Buying a Business and Confidentiality

Many local clients are considering buying or selling a business and, in doing so, secrecy is paramount. If details get out, the deal can be scuppered so it is important to keep things under wraps to protect relationships with customers and suppliers. In some cases, employees will be inclined to leave if they get wind of a deal in the offing.

Lawrence Furlong says:
"In the current economic climate some sales are forced due to liquidity problems and some buyers are snapping up businesses or assets. Some people often do not properly consider the legal side of the sale and purchase of a business. In June, the Information Commissioner’s Office published new guidance to help organisations comply with the Data Protection Act when providing information about their employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

TUPE ensures that employees’ terms and conditions of employment are preserved when a business or undertaking is transferred to a new employer. To achieve this, TUPE requires that certain information is provided to the new employer before the transfer takes place. This will include details of pay, contracted hours, holiday entitlement and any details of disciplinary or grievance action relating to that employee. The Data Protection Act does not prevent the transfer of this information as it is a requirement by law. However, both parties must comply with the Act when handling the information, for example ensuring it is accurate, up-to-date and secure.

If you are considering buying or selling a business contact us for a competitive quote. Call Lawrence on 01329 822333

Notes

1. Phil Jones, Assistant Commissioner at the ICO, said: “Organisations should consider their data protection obligations early in the transfer process and only transfer the information required by the new employer. Additionally, if not prevented by insider trading restrictions, employees should be told that their information is going to be passed on.”

2. A copy of the guidance can be downloaded from the ICO website at

http://www.ico.gov.uk/upload/documents/library/data_protection/practical_application/gpn_disclosure_employee_info_tupe_v1.0.pdf

3. The 7th edition of Beswick & Wine - Buying and Selling Private Companies and Businesses has just been published, which provides guidance in this field (Tottel Publishing 2008).

Corporate Restructurings

Not all businesses are as high profile as Northern Rock or Bradford & Bingley but many are going through similar periods of financial difficulties at present. Many need more cash like some of the banks that have been in the press during May 2008.

Nicholas Eve says:

"Act early and do not panic, is our principal advice to local businesses in difficulties in the present economic climate. If you may need more funds, think about that early before creditors are calling. Look at cash flow on a regular basis. The Companies Act 2006 sets out the duties directors owe to a company and if you operate through a limited company you need to ensure you comply with your legal obligations. It is an offence to trade whilst insolvent. It is important to take advice from solicitors or accountants before that point is reached so that sensible decisions can be made about the business.

It may be possible to sell off the shares in the company or its assets or sell a partnership or business operated as a sole trader which is preferable to going into liquidation as a company (or bankruptcy for a company). It is better to take charge, appoint your own liquidator or effect voluntary arrangements with creditors where possible. We can steer you through the process and also advise on any sale or refinancing of your business."

Call Nicholas on 01329 822333

Protect your Inventions

Many local businesses need better protection for their valuable commercial inventions. In December, new patent rules came into force simplifying the patent system. Patents can be registered for up to 20 years for new products or new processes.

Roger Hahn says:

“Some companies let inventions go without bothering to register them as patents, which is a waste. Others find inventors disclose the invention too soon because they have not signed confidentiality or non-disclosure agreements (NDAs) before discussing the invention with a possible business partner. We can draw up NDAs for you and advise on how best to protect your business’ intellectual property.

Another recent change is a new patent scheme run by the UK Intellectual Property Office, whereby customers can now request an online certified copy of their patent applications on line. On 13th December 2007 the revised European Patent Convention came into effect. It makes it simpler to apply for patents too where registration is needed in more than one country in the EU.

“It is wise to have written agreements with collaborative partners dealing with ownership of patents and other intellectual property rights and to ensure in commercial contracts, and even standard conditions of purchase, that it is made clear which party will own any resulting intellectual property rights. Although employers will own patents in inventions made by employees in the course of their normal duties or duties specifically assigned to them, if the individual is self employed that does not apply and it is wise to have written contracts dealing with this. We can draw up these for you. Contact us for further information”.

