Category Archive: Company & Commercial

1. Recent court case demonstrates why incorporation of terms and conditions matters

   June 29, 2021 12:07 pm Leave a Comment

   A recent High Court case, concerning, amongst other things, whether or not the supplier’s standard terms and conditions were properly incorporated into the contract between the parties, has demonstrated the need for careful drafting of standard terms and conditions.

   Phoenix Interior Design Ltd v Henley Homes plc [2021] EWHC 1573 (QB) was a lengthy court case involving a number of complex legal issues, including in respect of the reasonableness of an exclusion from the warranty for goods and services supplied.

   The claimant – an interior designer – sought to bring a claim against unpaid invoices from the defendant for monies owed in connection with goods supplied and services rendered in relation to the refurbishment of (what the defendant claimed was) a five-star hotel in the Scottish Highlands.

   The claimant asserted that the balance outstanding from the defendant comprised one half of the agreed price under the contract between them. However, the defendant counterclaimed that the goods supplied were defective. The defendant further argued that, as the last half of the price was payable on completion and (in their opinion) performance was defective, completion had never occurred and the remaining half of the price had never fallen due for payment.

   In relation to the standard terms and conditions, the initial question arising was whether the claimant’s standard terms and conditions had been incorporated into the contract between the parties. Here the court referred to an earlier (2006) case for the test for incorporation with the question as to whether terms and conditions had been properly incorporated into the contract between the parties depending “on whether that which each party says and does is such as to lead a reasonable person in their position to believe that those terms were to govern their legal relations’. The court also considered whether the claimant, in issuing its standard terms and conditions, had done all that was reasonably sufficient to give the customer (the defendant) notice of those conditions.

   Having been handed to, and later emailed to, the defendant, the court concluded that the claimant’s terms and conditions had been incorporated into the contract. The High Court further held that the claimant was able to recover almost all of the remaining amount of the contract price due to it, due to the successful arguments in respect of the reasonableness of its terms and conditions and the factual circumstances around the claim itself. However, this case serves as a cautionary tale to suppliers of goods and services to ensure that they provide a copy of their terms and conditions before the contract is formed and not merely after the fact – for example, on the back of the invoice.

   If you require advice on your business’ standard terms and conditions and the proper incorporation of the same, or you wish to have your terms and conditions reviewed by one of our specialist corporate and commercial law solicitors, contact us by telephone on 01782 652392 or fill out our contact form here https://tinsdills.co.uk/business/company-commercial/

2. Colin v Cuthbert: The Great British Cake Off

   April 26, 2021 4:54 pm Leave a Comment

   As most people will know, M&S have brought court proceedings against Aldi in relation to Aldi’s ‘Cuthbert the Caterpillar’ cake. Apparently, it was as long ago as 1990 that the now famous caterpillar cake was first sold by M&S, and it claims to have since manufactured 15 million caterpillar cakes under the names of ‘Colin the Caterpillar’ and his female counterpart ‘Connie the Caterpillar’. Following their huge success, in 2008 and 2016 respectively, M&S protected those brands as UK trademarks, which M&S now claim Aldi have breached with the sale of their own brand “Cuthbert the Caterpillar”, who bears a striking resemblance to the M&S original.

   A trademark can be any sign that identifies you as the owner of your goods or services to make it clear they belong to you and gives the owner of a trademark exclusive use of that sign. Many things can be registered as a trademark, but names and logos are the most common, however a trademark can be anything that allows consumers to distinguish a business’s goods or services from those of another.

   Trademark registration gives the owner the right to sue anyone who uses an identical or similar mark in the course of trade, without the owner’s consent, for infringement as is the case with M&S and Aldi. For M&S to succeed, they will have to prove that Aldi’s Cuthbert the Caterpillar cake has caused or is likely to cause confusion to consumers.

   M&S may also argue that Aldi’s Cuthbert the Caterpillar cake amounts to passing off. Passing off is a common law offence which can protect any goodwill associated with unregistered rights, which can include the appearance of a product. In this case M&S would need to show that Aldi’s Cuthbert the Caterpillar cake has damaged, or has the potential to damage, their goodwill in Colin the Caterpillar.

   The Court’s decision will depend on whether it believes confusion between the products was likely at the time when Cuthbert the Caterpillar cake was sold and whether Aldi is benefitting commercially by bringing a confusingly similar product to the market.

