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Stories included
- New Government promises to cut red tape for businesses
- Director of insolvent film company found guilty of wrongful trading
- Will World Cup ‘sickies’ hit your business?
- Businessmen win damages for breach of confidentiality agreement
- New right to request time for training comes into effect
- Firms using unscrupulous tricks to delay paying invoices
- Scrapping HIPs will ‘help boost the housing market’
- Divorcee awarded £215,000 - 25 years after separation
- UK opts out of European proposals on wills and cross border estates
- Overworked manager receives £110,000 after suffering from stress
- Father wins appeal to make judge reconsider child contact case
New Government promises to cut red tape for businesses
The new Government has promised to reduce bureaucracy for businesses and to take urgent action to “boost enterprise”.
Its plans were outlined in its policy document, The Coalition: our programme for government, which covers more than 30 subject areas including banking, business, jobs, welfare, equality and taxation.
As far as business is concerned, it says it will “cut red tape by introducing a ‘one-in, one-out’ rule whereby no new regulation is brought in without other regulation being cut by a greater amount”.
It will also “end the culture of ‘tick box’ regulation, and instead target inspections on high-risk organisations through co-regulation and improving professional standards”. There will also be “sunset clauses on regulations and regulators to ensure that the need for each regulation is regularly reviewed”. The Government will also "end the so-called ‘gold plating’ of EU rules, so that British businesses are not disadvantaged relative to their European competitors".
There’s a pledge to promote small business procurement “by introducing an aspiration that 25% of government contracts should be awarded to small and medium-sized businesses and by publishing government tenders in full online and free of charge”.
The word aspiration makes the pledge a little vague but many will still see it as a step in the right direction. There will also be a review of employment and workplace laws “to ensure they maximise flexibility for both parties while protecting fairness and providing the competitive environment required for enterprise to thrive”.
The Government will promote equal pay and take a range of measures to end discrimination in the workplace.
The right to request flexible working will be extended to all employees but employers will be consulted on the best way to achieve this. The default retirement age will be phased out and there’ll be a review to set a date at which the state pension age starts to rise to 66, although that will not be sooner than 2016 for men and 2020 for women.
We shall keep clients informed of developments as new policies are introduced. In the meantime, please contact us if you would like more information about any of the issues raised in this article.
Director of insolvent film company found guilty of wrongful trading
A director of a film company has been found guilty of wrongful trading after entering into a production agreement without having sufficient funds to pay for the work being commissioned.
The case illustrates the risks involved in entering into contracts while a business is struggling to avoid insolvency.
The court heard that the director had engaged the services of a facilities house to produce a film at a time when he knew, or ought to have known, that his company had insufficient funding to pay for the work and no reasonable chance of avoiding insolvent liquidation.
When the agreement was drawn up, his company had a share capital of just £2 and no other assets. Shortly after production began, the company was compulsorily wound up after the facilities house obtained a judgment against it because it had failed to pay the agreed amounts.
The liquidator then brought an action for wrongful trading. The court held that the director had taken a casual attitude both to his duty to consider the best interest of his company and his duty to his creditors.
This is perhaps an extreme case because the director had been so casual about his duties, but it’s also true that many directors are not aware of the personal risks they run as they battle to stay solvent.
As soon as a company becomes insolvent, directors have a legal duty to protect the interests of creditors. When formal insolvency procedures get underway, the behaviour of directors over the previous few years could come under investigation.
They could become liable for wrongful trading if it’s found that they continued entering into contracts or accepting credit after they knew or should have known there was no reasonable chance of avoiding insolvent liquidation. The court could then order them to use their personal assets to help settle the company’s debts.
Many directors find it difficult to recognise or accept the point at which they become insolvent so they should seek professional help as soon as problems start to emerge.
Directors also have a legal responsibility to take action if they discover that other directors are acting fraudulently or dealing inappropriately with company funds. Failure to do so could render them liable for subsequent losses.
Please contact us if you would like more information about the issues raised in this article.
Will World Cup ‘sickies’ hit your business?
Staff absence traditionally rises during the World Cup month and while the excitement may be understandable, you still have a business to run.
Even the most conscientious of workers may be tempted to ‘throw a sickie’ so they can watch the big game, or they may call in ill because they are hung over from over-exuberant celebrations the night before.
There is, of course, no statutory right to take time off to watch football so employees will need to abide by the company’s annual leave policy when requesting time off. Unauthorised absence could lead to disciplinary action, but in reality, it is better to plan ahead and try to avoid conflict.
The key is to have a clear cut policy that’s fair to all and easily understood. Some firms may be able to provide TVs and allow staff to take a few hours off to watch the game on the understanding they make up the time later.
