September 2019 - MLP Law

The clown in the room – The right to be accompanied to meetings in the UK

But even if an employee thought it was a good idea to do so, would they be entitled to bring a clown with them to a meeting and how would you react if they did?

As in New Zealand, employees are entitled to be accompanied to certain employment meetings. However, in the UK there is a limitation to this right, in that it only applies to disciplinary and grievance meetings and the list of possible companions is limited to work colleagues or trade union representatives, and certainly doesn’t include clowns.

In the UK, there is no statutory right to be accompanied to a redundancy meeting, but nevertheless, it is good practice for employers to give employees this right and failure to do so may in some circumstances may cause the dismissal to be unfair. Furthermore, in some circumstances (such as where the employee is vulnerable) an employer may be expected to extend the right to be accompanied to allow friends or even family members to accompany employees

With this in mind, it is extremely hard to picture a redundancy consultation in the UK taking place with a clown in the room. However, it is important for employers to consider the rights its employees have during certain employment processes (such as during a disciplinary or grievance process) as any misstep can result in a successful unfair dismissal claim.

If you have any questions regarding redundancy as a business owner or employee, please contact our Employment Team on 0161 926 1508, or follow our employment law-specific Twitter account @HRGuruUK.

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Buying or Selling a Business: Shares or Assets?

 

The Fundamental Difference

Share Sale or Purchase:  this involves the buyer acquiring all the shares in the company of the target business from the shareholders

Asset Sale or Purchase:  this involves the buyer acquiring specific assets of the target business (and certain liabilities) from the company

 Considerations for a Seller

 

Share Sale:

  • The only asset being transferred is the shares
  • It results in a ‘clean break’ for the seller
  • The sale process may take longer and the due diligence investigations will be more extensive as the buyer will want to thoroughly investigate the company
  • The buyer will expect extensive warranties and indemnities
  • The shareholders receive the sale proceeds directly
  • No third party consents are required to transfer the assets or contracts (unless a contract contains a ‘change of control’ provision)
  • No conveyance or assignment of the property is required
  • All employment contracts remain in place
  • In relation to Tax:
  • CGT will be payable, but this may be reduced to 10% through Entrepreneurs Relief
  • Potential for roll over relief to the extent any consideration is deferred (loan notes) or consideration shares in the buyer are issued to the seller

Asset Sale:

  • The seller retains ownership of the company and the buyer can ‘cherry pick’ the assets it wishes to purchase
  • Exactly what is being purchased must be identified in the asset purchase agreement
  • The sale process may be quicker and less extensive due diligence undertaken by the buyer, although this is not always the case
  • Legal ownership of the relevant assets (and liabilities) must be individually transferred or assigned to the buyer
  • Third party consents to the transfer of all the contracts (and certain assets) will be required
  • The sale of the business premises (or assignment of the lease) will have to be negotiated and transferred separately
  • The employees will (in most circumstances) transfer to the buyer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
  • In relation to Tax, the seller is effectively subject to double tax:
  • Corporation tax on the profit from the sale of assets; and
  • Capital gains tax on cash withdrawn by the shareholders as a dividend

Considerations for a Buyer

Share Sale:

  • Continuity of the target business
  • No obligation to consult with employees
  • No third party consents required (unless there is a ‘change of control’ provision)
  • Buying the company ‘warts and all’
  • Adequate warranties and indemnities will be required from the seller in the share purchase agreement to protect the buyer’s position
  • In relation to Tax:
  • Stamp duty is payable on the transfer of shares
  • There is no SDLT

Asset Sale:

  • Agree exactly what assets (and liabilities) will transfer
  • Less risk for the buyer than the purchase of the entire company
  • Need third party consent to transfer the contracts, with no guarantee that such consents will be forthcoming
  • The employees will transfer under TUPE, which can have implications for an unwary buyer
  • SDLT will be payable on the transfer of property, although some reliefs may be available in terms of corporation tax relief, roll over relief, etc.

Which should you choose?

This will depend upon the circumstances of the buyer and the seller.  There may be reasons why one structure is more favourable.  There will be both legal and tax considerations, so it is important for a seller or buyer to take legal and financial advice at an early stage.

 


 

For more information or for answers to specific questions on a business sale or business purchase contact our

corporate team on

0161 926 9969 or corporate@mlplaw.co.uk

 

 

MLP Law’s Brexit Business Checklist

Whilst we may be personally feeling bombarded around the discussions, arguments and uncertainties surrounding Brexit, it is critical for all business leaders to ensure that their business is ready for Brexit.  With the knowledge and experience of advising on various aspects since the referendum result, MLP Law are here to guide you and your business in preparing for the future relationship the UK will have with the EU, whatever form it may take.

If you and your business sell or receive goods from the EU and the any of the below apply to you MLP can help:

  • Have you made contingency plans?

Think about your stock levels, or whether you’ll need a GBP Sterling or Euro currency account for you customers or suppliers. Is your business model robust enough to deal with disruptions to your supply chain?

  • Have you reviewed your contracts?

Your contracts and commercial agreements will remain valid in the event of a no deal, but have you reviewed your jurisdiction, governing law and dispute resolution clauses? You’ll need to be clear before any dispute arises, particularly if you trade with overseas suppliers or distributors. 

  • Do you and your EU importer have a valid EORI Number?

You will need an EORI number beginning with ‘GB’ to move goods in or out of the EU in the event of a no deal Brexit. Your EU Importer will also need a valid EORI – if you export to your own EU based company, then you will also need a valid EU EORI number.

  • Who is dealing with Customs of your behalf?

You can make customs declarations yourself, or hire someone else to do this for you. Gov.UK has some further information to help you decide

  • Have you registered to make the transit of goods simpler?

You may be able to use the Common Transit Convention (CTC), so that moving goods through customs can be simplified. There are also other procedures available for import and export that could help make the transit easier. See GOV.UK for further information to see if you can register.

  • Have you prepared for VAT, tariff and duty changes?

In the event of a no deal Brexit, UK-EU trade would be on WTO terms and goods would be subject to customs duties. There may also be changes to VAT recovery, regulatory requirements, customs declarations and security and safety controls. Consider your pricing – You’ll also need to consider who is responsible for paying the costs of any extra tariffs or duties.


If you have any questions about your Brexit preparations, and want to meet with like-minded businesses sharing your concerns, keep in touch to hear about our MLP Brexit breakfast seminars. Our team of expert lawyers will be happy to help.  Contact our Commercial Team on 0161 926 9969 or commercial@mlplaw.co.uk.