Guide to being a company director

Posted on May 10, 2012 by metheadmin

Company Directors

Every company in the UK has to have at least one director and, since the Companies Act 2006 came in to force, at least one of them needs to be an individual (as opposed to another company).

The director(s) are ultimately responsible for the decision making of the company and are generally given all powers to act on behalf of the company. Subject to the company’s articles of association, they can delegate some or all of these powers but they remain ultimately responsible for any decisions taken under this delegated power.

As in many areas of life, with great power comes great responsibility. The directors can be held liable for the acts of the company and its employees and therefore they need to be incredibly careful in how they go about their business.  The directors need to comply with all applicable aspects of company law and will often lean on their company secretary to assist with this area. A good company secretary should be an expert on company law and advise the directors on their compliance requirements. Nowadays private companies are not required to have a company secretary but the company secretarial services will still need to be carried out.

Governance

Corporate governance is a key to the decision making of directors. In smaller companies it is an area often ignored, but only with good corporate governance can directors be sure that they are making decisions in the right way and have all the necessary information to make that decision.

Just one example of an issue that crops up regularly is around conflicts of interest. Directors can often find themselves in a position of conflict with the company through no fault of their own. Perhaps they are also a shareholder of the company and need to make a decision that will affect different shareholders in different ways. Perhaps they are also a director of another company and the two companies could work well together. The director is in a unique position to benefit both companies, but it is also very difficult for the director to act in the best interests of both companies.

In these cases it is very important that the conflict is declared to the other directors and the conflicted director absents himself from the decision making process. Only in this way can the interests of the company be protected.

Difference between shareholders and directors

People often confuse the role of shareholder and director, especially when the two are actually the same individual (often the case in smaller companies).

The shareholders are the owners of the company and, ultimately, they are entitled to receive the assets of the company on a winding up. They also have certain control rights, including the right to remove directors and take decisions in general meetings. Continue reading →

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The key points in a Health & safety policy

Posted on April 24, 2012 by metheadmin

Key Clauses in a Health and Safety Policy

A health and safety policy is the document which outlines and administers health and safety in the workplace. It clarifies responsibilities, both of the employer and the employee under the Health and Safety at Work Act 1974. The Health and Safety at Work Act 1974 is enforced by the Health and Safety Executive, which is an independent regulatory body that deals with work related health, safety and illness.

An organisation with more than five employees is required by law to have a written health and safety policy and to carry out regular risk assessments, the details of which should be recorded.

The contents of the health and safety policy will vary depending on the nature of the business, but the key provisions of a health and safety policy include:

  • A policy statement outlining the nature and purpose of the employer’s health and safety policy
  • Employer’s responsibilities, including compliance with health and safety legislation such as:
    • Providing safe systems of work
    • Ensuring plant, machinery and other equipment is well maintained
    • Consulting with employees
    • Ensuring the premises, including access to and from buildings and other places under the employer’s control
  • Employee’s responsibilities towards each other and their employer
  • Roles / Duties – whilst all managers and supervisors have a duty towards those they supervise, a health and safety officer will usually be appointed. This can be more than one person and includes who has overall responsibility for health and safety in the workplace and who has day to day control if different
  • Risk assessments – including near misses, fire risk assessments and any other foreseeable hazard
  • Hazardous substances – including their handling, storage and transport in line with the Control of Substances Hazardous to Health (COSHH)
  • Training and supervision – all employers should receive adequate training if required within a reasonable timescale including manual handling
  • Reporting of any accidents or near misses – including who these should be reported to
  • Accidents and first aid – including a requirement that a nominated person responsible for first aid is always available and ensuring that any or all incidents are recorded. The policy should also show where first aid kits and accident books are located.
  • Occupational health – including work related stress
  • Emergency Procedures – including in the event of a fire and a requirement that emergency exits, fire extinguishers and alarms are maintained and tested
  • Consultation – requiring the employer to consult with employees regarding the health and safety and the medium through which this will be conducted
  • General Information – requiring the employer to display health and safety policies or provide employees with a health and safety handbook
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Factoring

Posted on March 30, 2012 by metheadmin

Factoring

What is Factoring?

Factoring is when a business sells its customer/client invoices or accounts receivable to a factoring company in return for an advance payment on those invoices.