Call Roger on 01329 822333

Trade Marks

Many of our local clients use innovative names for their businesses and products. Some protect these by registered trade marks. From 1st October, new rules for trademarks come into force.

Matthew Bailey says:

“The new rules provide that the UK Intellectual Property Office (IPO) will now examine trade mark applications to see if the mark is distinctive and suitable for registration as now - but they will no longer check if someone else has the same or similar name. This means that unless trade mark owners are watching out for new registrations by competitors and others, they may find someone registers their name as a mark.

However, companies can oppose an application for registration of their own name or a similar name but that will occur only if they notice it is going through. This makes the UK system similar to that applying in the other 26 EU states which are part of the Community Trade Mark system. Many UK trade mark owners also apply for Community Trade Marks, which provide one mark protecting them in 27 EU states. Under the CTM system 25% of marks which are applied for are opposed but currently in the UK it is only 5%. It is likely that oppositions will also rise in the UK under this new system.

However, the IPO will notify applicants if it notices an overlap with an existing mark. There is also a system where existing owners can pay to use notification services. Contact us if you have any trade mark or similar issues. Call Matthew on 01329 822333

Directors' Duties

The Companies Act 2006 has changed the law on duties of directors. From 1^st October four of the new seven duties placed on directors of companies are in force.

John Guest says:-

“The four new duties are that the director must act within the powers granted to them by their company, that they must exercise independent judgement, must use reasonable skill, care and diligence and must promote the success of their company. The other three duties come into force in October 2008 - to avoid conflicts of interest, declare interests in transactions with which the company is involved and a duty not to accept benefits from third parties.

Many of these duties already exist as developed in case law over the years but this is the first time they have been written down in a statute. The duty to promote the success of the company extends the existing law. The director has to “act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole” This will include considering the interests of the employees, what consequences a decision will have long term, fostering good relationships with suppliers, customers and others, impact of the business on the community and environment and keeping the company’s reputation for high standards high.

If a director does not pay heed to these issues then they could be sued later by shareholders suing in the company’s name.

For more information on directors’ duties and the Companies Act 2006 in general call John on 01329 822333.

Competition Law Breaches

Most local clients know they cannot reach agreements with competitors about the prices they will charge to customers. This is a serious breach of the Competition Act 1998 and could land them in jail. However, not all are aware that acting alone they could also breach the competition rules if they are in a local ‘dominant market position’. In May, the Office of Fair Trading provisionally found that the council-owned Cardiff Bus Company engaged in predatory behaviour designed to eliminate a competitor.

Roger Hann says “The company deliberately made a loss after another bus company, 2Travel plc, entered the market. Cardiff Bus is accused of providing a new ‘no-frills’ bus service which operated below cost and was withdrawn once 2Travel left the market. The OFT found that the Cardiff Bus Company, which carries an estimated 80,000 people each weekday in Cardiff, used its dominant position to run its ‘no-frills’ services with revenues so far below costs that it was impossible for its competitor to remain in the market. If you are concerned about conduct of another company or indeed that of your own business, call us for advice on competition law.

In another case in May, the OFT announced it was carrying out a number of on-site searches as part of a criminal investigation into suspected cartel conduct in relation to the market for marine hoses used to transfer oil. Searches were carried out at two addresses in the UK, one of which was a home address. This is the first time that the OFT has carried out a search at a home address as part of a cartel investigation. The allegations under investigation relate to a possible worldwide conspiracy between executives of a number of companies to rig bids, fix prices and allocate markets in the supply of marine hoses. Marine hoses are typically used by customers in the oil and defence industries to transport oil between tankers and storage facilities. The suspected cartel may have affected contracts worth hundreds of millions of pounds. The OFT's criminal investigation has been coordinated with investigations by the US Department of Justice and the European Commission. The OFT's investigation is being carried out under the Enterprise Act.

