Corporate and Commercial
At Band Hatton we recognise the need of every successful business for effective and practical advice and assistance. We have the experience and expertise to help and guide you throughout your business life and development. We strive to provide this service no matter what type of business or entity you are:-
______________________________________________________________________________________________________
Business Start-up, Sole Traders, Partnerships, Limited Liability Partnerships
Business Start-up and Sole Traders
There are a number of options available when deciding what structure to use for your business. Most businesses take the form of a sole trader, partnership, limited liability company or limited liability partnership.
Trading as a limited liability company or limited liability partnership has the advantage of limiting individual personal liability, but from a negative perspective generally involves a greater level of ongoing administration.
You should also consider obtaining taxation advice from a chartered accountant upon tax treatment of these different business structures - as this may influence your choice of structure.
We can advise you in detail of all the advantages and disadvantages associated with each of the business structures and help you decide which is the most suitable structure for your business. We can also deal with the formation requirements of limited liability companies and limited liability partnerships for you. If you decide to trade in partnership or set up a limited liability company or limited liability partnership then you will also need to consider whether you need a partnership agreement, shareholders' agreement or limited liability partnership agreement.
Partnerships
"Two or more persons carrying on business with a view to profit” – constitute a partnership. There will be many circumstances where operating as a partnership may be preferable to a limited company –
- Business start-ups
- Businesses who do not want their private or financial information made public at Companies House
- Husband and wife teams
- Part time or low turnover businesses
- Professional business
A partnership will encounter similar problems and needs other forms of business but may need help with –
- Business contracts
- Changes of partners
- Employment
- Partnership agreements
- Terms and conditions
- Winding up
Limited Liability Partnerships
A specific kind of partnership – having limited liability – which may be particularly appropriate for :–
- Joint property development
- One off joint ventures
- Professional partnerships
Band Hatton is a limited liability partnership and we can therefore provide first hand knowledge and experience with :
- A partnership agreement
- Incorporation at Companies House
- Other business issues which will confront LLPs in the same way as other businesses – incorporated – or not.
Back to top
Business Transfers, or Sale and Purchase of Assets
One means of acquiring a business is to purchase the assets. These can include premises, equipment and stock. Unlike a share purchase, the ownership of the business will change. Also, depending on values the purchase of premises as part of the business assets can result in a liability to Stamp Duty Land Tax.
With an asset sale, it is normally the case that the staff who work for the business to be acquired are automatically transferred to the buyer, under the TUPE Regulations.
Back to top
Commercial Contracts, (including Agency, Distribution, Franchise, Joint Venture and Consultancy)
In the day-to-day course of your business, it is important to regulate and document your business relationships. To do this the agreements you have with your suppliers, customers, distributors, agents and your employees must be drafted in a way which properly protects your business interests.
It may be necessary for you to rely upon these agreements in the event of a dispute and in such circumstances a court will scrutinise and interpret each and every term. At the same time it is vital that your agreements provide a framework in which the parties can properly carry on business together without undue regulation.
Band Hatton LLP have expert knowledge and detailed experience in the drafting of all types of commercial contracts and can provide you with legal advice and the necessary documentation for:
- Agency Agreements
- Confidentiality Agreements
- Consultancy
- Distribution and Supply Agreements
- Franchise Agreements
- Hiring and Leasing Contracts
- Information Technology Agreements
- Intellectual Property Agreements and Licences
- Joint Venture
- Standard Terms and Conditions
- Warranties
Back to top
Company Formation and Restructing
Whether you intend to start-up a company for a new business venture or an existing business, you will need expert legal advice and assistance to ensure that the company is formed in a way which meets your specific business needs.
Band Hatton LLP can provide the legal advice that you need on several issues, including the role of the Company Directors, Directors powers and duties, shareholdings, Companies Act regulation, employment law etc.
We will work closely with you and your accountants to ensure that you receive the best legal advice possible so that your business is incorporated and organised in ways that are both effective and tax efficient.