Most factoring companies will pay immediate advances or first instalments of between 60% and 90% of the purchase price of the invoices or accounts receivable.

Why do Businesses Opt for Factoring?

With the economic climate the way it is right now finances for the vast majority will have taken a hit in some way or another and, with an increase in financial burden, commercial clients are taking longer to clear their accounts, if at all.

Many clients will leave it weeks, if not months, before paying their invoices which can significantly affect the cash flow of the business they owe.

With financial obligations such as salaries, rent, overheads and suppliers to be met many businesses simply can’t afford to wait these lengths of time for client invoices and accounts to be settled so are turning to factoring as a way of getting their company’s cash flow back on track.

How does Factoring Work?

  • Companies experiencing cash flow problems who are considering factoring will first need to find a factoring company that specialise in their specific area of business.
  • The business then sells their accounts receivable or invoices to the factoring company in return for an advanced payment on those accounts.
  • The advance is the first instalment and is generally between 60% and 90% of the value of the invoice or account.
  • The factoring company then takes on the recovery of the debt for each account or invoice they have purchased.
  • Once the debt is recovered the factoring company then make a further payment or second instalment to the company selling the accounts.
  • This second instalment is generally between 10% and 40% of the invoice or account value depending on the size of the first instalment or advance.
  • The factoring company will then charge the company selling the accounts a small fee for their services.
  • The factoring company’s fee is usually between 1.5% and 5% of the value of the invoice or account.

How does a Factoring Company determine its Fees?

A factoring company’s fees are determined by a number of factors including:

  • The quality of the account clients or customers supplied by the company requiring the factoring services
  • The volume of client accounts supplied each month by the company requiring the factoring services
  • Any further financial risks involved with the client or customer accounts supplied by the company requiring the factoring services

Obviously, the higher the financial risks involved the more a factoring company will be required to charge the company requiring their services.

What are the Benefits of Factoring?

There are several benefits to factoring for businesses and these include:

  •  Access to immediate or fast funds
  • The ability to pay company debts, staffing costs and suppliers
  • Factoring is quicker and easier to obtain than a business loan and, with banks and other financial institutions becoming more reticent when it comes to business lending, factoring offers a quick alternative

Are there any Disadvantages to Factoring?

There are some disadvantages to factoring which all companies considering this option should be aware of:

  • On purchase of an account or invoice, should a factoring company be unable to recover the debt, they can force the company who sold them the account to buy it back again
  • If a company is forced to buy back the account they may struggle to sell it on again at a later date due to loss in market value
  • Some companies opting for factoring may find that it can affect other forms of financing they may require to raise capital for their business

Who Qualifies for Factoring?

In order to qualify for factoring a business must:

  • Have commercial clients or customers
  • Have reliable clients or customers – The factoring company needs to ensure it will make back it’s investment
  • Have a profit or, if not, should have the necessary plans in place to achieve a profit in the near future
  • Must have a profit margin of at least 20% or, if not, should have the necessary plans in place to achieve a profit margin of 20% or more in the near future
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Consumer rights

Posted on March 27, 2012 by metheadmin

Consumer Rights

Consumers (buyer) when purchasing goods or services require some sort of protection against matters of fraud and misselling for instance. Consumer law is designed to offer protection against these issues. The Office of Fair Trading governs the market and further ensures that consumers are treated fairly and equitably.

Purchases made over the phone, via the Internet or in person are all treated slightly differently. What kind of protection is offered to a consumer is thus dependent on the forum by which the purchase was made and what was being purchased. For example, where a person seeks a loan or credit agreement (i.e. a financial product), consumer law dictates that a ‘cooling off period’ must be given to the purchaser, giving them an opportunity to change their mind. Or if a product was bought over the Internet, a receipt in written format detailing the purchase and ways to cancel or exchange the product must be given to the consumer after the purchase is made.

Consumer law therefore protects consumer rights. Particular purchases made in a specialist area are not the only type of purchase protected by the law, but also goods and services purchased generally.

Consumer law is made up of a combination of various statutes and established common law. Each statute or common law principle protects an element of consumer rights e.g. The Sales of Goods Act 1979, The Consumer Protection (Distance Selling) Regulation 2000 and The Consumer Credit Act 1974.