We can fully advise you on competition law and put in place for you a competition law compliance programme.

Call Roger on 01329 822333 for further information.

Unfair Terms

Many local businesses have terms and conditions of sale or purchase when they sell or buy goods. This is very useful protection. The Government is consulting on when terms are valid and when they might be ‘unfair’.

Christina Smith says “The Office of Fair Trading is consulting on its guidance on what is an unfair term in a consumer contract. This is a very interesting document as the OFT sets out which terms it regards as unfair and which it does not. Revised guidance is due by August. We are often asked to draft contract terms for clients and it is surprising how some companies have no written terms of business at all.

We can draft standard terms of sale or purchase and advise you on how to ensure your terms stick. Some of our clients also have internet websites and need terms and conditions for those too. As the law changes fairly frequently in this field, it is wise to take legal advice. Sometimes a term which appears very helpful saying there is no liability on the part of a supplier is invalid as the law ensures that unreasonable or unfair terms in some contracts are unacceptable. This is why it is sensible to take legal advice to ensure the terms limit and exclude liability as much as possible to protect your position but do not go too far in excluding so much liability the entire clause is void.

Also, anyone who employs salesmen to sell their goods or services needs to prepare for new laws due in December which will prohibit 31 listed trading practices used to put pressure on customers and make other ‘unfair trading’ practices subject to challenge.

Contact Christina on 023 9221 0170 for further information.

Monitoring Employee Emails

If you run a business you may be concerned about the extent to which you can legally monitor employees. Perhaps you want to check their emails or listen to telephone calls. In a recent case before the European Court of Human Rights, the court held that the UK Government must pay £3,000 damages and legal costs to Lynette Copland whose emails, phone calls and web use had been monitored, by her employers at CarmarthenshireCollege, without her knowing.

Andrew Bryan says “This was the material fact – that she had not been told that her emails might be read. Most employers do tell employees and/or have a web use policy which tells them so, and so would be unaffected by this decision. Here it was held that her rights had been breached under the European Convention on Human Rights Article 8 - that "everyone has the right to respect for his private and family life, his home and his correspondence". The college had no policy in place at the time informing employees that their communications might be monitored.

The law in the UK is contained in the Regulation of Investigatory Powers Act 2000 which allows interception if employees are told, for most purposes, and the Data Protection Act 1998 under which there is a code of practice for employers. This covers surveillance of employees too. These apply in addition to a general right of privacy under the Convention mentioned above. Most employers would be wise to take some legal advice to ensure their current email policies and staff handbook are fully up to date and best protect them against this kind of claim.

Call Andrew on 023 9221 0170 for further information.

Business Leases

Does your business have a lease of property? Many of our local clients and businesses take leases of commercial premises. A new Code for Leasing Business Premises has now been agreed.

Nick Eve says: “We are sometimes surprised people do not take legal advice on commercial leases when if they were moving house they would tend to use a lawyer. Yet business leases can be just as complicated and are a big commitment for any practice. The new Code has resulted from collaboration between commercial property professionals and industry bodies representing both owners and occupiers. The Code is divided into three parts:

• 10 point requirements for landlords in order for their lease to be Code-compliant


• A guide for occupiers, explaining terms and providing helpful tips


• A model Heads of Terms (which can be completed on line and downloaded)

No one is obliged to follow the code and not all landlords will want to offer code compliant leases however the Government is keen to encourage people to follow the code. Another change our clients need to consider is the new deposit scheme of private tenants’ deposits to be held by landlords which came into force on 1st April 2007. Anyone with a property issue should contact us for further information and advice."

Call Nick on 01329 822333.

Business Law

Many local businesses feel caught up in red tape and new regulations in fields from employment law to health and safety. Stuart Nuttall says:

"We spend a lot of time with business clients and those starting a business advising on the various legal areas they need to consider. In December the Government announced major plans to cut red tape and we can advise on these changes too. The simplification plan aims to save businesses up to £700m a year."