   Interestingly most other supermarkets have also created their own similar product. The UK’s ‘big four’ supermarkets have been selling similar style cakes for some time under the names ‘Curly the Caterpillar’, ‘Wiggles the Caterpillar’, ‘Clyde the Caterpillar’ and ‘Morris the Caterpillar’, all of which are Caterpillar shaped cakes. It remains to be seen if M&S will also issue legal proceedings against these brands.

   Regardless of the outcome some may say that this is a shrewd move from M&S due to the significant publicity and media attention this legal battle has created.

3. Legal Update: Extension for exemptions under the Corporate Insolvency and Governance Act 2020.

   March 26, 2021 4:47 pm Leave a Comment

   Changes have today come into force to extend the limited suspension of provisions and other temporary provisions which were introduced last year under the Corporate Insolvency and Governance Act 2020 (CIGA 2020). Under the new regulations, provisions have been made to:

   • extend the temporary suspension in the wrongful trading provisions in section 214  Insolvency Act 1986 (wrongful trading), and section 246ZB (wrongful trading: administration), by extending the relevant period until 30 June 2021;
   • extend the relevant period of various temporary provisions under CIGA 2020
     
     • the exclusion for small suppliers from the prohibition on clauses triggering termination of contracts due to insolvency of the customer, to 30 June 2021;
     • the relaxation of entry requirements for companies into the Part A1 moratorium procedure and prescribed rules contained in CIGA 2020; and
     • the restriction on statutory demands and winding-up petitions.

   For more information on the changes under CIGA 2020 and how these affect your business, contact one of our specialist commercial law solicitors on 01782 262031.

   Want to know more about CIGA 2020 and the changes to insolvency provisions?

   Read our recent article: https://tinsdills.co.uk/legal-update-changes-introduced-to-insolvency-provisions-and-the-law-on-termination-of-b2b-supply-contracts/

4. Is my Personal Guarantee still Enforceable?

   March 22, 2021 5:11 pm Leave a Comment

   Is my personal guarantee still enforceable if my directorship was terminated due to the company’s liquidation?

   A recent High Court decision in Nirro Holdings SA v Patrick O’Brien [2021] EWHC 279 (Ch) considered whether the term of a personal guarantee, given by a director over the debts of a company, were enforceable in circumstances where the director’s office had been terminated as a result of the liquidation of the company.

   In Nirro, Mr O’Brien and his wife were directors and (originally) 100% shareholders in a company specialising in audio visual and conferencing facilities. In 2014, the company secured an agreement to supply video conferencing facilities to Google’s offices in Russia. It was required to have a joint venture partner for the deal and so entered into an agreement with a subsidiary of Nirro.

   Nirro made a series of loans to the company, for which Mr O’Brien provided personal guarantees (as if often required to provide security to lenders). The company then failed to repay the loans and was placed into administration in 2016 and, in 2017, was dissolved and removed from the companies’ register.

   One clause in the guarantee given by Mr O’Brien, required that he irrevocably and unconditionally guarantee the proper and punctual performance of the guaranteed obligations of his company. He further guaranteed that he would also remain a member of the board and a shareholder of the company. A later clause in the guarantee provided that, on or after a “Significant Event”, the guarantor (Mr O’Brien) would fully perform the guaranteed obligations and be liable to Nirro for losses, costs and expenses resulting from the breach. A “Significant Event” was defined to include “the guarantor resigning or otherwise ceasing to be a member of the board of directors of the Company for any reason other than ill-health, death or by mutual agreement”.

   Nirro claimed that the company owed it in excess of £1.9m under the terms of the loans and that Mr O’Brien was obliged to pay that amount under the terms of the guarantee, arguing that as Mr O’Brien had ceased to be a member of the board of directors (because the company had been wound up).

   Mr O’Brien, meanwhile, denied that his ceasing to be a member gave rise to a ‘Significant Event’. The case came down to a matter of contractual interpretation, as he argued that the events anticipated by the agreement giving rise to his liability included his resigning (because he would the no longer be contributing to the success of the company), rather than his being removed upon the company’s liquidation. References to the “company” implied an existing entity and so, as dissolution was not specifically referred to as a “Significant Event”, O’Brien argues it was not a triggering event.

