned:

Lack of energy? Yes, normally after a sleepless night running over a client ‘s case in my head, or a succession of early mornings and late evenings at work;
Anxious thoughts? Definitely, when too many things that I need to deal with come at the same time;
Headaches? Certainly, when I’ve been setting at my computer reading detailed witness statements all day; and
Back pain? Occasionally, when I forget to leave my chair for hours on end.

Apparently the main drivers of stress include things like the fear of losing their business altogether, losing clients, the pressures of bringing in new business and being constantly on call. I’m sure any business owner reading this can relate to these fears.

There are some useful ideas from medical professional, Dr David Bull, in response to the survey. He advises, “It's important to make sure that business owners take steps to combat stress which include eating healthily, making time for exercise, ensuring they get enough sleep, having time out, taking part in hobbies and ensuring that they take holidays.”

I’d just add my thoughts to this list, and of course they are tempered by my own experiences. The clients I see are often stressed as a result of a business dispute with a customer or supplier. They come to me sometimes wanting justice or vengeance, or simply a way out of their immediate problems and peace of mind. They’ve sometimes ignored a problem until it’s escalated to a point where the only resolution will come from the courts.

So my advice is to have a healthy diet of reality (we do sometimes become so obsessed with our own view of the problem that we don’t see the other side), make time to get advice from a lawyer early on (the sooner you tackle a problem, usually the easier it is to resolve), sleep on any decisions (don’t send that strongly-worded email today, read it again in the morning) and do try and take a break from the problem when you can.

I’m clearly no doctor or stress buster but I’d like to think this advice would help any business owner face the stresses of a dispute at work.

Gary Cousins
Business Solictor

Twitter: @GaryCBLCousins

Do you think of reading War and Peace when you sign up for goods or services on a website?

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I saw an article recently which made interesting reading. It compared the length of the terms and conditions on a number of well-known websites with works of Shakespeare. PayPal came out top of the survey beating Hamlet with 36,275 words compared to 30,066. That was well ahead of the next contender, Apple iTunes with 19,972 words as against Macbeth with 18,110.

That’s quite a bit of reading when all you want to do is to make a quick purchase. OK, I was exaggerating in the title by referring to the proverbial War and Peace which comes in at well over half a million words, but equally you wouldn’t think you would need to read the equivalent in length of Hamlet or Macbeth either.

So why are website terms and policies so wordy? The various businesses involved will want to comply with the law and to protect themselves in their dealings with their customers. They will no doubt have taken legal advice on what they need to say and in preparing the terms and conditions. I’m not going to continue by suggesting that all that information isn’t necessary, but I do wonder if there isn’t a way of cutting it down.

One of the main reasons why websites have such an amount of information and formal terms on them is to comply with a raft of legislation and regulations which apply to them dealing with matters from data protection to distance selling, consumer protection and cookies to direct marketing. With such a diverse range of issues to cover it’s no wonder that websites tend to have so many words on them.

What has happened is that information technology develops much faster than the law and legislators try to keep pace by imposing what they consider to be appropriate rules to regulate the sector. Unfortunately the result is multiple laws and regulations, frequently overlapping, that apply to websites.

Given that e-commerce is one area of the economy which is increasing in these challenging times, it seems to me that it would help if there were to be some rationalisation of the rules which apply to online businesses. Such a task would be potentially time-consuming, but the outcome could reduce some of the rules applicable to websites, although I fear it might not be significant. How it could help would be in producing a consolidated website code in place of such piecemeal rules. That would make it easier for businesses to locate all the relevant rules and, hopefully, to comply with them. Unfortunately I think it is unlikely to become reality because there are much higher priorities on the lawmakers’ agenda.

For the foreseeable future we will therefore have to continue to work within the current regulatory framework. In defence of the businesses named in the article I saw, clearly they have a complex business model which they wish to protect. Striking a balance between the need to comply with such wide-ranging legislation and making the terms accessible to users of the website is not easy. So what we aim to do at Cousins Business Law is to make the website terms proportionate to the needs of the business and draft them as far as possible in plain English – a modern short story rather than War and Peace.

Sue Mann
Commercial Solicitor, Birmingham

0845 003 5639

Update on police powers of closing licensed premises

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Since the Licensing Act 2003 came into force in 2005 there have been a number of occasions when certain police forces have closed down licensed premises with immediate effect where they consider that they are operating in breach of the conditions on their Premises Licences. Often the breaches are trivial. Examples have included CCTV systems not fully functioning, CCTV tapes not kept for the required period, a copy of the Premises Licence displayed instead of the original, and so on.

