Company & Commercial Law’s Most Frequently Asked Questions
Company & Commercial Law, and corresponding Corporate Law, can be complex and hard to understand by definition.
Legal issues surrounding business are varied and important.
Here at Tinsdills, we have the expertise to match that importance and provide you with some much needed answers to any questions you might have.
Below you will find some of the most frequently asked questions on Company, Commercial and Corporate Law. Within each of these questions, you will also find a detailed answer.
If you can’t find what you’re looking for, feel free to use the form (right) or any other contact details provided to get in touch with us directly.
Frequently Asked Questions On Corporate Law
If you are thinking of selling your business, you firstly need to establish whether you are considering selling your whole business or a specific arm.
You should engage your accountants, tax advisers and solicitor as early as possible to discuss and plan your proposed sale from a financial, legal and tax perspective. It may be that certain pre-sale steps need to be taken in order to achieve the best sale price for your business, resolve issues that may be of concern to potential buyers or to create tax efficiency for you. Your accountants or other appropriate advisers will be able to value your business. You may then wish to instruct an agent or corporate finance advisers to market your business for sale, but always be mindful of fees involved and terms.
Before signing an agreement in these circumstances, have it checked over by your solicitor. Alternatively, you may feel comfortable in marketing your business for sale yourself. The most important thing is that you seek advice from appropriate advisers at an early stage so that they can advise on, and assist you throughout, each stage of the process.
Commercial law is a vast area and is, generally, the law relating to business operation and dealings. Typical areas include commercial contracts, service agreements, standard terms and conditions of business, advertising, marketing, franchising, outsourcing, agency and distribution, sponsorship, intellectual property and legal compliance matters such as data protection.
The advice of commercial lawyers is often sought to draft documentation, and advise on the legal issues relating to such matters, with a view to balancing risk and commercial need whilst ensuring legal compliance. Commercial Law sits alongside Corporate Law, which relates to business and share sales & purchases, shareholders’ agreements & partnership agreements, amongst a number of other things.
In the sale of a business or shares in a company, the seller is legally under no duty to disclose to the buyer any issues, defects or liabilities affecting the business, so the buyer needs to conduct its own investigations, which is known as due diligence.
Due diligence can take the form of commercial, legal, accounting, financial and tax investigations (amongst other things) and may involve various different advisers such as solicitors, accountants, tax advisers and specialist advisers (for example, health and safety or environmental consultants).
The extent of due diligence will depend on the nature of the transaction, what is being sold, the size and nature of the business and the buyer’s appetite for risk.
The aim of due diligence is to uncover any issues or risk in relation to the business
enabling a buyer to:
- Make an informed decision as to whether it wishes to proceed to purchase the
- Assess whether the purchase price offered is fair or whether there will be any issues
or liabilities post completion that should result in a reduction to the purchase price
- Have a rounded view and understanding of the business and assets that it is
acquiring and any liabilities that are being assumed
- To know whether any post-completion actions need to be taken
- To negotiate further protections from the seller in the sale and purchase agreement
with regard to known liabilities or issues
- Determine whether any additional contracts or documents are required in relation to
The GDPR (General Data Protection Regulations) only apply to the processing of personal data.
Personal data only includes information relating to natural persons who:
- Can be identified, or who are identifiable, directly from the information in
- Who can be indirectly identified from that information in combination with other
Generally, a person, or other legal entity, with significant control over a company is a person or legal entity which controls or beneficially owns that company. The law prescribes that the persons or legal entities that satisfy one or more of the following in relation to a company have significant control:
- direct or indirect ownership of more than 25% of the shares in the company
- direct or indirect control of more than 25% of the voting rights in the company
- a direct or indirect right to appoint or remove a majority of the directors of the company
- the actual exercise or right to exercise significant influence or control over the company (for example, a director who is not a shareholder)
- the actual exercise or right to exercise significant influence or control over the activities of a trust or firm which itself meets one of or more of the first four conditions
It is a legal requirement for private limited companies to keep an up to date register of the persons with significant control over that company and to inform Companies House of the same and if any changes occur.
The PSC rules can be complex, particularly in relation to shares held by trusts, partnerships or other legal structures so legal advice should be sought if you are unsure of your requirements.
In short, a shareholder can freely transfer his shares to another person provided there are no restrictions upon the shareholder doing so under the articles of association of the company in question or any agreement between the shareholders (or otherwise) relating to the shares of the company. The articles of association of the company in question and any agreements relating to the shares of the company must therefore be checked before transferring shares to any third party. There are no restrictions on the transfer of shares included in the model articles of association for companies, but it is common practice for private companies to have bespoke articles of association which incorporate such provisions.
It is important to take advice from your accountant/tax adviser and solicitor when you are considering selling your business as they will be able to advise on the best structure for the sale. An asset sale and a share sale have different effects for a seller from both a legal perspective and tax perspective.
In a share sale, the buyer will acquire the shares in the company from which your business is traded. This means that the company retains ownership of its business, assets and liabilities and continues to operate and trade in its usual way without interruption. The only thing that changes is who owns the shares in the company.