   So what did the courts decide and does it mean a guarantee is still enforceable if you cease to be a director because your company is in  liquidation?

   Deciding the matter in Nirro’s favour, the judge concluded that a “Significant Event” was defined to include Mr O’Brien’s ceasing to be a director in any circumstances, including the liquidation of his company. It therefore followed that he was liable to Nirro in respect of the debts owed to it.

   Whilst every guarantee will be limited to its circumstances and the specific wording used it both the guarantee and any loan agreement to which it relates (as well as any earlier agreements between the parties which have been superseded, as was the case in Nirro), this recent case highlights the importance of seeking independent advice before entering into a personal guarantee.

   Personal guarantees are becoming increasingly commonplace in the current commercial market and so, if you require advice on a personal guarantee (whether new or existing), why not speak to one of our specialist corporate and commercial law solicitors on 01782 262031.

5. What is ‘fair value’ anyway?

   February 19, 2021 1:05 pm Leave a Comment

   A recent High Court case has shed some light on the ‘fair value’ of shares held by a minority shareholder, which some would say may not have been that fair.

   It is common practice for companies with more than one shareholder (particularly those with employee or minority shareholders) to include provisions requiring those shareholders to transfer their shares back to the company or to other (usually, majority) shareholders on the occurrence of certain events. Whenever a transfer takes place, the price of the shares being transferred should be considered and the articles of association (and shareholders’ agreement, if there is one) will usually determine whether that price is: nil, par value, fair value or something else. Nil or par value are easy to determine but the company’s articles of association will usually include specific wording as to when fair value is applied and how it is calculated. This is where things can get tricky.

   In Re Euro Accessories Ltd Monaghan v Gilsenan and another [2021] EWHC 47 (Ch), fair value was discussed and, in particular, whether a minority shareholder was entitled to have his shares valued at an amount calculated pro rata to the value of the entire issued share capital of the company or whether the value should be diminished due to the ‘minority’ nature of his shareholding.

   In 2003, the petitioner had joined the company as a sales representative. In February 2008, another shareholder voluntarily transferred 24.99% of the then issued share capital of the company to the petitioner. Some time around January 2010, the relationship between the parties broke down and, on 31 January, the petitioner resigned from the company, triggering a compulsory transfer of his shares in accordance with the company’s articles of association.

   The minority shareholder argued that the meaning of the expression ‘fair value’ was akin to the definition found in the 2013 edition of the International Valuation Standards: “the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties”. The majority shareholder, however, contended that ‘fair value’ meant the value of the shares on a sale between a willing buyer and a willing seller and that, as the shares represented a minority holding, the price should be discounted to reflect that fact.

   The High Court rejected the minority shareholder’s argument that ‘fair value’ (within the context of the company’s articles of association) meant that he was entitled to be paid an amount for his 24.99% minority shareholding which was calculated pro rata to the value of the entire issued share capital of the company. Instead, the Court held that it was a clear statement of general principle that, unless there were indications to the contrary (for example, in the company’s articles of association or shareholders’ agreement) then the general principle was that a ‘fair value’ had to be given to what was actually being compulsorily transferred (in this case, a minority shareholding with less control over the company than a majority or equal shareholding, inherently making those shares less valuable).

   If you would like us to review your company’s articles of association or to review or put in place a shareholders’ agreement with considered fair value provisions, contact us on 01782 262031.

6. Is your business ready for Brexit?

   December 17, 2020 1:32 pm Leave a Comment

   The transitional arrangements under the UK-EU Withdrawal Agreement deferred many of Brexit’s legal effects on UK law by requiring the UK to continue adhering to EU law from exit day until 11pm on 31 December 2020 (known as IP completion day).

   With the prospects of a no-deal Brexit looking increasingly likely and the Government telling us to prepare for the same, every business should be considering how the market will look for them on 1 January 2021.

   One example of the impending changes, is highlighted by the new designated standards issued by the Office for Product Safety and Standards (OPSS). The new standards are intended to help stakeholders prepare for the IP completion day and beyond and covers a range of related matters, including:

   • harmonised standards with a presumption on conformity to EU law will become designated standards by references published on gov.uk;
   • harmonised standards will remain the relevant standard for placing goods on the market in Northern Ireland;
   • the content of the standard;
   • deciding whether a standard is appropriate for designation; and
   • referencing designated standards.