Key measures in the DTI simplification plan include:

• New plans to simplify consumer protection legislation by replacing and improving provisions in twenty-two pieces of consumer legislation, through DTI-led implementation of the Unfair Commercial Practices Directive – in December the full proposals for this were set out


• The new International Trade Single Window to allow traders to lodge information with a single body to fulfil all import and export regulatory requirements. The one-stop-shop has just gone live through the Business Link website. Savings are expected to amount to about £60m a year


• A review announced to simplify and improve employment dispute resolution


• A Retail Enforcement Initiative establishing new ways of working between trading standards, environmental health, and health and safety and fire authorities to achieve a third fewer inspections for compliant businesses


• Companies will be allowed to communicate with shareholders electronically rather than in writing, saving larger firms £100,000-400,000 per mailing, with the implementation of the Companies Act 2006


• Form filling and access to Companies House registration and database services is being improved through automated systems. Over 50% of annual returns are being filed electronically. The £13m savings could be increased by a further £60m as a result of a joint filing initiative with Her Majesty's Revenue and Customs

If you need any advice on any of these areas call Stuart Nuttall on 023 9286 2424.

Age Discrimination Changes

Are you ready for 1st October? Have you checked your job ads to ensure they don’t refer to ages of staff or use phrases like “youthful” in setting out the person needed to fill a vacancy? Have you looked at your retirement ages and hiring policies?

Andrew Bryan a partner in Churchers says “1st October is D Day for the age discrimination legislation. All businesses need to look at their retirement policies. To start with, most employees in the UK will have a right to keep working to age 65 even if their employment contract specifies 50, 55, 60, 63 or any other age, with a few exceptions such as footballers. Check your contracts now. In addition, even at 65 an employee cannot be shown the door. You have an obligation to go through a special procedure before asking them to go, although the right to force them to leave remains, something which Age Concern is challenging in the courts as age discriminatory.

The new rules do not just apply to older people being discriminated against. There may be no good reason older people are treated better than the young or youngsters might be refused jobs they are perfectly competent to do and those younger people are protected too. Gone are the job ads – age 25 – 30 or those with words such as “young thrusting employees wanted”. Even office jokes about the elderly could not only be non-PC but also illegal and lead to an age discrimination case later.

In a country with a huge problem over funding pensions, allowing people to work longer should be enormously beneficial. However, in companies where the old were traditionally moved out to make space for the young, promotion issues may become an issue and log jams may be caused. Specialist areas like pensions require individual guidance. Call us for information on how the new rules affect you. call Andrew on 02392 210170 for further information.

Organizing Your Company

Too many businesses in the UK operate without a written agreement between partners and shareholders. Then when things go wrong or one person wants to leave the business it is not clear what should happen.

This is a common problem. When a shareholder or partnership dispute arises, the first thing solicitors ask to see is the written agreement but often there is none. Yet it does not take long at the start of a business relationship to draw up a document saying how things are organised. We would usually deal with issues such as how profits are shared, what happens if someone dies or wants to leave and when shares for a limited company can be bought or sold. Frequently, directors also do not have service or employment contracts when they ought to. A company’s Articles of Association are not a substitute for a well drawn shareholders’ agreement. Different issues arise depending on the number of shareholders. A “50/50 two director/shareholder company” will be a different entity to a “5 shareholders with 20% each” body. It is wise to have a list of matters to protect those with a minority of the shares in a company from changes which could otherwise be forced on them, such as dilution of their shareholding or a change in business focus.

There will be some changes to the law in this field when the Company Law Reform Bill is enacted, but it will not affect shareholder agreements in a major way. It will codify in one place the law on directors’ duties, which will prove very helpful for directors.

Call Michael Goodwin on 01329 822333 for information on this area.