We can provide expert legal advice on:
- Directors Duties and Service Contracts
- Corporate Restructuring
- Formation of Tailor Made / 'Off the Shelf' Companies
- Forming Groups of Companies
- Joint Ventures
- LLP Incorporation
- Shareholders Agreements
Operating a business as a private limited company requires compliance with a multitude of company regulations and legislation.
We can advise company officers on the precise formalities involved in the day-to-day running of their business, or advise shareholders on whether the company has correctly followed the relevant procedure.
In an ever changing world it is always advisable to review your current business structure to ensure your business assets are protected as far as possible.
We offer valuable practical advice on reviewing your existing business structure and how to improve and build upon it for maximum benefit.
- Business Succession Planning / Exit Strategies
- Capital Company Purchase of Own Shares
- Corporate Insolvency
- Creation of New Classes of Shares
- Creation of Parent or Holding Company
- Creation of Subsidiary Companies
- Issue of Company Securities
- Mergers / De-Mergers
- Re-Designation of Share Capital
- Rights Issues
- Sub-Division of Shares
Back to top
Company Secretarial and Administration
Staying up to date with changes in company law and also your Companies House requirements can be difficult. We offer a full company secretary service for competitive prices leaving you free to run your business.
Our services include:
- Incorporating your company (this service includes the creation of the statutory books with the certificate of incorporation and memorandum and articles of association);
- Making up and maintaining your statutory registers;
- Preparing your annual return;
- Providing appropriate forms for filing with Companies House, i.e. a change of registered office address or director’s details (this service includes board minutes);
If you wish we can hold the statutory registers for you and/or be listed as the registered office address.
Back to top
Compliance and Governance
At Band Hatton LLP our dedicated corporate commercial department know that operating a business as a private limited company requires compliance with a multitude of company regulations and legislation.
Our specialists can advise company officers of the precise formalities involved in the day-to-day running of their business, or advise shareholders on whether the company has correctly followed the relevant procedures.
We can provide you with expert legal advice for:
- Appointment and Dismissal of Company Directors
- A Company's Purchase of its Own Shares
- Board / Company Meetings
- Changes of Company Name
- Company Secretarial Services
- Creation of New Classes of Shares
- Directors Duties
- Memorandum and Articles of Association - Preparation of New or Amended
- Minority Shareholders Protection and Rights
- Regulatory Compliance
- Share Issue
- Share Capital Increases or Reduction
- Share Capital Re-organisation
- Share Option Agreements
Back to top
Corporate Re-construction and Re-Financing
For most business clients sourcing and entering into new banking and / or financing arrangements is an administrative and complex procedure. Our specialist corporate department can provide pragmatic and straightforward advice and assistance.
We can help you with:
- Advising On and Approving Bank Facility and Security Documentation
- Company Restructuring
- Debentures
- Deeds of Priority Between Lenders
- Inter-Company Guarantees
- Legal Charges
- Loan and Credit Agreements
- Negotiations with Banks and / or Other Financiers
- Personal Guarantees
- Refinancing
- Registration Formalities
Back to top
Directors' Duties and Liabilities
The Companies Act 2006 has modified the law relating to Directors and their duties and powers.
Many of the liabilities and responsibilities of a director apply equally to a "shadow director". A shadow director is a person, or a company, in accordance with whose directions or instructions the directors of the company are accustomed to act.
The constitution of a company is contained in its memorandum and articles of association. It is these documents which specify the powers of directors. In most cases directors are given the power to manage the company's business. However, all directors should refer to their company's memorandum and articles of association in order to ascertain precisely their powers and responsibilities and to check if any restrictions have been imposed upon them. Legal advice should always be taken as to the effect of such documents as well as a director's contract of employment.
Legal advice should always be taken when considering the memorandum and articles of any particular company and as to the appointment, resignation or removal of any director and his or her powers, duties and responsibilities.
Back to top
Licensing Agreements
A licensing agreement is a contract conferring on someone the legal right to use intellectual property rights owned by another person. It is used when the owner of a product does not have the necessary expertise, resources, time or indeed inclination to successfully manufacture/ operate/market the particular product.
