Business Law

The Court of Appeal recently decided a case on the correct approach for courts in considering whether a company can be held liable for the acts of one of its employees.

The case of R v St Regis Paper Company Ltd dealt with the issue as to the extent to which the company could be held criminally liable for the action of its employee who had intentionally made a false entry in a record required for environmental pollution control.

The employee who had the role of technical manager was convicted of deliberately falsifying records but the issue for the Court of Appeal was whether the company could also be held criminally liable.

The decision was that it was not enough for an employee to carry out management functions for the company for it to be said that the employee was part of the directing mind and will of the company. The directing mind and will would normally be the board of directors, the managing director and other superior officers of a company who carry the functions of management and spoke and acted as the company.

Therefore for a company to be found criminally liable of an offence which requires a mental element (as opposed to a strict liability offence) one of the controlling officers of the company must perform the alleged conduct with the necessary intent.

This does prevent companies being prosecuted for the actions of a rogue employee although as noted above some regulatory offences are strict liability and only require the act to take place without the need for the authorities to prove any intent.

Daven Naghen a Partner in our Criminal Law Team commented upon the case as follows:

“The Court of Appeal decision should provide some comfort to businesses that only a very specific and small list of people will be interpreted by the Criminal Courts as being the directing will and mind of the company. Had the Court of Appeal not overturned the decision made in the Trial Court, it would have been very difficult for businesses to identify which employees may act in a way which would expose the company to criminal prosecution. Employers must be aware however that they do remain in civil law vicariously liable for the actions of their employees and so this perhaps highlights the need for an appropriate management and supervision structure.”

Should you require an advice or assistance in respect of a regulatory or criminal allegation you should not hesitate to contact Daven Naghen or Anita Toal on 01775 722261 or by email at daven.naghen@maplessolicitors.com or anita.toal@maplessolicitors.com 

Should you have a more general enquiry regarding commercial or employment law please ring the office on the above number.

What is a Shareholders’ Agreement?

A Shareholders’ Agreement is an agreement between the shareholders (members) of a company with the intention of helping the smooth running of a company and to prevent disputes between the shareholders about the management of the company.  Shareholders’ Agreements will often seek to protect the shareholders’ interests in the company, establish and record an agreed relationship between the shareholders and record the shareholders’ intentions for the company.

There are usually a number of key provisions in the Shareholders’ Agreement which often include the following:-

1. Sale of Shares

The Shareholders’ Agreement will regulate the sale of shares in the company, including provision as to how to value the shares and for preventing the shares being sold to undesirable third parties.

2. Veto Rights

The Shareholders’ Agreement will often protect the minority shareholders (who hold less than 50% of the shares in the company), giving them more input in fundamental decisions.

3. Protecting the Company

The shareholders will agree, if they sell their shares, to protect the company by not setting up rival businesses within a defined area for a period of time and by not poaching staff, customers or interfering with suppliers for a period of time.  The shareholders usually also agree to abide by duties of confidentiality.

4. The Business of the Company

The shareholders will agree the scope of the business that the company can carry on, determine the business plan and select the directors etc.

5. The Financing of the Company

The shareholders will agree how the company is to be financed, including provisions on the control of the company’s bank accounts and the preparation of management accounts and reports for the shareholders.

If you need further advice about a Shareholders’ Agreement then please contact Daven Naghen on 01775 722261, daven.naghen@maplessolicitors.com or at 23 New Road, Spalding, Lincolnshire PE11 1DH or Gemma Mayer on 01775 722261, gemma.mayer@maplessolicitors.com or at 23 New Road, Spalding, Lincolnshire PE11 1DH.

When your business is successful, and builds up an excellent reputation and customer goodwill, competitors may try to pass themselves off as your company in order to “steal” some of your business.

What is Passing-Off?

The most common form of passing-off is when a competitor uses a similar name to that of your business.  The unscrupulous competitor could trade using a name similar to yours, perhaps with only a slight change which a customer might not notice.  As a result that customer could go to this competitor in error, rather than yourself, resulting in a loss of business for you. Furthermore if your competitor is not as good, your reputation could plummet.

The actions of the competitor here do not have to be intentional, and you can go to Court to protect your business.

Other common forms of passing-off include using a similar logo to you, or advertising using similar or same slogans etc.  These things can confuse customers, re-directing their business elsewhere.

What problems can Passing-Off cause? 

Obviously your business may lose out on customers who have been led to believe that another business is actually you, and you might not even know about it!  Not only do you lose these customers, you can also lose their repeat business.  Furthermore if that competitor’s business is not as good as yours, your reputation can be damaged and adverse publicity may follow.  It can be very difficult to quantify how much loss or damage a passing-off can cause.

What can you do about Passing-Off? 

You might be able to get an injunction stopping your competitor from using the offending name, logo or advertisement, as well as getting compensation not only for loss of earnings but also for any gain made by the competitor from using your name etc.