   It is likely that new and updated guidance will be issued as the transition period progresses, so businesses are advised to monitor the Government’s designated transition website: www.gov.uk/transition          

   If you would like to discuss how Brexit will affect your commercial contracts after IP completion day, call us on 01782 262031 to speak to one of our specialist corporate and commercial solicitors.

7. Signing Contracts When Working from Home: What’s the Risk?

   September 21, 2020 8:34 am Leave a Comment

   In an attempt to slow the spread of COVID-19, the offices of many businesses remain closed. For those that have opened their doors, many continue to recommend that their staff work from home or that the offices operate on a skeleton/reduced staff basis. This will inevitably mean that it may not always be possible for contractual parties to execute documents in person. So, what does that mean for you legally?

   It makes sense to start by explaining the two fundamental ways in which documents can be executed: either as a contract; or, as a deed.

   A deed is a written instrument, executed with strict formality. There are four formalities to satisfy when executing a document as a deed:

   1. a deed must be in writing;
      
      
   2. it must be clear from the face of the document that it is a deed (usually achieved by referring to the document as a deed within the document itself);
      
      
   3. it must be executed correctly according to various statutory requirements (this includes, for the most part, the need for signatures to be witnessed); and
      
      
   4. it must be delivered. Delivery does not mean physical delivery. A deed is ‘delivered’ when the parties to the deed make clear their intention to be bound by the deed.

   In contrast, a simple contract may be made under English law in writing (or orally) without the need for the formalities required of a deed.

   So how can I execute documents virtually?

   The Law Society has issued (non-exhaustive) guidance on the virtual execution of documents.

   Simple contracts can easily be executed through use of an electronic signature.

   Electronic signatures can take a number of different forms, including:

   1. typing your name into a contract or into an email containing the terms of a contract;
      
      
   2. electronically ‘pasting’ your signature or an image of your signature into an electronic version of the contract;
      
      
   3. accessing a contract through a web-based e-signature platform and clicking to have your name in a typed or handwriting font automatically inserted into the contract; or
      
      
   4. using a finger, light pen or stylus and a touchscreen to write your name electronically.

   In the case of deeds, matters are somewhat nuanced. The general attitude of the courts towards electronic signatures is that it seems theoretically possible for a deed to be validly executed electronically provided the requirements for a valid deed can be satisfied. However, an issue (amongst others surround the formalities for creation of a deed) arises at the point of requiring a signature to be witnessed. Generally speaking, signatures to a deed require an independent adult witness to be present. This is usually not an issue but, when you are working from home, social distancing or self-isolating due to COVID-19, things get tricky. To be independent, the witness must not be related to you. This means you cannot simply call on a family member, living in your household, to witness your signature to the document.

   With that in mind, how do you get your signature witnessed? Well, the Law Society has been somewhat unclear on this point but it appears that, where a witness cannot be in the same room as you when you sign a document electronically (which is the preferred and advised option), the solution may not be as simple as having the witness watch you sign the document via video call and then signing the document once it is sent on to them. After all, this could create evidentiary risk as to whether the person genuinely witnessed the signing.

   Until the issues surrounding virtual execution of deeds and, in particular, the remote witnessing of signatures are clarified by way of parliament or court ruling, it would appear that the safest approach is to avoid seeking to execute deeds electronically and for witnesses to be physically present for the signing of the same unless absolutely necessary and, if electronic signatures are to be used, to take legal advice on the steps to be taken to effect a valid execution. Electronic signature of simple contracts, however, should be of little issue.

   If you would like further information and advice on the execution of contracts, contact one of our specialist corporate and commercial solicitors on 01782 262031.

8. Legal Update: Changes Introduced to Insolvency Provisions and the Law on Termination of B2B Supply Contracts

   August 6, 2020 10:59 am Leave a Comment

   The Corporate Insolvency and Governance Act 2020 (“CIGA 2020”) was first introduced as a bill in May 2020 and, having been fast-tracked though Parliament in light of the COVID-19 pandemic, came into force on 26 June 2020.

   According to its explanatory notes, “the overarching objective [of the CIGA 2020] … is to provide businesses with the flexibility and breathing space they need to continue trading during this difficult time” but, whilst the changes may bring relief to customers, they do little to help suppliers who are struggling to cope in the wake of the COVID-19 pandemic.

