July 2020 - MLP Law

Update

Shareholders’ Agreements – is your house in order?

As we now start to move into a transition period of getting businesses back open and trading again, you may have had cause to consider the future of your company, your goals and those of your fellow shareholders.  If you haven’t done so recently, now is a good time to review and renew your shareholders’ agreement and test the alignment of the owners’ expectations.

Please see our previous article on the benefits of an up to date shareholders’ agreement: https://www.mlplaw.co.uk/shareholders-agreements-and-articles-of-association-does-my-company-need-them/

  1. Top 5 key benefits of having a Shareholders’ Agreement
  • It clarifies the parties’ expectations for the medium term at least so helps reduce the risk of disputes arising later;
  • It is a private document, unlike the company’s articles of association which is made public on Companies House;
  • It can help attract investment – investors may be encouraged by the clarity that a shareholder agreement brings;
  • It sets out how key decisions will be made and, if relevant, can protect minority shareholders and majority shareholders in particular circumstances such as when key investment decisions need to be made or when an offer is made for the sale of the company; and
  • It can provide clarity and certainty as to what happens on key events such as a dispute arising, a serious illness or the death of a shareholder.

2. The key benefits of updated Articles of Association

  • To simplify and modernise an old style constitution / memorandum;
  • To ensure they reflect your company’s current circumstances so you do not fall foul of specific provisions;
  • To deal with different classes of shares and different rights attaching to shares; and
  • To deal with bespoke shareholder arrangements regarding transfers of shares, such as compulsory transfers, drag along/tag provisions, good leaver/bad leaver provisions, etc.

For help and advice on Shareholders’ Agreements and Articles, please speak to our Corporate team on 0161 926 9969 or email corporate@mlplaw.co.uk

TRADING TERMS – SIMPLE STEPS TO AVOID TRAPS FOR THE UNWARY

  • How long has it been since you last reviewed your Terms & Conditions of supply of goods or services?
  • Do you even have a set of terms?
  • Are you using them effectively?
  • Could they leave your business wide open to dispute?

Terms & Conditions are generally the basis of a binding contract between you and your customer. Getting them right is crucial for your business.

Top Tips for Terms and Conditions

Here are our top tips for making sure your terms and conditions are working for your business.

  • For a business’ standard terms and conditions to be binding on its customers, they need to be incorporated into the contract between the parties. If terms are not properly incorporated, then the law, or even your customer’s terms of purchase, may prevail and impose a greater liability on the business. You must be able to establish that they were agreed by the customer before the contract was entered into. The easiest way to achieve this is for both parties to sign the terms and conditions, however that often does not happen.
  • The next best alternative is to bring your standard terms and conditions to the attention of customers at the earliest possible opportunity whilst you are negotiating the terms of the contract. This can best be achieved by included them in all documents in your paper trail – for example, such as on brochures and catalogues and on your website, on quotations, on purchase orders, on order acknowledgements and on delivery notes. This can be particularly helpful with repeat customers as it can establish a course of dealing.
  • Printing terms on the back of an invoice alone will generally be ineffective incorporation of those terms as the contract will have been formed before the invoice is generated. New contract terms therefore cannot be introduced after the contract has been formed and accepted, other than by the agreement of both parties.
  • Keep records on how your terms were brought to the attention of each customer. When you introduce new terms, let your customers know that they will apply to all future orders.
  • Train your sales staff on the content of the terms and, if they are allowed to agree any variations to those terms, ensure there is a set policy in place for them to follow.  Also make sure your sales team do not make inaccurate or unsustainable statements about your goods or services – they could be held to be incorporated into the contract in the event of a dispute.
  • Critically review your last few months of orders – have there been any particular issues? Do you have an issue with debtors? Do the same clauses always cause a debate with customers? If so, your terms may benefit from being updated to ensure that they reflect your current business practices and any changes in the law.
  • Consider how you have protected yourself if you are unable to provide the goods or services due to events which are outside of your control, such as flooding, fire acts of God, or – perhaps most relevant in 2020, a global pandemic. Consider the effect of a force majeure event and the steps that need to be taken to reduce or eradicate any loss.
  • Also consider what rights you have if your customer cannot pay or enters insolvency, which many of our clients are currently having to deal with as a result of Covid-19.
  • Consider how you will resolve matters in the event of a disagreement. It will be likely that you are in an ongoing relationship with your customer and that court proceedings are not likely to be the best solution from both a commercial and a financial perspective. You should try and provide a dispute resolution process which is managed amicably between you and your customer in the first instance, failing which more formal proceedings may need to be considered.
  • Have you considered your termination rights? Consider whether the contract should last for a specific period or whether it should be open-ended and subject to termination on reasonable notice.
  • Do you provide sensitive confidential information to your customers, and is non-disclosure clause required? You may need to limit disclosure to an identifiable list of people, permit disclosure only to courts or regulatory bodies, limit the number of copies that can be taken and specify what happens to the confidential information if the agreement is terminated.
  • You will likely own various intellectual property rights (IP). You will need to protect these rights to ensure that the ownership remains with you always. You will need to understand how exactly your IP is used throughout the engagement with your customer. It should be made clear that all IP is owned by you. You may also wish to licence some IP to your customer if appropriate to do so.
  • Consider both you and your customers’ obligations under the GDPR. If either party processes personal data of the other, you need to include a clause which sets each party’s responsibility under the GDPR. Remember, failure to comply with this can result in hefty fines, so it is crucial to be compliant. 
  • Are your terms in line with those of your competitors?
  • If you supply consumers as opposed to businesses, have your terms been updated so that they comply with the Consumer Rights Act 2015 which came into force on 1 October 2015?