The owner grants a licence to a third party who has the requisite finance business acumen, knowledge and experience to operate, manufacture and market the product in a certain territory on behalf of the owner of the product. Although the licensor relinquishes the direct sale or manufacture of the product, he enjoys the benefit of still owning the intellectual property, and usually retains control over the use of same.
In addition, the licensor may receive continuing royalties throughout the duration of the licence, thereby fully maximising his return. Royalty figures are usually calculated based on the number of licensed products sold. It would therefore be most advantageous for the licensor to select the licensee who is likely to make the best yield on the product.
Back to top
Mergers and Acquistions, Management Buy-outs
We advise on all corporate aspects of buying and selling businesses and companies in England and Wales, acting for vendors, purchasers and funders.
From an early stage we can advise on the merits of an “assets” sale or a “share” sale.
In particular we deal with the following:
- Advising in relation to heads of terms;
- Drafting and negotiating confidentiality agreements;
- Drafting and negotiating the sale and purchase agreement including the warranties required of the vendor;
- Raising pre-contract enquiries and conducting due diligence for the buyer;
- Assisting the vendor in the disclosure exercise and preparing the disclosure letter;
- Drafting ancillary completion documentation, ie board minutes, members’ resolutions and filings at Companies House;
- Obtaining necessary consents to the transaction from third parties;
- Post completion corporate restructuring advice;
- Post completion vendor support services; wealth management and reinvestment
Back to top
Partnership Agreements
If you are already operating a business in a partnership, or you intend to do so it is crucial that the agreement between the business partners is set out in a formal partnership agreement.
In the absence of a partnership agreement, UK law will imply certain terms into the business relationship whether or not the partners agree or are aware of the implied terms.
At Band Hatton LLP we can help you to avoid future partnership disputes and ensure that your partnership agreement is properly recorded. We can provide expert advice upon:
- Limited Liability Partnerships
- Partnership Formation
- Partnership Agreements
- Partners Duties and Liabilities
- Partnership Disputes
- Partnership Dissolution
Back to top
Private Limited Companies
Trading as a limited company can provide numerous benefits :
- Limiting your liability to creditors
- Tax Savings - when profit can be taxed at lower rates than personal tax rates
- Status - despite the limited liabilities - consumers and suppliers often more comfortable if they are dealing with a company rathan than an individual
At Band Hatton we can provide legal and business advice and support throughout the life of your company – with –
- Formation
- Shareholder agreements
- Statutory compliance – especially following the implementation of the Companies Act 2006
- Sales, merges and acquisition
Back to top
Shareholders Rights and Agreements
In the absence of a shareholders' agreement your rights and obligations as a shareholder in a private company are set out in the Companies Acts 1985 & 2006 ("Companies Acts") and the company's Articles of Association ("Articles").
Commonly, the provisions of the Companies Acts and the Articles (unless they are Articles specifically prepared for the company by a solicitor) do not provide the level of rights that shareholders wish to have the benefit of, nor the level of obligations that they wish their fellow shareholders to be subject to.
For example: ·
- Unless the Articles state otherwise, a director may be removed by the holders of more than 50% of the voting rights in the company. This situation is unsuitable for many private companies who have minority shareholders who require the right to be, or appoint, a director to ensure that their interests are taken into account in the day to day running of the company.
- What happens if a shareholder dies? Usually, the surviving shareholders will want the deceased shareholder's shares to be transferred to them or back to the company to prevent the shares being transferred to a third party who would then be involved in the company. Usually the Articles will cover this situation to some degree, but a shareholders' agreement can be used to govern the whole process including how the price for the shares will be calculated, paid and funded.
These are just two examples of many problematic situations that can arise and that a properly drafted shareholders' agreement can help to avoid.