   The CIGA 2020 introduces new provisions into the Insolvency Act 1986 aimed at ensuring the continuity of supplies and restricting contractual termination provisions related to events of insolvency. Whilst the CIGA 2020 has been fast-tracked in the wake of the COVID-19 pandemic, the changes introduced have been intended for some time and will be permanent, save in respect of a temporary ‘small suppliers’ exception.

   The changes made by the CIGA 2020 are not intended to apply to consumer contracts but will apply to any B2B contract for the supply of goods or services. They will also apply to contracts for the sale of any assets, stock, consumables or other goods; intellectual property licences which also involve the provision of some services; and joint venture agreements (where the supply of goods or services will be an integral part of the wider transaction).

   Effect of CIGA 2020 on insolvency procedure triggered provisions in contracts

   If a company enters into a relevant insolvency procedure (such as liquidation, administration, moratoriums (including the new moratorium created by the CIGA 2020), voluntary agreements, the appointment of a provisional liquidator and other procedures) on or after 26 June 2020, a supplier of any goods or services to that insolvent company will no longer be able to rely on a contract term entitling the supplier to terminate the contract because of the commencement of insolvency procedures.Subject to certain exemptions, you must continue to supply to the insolvent company.

   The CIGA 2020 also expressly prohibits making the continued supply of goods and/or services to a company after that company has entered into a relevant insolvency procedure subject to the payment of any outstanding charges for supply which accrued before the procedure began. You can no longer cease to supply because an invoice issued before the procedure began remains unpaid.

   A person supplying goods or services to a company which enters into a relevant insolvency procedure will also no longer be able to rely on a contract term entitling it to do ‘any other thing’ as a consequence of that company becoming subject to such a procedure. This would include withholding deliveries from an insolvent customer if the trigger for that right is the entry into the procedure.

   The restrictions will remain in place throughout the duration of the insolvency procedure.

   It is still potentially possible to rely on the termination (and other) rights contained in a contract for the supply of goods/services but only where the supplier can satisfy a court that not allowing the enforcement of such provisions would result in ‘hardship’ for the supplier. Unfortunately, the CIGA 2020 does not define what ‘hardship’ means and so it will be for the courts to interpret this as they see fit.

   Temporary exemption for small businesses

   Whilst the changes brought into force by the CIGA 2020 seem to favour customers over suppliers, there is at least some good news for small businesses who supply goods or services. As part of the CIGA 2020, a temporary exemption from the changes was introduced for qualifying small businesses.

   The exemption will run until the end of September 2020 and applies to ‘small’ businesses who meet at least two of the following conditions (in their most recent financial year):

   • turnover of not more than £10.2 million;

   • balance sheet total not more than £5.1 million; and

   • not more than 50 employees

   This exemption means that ‘small’ business suppliers will still be able to enforce the provisions of their contracts during this period.

   Other exemptions to the changes are available but these are limited in nature

   Recommended actions for suppliers

   • Review/redraft any standard contracts used by the business that involve an element of supply of goods/services so they are fit to be used under CIGA 2020.

   • Review contract management procedures and retrain those responsible for managing any contracts with customers to which they supply to ensure that they understand the implications of the CIGA 2020.

   • Review any existing contracts (particularly those of high value/importance) to identify any changes to the way in which they will need to be managed going forward.

   • Review your processes for financially monitoring customers so that you can manage risk and ensure you have an earlier warning of any insolvency.

   Suppliers will need to consider how to account for the additional risk that the CIGA 2020 forces them to take in any contract pricing. For example, suppliers may wish to consider contracts that increase the amount payable in the event of non-payment within the contractually agreed time. There are, however, certain legal requirements necessary to make such provisions enforceable.

   Additionally, suppliers may have to consider simply raising their prices to any business customers whose future solvency is in doubt, or, particularly in the case of high risk customers, insisting on payments being made before any supply takes place.

   If you would like to speak to one of our commercial solicitors regarding the changes that have been introduced by the CIGA 2020 or to discuss amending your standard commercial supply contracts, please telephone on 01782 262031 or by email at lawyers@tinsdills.co.uk

9. The Importance of a Shareholders’ Agreement

   June 19, 2019 11:29 am Leave a Comment

   [vc_row][vc_column][vc_column_text]Having a well-drafted shareholders’ agreement in place not only documents the understanding between shareholders in relation to particular matters, which can provide certainty, but can also provide shareholders with better protection in the unfortunate event of relationships deteriorating.