The Consumer Protection (Distance Selling) Regulation 2000

The Regulations were designed to offer protection to those who make purchases over the Internet, on the phone or using a catalogue etc. The rules and guidelines set specify the requirements of the retailer. Consumers are entitled to know details of the product/service, costs, delivery and cancellation policies.

The Consumer Credit Act 1974

As the title suggests, the Act was devised to protect the consumer where they have entered into a credit or loan agreement. It requires the creditor to make clear on the agreement the details of the credit amount, information on payments, any interest charged APRs and the consumer rights to cancel.

Sales of Goods Act 1979

This Act is more general in that it proffers protection to consumers against faulty good or services. The aim is to ensure that any product bought is of satisfactory quality, matches the description that the trader used to sell the product and fit for the purpose of which it was bought.

Satisfactory Quality – The item should be fault free including minor defects. The products should be satisfactory in quality given the description, price and any other relevant circumstances in the mind of a reasonable person.

Description – This requires the trader to have given the consumer an accurate account or description of the item/service so that the description matches the product.

Fit for Purpose – The product bought must be usable by the buyer for the purpose that you would usually expect from this type of item. This includes a purpose, which the seller may have told the consumer.

Rights of the Consumer Where Goods Are Faulty

A faulty item or a product/service that does not meet the prerequisites set by law entitles the consumer to have things put right. The person who sold the product is the responsible for doing this. What right the consumer has is dependent upon circumstances, however, generally speaking a consumer is has the right to a full or partial refund, exchange, repair or compensation. Although it should be noted, where a purchase is made of a defective product and the retailer informed the consumer of the fault prior to purchase, the above rights are not available.

Limitations

A consumer’s rights are limited however in the following circumstances:

  • Where a purchase is made from a private individual via a newspaper advert or car boot sale for example;
  • At certain auctions;
  • A purchase made in the course of carrying out business meaning goods a business would buy itself; and
  • Where the goods are given as a gift (the person who bought and gifted the item is the one who should be complaining rather than the person who received the product as a gift).
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Compensation for delayed flights

Posted on February 9, 2012 by metheadmin

Compensation for delayed flights

Going on holiday can be a stressful experience. Nevermore so than if your flight gets delayed or cancelled. What remedies are there if this happens?

It is possible that you may be entitled to financial compensation if this happens under E.U. Regulations. If the delay to your final destination is in excess of 3 hours then you may be able to claim.

Many factors are taken into account when calculating any compensation that you maybe due. For example, the length of the flight, whether or not it is within the EU is taken into account. It is always sensible to take out travel insurance so that any additional losses you may suffer, such as hotel and car booking will be covered and if you are booking a package holiday or through a travel agency, then it is important to ensure that they are IATA or ATOL protected.

The legislation is in respect of all flights that leave from an EU country or land in an EU country. You are also generally entitled to compensation if the flight has been overbooked and you have been “bumped” from the flight. Only if there is a sufficient delay time from the time of the original flight to the alternative flight to which you are offered.

Depending on certain flight distances and also the length of delay an airline must provide you as the passenger with complimentary meals and drinks and also phone calls, emails, telex, or faxes as well as compensation, though this is capped and you will need to look into it further before making a claim. If you wish to claim compensation and after contacting your flight operator you don’t get a satisfactory outcome you should the go directly to the Civil Aviation Authority.

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More legal controversy based on social media use

Posted on January 21, 2012 by metheadmin

Linked In related dismissal

Online activity, social media and employment law are throwing up some fascinating cases and implications, not least regarding where and how the lines are between the “personal brand” and the “corporate brand”, duties, rights and responsibilities in the workplace vis online activity.

Whilst there ahave already been quite a few test cases on certain areas such as what is disclosable in terms of facebook activity, a particularly interesting case caught our eye recently.

With Linked In, as many will know, in the profile details options, there is an option which can be ticked where the member wants to indicate he or she is interested in “career opportunities”. This can mean many things and in our view does not indicate disloyalty to an employer or an immediate desire to kleave or undertake jobs on the side. The option is ticked n=by many thousands of employees iojn theior profiles.

In the case in question, the employer took exception when finding that the employee, a Mr Flexman, had ticked the box. The employer BG Group, a major gas exploration firm sought to insist that he unticked the box, and Mt Flexman refused, he says, as a matter of principle. This of course upped the ante as far as the employer was concerned. He faced disciplinary process and resigned claiming constructive dismissal.