From a legal perspective sellers generally prefer share sales where they are selling all of their business, as all liabilities of the business remain with the company, meaning the sellers achieve a clean break. In an asset sale, a buyer acquires the business (the goodwill) and associated assets to the business that the seller and the buyer agree are to be sold.
In an asset sale, the buyer tends to cherry pick which assets it wishes to acquire. Furthermore, a buyer tends to only agree that limited liabilities (if any at all) will pass to it and, generally, most liabilities arising before completion of the transaction remain with the seller.
To this end, from a legal perspective, buyers usually prefer asset purchases. Asset sales are appropriate for sellers who wish to sell only a part of their business or certain assets but wish to retain the rest. Whether a transaction proceeds as a share sale or an asset sale will ultimately be a commercial decision for the parties to the transaction but may depend on the following:
- the tax consequences for the sellers and the buyer;
- the bargaining power of the parties – who wants the sale or purchase more;
- what is the economic climate at the time of the sale and purchase;
- what are the terms that are being offered;
- whether there would be any difficulties in transferring the business or any of the assets such as obtaining consent from regulatory bodies, third parties in respect of key contracts, landlords in relation to any properties out of which the businesses are traded;
- and the existence of any extensive liabilities of a company
If you are considering selling your business it is important to plan ahead and take advice from the right professionals so that you understand the legal and tax implications of the sale structures which will enable you to market a structure best for you.
This depends on whether the transaction is an asset sale or a share sale. See our FAQ ‘Should I sell my shares in my company or just the business and assets’ which briefly explains the difference between an asset sale and a share sale. In a share sale, only the ownership of the shares in your company will change and there will be no change of employer for the employees.
Your employees will remain employed by the company after you have sold your shares on the same terms and conditions as when you owned the shares in the company. Any changes affecting or regarding the employees following completion would need to be effected by the company (under its new ownership and management) in accordance with applicable Employment Law.
Generally speaking, if you transfer your business (or part of your business) through an asset sale and there are employees who work in your business, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) will apply. TUPE gives your employees the automatic right to transfer their employment to the buyer and continue to be employed by the buyer in the business following the sale. TUPE provides that the employees’ employment will transfer to the buyer on the same terms and conditions with no change to the employees’ length of service. TUPE lays down procedural steps that must be followed in relation to the transfer of a business with employees. TUPE also applies to those persons who work in the business under ‘worker’ status.
It is extremely important that you take legal advice if you have employees (or ‘workers’) and you wish to sell your business, particularly where TUPE will apply. It is the responsibility of both the outgoing employer and incoming employer to ensure the TUPE provisions are complied with and severe penalties can be imposed by employment tribunals on both the outgoing employer and incoming employer for non-compliance and/or employee dismissals by reason of, or reasons associated with, a business transfer.
A contract can be transferred by a party to the contract in question either by assignment or novation.
Assignment is the process of transferring the rights of a party under a contract to a third party. Novation is the process of transferring the rights and obligations of a party under a contract to another. Unless an assignment is prohibited or restricted in a contract, a party may generally assign its rights under the contract to a third party without the consent of the other party to the contract. A person cannot usually assign its obligations under a contract meaning the obligations may remain with the original party.
A novation cancels the current contract with the existing parties and creates a new contract with the new parties and therefore generally requires the consent of all parties involved in the novation. The starting point therefore is to review your contract terms and to consider whether you are transferring rights under a contract only or your rights and your obligations. This will determine whether you are able to assign your contract (with or without consent) or whether you need to novate the contract. There are various ways in which an assignment and a novation can be effected. It is therefore important to seek legal advice if you wish to transfer a contract.
The typical way to protect your business name and logo with regard to the goods and/or services that you provide within your business, is by registering your business name and logo as a trade mark at the Intellectual Property Office.
Trade marks may also comprise slogans, symbols, colours and, interestingly, smells. Intellectual property is a complex area and often specialist intellectual property attorneys are needed to assist. We can help you in the registration of trade marks, but other intellectual property matters (including intellectual property disputes) may need to be dealt with by specialists in that field.
The short answer is no, unless you have a contractual right to do so. You may have the right to do so in a shareholders’ agreement, option agreement or the articles of association of the company in which the shares are held. Take legal advice before transferring your shares to another person.
Yes. The Companies Act 2006 requires private companies limited by shares to keep the following registers in addition to the requirement to notify Companies House of certain matters:
- a register of members;
- a register of directors;
- a register of director’s residential addresses;
- a register of secretaries; and
- a register of people with significant control (PSC Register).
The Companies Act 2006 prescribes certain information that must be contained in
A company’s registers can be kept in electronic or paper format and should be kept at the company’s registered office address unless the statutory procedure for keeping the register at a different location has been followed. Private companies have the option of keeping the information currently kept on the following registers publicly at Companies House, as an alternative to keeping their own registers:
- the register of members;
- the register of directors;
- the PSC register;
- and the register of director’s residential addresses.
However, many companies choose not to keep the above registers publicly as private information, such as the dates of birth and residential addresses of the directors and persons with significant control.