   So what is a shareholders’ agreement?

   A shareholders’ agreement is a contract between the shareholders of a company, and more often than not, the company itself, which sets out agreed matters between them such as how shares can be transferred, how dividends are payable, non-compete restrictions and exit plans, amongst other things. It gives the shareholders personal rights and imposes personal obligations on the shareholders.

   The agreement can provide protection to minority shareholders and majority shareholders, regulate the transfer of shares, impose restrictions, govern decision-making, and much more.

   It is also very easy for individuals to go into business together and to hit the ground running without thinking about what happens to the company if there is a major disagreement. Despite good intentions, there will be times during the life of a company where disagreements occur. A shareholders’ agreement can include a dispute resolution procedure which can be utilised if relationships have broken down, and which will give the parties a structured plan in stressful circumstances.

   However, it is important to ensure that the company’s articles of association are consistent with the shareholders’ agreement to avoid uncertainty or conflict and ensure adequate remedies are available in the event of a breach of the provisions. Together, the articles of association and the shareholders’ agreement regulate and govern the running of the company, the relations between the company and its directors & shareholders. Below are a few common questions often asked when discussing the benefits of a shareholders’ agreement.

   Below are a few common questions often asked when discussing the benefits of a shareholders’ agreement.

   Why should the shareholders have an agreement?

   Some of the main benefits of a shareholders’ agreement are:

   • In the event of a dispute occurring, a well-written shareholders’ agreement can provide a dispute resolution procedure to be followed, with the intention of resolving disputes swiftly in order to protect the company’s business. A shareholders’ agreement may also prevent a dispute escalating as
     the provisions may assist in clearing up any misunderstanding between the parties.

   • Share transfer provisions, such as pre-emption rights (the right of first refusal), compulsory transfer provisions (deemed transfer of shares in certain situations) and permitted transfers (the ability to transfer shares to family members or intra-group).

   • It can include specific policies in relation to the declaration of dividends, providing for certain levels of dividend to be declared, certain reserves to held or different policies that apply to different classes of shares.

   • It can offer protection to minority shareholders, such as providing for matters that require the consent of minority shareholders or “tag along” rights in respect of any sale of shares by the majority shareholders allowing the minority to “tag” on to that sale.

   • It can also offer protection to majority shareholders, such as the ability to oblige the minority shareholders to sell their shares if an offer is received for the entire share capital of the company and they wish to sell.

   • It can detail agreed provisions relating to the management of the company at the director level, which helps to provide clarity and consistency regarding the day to day running of the company. For example, detailing matters that would require the consent of the shareholders or allowing specific shareholders to appoint directors.

   • It can impose restrictive covenants on the shareholders, restricting their ability to be involved in any business that competes with the company’s business or provides services to the clients of the company or engages suppliers.

   • It can provide for what will happen where consent to certain matters require the consent of two or more parties and such consent is not forthcoming. As a result, the inaction may adversely affect the company’s business. Deadlock provisions can be included in an agreement which provides the mechanics of how the deadlock will be resolved, usually by providing that the parties can buy each other’s shares.

   • It can impose confidentiality restrictions on the parties to the agreement to protect valuable information that is key to the company’s business, both whilst the parties are involved in the company and after.

   • The process of drawing up a shareholders’ agreement requires the shareholders to address many provisions and scenarios, such as what happens if a shareholder wishes to transfer or sell his shares or passes away, exit strategies, and how shares would be valued in different scenarios. On a practical level, this engages the shareholders to discuss, consider and agree with each other an acceptable position in relation to such matters which, in doing so, focuses minds and minimises the risk of disagreement in relation to such matters in the future if and when they arise.

   • It can include provisions that relate to commercially or financially sensitive matters which are not appropriate to be included in the articles of association of the company (which is a publicly available document).

   • The agreement can also demonstrate that the shareholders have planned ahead and have acknowledged that disputes may arise, but have attempted to address how such disputes would be handled to minimise disruption and detriment to the company and its business. Having such foresight can create a good impression if the company is seeking finance or investment from third parties.

   What are the risks of not having a shareholders’ agreement?