An important issue that is often overlooked is the difference between the Articles and a shareholders' agreement. On the face of it they may appear to be one and the same in that they both set out a shareholders’ rights and obligations. However, there is a subtle, but significant difference. The Articles are a contract between the company and each of its shareholders. As such the Articles can only be enforced by or against the company and not by one shareholder against another. This can cause problems, particularly for minority shareholders who do not have sufficient voting power to procure the company to enforce the Articles against a shareholder who has breached the Articles. A shareholders' agreement has the advantage of being a contract between the shareholders themselves and therefore can be enforced by one shareholder against another.
It is often the case that a shareholders' agreement is not considered until a problem arises. Unfortunately, it is usually too late then for the terms of a shareholders' agreement to be agreed by the shareholders. The best time to put a shareholders' agreement in place is at the time of setting up the company when relations between shareholders are amicable.
Back to top
Statutory Controls
Directors' contracts
A director may not be interested in a contract with the company unless such an interest is permitted by the articles, or by the shareholders in general meetg. The articles generally permit such an interest.
If a director is in any way interested in a contract with the company, they must declare the nature of that interest at a directors' meeting. Failure to disclose may result in a fine.
General meeting approval is also required if a director or connected person enters into a transaction to sell to, or acquire from the company, a non-cash asset whose value exceeds certain amounts or a certain percentage of the company's asset value. If the required approval is not given and the transaction has already happened, the transaction is voidable at the company's option and the director or connected person is liable to account to the company for any gain, and indemnify the company for any loss or damage resulting from the transaction.
Loans to directors
A company may not make a loan to a director of itself or of its holding company. This provision is widely drafted. A company may not lend money to a director, nor may it guarantee a loan made to a director or provide security for such loan.
There are further restrictions for relevant companies. A relevant company is a public company, or any company in a group containing a public company.
There are a variety of exceptions to this provision, in particular loans of up to £5,000 are permitted. In addition, directors may be provided with funds to meet expenses incurred for the purpose of the company or in the performance of their duties.
If the company enters into a transaction in contravention of the statutory restrictions, it is voidable at the instance of the company and the director is liable to account to the company for any gain that has been made and is liable to indemnify the company for any loss which it has suffered. In addition, a director of a relevant company who authorises or permits such a transaction is guilty of a criminal offence.
Directors' contract of employment
If a director's service contract is for a period of more than five years, the approval of the shareholders in general meeting is required. If approval is not obtained, the company can terminate the contract, at any time, by giving reasonable notice.
Insider dealing
It is a criminal offence for an individual who is, or at any time in the preceding six months has been, knowingly connected with a company, to deal on a recognised stock exchange in securities of that company, if he has information which:
- was obtained by virtue of their position;
- it would be reasonable to expect such a person not to disclose, except in the proper performance of his duties;
- they know that the information is unpublished, price sensitive information.
A person is connected with a company if he is a director of the company, or occupies a position as an officer or an employee of that company, or a position involving a professional or business relationship with the company.
Considerable care must be exercised by all directors who have access to confidential information. Not only is it an offence to use the information to deal directly on the stock exchange, but it is also an offence to pass information on to a third party, knowing or believing that third party would use the information to deal on a recognised stock exchange.
Contravention of the insider dealing regulations is a serious criminal offence and punishable by a fine and/or imprisonment.
Back to top
Terms of Trading
It is inevitable that your business will buy and/or sell goods and/or services. It is likely to increase your business' chances of being successful if you buy and sell goods and/or services on defined terms that suit your business. This is why most successful businesses have standard trading terms for both buying and selling goods and/or services.
Whilst the Sale of Goods Act 1979 and the Supply of Goods and Services 1982 and various other statutes ("Acts") provide a framework of rights and obligations to fall back on, standard terms of trade can be used to vary, exclude (except for a small number of provisions which cannot be varied or excluded) and enhance the framework of rights and obligations provided by the Acts to allow you to trade on terms that best suit your business.
Whatever the nature of your business, we can work with you to produce standard terms of trade that assist your business to gain maximum benefit from its trading relationships. Once you have standard terms of trade, then it is worthwhile having them reviewed on a regular basis to ensure that they remain up to date. From time to time, new legislation or common law precedents mean that standard terms of trade need updating to ensure that you contain to trade on terms that are most beneficial to you.