In light of the above therefore, are your current terms currently fit for purpose for your business, or are they outdated and unsuitable for your ongoing use? Are you, without realizing, putting you and your business at risk of being exposed to some of the pitfalls outlined above?

If you think this is the case, or even if you would like more advice as to how you can use your terms, please contact Stephen Attree from our Commercial and IP team on 0161 926 1524 or stephena@mlplaw.co.uk to receive expert legal advice for your business.

Everything you wanted to know about…Redundancy…but were too afraid to ask!

No business likes making redundancies. However, when it becomes necessary to do so it is vital that employers get it right. We have therefore set out below some commonly asked questions about redundancies which will help you prepare for conducting a fair redundancy process should the need arise. 

What is redundancy and when does it arise?

A redundancy situation arises where an employerceases carrying on the business in which the employee worked or in the place in which the employee worked, or where the business needs fewer people carrying out work of a particular kind.

What is the process for making employees redundant?

Redundancy is a potentially fair reason for dismissing employees but the fairness of such a dismissal will be determined by the test of whether an employer’s decision to dismiss falls within the band of reasonable responses of a reasonable employer in those circumstances and in that line of business. This means that employers will need to follow a fair redundancy process as a failure to do so will normally render the dismissal unfair.

A fair procedure comprises a number of stages, namely:

  • warning and consulting with the potentially redundant employees about the proposal to make their role redundant;
  • adopting a fair basis for selecting employees for redundancy; and
  • considering alternatives to redundancy.

How do I warn and consult with potentially redundant employees?

This requires a series of consultation meetings with the potentially redundant employees prior to reaching a decision, to discuss the redundancy proposal, the reasons for the proposal, the employee’s selection for redundancy and any alternatives to redundancy which may be available.

How do I choose between potentially redundant employees?

Employers will first need to identify an appropriate pool of employees who are at risk of redundancy. The appropriateness of the pool will depend on a number of factors, including the roles or workplaces in respect of which there is a diminished requirement for employees.

Once an appropriate pool has been identified, employers may need to apply selection criteria to decide which employees in the pool should be made redundant. This typically involves a scoring exercise using objective and measurable criteria.

Do I have to find alternative work for redundant employees?

A fair redundancy process requires an employer to explore ways in which redundancies may be avoided. In most cases, amongst other things this will include identifying any suitable alternative roles which the potentially redundant employees may able to perform as an alternative to being made redundant. However, there is no absolute obligation to find alternative work for redundant employees where none can be found.

What are employees entitled to when they are made redundant?

Redundant employees with at least two years’ continuous employment will be entitled to a statutory redundancy payment which is calculated using a formula which takes into account their age, length of service and weekly wage. All employees are entitled to receive paid notice of their dismissal and a payment in lieu of any accrued but untaken holidays.

What are the consequences if a business gets redundancies wrong?

The main consequence of a poorly handled redundancy process is being on the receiving end of an unfair dismissal claim from your former employee. The compensation in such claims may be up to a year’s gross salary.

Please don’t hesitate to contact the team at MLP with ideas about topics or for detailed advice in connection with any of the issues raised. You can reach us at employment@mlplaw.co.uk or @HRHeroUK or on 0161 926 9969.