But do the Police have the power to close premises with immediate effect in such circumstances? The short answer is no. Licensing experts have been arguing this for years. The police have simply ignored us, and have been backed by the Home Office. But now they have had to back down with considerable egg on their faces and with potentially huge claims for compensation for loss of profit for their illegal conduct.

To be fair the Home Office did withdraw its flawed guidance last July, but the High Court has on 13 March now given a definitive ruling that the police do not have the power of immediate closure under section 19 of the Criminal Justice & Police Act 2001. In the case brought by the Bank in Wakefield, the West Yorkshire Police and the Home Office have been ordered to pay compensation.

In a consent order it was stated that “the service of a closure notice under section 19 of the Criminal Justice & Police Act 2001 does not require the premises to close or cease selling alcohol immediately; or entitle the police to require it to do so; or entitle the police to arrest a person on the sole ground of non-compliance with the notice”.

So what are the powers that the Police have over closure of premises licensed to sell alcohol?

The Criminal Justice and Police Act of 2001. This allows the Police to serve a closure notice under that Act where premises are being used for the “unlicensed sale of intoxicating liquor for consumption on the..... premises....”.

The breach of a condition on the Premises Licence or Licensing Act 2003 can make any sale of alcohol “unlicensed”. Whilst this was aimed at the sale of alcohol where there was no licence at all, it can be used for minor breaches. The notice has to set out the grounds of the complaint and what steps have to be taken to remedy the situation. It does not, as now confirmed, have the effect of closing the premises immediately. Only the magistrates have the power to close the premises, and the police can only apply to the Magistrates not earlier than 7 days after service of the closure notice, and only then if the complaint has not been remedied. So in this situation a licensee has 7 days to get the situation sorted, and does not have to close immediately.

The Licensing Act 2003 . The police have the power to issue a closure order requiring the premises to close for up to 24 hours if there is or likely to be disorder and the closure of the premises is necessary in the interests of public safety. The order comes into effect when it is served, but the Police must apply to the Magistrates’ Court to consider the closure order, and the Licensing Authority must then carry out a Review of the Premises Licence. But note that these powers are only available where there is a disorder and public safety scenario.

If you are now faced with this situation, or have previously been forced to close immediately, I strongly advise that you seek urgent legal advice.

Nigel Musgrove

Licensing Law Specialist
Tel: 0845 003 5639

6 expensive mistakes that company directors make

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As a solicitor who defends directors when they get into problems with liquidators, fellow directors and shareholders, suppliers and customers, as well as government bodies, I am constantly struck about how most of these problems could have been avoided if directors hadn’t made a few basic mistakes.

So here’s my list of 6 mistakes that I’ve seen since the beginning of the year that have led to real problems, heartache and unforeseen expense for my director clients.

Going into business with a partner, forming a limited company and each having 50% of the shares. It sounds fair but will lead to deadlock if you ever disagree over something serious where the company can’t make a decision. It can easily lead to either the collapse of the company, or being stuck in a company you can’t get out of. The solution: get a well-drafted shareholders’ agreement in place, and before you fall out.
Paying yourself from the company without the correct paperwork in place (such as a service agreement or shareholders’ resolution). This can lead to you having to pay it all back.
Paying yourself through an overdrawn loan account with the idea that you can declare these payments as dividends at the year-end. It’s unlawful and, if not done right, can lead to you having to pay it all back and paying extra tax too. Speak to your accountant and don’t accept his advice if he says that everyone’s doing it so you’ll be OK.
Trying to avoid the burden of taking on employees by using self-employed contractors instead. Unless you’ve got a well-drafted contract in place, you could end up with them taking you customers, your best ideas and you paying extra tax too. The solution: get a good contractor agreement in place.
Copying standard terms and conditions from other firms or from the web. They probably won’t fit your particular situation, could well be out-of-date (the law does change) and often parts of the wording contradict other parts. This can lead to you being involved in expensive litigation if you ever have a dispute with your customer. The solution: make sure you get your terms and conditions drafted by a solicitor who understands your business and how it works, and remember to get them reviewed every couple of years.
Conducting business through email without having a proper email signature saying ‘[your name] on behalf of [your company name]’. These days, it’s common to reach agreements with customers and suppliers without them ever seeing your letterheads. The risk is that you can find yourself personally liable if things go wrong.

Gary Cousins
Business Solicitor

5 legal tips for running your business

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When starting a new business the legal aspects are often the ones that get forgotten, or at best sorted out with reluctance. As your business grows and becomes more successful the risks involved can become greater. Still, worrying about the legal side of things may not take number one priority.