If you think that someone is passing-off as your business, then you need to take action straight away.  Often the offending business, when confronted, will back down and refrain from using the offending name etc.  If they don’t, then you need to take the appropriate legal action to protect your business.

For advice on passing-off actions or any issue as to intellectual property please contact Daven Naghen on 01775 722261, daven.naghen@maplessolicitors.com or at 23 New Road, Spalding, Lincolnshire PE11 1DH or Gemma Mayer on 01775 722261, gemma.mayer@maplessolicitors.com or at 23 New Road, Spalding, Lincolnshire PE11 1DH.

From the 6^th April 2011 all Land Agreements became subject to Competition Law. Until then they were excluded from UK Competition Law and the prohibition on anti-competitive agreements.

Land Agreements are agreements between businesses which create, alter, transfer or terminate an interest in land. One party to the agreement may seek to impose restrictions on the way in which land may be used or how a right over land may be exercised.

An example of a land agreement which would fall foul of competition law would be, for instance, where two competitors in a particular industry seek to restrict the use of land with a view to restricting competition from other competitors in the same industry.

However not all such Land Agreements will offend the law and many will be able to claim an exemption especially where the benefits of the agreement outweigh its negative aspects

Also some land agreements will remain unaffected. For instance covenants relating to the payment of service charges; restrictions imposed on a lessee regarding alterations, repairs, obstructions to the premises, applications for planning permission, advertisements or hours of use and provisions which relate to the use of premises.

If the law in this area is breached however the consequences include, amongst other things financial penalties and director disqualification orders

If you need further advice on this subject please contact James Turner on 01775 722261 or james.turner@maplessolicitors.com.

All businesses need to decide the best medium for that business, such as being a partnership/sole trader or say a limited company.

Particularly when I advise small to medium sized businesses I am surprised by the number of these businesses that are not incorporated (i.e. not a limited company) and have not properly considered whether to become incorporated.  So what are the pros and cons of being a limited company?

The Pros

1. The main advantage is the limited liability status of the company.  If the company gets into financial trouble, save for certain exceptions, the owners’ liability is limited to the extent of their shareholding (e.g. a £1 share) and their personal assets are safe from a claim from the company’s creditors.  The advantage is often diminished where banks or other sources of credit insist on the owners giving personal guarantees.

2. Quite often the word “limited” after a business name may provide enhanced status in the eyes of bankers, suppliers, potential customers and can often help to gain new contracts.

3. There can be significant tax advantages.  A limited company pays tax on its profits, and its directors are taxed on what they receive in remuneration from the company.  A partnership on the other hand is not taxed in its own right as a company is (as it is not a separate legal entity).  Instead each partner is taxed on his or her share of the profits, irrespective of how much they have taken out of the business.

Let’s say for example the business makes a profit of £200,000 and pays “salaries” of say £100,000 in total to its two owners.  In the case of a limited company, it would be taxed at 21% on the sum of £100,000 (profit less salaries), and the directors would be taxed at 40% on the salaries of £50,000 each.  The total tax payable would be £61,000 (£21,000 plus £40,000).  In the case of a partnership, the partners would be taxed at 40% on all of the sum of £200,000, even though only £100,000 is paid out in salaries/drawings.  The total tax liability would therefore be £80,000.

4. Furthermore there are often tax advantages from being a limited company as owners can pay themselves a nominal salary plus substantial dividends at lower rates of tax.  For example you might only have to pay 10% tax on dividends.

The Cons

1. I think the main disadvantage is the extra administration burdens that can arise.  As a limited company you have to file accounts and information at Companies House, and often these involve a significant cost in terms of accountants’ fees etc.  However usually the tax advantages outweigh these disadvantages.

2. There can be tax disadvantages in being a limited company and some of these include a less favourable treatment of trading losses that may arise, reduced IHT relief for assets owned personally but used by the company, e.g. premises. Particular care also needs to be taken when there is a prospect that the business could be sold within 2 or 3 years.

If you need advice on whether your business should be a limited company or not then please contact Daven Naghen on 01775 722261 or email daven.naghen@maplessolicitors.com or Gemma Mayer on 01775 722261 or email gemma.mayer@maplessolicitors.com

The conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2010 came into force on 1^st October.

The Regulations amend rules regarding up front fees for the entertainment industry.  They prohibit employment agencies from taking up front fees from photographic and fashion models.  They extend the cooling off period for up front fees for certain occupations.  They also remove a number of administrative steps that employment agencies are required to take, including: carrying out identity checks for job-seekers (other than those who will be working with vulnerable people); obtaining agreements to terms when they introduce job-seekers for permanent employment (except when they charge a fee for a work-finding service); and agreeing terms with the permanent employer.

Advertisements for jobs no longer need to include a statement as to whether or not the organisation is acting as an employment agency or employment business but they must state whether a position is temporary or permanent.

If your business needs advice about the implementation of these new regulations then please call Daven Naghen on 01775 722261 or email  daven.naghen@maplessolicitors.com.