   Some of the main risks of not having a shareholders’ agreement are:

   • If things don’t work out as planned, difficulties can arise without a clear exit strategy for shareholders.

   • Shareholders who leave their employment with the company may be able to retain their shares, which is often commercially undesirable.

   • Minority shareholders are forced to rely on statutory rights which, in practice, may be cumbersome and expensive to enforce.

   • Minority shareholders may be able to block a sale.

   • If there is a deadlock situation and no resolutions either at director or shareholder level, draconian measures such as winding up the company may be the shareholders’ only option, which can be extremely time-consuming and expensive.

   • Shares are, at law, freely transferable unless the articles of association of a company, or any relevant agreement between shareholders, prevents this. So without appropriate share transfer restrictions, the shares are at risk of transfer to unknown parties.

   • Reliance on common law confidentiality obligations which may be more difficult to enforce.

   • Departing shareholder’s ability to set up a competing business, poach employees or suppliers.

   • The directors may be able to take decisions of the company which the shareholders would want to be involved in, such as excess capital expenditure, acquisitions or sales of other businesses or assets, making or receiving loans or other financial commitments.

   What are the benefits of seeking legal advice on a shareholders’ agreement?

   It is always advisable to seek legal advice on the terms of any legal agreement.

   It is often the case that the risks lie with what is not in the agreement rather than what is.

   

   The terms of a shareholders’ agreement and the articles of association of a company are very much tailored to a company’s share and management structure, and the company’s future plans. The agreements are not “one size fits all” and receiving advice appropriate to your company circumstance is imperative to avoid creating more problems than the agreements solve.

   We can negotiate and draft all terms of a shareholders’ agreement and articles of association on your behalf. We have vast knowledge and experience in drafting both simple and complex agreements and articles to suit your needs. Getting the right legal advice at the right time can help to keep your business running smoothly in order to achieve long-term success.

   If you have any other questions regarding this subject or Commercial Law generally, feel free to contact us today. Give us a call on 01782 652300 or email us at lawyers@tinsdills.co.uk.[/vc_column_text][/vc_column][/vc_row]

10. Gift Cards for Christmas: What Happens if a Retailer Goes Bust?

    December 20, 2018 1:24 pm Leave a Comment

    [vc_row][vc_column][vc_column_text]What do you get for that difficult-to-buy-for family member at Christmas? We’ve all been there, and chances are a fair number of us have ended up buying some sort of store gift voucher. It’s a simple but useful option that everyone appreciates!

    Against the backdrop of reports of some high street retailers going through difficult times, it’s worth bearing in mind that if the retailer whose gift vouchers you have bought ends up in insolvency, administrators routinely refuse to honour the vouchers. Instead the voucher holders are treated as if they are unsecured creditors of the company. In practice, this means that they will receive only pennies in the pound, if anything at all. This happened most recently a few months back when House of Fraser went into administration.

    The problem can also extend beyond gift vouchers to goods which have been purchased online and paid for, but which have not been delivered at the time the retailer enters administration. In legal terms, “property” in the goods has not yet passed from the retailer to the buyer – it does so at the point of delivery – and so the administrators are entitled to say that the goods still belong to the company.

    So, can anything be done to reduce the risk?

    The most obvious step is for the recipient to use the vouchers sooner rather than later, minimising the risk of the retailer becoming insolvent.

    However, there is another method that can be used in higher value purchases. If the present-giver has used a credit card to purchase the vouchers, the Consumer Credit Act 1974 provides a degree of protection where goods have been ordered and paid for, but which are not delivered. As long as the transaction value was between £100 and £30,000, the card issuer would be required to refund pre-payments.

    Additionally, Visa and MasterCard both operate card schemes which provide that in circumstances where goods have been ordered and paid for but the retailer goes into administration before they are delivered, the payment debited to the card holder will be charged back and refunded. In this case, there is no minimum transaction value.

    Ultimately, if you really are stuck on what to get that person who is a nightmare to buy for, the easiest way to minimise risk is to pay using a credit card rather than cash.

    If you are seeking further advice on an issue with gift vouchers or cards this Christmas, or if you need help with any of the other legal issues we cover, then feel free to get in touch. You can call us on 01782 652300. You can also drop us an email at lawyers@tinsdills.co.uk. [/vc_column_text][/vc_column][/vc_row]