The arguments from the employer appear to be as follows :-

  • The employer claims that the employee was in breach of company policy
  • The employer argues that the employee has created a conflict of
  • The employer claims that the employee has disclosed confidential information
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Basics on lease extensions, purchase of freehold and absent freeholder

Posted on December 2, 2011 by metheadmin

Basics on lease extensions, purchase of freehold and absent freeholder

In 1993 the Government introduced the Leasehold Reform, Housing and Urban Development Act whereby qualifying tenants of flats have a right to either extend their leases or collectively purchase the freehold title from the Landlord on payment of a premium.

Many long leaseholders can find themselves running out of time on a lease that once seemed to last a lifetime. Even if they have 70 years left on a lease, many people can find themselves with difficulty in trying to sell such a lease on, or even to get a mortgage, since in commercial and investment terms, the lease is considered too short.

Consequently, The Government made legislation which allowed the Tenant to follow a process which would allow them the right to extend their lease or even purchase the freehold. This would allow more flexibility to sell to a prospective buyer and can also allow the new freeholders to grant themselves very long leases, such as 999 years.

It is best to try and extend the lease or purchase the freehold before your lease has less than 80 years left to run. Before this time all that needs to be paid to the Landlord is a premium for the purchase. However once the lease has 80 years or less left, the Landlord then becomes entitled to 50% of what is known as the ‘marriage value’. This is the difference in value of the property before your purchase and that of the property after. This amount can be considerably more than the simple premium you would have to pay to the Landlord before the lease dropped below the 80 year mark.

Qualifying Tenant

In order to use this right, the correct procedures must be followed as laid down in the Act. Only a ‘qualifying tenant’ has the right to demand the purchase of the freehold. This is a tenant of a flat which has a long-lease which was granted for at least 21 years. For a block of flats it is necessary for at least 50% of the flats in the building to participate in the purchase for the procedure to be used. If there are only two flats, then both tenants must participate. Where one owner owns several flats they are considered only one person, so a majority of owners are still needed.

Qualifying Property

The property itself must be mainly residential. It cannot be made up of more than 25% commercial premises.

The Initial Notice

The first step in the procedure is to issue the landlord with an ‘Initial Notice’ giving the landlord specific information including who the ‘Nominee purchaser’ is, by when the Landlord needs to respond to the notice and what terms they are offering the landlord for the purchase. The ‘Nominee Purchaser’ is usually a company set up by the tenants for the purposes of purchasing the freehold. It is extremely important that the information is given correctly on the notice, as if anything is missed then the notice is not valid. Should it be that the notice is invalidated for any reason, then another claim cannot be made against the landlord for another 12 months and the landlord could seek the costs of the abortive transaction from the tenant.

Counter Notice

Once the notice has been correctly served the Landlord must give a counter notice within the time limit specified. This must be at least two months after the original service on the Landlord.

The counter notice must specify if the landlord agrees to the tenants right to purchase the freehold or whether they are denying the right. There are only a limited number of grounds on which the landlord can rely to deny the right. This includes the invalidity of the notice or the fact that they have the intention to develop the property (this can only work if at least two-thirds of the flats have left than five years left on the leases).

Should the Landlord agree to the notice, he must specify exactly which terms laid out are agreed on and which he wishes to negotiate on. If they parties cannot come to an agreement as to the terms, then either party can apply to the Leasehold Valuation Tribunal (LVT) for them to determine any matters in dispute between them. If the landlord denies the tenants the right, then they may apply to the Court within two months of receiving the counter notice to put their argument as to why the landlord is not entitled to deny them the right.

If the landlord fails to respond to the notice then the tenant can apply to the Court within six months from when the counter notice should have been given, for a vesting order where the Court will determine the terms of the acquisition.

Once the terms are agreed or determined by the Court or LVT the landlord has an obligation to prepare the draft contract and to provide it to the tenant within 21 days of the agreement/determination. The tenants then have 14 days to make any amendments to the draft, failing which it will be deemed approved. If the tenants have made any changes, then the landlord will be given a further 14 days to make his amendments. It should be noted that the landlord can require the tenants to pay a deposit of £500 or 10% of the purchase price (whichever is greater). Additionally the tenants are liable for the reasonable costs of the landlord in valuing the property (except for negotiations), in providing information required by the tenants and in dealing with the conveyance. However, they are not liable for the landlord’s costs of negotiations or LVT proceedings, should it go down that route.

