Posted by Simon Elliman, Partner
Business Briefing – March 2014
Busy company managers need to stay on top of legal develelopments. Our legal experts have prepared a round-up of the latest legal developments and other issues which may affect you in your business and personal life.
Appeal case highlights perils of personal guarantees
It is now common practice for directors to enter into personal guarantees when securing funding for their company but a recent appeal case serves as an important reminder that doing so should not be taken lightly. The director involved was held to be responsible for a loan nearly seven years after he had resigned and worse, the guarantee allowed for the credit limit to be increased without the director’s permission resulting in the company going on to almost double the debt owed to the lender after he had left. On resigning from a role directors should always seek an effective release from their responsibilities.
Shake-up of divorce and financial settlements
The government’s Law Reform Commission is due to publish proposals for a radical overhaul of English divorce law. Reforms are likely to give legal standing to pre-nuptial and other marital finance agreements so that pre-acquired assets, including inheritances, shares and businesses, can be ring-fenced and kept out of the ‘pot’ for division on divorce. There will also be a review of the law relating to spousal maintenance.
More than one person needed to handle the disciplinary process
When dealing with a disciplinary issue, the investigation and disciplinary stages should be kept separate. One person should oversee the investigation and a second person should deal with the disciplinary hearing. Ideally any appeal should be dealt with by a third person, previously uninvolved with the matter.
However, SMEs will often have the same HR manager overseeing both. A recent case in the Supreme Court has highlighted the need to limit the remit of the HR role to advising only on procedural matters. A failure to do so could lead to the fairness of the procedure being challenged and any dismissal may be unfair.
Reforms to Intellectual Property law could impact you
With many balance sheets looking healthier as the recovery takes hold, some companies are taking the opportunity to buy back shares from their shareholders. Motivations vary but it is often seen as a way to increase earnings per share and to extricate unwanted shareholders without the remaining shareholders having to purchase the shares themselves. It is essential for directors to remember that this is a technical process with many hoops that need to be jumped through. Various declarations need to be made by the directors regarding the financials of the company and stamp duty may be payable. Failure to follow the steps correctly can have serious ramifications for the company and the directors.
Three ways to get out of your lease
If you need to move out of your business premises earlier than expected, you will need to scrutinise the terms of your lease so you can weigh up your options. Here are three of the most common ways to exit:
i. Bring your lease to an end by using a break clause or, if there isn’t one, try to negotiate an early surrender with the Landlord.
ii. Assign the lease if this is permissible. You will need the Landlord’s prior consent and it is likely you will be responsible for the new tenant’s performance under the terms of the lease for as long as they remain the tenant.
iii. Sublet the whole or part of the premises to a third party, with the Landlord’s prior consent. Although it will not allow you to get out of your lease, it will mean someone else is paying the rent and covering the bills.
Choosing the best structure for your charity
Trustees of charities which are businesses, or employ staff, often want to limit their potential personal liabilities. Previously, charities were usually set up as companies but the compliance and administrative responsibilities accompanying company status could seem burdensome. Now it is possible to register as a Charitable Incorporated Organisation (CIO). This new form of charity, aimed at small to medium sized organisations, is designed to be simple to administer. 500 CIOs have so far been registered, but, as the jury is still out over whether they confer benefits in practice, a company structure may still be preferable.
Withy King: A business law firm with your business firmly in mind
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