Be wary, however, of being too hospitable by letting staff drink alcohol, especially if they have to drive or operate machinery as this could lead to health and safety issues. Employers could also be liable for an employee’s behaviour if it results in personal injury.
Many firms cannot be flexible and so staff may have to use up holiday entitlement to ensure they get time off. In this case, it’s important to ensure that there are clear and fair rules for booking such leave.
If there are likely to be too many requests then employers could use a first come first served basis, or they could get employees to draw lots. People who miss out on one key match could be given preferential treatment for the next.
It’s also possible that there may be workers who support teams other than England. They should be treated the same as England fans and given the same rights.
Remember too that this is no time for sexism – women must be given the same rights as men to watch the matches.
Of course, no matter how even handed you try to be there’s a chance that some fans will still be tempted to throw the last minute ‘sickie’ to get their way.
Employers should make sure that every employee knows that such behaviour could be considered gross misconduct and could lead to dismissal. However, care should be taken when reacting to staff suddenly falling sick on the day of a crucial game.
It may be a genuine illness. The employee should be asked to produce a sick note or some evidence that they really were unwell. If he fails to provide a satisfactory explanation the employer may be entitled to take action in line with the firm’s disciplinary policy and the ACAS Disciplinary Code.
But the real victory is to prevent it ever coming to that. Get the policy in place, let everyone know where they stand and there shouldn’t be too many problems.
Businessmen win damages for breach of confidentiality agreement
Two businessmen have won damages from a venture capital company which breached a confidentiality agreement with them.
The two men had identified an opportunity to take over and develop a pawnbroking business. They wanted to be able to manage the new business and hold equity shares.
They approached a venture capital company for funds. During negotiations, they signed an agreement to disclose information which could be used to assess the project. This included their business plan and outlined the management posts that they would occupy.
The agreement stated that the information could only be used by the venture company to assess whether it wanted to proceed. It then decided that it did want to go ahead and put forward funding proposals which the two men accepted.
The owners of the pawnbroking business agreed to sell and due diligence began. However, the two men were then told that they would not be offered the kind of management roles they had outlined in their original business plan.
The venture company then completed the purchase and later made a substantial profit when it floated the new business on the stock market.
The two men took legal action and have been awarded damages for breach of contract. The judge held that the confidentiality agreement meant the venture company had been obliged to provide the two men with the management roles specified in the business plan.
If it had wanted to proceed without them then it should have obtained their consent but it had not done so. The two men had not waived their rights and so were entitled to compensation.
Please contact us if you would like more information about contract law.
New right to request time for training comes into effect
Workers in companies that employ more than 250 people now have the legal right to request time for training.
Time to Train, which was introduced in the Apprenticeships, Skills, Children and Learning Act 2009, came into effect in April this year. It will be extended to apply to all employees from April next year.
The phased approach is intended to give smaller businesses time to prepare for the changes.
The legislation entitles employees to request time for training that is relevant to their work. This could be an accredited course that leads to a qualification, or it could involve unaccredited training that helps develop skills and improve business productivity.
The procedure for employers considering such requests is similar to the model laid down for dealing with requests for flexible working.
The employer is obliged to consider the request but can turn it down if there are good business reasons for doing so. For example, the employer may feel that the training is not relevant or would not improve business performance.
Please contact us if you would like more information about this or any aspect of employment law.
Firms using unscrupulous tricks to delay paying invoices
An increasing number of firms are using unscrupulous tricks to delay paying invoices for as long as possible, according to new research.
The business information provider, Creditsafe, found that 1 in 10 companies had been forced to reissue at least 20% of their client invoices in the last 12 months. Nearly nine out of ten companies had to reissue at least one invoice over the same period.
The research suggests that asking suppliers to reissue invoices is becoming routine for some firms who hope that the move will restart the timescale for payment. This gives them the chance to hold on to their money for longer and so protect their liquidity.
David Knowles, Business Development Director, Creditsafe said: “Unscrupulous accounts payable teams and finance directors are using every trick in the book to prevent paying invoices on time.”
The most commonly used excuse for requesting a duplicate invoice is to claim that the original was never received. This is in spite of the fact that the original was sent by registered post. Some firms can become very arrogant, as in the comment from one director: “I’m too important to read my post so why would I know you billed me?”
Faced with such intransigence it is best to start taking action as quickly as possible. A straightforward solicitor’s letter is often enough to secure payment because people then realise you are taking the matter seriously.
For those who still refuse to budge there are several other options available to get them to pay. In fact, firms can turn credit control into a profit making operation by recovering unpaid money in a way that earns more than enough to cover the cost of pursuing bad payers.