‘It’s… Rebekah Vardy’s account’

The UK tabloids went into overdrive last year following very public falling out between WAGs Coleen Rooney (CR) and Rebekah Vardy (RV) back in 2019, respectively, the wives of footballers Wayne Rooney and Jamie Vardy. The falling out sparked numerous internet memes, but also raised two key legal issues: (1) Libel; and (2) breach of Confidence. We will discuss the latter.  

Background

By way of recap, CR had noticed that various stories about her were being leaked to The Sun, which had originated from her ‘private’ Instagram account story. She had her suspicions that it was RV, but had no definite proof. She therefore decided to hide all her followers from viewing her story – except RV. Her suspicions were proven correct, as a story which only RV had been able to view eventually ended up in The Sun.   

In response, CR publically shamed RV on Twitter, explaining the background and the steps she took to prove it was RV, and finally concluding with the infamous line: “it’s … Rebekah Vardy’s account”.

We assume CR obtained legal advice before posting the tweet, and was advised to state it came from RV’s account, not from RV herself, to try and lessen the risk of a defamation claim being brought by RV (it is often the case that celebrities allow others to access and manage their social media accounts). 

Nevertheless, RV has filed a lawsuit against CR and is suing her for libel and defamation. CR initially indicated that she was going to counter-sue RV for breach of privacy. However, we understand she has dropped these plans, stating that it was in ‘bad taste’.

Breach of confidence

Should CR have proceeded to counter-sue, it’s hard to say whether she would have been successful or not, as these types of claims tend to fall on their facts.

Over the years, the courts have developed the ‘law of confidence’ to protect individuals against breaches of their privacy. Let’s look at what elements there must be established to successfully bring a breach of confidence claim

Firstly, the information must have the “necessary quality of confidence”;

  • Secondly, this information must have been communicated in a way which would impose an obligation of confidence; and
  • The information must be used in a way which is detrimental to the owner of such information.  

Taking each of these in turn:

  • CR stated that “There has been so much information given to them [the Sun] about me, my friends, and my family – all without my permission or knowledge”. We all have a right to respect for our family and private life under Article 8 of the Human Rights Act 1998. On the face of it therefore, we could reasonably conclude that as the information relation to her and her family, the leaked information did have the required quality of confidence.
  • By sharing the information on her private Instagram account, which (1) uses an alternative name; and (2) was only visible to her approved and ‘trusted’ audience, CR clearly had the intention to keep all information shared on this account, private. It raises some crucial questions though: How private is the content you post online? What rights do you have after posting content online? Does this content meet the required obligation of ‘confidence’?

Just because it is private on Instagram, does not make it private in the eyes of the law. However, our view is CR’s content does meet the obligation of confidence. As noted, CR clearly intended to keep the content private, and, with the stringent steps she took to protect her privacy, she took all reasonable steps to protect her privacy.

  • Was the information used in a way that as detrimental to CR? We think so. Clearly, the information was private to her and she clearly did not want it being publicised online. As to how detrimental it actually is, will rest on the facts. 

Views

Given that CR dropped the breach of privacy claim against RV, we will not know how this particular set of facts would have been viewed by a judge. However, we assume that a judge would have agreed that the requirements to establish a breach of confidence have been met. However, an important lesson to take away from this, is that setting your social media accounts to private, doesn’t necessarily equal privacy. Be aware of what you post online and consider the possibility it could fall into the wrong hands.

Employee Ownership Guide

MLP Law is a leading law firm specializing in business and employment services.

To address the increasing popularity and prevalence of Employee Ownership as an exit or growth strategy for a company and its owners, we have produced a guide to share our experience of the developments in this area.

As an owner and business leader it’s important to recognise when considering an exit strategy or perhaps looking into succession planning for your business, Employee Ownership is only one of the possible solutions for any exit or growth strategy.

Our experts will help you explain what is meant by employee ownership, the different types and how it can have a significant effect on you and your business.

“They are prompt, efficient and provide a good value service. I highly recommend them”- anonymous

For a copy of our guide, please complete the form below. If you wish to speak to our experts at MLP Law for more information and professional guidance please contact our employment and business teams on: corporate@mlplaw.co.uk

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CORPORATE INSOLVENCY & GOVERNANCE ACT 2020 (Act)

On 26th June 2020, the Corporate Insolvency and Governance Act 2020 came into force introducing measures, some of which are only temporary, that are intended to give companies a fighting chance of survival during this unprecedented time.

Moratorium Plan

The Moratorium gives companies the space and time it needs to pursue a rescue plan for their business. During this time, ONLY the court can grant leave for legal action to be taken against the Company. 