I’ve put together these tips for small business owners, they cover the essentials you should consider from a legal perspective and will hopefully keep you out of the hands of my dispute management colleagues (sorry guys) who tell me they get a large proportion of their work because business owners fail to set their business up with the right legal protection in place.

Minimise the risk to your personal finances

The way you structure your business will help you to control the personal financial risks you take. If you are starting a business with one or more people, you can choose to operate as a partnership, limited liability partnership or limited company. Each of these can be properly legally constituted and provide degrees of protection.

It is worth remembering that in a partnership, all partners are jointly liable for debts. It’s also worth bearing in mind that unless you have a formal agreement in place about the amount each party invests in the business, whether in terms of money or time, you could find there are disagreements and misunderstandings along the way about how these differentials should be rewarded or otherwise.
Put everything in writing

Make sure that all your business deals and agreements are confirmed in writing. If you strike an agreement verbally, get a confirmation in writing as anything that is agreed verbally is often difficult, if not impossible, to prove in the future if problems arise.

A written agreement will also protect you from genuine misunderstandings which might otherwise ruin a good business relationship as well as less scrupulous characters who change their minds or give you a different story after the event.
Be clear about your terms of business

Make sure all your customers are aware of your terms and conditions and that you explain or provide your terms of business at the right time.

Without written terms and conditions of business you run the risk of not getting paid in a timely fashion or at all, in some cases. You are also more prone to disputes about the product or service you have provided.

Unless terms of business are accepted at the start of your business relationship, when the order is placed, for example, they may be unenforceable. So T&Cs on the reverse of an invoice are usually no good to you at all.

There are more details on this point in Can you rely on your terms of business to provide legal protection?
Avoid expensive mistakes

One area where many new businesses fall down is in the area of protecting their ideas and intellectual property as well as keeping information about their business confidential. Mistakes in these areas can be catastrophic for businesses in certain key sectors like consultancy, software development and new technology.

Make sure you firstly consider things like your business name, product names and any potential trade mark issues. And before discussing your business ideas, new products or services or even which customers you are targeting, consider the use of a confidentiality agreement.
Take advice early on

In law, as in health, prevention is always better than cure. It is certainly often cheaper and easier to deal with in any event.

Set your business up correctly, make sure you have agreements in place with any fellow directors, with employees, contractors, suppliers and customers and you will certainly be in a strong position. Couple this with some basic procedures for how you transact with new customers and hopefully you won’t need to deal with my colleagues in our dispute management team.

Sue Mann
Commercial Solicitor, Birmingham

Internet business is BIG business

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New research from Boston Consulting Group (BCG) - The $4.2 Trillion Opportunity: The Internet Economy in the G-20 - highlights the importance of web based businesses to the UK economy and contains some surprising details.

Their latest study showed that in 2010, the internet economy in the U.K. accounted for the highest percentage of national GDP of all the G20 economies.

The internet contributed 8.3% of the UK economy and was worth £121bn in 2010, making it bigger than the health care, construction or education sectors.

The UK carries out far more retail online than any other major economy with 13.5% of all purchases made on the internet in 2010, according to BCG. This is projected to rise to 23% by 2016. The suggestion for retailers is that if you’re not online now you will need to be in the not too distant future, or risk missing out on a large proportion of the possible sales for your product.

This all set me thinking. For any web based business there will be challenges so it is important to understand that the normal rules of trade still apply.

Make sure you have constituted your business correctly to provide appropriate levels of legal protection. If you are in business with a partner get a partnership and shareholder agreement drawn up. If you established a limited company are you and fellow directors clear about your duties and responsibilities?

Produce written terms of business and make sure that these are available at the correct stage in the web sale, otherwise you may not be operating within the law. Make sure that they are printable and cover things like your returns policy.

Cover privacy and terms of use on your website, including taking account of the new cookies regulations. You might think your business is only small and will fly under the radar of the authorities but don’t you believe it. If a customer or website visitor has a problem and goes to the authorities this isn’t an adequate defence.

Consider where you will sell and to whom. There are different rules for selling to consumers and business to business. Will you sell outside the UK? If so do you know what rules and regulations will govern your activities?

I think it’s great news that the internet economy is booming, it really can create a level playing field for SMEs to compete with much bigger businesses as well as allowing them to play on an international stage, but as always it’s really important to dot the i’s and cross the t’s to make sure there are no legal pitfalls for you to tumble into.

Sue Mann
Commercial Solicitor, Birmingham