It’s possible because businesses are entitled to levy a statutory late payment fee depending on the size of the debt and they can also impose punitive interest charges. If this doesn’t make the debtor pay, it may be necessary to issue a ‘court order for questioning’ against the company secretary. This is often enough to prompt many late payers into action but for those who still refuse to pay, there are other legal options available.
Please contact us if you would like more information about dealing with late payment.
Scrapping HIPs will ‘help boost the housing market’
The Government believes that its decision to scrap Home Information Packs (HIPs) will encourage sellers back into the market and help the economy recover.
The decision was first announced in a joint policy document published by the Conservatives and the Liberal Democrats within days of the coalition being formed.
Ministers then moved quickly to suspend HIPs from May 21st to prevent any uncertainty that might disrupt the housing market. Primary legislation will be needed to abolish them permanently and that will be introduced in due course.
It means that HIPs, which have been widely criticised since they were introduced by the Labour Government three years ago, are no longer needed when selling a home. However, Energy Performance Certificates (EPC), which many people considered to be the most important component of HIPs, will be retained.
EPCs rate a property’s energy efficiency from A to G and are seen as an important part of the new Government’s policy to protect the environment. Sellers will still have to commission an EPC before marketing their property. The EPC must then be available within 28 days of the property being put up for sale.
Abolishing HIPs means the burden of paying for searches will now fall back on the buyer and so will add to their costs.
The new communities secretary, Eric Pickles, said: "The expensive and unnecessary Home Information Pack has increased the cost and hassle of selling homes and is stifling a fragile housing market.
"That is why I am taking emergency action to suspend the HIP, bringing down the cost of selling a home and removing unnecessary regulation from the home buying process.
"This action will encourage sellers back into the market, and help the market as a whole and the economy recover."
The Law Society welcomed the decision to scrap HIPs and is calling for further reform to improve the system for both buyers and sellers. It says it wants to develop new approaches that will improve efficiency, value and transparency.
The Office of Fair Trading (OFT) also say it’s time for a “shake-up” in the system of buying and selling houses in the UK.
It has just completed a study which found that the housing market is dominated by traditional estate agents with “weak competition between them on prices”.
The OFT report says that as “property prices rise during housing booms, so too do estate agents’ fees”. It calls for legislation to allow new entrants into the market with more competitive business models to provide better value for money for the consumer.
It also calls on the Government to consider additional regulation relating to the fees estate agents receive for referring consumers to providers of ancillary services such as mortgage advice and surveys.
Please contact us if you would like more information about the new developments or any aspect of buying and selling a home.
Divorcee awarded £215,000 - 25 years after separation
A barrister has been ordered to pay a lump sum of £215,000 to his former wife, 25 years after they were divorced.
The couple separated in 1985 after 13 years of marriage. They had no children. Under the divorce settlement, he agreed make regular payments to her. He then remarried and now has two children with his second wife.
The barrister retired last year and applied to have the payments dropped because his income had reduced. His former wife submitted that if the payments were to stop, he should pay her a lump sum instead as a final settlement.
When assessing the barrister’s income, the judge halved the value of some of his assets to reflect the interests of his second wife. This included his pension which would be the main source of his income.
The judge also took into account that the first wife had received an inheritance which she could use to support her needs. He then granted the order allowing the barrister to stop the payments. The wife’s claim for a lump sum payment was rejected.
The wife appealed on the grounds that she would suffer undue hardship and that the judge had overestimated the interests and claims of the second wife.
The Court of Appeal has now ruled in her favour. It held that the judge had been wrong to give priority to the claims of the second wife and that the barrister was in principle obliged to continue making the payments.
The judge had also been wrong to conclude that the first wife could adjust to the sudden loss of payments without undue hardship.
The court ruled that the barrister should pay his first wife £14,000 a year until he had paid a total sum of £215,000.
Please contact us if you would like more information about matrimonial law.
UK opts out of European proposals on wills and cross border estates
The UK has chosen to opt out of EU proposals dealing with wills and cross border estates.
The issue may be important to people who own property abroad or who may live away from their native country. Different countries have widely differing approaches to inheritance and so the administration of cross border estates can become very complex as more than one legal system may apply.
The European Commission is currently considering draft proposals to address the problem by simplifying the regulations on international successions.
The new proposals mean that successions would automatically be dealt with under the laws of the country in which the person was permanently resident before they died. This would apply unless the person had opted out and chosen the country of their nationality instead.
The proposed changes would have no effect on the succession laws of each member country.
The UK has decided to opt out for the time being because of concerns that the new regulations could create some potential problems.
For example, under English law, if a person makes a lifetime gift then, with a few exceptions, it is considered final and cannot be later undone.
However, in some EU countries such lifetime gifts can be “clawed back” in favour of family members.
