CorporateFILE July 2008
In-House News
Launch of B-Sec for company secretaries Services
Brethertons LLP has launched a new commercial service this month called B-Sec, which is aimed at company directors, business owners and managers who are also company secretaries.
B-Sec is a service to help company secretaries manage the paperwork and processing of official company documentation with ease. The Brethertons system, B-Sec, allows automatic filing of documents at Companies House and helps keep company secretaries on top of basic company secretarial administration.
Team Commercial partner, Brian Auld, said of the launch:
“We are all extremely excited to launch the B-Sec service which is available from our Rugby and Banbury offices. This is something new for Brethertons and we hope it will help save a lot of time and effort for company secretaries who often struggle to keep up-to-date with their documentation surrounding the Companies Act and overall business compliance. The costs are pretty reasonable and you don’t have to be an existing client of Brethertons to use the B-Sec service.”
If you would like to find out more about B-Sec, click on the links below or contact Brian Auld on (01295) 270999.
Can Big Brother Read Your Emails?
Recently amended provisions of the Regulation of Investigatory Powers Act 2000 could further restrict the rights of organisations and individuals wishing to protect sensitive electronic information.
Part III of the Act covers the encryption of electronic data and requires holders of encrypted data to provide the means of putting this into an intelligible form when required to do so by the authorities. Failure to do so can lead to criminal charges, with a maximum sentence of up to two years in prison or five years in certain cases relating to suspected terrorism.
Many people choose to use readily available encryption programs to encrypt their email, files, folders, documents and pictures. These same technologies can also be used by terrorists, paedophiles and others to hide their criminal activities.
If the police or other public agency suspects that data encryption is being used to conceal any kind of criminal activity, then they have the power to serve a notice on the person in control of that data, be it an individual, company director or anyone else with responsibility. The legislation has already been used to demand encryption keys from several animal rights activists.
However, the Code of Practice governing the use of such powers allows the data owner or controller ‘reasonable time’ to comply.
Brethertons’ view:
“Data users can no longer assume that encrypting data means keeping it secret forever. Data encryption is a powerful tool that can and should be used to protect sensitive data from prying eyes, but it does not mean that public authorities cannot get at it if required.”
Directors – Be Careful What You Sign!
The Court of Appeal recently handed down a decision which should convince directors to take great care when they sign contractual documents on behalf of their companies… because if the contract contains a misrepresentation, they can in some circumstances be held personally liable for it by the courts. The fact that the contract may not benefit the director is not a defence.
In the case in point, a company entered into a contract to pay for goods it then received. A director of the company signed the contract knowing that the company was insolvent and would be unable to pay for the goods.
The Court of Appeal ruled that the director had made an implied misrepresentation to the supplier. Since he knew the goods would not be paid for, the Court found him personally liable for the sum owed, on account of his deceit.
The message for directors is to be careful what you sign. ‘Limited liability’ may not be limited if the court decides that the director knew that the company could not meet its obligations. This could apply in a variety of instances, for example where the company enters into a long-term agreement such as a lease of new premises.
Brethertons’ view:
“The Companies Act 2006 places a statutory burden on directors to adhere to certain standards and consider specifically the effects of their decisions in various ways. A part-time, non-executive or even ‘shadow’ director (one who has no official position in the company but whose decisions are normally followed) can be in the firing line when things go wrong just as surely as can the full-time working directors. Clients should be particularly careful where family members are acting as directors of the family company but are not participating the in the day to day management of the company.”
Disqualification Traps for Directors
The Companies Act 2006, most of which is now in force, imposes tough new criteria governing the behaviour of directors. In particular, when making decisions directors must bear in mind the potential effects of those decisions on various ‘stakeholders’ (those with an interest in their outcome, such as employees and shareholders) and the environment.
In several circumstances, miscreant directors can be disqualified by the Secretary of State from acting as directors. These include:
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where the director has been convicted of an offence in connection with a company
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where the company becomes insolvent and where the conduct of the director is such that it renders them unfit to be a company director
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where there is fraudulent trading or fraud or breach of duty in relation to which the company is wound up
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where the company persistently defaults in filing documents with the Registrar of Companies; or
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where in the view of the Secretary of State it is in the public interest for the director to be disqualified.
It is important to note that disqualification may not necessarily be the result of a criminal offence or because the company with which the director was involved has failed.