In a relatively straightforward case the entire process should take around six month from start to finish. If it is necessary to apply to the LVT or to the Court, then it could take considerably longer.

Absent freeholder problems

A major concern of some tenants is that they feel that if their landlord is absent and cannot be traced, then they lose their right to extend the lease or purchase the freehold. This is not the case although there is still extra aggravation and cost.

The Act allows for the tenants to seek a vesting order from the Court to enable them to utilise this right. The Court must be satisfied that reasonable efforts were made to trace the landlord. Evidence to prove this would include making a land registry search of the Landlords last known address and trying to serve him at that address and producing a Witness Statement confirming that someone tried to visit the landlord at his last known address and they weren’t there and no forwarding address was available. Additionally a notice should be served in the London Gazette or local paper, and proof of this must be shown to the Court.

On application, the Court may either set a date for a hearing where it will be necessary to satisfy the judge in person that you made your reasonable efforts to find the landlord, or alternatively the judge may be satisfied with the documentation sent to him in the application and grant the order without a hearing.

On granting of the vesting order the Court will set out that the freehold title may be purchased by the leaseholders. The matter will then be deferred to the LVT to determine a reasonable premium that would have to be paid into the Court.

Most absentee cases are decided by the LVT without a full hearing. Rather directions are provided to the tenant to produce certain documentation and valuations. They will then determine what price is to be paid to the Court. This decision is then sent back to the Court along with the money and the Court will then make the final order to transfer the freehold to the tenants. In this way even tenants with an absentee landlord can have the benefits of the right to purchase the freehold.

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Varying a contract of employment

Posted on December 2, 2011 by metheadmin

How easy is it to vary a contract of employment ?

The employer should first be clear as to what the existing contract states, does it include any flexibility provisions and/or a general right to vary it on the employer’s part. The employer should however be wary in any event as problems can still arise even if the contract has very favourable flexibility clauses in the employer’s favour and :-

  • ambiguity relating to the terms of the contract will almost certainly go against the employer.
  • flexibility clauses tend to be narrowly interpreted
  • the more important the change, the more a court is likely to stroke down or water down even an express clause. Big changes might be fundamental changes to job role or being asked to relocate to a place a long way away.

In the absence of an express contractual right, an employer needs to tread very carefully and adopt a consultative approach. Below are some options, some of which are very risky, others not so :-

  • Seek express agreement from the employee to the new terms.
  • Attempt to unilaterally change the employment terms and hope that the employee will acquiesce and effectively “waive” the breach of contract.
  • Terminate the current employment contract and then offer new employment on different terms.

What can an employee do if employment terms are changed but without consent ?

If an employer acts as above, this will constitute a breach of the employment contract. Employment contracts are no different to any other contract in the sense that there are different classifications of terms. Some terms in any contract will be fundamental terms i.e those terms which are obviously the most important (in the case of an employment contract clearly issues such as the job role, place of work and pay) and other terms which are less important. Whether a party in breach has committed a fundamental breach is highly significant as this impacts on the remedies available to the innocent party, in this case the employee. The general options, regardless of the type of breach (although it is important for the reasons stated above) are :-

  • To comply with the changed terms of employment but expressly under protest and claim breach of contract.
  • If the breach of contract is clearly a fundamental breach, the employee then has the right to resign claiming constructive unfair dismissal.
  • Refuse to change terms, continue to stick to the current terms and see what the employer will then do about the situation. If it is not clear whether the breach of contract by the employer would be a fundamental breach, this is a safer although very awkward in practical terms option., The employer may dismiss but would then need to justify the dismissal and will almost certainly face a claim for unfair dismissal.

Thanks to Ben Jones of Darlingtons Solicitors for this very useful contribution. Ben specialises in employment law and commercial law. Darlingtons can be contacted on 0208 951 6666.

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Hello world!

Posted on December 2, 2011 by metheadmin

Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!

Posted in Uncategorized | 1 Comment