Despite the decision to opt out for now, the UK may eventually adopt the new regulations when they are finalised as long as certain concerns are addressed.
In the meantime, the main issue for most people will be how to make the most of the current regulations in the UK and ensure that as much of their estate as possible will pass on to their chosen heirs.
It is important to start planning as early as possible. Make sure you make a will and keep it up to date and then look at the provisions provided by the law that could help you pass on your wealth in a tax efficient way.
Currently, there is a £325,000 threshold before inheritance tax becomes payable. It is then charged at 40% on the value of the estate above the threshold. However, there is no tax to pay if a person leaves their estate to their spouse when they die.
Since 2007, married couples and civil partners have been able to effectively double the threshold to £650,000 at today’s rates when the second spouse dies. This won’t happen automatically, however. To take advantage of this benefit, the first spouse’s unused inheritance tax threshold or “nil rate band” as it is known must be transferred to the second spouse when they die.
A solicitor will be able to advise on how this should be done.
There are other provisions people may wish to consider. For example, if you live for seven years after making a gift to someone there will usually be no inheritance tax liability – no matter how large the gift.
You can also give away a total of £3,000 each year, either to one person alone
or divided between several people, without the recipients being liable for inheritance tax on the gift when you die. Gifts made to charities, either in your will or in your lifetime, are also exempt from inheritance tax.
Inheritance tax planning can be quite complicated so it is wise to seek legal advice as soon as possible to make the most of the provisions available.
Please contact us if you would like more information about the issues raised in this article.
Overworked manager receives £110,000 after suffering from stress
A man who had to give up his job due to the stress of working a 65-hour week has received £110,000 in compensation.
The man worked for a university as a manager organising courses for overseas students. Due to short staffing, his team of four had to carry out work normally dealt with by six people.
The manager found himself working 65 hours a week on a regular basis. He had worked for the university for 10 years and had suffered from anxiety and depression in the past.
His increased workload put him under a great deal of pressure. He complained to his employers but they failed to deal with the problem.
He then took time off work suffering from stress. He was able to return briefly but was forced to take time off again.
He then decided to take legal action and claimed compensation on the basis that his employers had not done enough to support him and ensure that he wasn’t overworked.
The employer denied liability but agreed an out-of-court settlement of £110,000.
Please contact us if you would like more information about this or any aspect of employment law.
Father wins appeal to make judge reconsider child contact case
A father who appealed against a decision allowing his former wife to take their five-year-old son to Australia has won the right to have the case reconsidered.
The couple had divorced after a short marriage during which their son was born. The wife later remarried and wanted to take her son to live with her and her new husband in Australia. This would remove the boy from the jurisdiction of England and Wales.
The court ruled in favour of the mother but the father appealed on the grounds that the judge had not given proper consideration to a report on the case by CAFCASS – the agency which protects the welfare of children involved in court proceedings.
At the time of the hearing the full report was not available although a CAFCASS officer attended. The father said he did not cross-examine the officer at length because he thought a full report would be provided. This meant that his views had not been put forward properly at the hearing.
The judge went ahead without the full report and relied on other evidence when making her decision. The Court of Appeal has now held that the judge had been wrong to reach a decision without all the relevant information being available.
It meant that justice might not be seen to be done. The judge would therefore have to reconsider her decision having taken into account the full CAFCASS report.
Please contact us if you would like more information about family law issues.
Case List for June Combined Website Articles
Director of insolvent film company found guilty of wrongful trading
SURJIT SINGLA v (1) THOMAS HEDMAN (2) GONE TO HELL LTD (3) STONEWOOD COMMUNICATIONS BV (2010)
[2010] EWHC 902 (Ch)
Ch D (Peter Smith J) 28/4/2010
Businessmen win damages for breach of confidentiality agreement
(1) DUNCAN EDWARD VERCOE (2) JOHN ROBERT JAMES PRATT (3) MAS CORPORATION LTD v RUTLAND FUND MANAGEMENT LTD & 5 ORS (2010)[2010] EWHC 424 (Ch)
Ch D (Sales J) 5/3/2010
Divorcee awarded £215,000 - 25 years after separation
PHILIPPA MARY VAUGHAN V DAVID ARTHUR JOHN VAUGHAN (2010)
[2010] EWCA Civ 349
CA (Civ Div) (Wilson LJ, Hughes LJ, Patten LJ) 31/3/2010
Overworked manager receives £110,000 after suffering from stress
MARK BANNISTER V STAFFORDSHIRE UNIVERSITY
Father wins appeal to make judge reconsider child contact case
RE D (A CHILD) (2010)
CA (Civ Div) (Wall LJ, Aikens LJ) 8/4/2010
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