Just because a person does not carry the title ‘director’ or is a non-executive director does not mean they are not subject to these rules. They apply to anyone who acts in a directorial capacity (whether their title is director or not) or who is on the board of directors of a company.
Disqualification orders can be made for a minimum of two and a maximum of 15 years. Recently, a director was disqualified for refusing to cooperate with an investigation into another company with which he had dealings but of which he was not a director.
Employing Illegal Migrant Workers
New measures designed to tackle illegal migrant working came into force on 29 February 2008. These measures, contained in the Immigration, Asylum and Nationality Act 2006, include:
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a system of civil penalties for employers who employ illegal migrant workers – the maximum civil penalty per illegal worker is £10,000
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a new criminal offence for employers who knowingly employ illegal migrant workers – this offence now carries a maximum two year prison sentence and/or an unlimited fine; and
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a continuing responsibility for employers of migrant workers with a time-limited immigration status to check their ongoing entitlement to work in the UK.
The new measures do not significantly alter employers' responsibilities. Employers were already required to check a prospective employee’s right to work in the UK in order to establish a defence against conviction for employing an illegal migrant worker. Under the new measures, employers can obtain a statutory excuse from payment of a civil penalty if they have carried out the required checks on a prospective employee’s documents. In addition, employers are required to undertake repeat document checks, at least once a year, for those employees who have limited leave to enter or remain in the UK, if they are to retain the statutory excuse. However, the excuse will not apply where an employer knowingly employs an illegal migrant worker.
A code of practice is now available containing guidance on the civil penalties for employers. This contains information on how the level of penalty may be determined and on the documents required for the purpose of establishing the statutory excuse. It can be found on the website of the Border and Immigration Agency at http://www.bia.homeoffice.gov.uk/.
Is a Risk Assessment Necessary?
These days, health and safety issues are important considerations for the management of most firms and the potential ramifications of failing to adopt robust health and safety policies are now well known.
However, a recent case has indicated that failure to carry out a risk assessment may not necessarily prove the contention that appropriate steps were not taken to make a procedure safe. Only if it can be shown that the employer did not take steps to make the risk associated with the operation of the procedure as low as practicable can the causal link necessary in order to make the employer liable for an injury to an employee be established. This does not necessarily mean that a formal risk assessment has to be available for the particular operation which gave rise to the injury. Also, merely breaching the Manual Handling Operations Regulations 1992 is not in itself sufficient, as to establish liability under statute law the breach must be shown to have caused the injury.
In the case in point, an employee was injured when carrying out a mechanical handling operation. The employer successfully argued the risk assessment point in the Court of Appeal. However, the evidence in this instance showed that the employer had failed to take appropriate steps to make the operation safe and so the employer was found liable for the injury to the employee.
Brethertons’ view;
“Whilst not having evidence of a formal risk assessment will not of itself undermine an employer’s defence against a claim that insufficient steps have been taken to minimise the risk of injury, carrying one out is the best way of identifying what needs to be done to protect the health and safety of employees,”
Right to Buy – Common Sense Prevails in Definition of Premises
The right of a tenant to buy his or her property (under the Leasehold Reform, Housing and Urban Development Act 1993) is now well known. The right, however, does not apply in all cases and one of the exceptions is that a landlord may refuse to sell a property if it is the landlord’s intention to redevelop the premises.
Recently, a tenant’s application to buy his flat, which was one of a block of 50 in a nine-storey building, was refused by the landlord on the grounds that he intended to redevelop the premises, in this case by making the flat into a ‘duplex’ including the flat below.
The relevant section of the Act allows the landlord to resist an application if the landlord intends to ‘redevelop any premises in which the tenant’s flat is contained’, but only in cases in which the construction works are carried out on a ‘substantial part of any premises in which the tenant’s flat is contained’.
At issue was what was actually meant by the phrase ‘any premises in which the flat is contained’. In the view of the landlord, it meant any definable part of the building which could be shown on a plan. The tenant, however, argued that ‘premises’ meant a recognisable part or area which contains the flat in question. In essence, this argument is that if a space is one which a visitor would recognise as constituting premises, then that space or area counts as premises for the purposes of the Act. If, on the other hand, a visitor would not recognise the ‘separateness’ of that space or area, it is not premises. The House of Lords agreed that this must be the test, since it could not have been the intention of Parliament to allow landlords to define what constitutes premises, in such circumstances, according to their own wishes.