Restructuring Plan (RP)

For companies that find themselves in financial difficulty, this new RP allows the court to bind a group of creditors to the RP even if they don’t agree (“Cram Down”), providing the class or classes that voted against it are no worse off than they would be in the next most likely outcome.  Although there are steps involved that safeguard affected creditors, the court does have absolute discretion whether to sanction the RP.

Prohibition of termination clauses

This measure helps those companies who are entering an insolvency procedure, entering the new moratorium or beginning the new restructuring plan procedure. It prevents suppliers from threatening a company’s rescue plan so suppliers can’t terminate their supply or ask for additional payments while a company is going through a rescue process.

Note: it does not apply after an insolvency procedure commences.

Suspension of wrongful trading liability*.

This measure temporarily removes the threat of personal liability for a director who trades through the crisis, and tries to keep the company afloat, knowing the company may have to become insolvent in the near future. A director of an insolvent company will also not be liable for any losses to the company or its creditors resulting from continued trading while the wrongful trading rules are suspended.

For our full guide to director duties, please see our previous blog here: https://www.mlplaw.co.uk/directors-duties-and-responsibilities/

Statutory demands* and winding-up petitions**

Creditors can no longer file statutory demands and/or winding up petitions against companies whose debt is due to Covid-19.

*Came into force on 1st March 2020.

**Came into force on 27th April 2020

Other provisions relating to filings at companies’ house can be found at: https://www.gov.uk/government/publications/corporate-insolvency-and-governance-bill-2020-factsheets.

For help and advice on corporate insolvency and governance, please speak to our Corporate team on 0161 926 9969 or email corporate@mlplaw.co.uk

Chancellor’s Summer Statement – a Summary

Chancellor of the Exchequer Rishi Sunak has presented his summer statement, announcing a series of measures designed to help the UK economy bounce back from the effects of the COVID19 pandemic.

We have set out below a quick summary of the key points:

Coronavirus Job Retention Scheme – “furlough bonus”

Mr Sunak reiterated his plans for the scheme to wind down gradually until the end of October. The chancellor’s comments made it clear that the scheme will not be extended beyond the current end date.

However, a new “furlough bonus” was announced, which will see businesses receive £1,000 from the Government for every furloughed employee they return to work and continue to employ until January 2021. This measure is estimated to cost the Treasury £9 billion if every furloughed job was retained.

Job creation scheme

Under this “kick-start” scheme, the Government will fund six month placements for young employees aged between 16 and 24. There will be no cap on the number of places which the Government will fund and an initial £2 billion has been put aside by the Treasury to fund the scheme.

Apprenticeships and training

The chancellor announced that job centre work coach numbers will double and that businesses employing apprentices will be supported with a payment of £2,000 for each apprentice they take on (£1,500 for apprentices aged over 25).

This apprenticeship bonus can be claimed by employers between August 2020 and January 2021.

Stamp duty

Stamp duty is to be cut with the aim of reinvigorating the housing market, with the threshold increasing from £125,000 to £500,000. The changes take effect immediately and will be in place until 31 March 2021.

Hospitality measures – VAT cut and discounts for the public

The chancellor recognised that the UK hospitality industry has been particularly hard hit by the economic impact of the COVID19 pandemic and therefore warrants further Government support.

Mr Sunak announced that this support will take the form of a cut on the VAT payable on food, accommodation and attractions, reducing it from 20% to 5% for the 6-month period from 8 July 2020 to 12 January 2021.

It will also include a scheme whereby the Government will fund an “eat out to help out discount” to encourage spending in pubs, restaurants and cafes. Under this this scheme, diners will receive a discount of 50% (up to a maximum of £10 per head) on food and non-alcoholic drinks when eating out on Mondays to Wednesdays throughout August 2020.

Businesses who wish to participate in the discount scheme will be able to register through a website from 13 July 2020 and claims made will be paid to business within five working days.

Green recovery

Mr Sunak confirmed the Government’s pledge to pursue a “green recovery”, announcing a series of grants to decarbonise housing and public buildings. This includes vouchers worth £5,000 to £10,000 for poorer families to refit homes with insulation and £1 billion set aside to make public buildings.

Businesses are bound to have questions about how these announcements will affect them and the commercial and employment law experts at MLP Law is here to help in any way they can. Please do not hesitate to get in touch with our experts on 0161 926 9969 if you would like to discuss any of the issues raised in this update blog.