Back to top
Winding Up Liabilities
There are a number of circumstances in which a director may be made personally liable to contribute to the assets of the company.
Damages against delinquent directors
If in the course of winding up it appears that any manager, director or officer of the company has misapplied or retained company money or property, or has been guilty of any misfeasance or breach of any fiduciary or other duty, then the Court may order that they repay or restore the money or property to the company or contribute such sum as the Court thinks just.
Fraudulent trading
If in the course of a winding up it appears that any business of the company has been carried out with intent to defraud creditors or for any fraudulent purpose, the Court may declare that any person who was knowingly a party to the fraud be liable to such extent as the Court thinks proper.
This provision would impose liability not only on directors, but also on any other officer of the company who was party to a fraudulent activity. The Courts have suggested in the past that directors would be acting fraudulently if they enter into any transaction knowing that there is no reasonable prospect that the creditors will be paid.
Wrongful trading
If in the course of a winding up it appears that the company is insolvent and at some time before the commencement of the winding up the directors knew, or ought to have concluded, that there was no reasonable prospect that the company could avoid going into insolvent liquidation, the Court may, on the application of the liquidator, order that the directors contribute to the company's assets such amount as the Court thinks fit.
No order will be made if the Court is satisfied that the directors took every step that they ought to have taken with a view to minimising the loss to the company's creditors.
This provision is somewhat novel in that when determining what the director knew or ought to have concluded, the Court may assume that the director has the general knowledge, skill and experience which may reasonably be expected from the person carrying out those functions. In addition, the director is expected to use the general knowledge, skill and experience they themselves have, i.e. a director is expected to use their specialist knowledge and experience. It is important to note that when considering the director's functions, the Court will have regard not only to those functions they carried out, but also to those entrusted to them. This means that the director can be made liable for those matters they should have done, but failed to do.
Any director faced with a possible insolvency situation should take legal advice as to what steps they should take to protect their personal position.
Criminal Liability
If a company is in financial difficulties, or in the process of being wound up, the directors may be required to prepare a statement indicating the extent of the company's assets and liabilities. In some cases, particularly with smaller companies, there may have been very little distinction made between the assets of the company and the personal assets of the controlling directors. It may therefore be a fairly painful process for the directors to disclose what is their personal property and what belongs to the company. Various criminal penalties have been enacted to deter directors from being less than honest in identifying the company's assets.
Where a company is being wound up, a director or officer of the company, would commit a criminal offence if they do not fully reveal all the company's property to the liquidator, and how, and for what consideration the company disposed of such property. They would also commit an offence if they do not deliver to the liquidator all such property as is in their custody or control.
A director or other officer of the company commits an offence if they destroy, mutilate, alter or falsify any books, papers or securities of the company or make a false entry in the company's records with the intent to defraud or deceive any person.
A director or other officer of the company commits an offence if they make a material omission in any statement relating to the company's affairs.
A director of the company commits an offence if they make a false representation, or commits any fraud for the purpose of obtaining the consent of creditors. If the business of the company is carried on with the intent to defraud creditors, or for any fraudulent purpose, every person knowingly a party to the fraud is guilty of a criminal offence.
Restriction on use of company names
When a company has gone into insolvent liquidation, the directors and shadow directors of the company are prohibited from using the company's present or past name or a similar name, which might suggest an association with the insolvent company.
If a director, in breach of these provisions, is in any way concerned with the management of a company trading under a prohibited name, that person would be guilty of a criminal offence punishable by a fine and/or imprisonment. In addition, such a person would be personally liable for all the debts and other liabilities of the business which trades under the prohibited name.
The tightening up of the rules on responsibility of directors of insolvent companies over the last few years has made it essential that advice is taken when a director is faced with insolvency. Advice is also needed when the company is successful - particularly as to areas of possible conflict between the director and the company.
Back to top
As Solicitors our advice is impartial and entirely confidential to our client. For more information on this complex area of law please contact Haydn Jones Head of our Corporate Department.
|