In the case in point, the Lords considered that a visitor to the block of flats would consider the block as a whole to be the premises, not the tenant’s flat plus the flat below it. In this case, therefore, the landlord’s claim failed, since the premises as a whole were not subject to redevelopment plans.
Who Decides? Big Decision
Many forms of commercial contract these days contain clauses which seek to bring about a resolution of disputes by referral to an independent expert who ‘determines’ the outcome. Sometimes these work well, offering a flexible and straightforward way to settle the dispute. Sometimes, however, having an expert’s determination might not be at all satisfactory – at least from the standpoint of one of the parties to the dispute.
The main advantages of using an expert determination clause are:
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it can be an inexpensive and quick method of resolving a dispute
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there is no need to go to court; and
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it is normally a mediated form of settlement, in the sense that the expert hears the points of view of both sides and makes a decision – the degree of confrontation which can occur in litigation is therefore less likely.
The main disadvantages are:
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there is virtually no right of appeal against a decision by the expert
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the expert may not have the breadth of knowledge which might be necessary to understand fully the issues and thus achieve a fair result
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the expert cannot compel (as can the court) the parties to the dispute to cooperate; and
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the decision of an expert can only be enforced by the court.
There will be some sorts of dispute, therefore, which are best dealt with through legal process rather than expert determination. The problem which can arise, however, is that when the contract provides that a dispute will be settled by expert determination, the courts are reluctant to intervene, so in the event of a ‘bad’ decision by the expert, unless the aggrieved party can persuade the expert to issue a revised decision, they may well be stuck with it.
Clearly, the overriding argument for the use of such a clause will be where commercial expediency dictates that the speed and informality of the approach has advantages which outweigh the benefits of using the courts. If such a clause is used, it is essential to make sure that the expert has appropriate qualifications and experience, and that the terms of reference of the decision are very carefully drawn up.
IVAs – New Code of Conduct
A new voluntary code of conduct for the management of Individual Voluntary Arrangements (IVAs) has been announced. In an IVA a debtor agrees to make payments to his or her creditors over a period of years (typically three to five). The new code of conduct will ensure that the processes leading to an IVA will be more transparent and will give greater certainty as regards the debtor’s home as well as greater reassurance for creditors and the debtor that the IVA applied is the best option.
The new code of conduct will incorporate the use of standard terms and conditions. The use of a standard framework is intended to allow the debtor and creditors to be more open in their dealings with one another.
The new code of conduct can be found on the Insolvency Service website at www.insolvency.gov.uk.
2008 Webinar Programme
All webinars (seminars over the web)commence at 12.30pm, a convenient time to get your team together for an hours training over the lunch hour.
You need no special equipment other than a telephone with a hands free facility and a computer with an internet connection. You will hear the speakers through your telephone and see interactive slides/graphics on your PC as the speaker makes the presentation. Copies of the speakers handouts/slides will be emailed in advance of the presentation. Please visit our events page at www.brethertons.co.uk and complete the booking form below to reserve your link.
12.30pm - 11th September: Terms And Conditions In A Nutshell
Why you should have them and how you should use them.
All business should have Terms and Conditions of Trading, as failure to do so could mean that it is left to the Court to decide on what terms businesses have entered into contracts. Who in there right mind will want a Judge deciding the terms on which you should do business? This Webinar will include:-
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Why have them?
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The principal clauses to use
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The clauses to avoid
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How to use T&C’s to your advantage
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How to win the battle of the forms
Click here to download the booking form for the Terms and Conditions webinar.
12.30pm - 13th November: Small Claims Court Procedures In A Nutshell
How to maximise your chances of successfully recovering your cash if you have to go to a court hearing.
If your debts remain unpaid you may find yourself attending a hearing before a District Judge in the Small Claims Court. This Webinar will cover the following subjects:-
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How to avoid bad debts in the first place
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Smalls County Court proceedings
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Preparation of cases
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Conducts at hearings
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Enforcement proceedings and recovering expenses
Click here to download the booking form for the Small Claims Court Procedures In A Nutshell
12.30pm – 4th December: Effective Letter Writing
How to write letters which will grab a debtors attention.
If your debts remain unpaid you may find yourself attending a hearing before a District Judge in the Small Claims Court. This Webinar will cover the following subjects:
Click here to download the booking form for the Effective Letter Writing Webinar
