business

HOW TO … chase debts!

Posted on by thelegalknow

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The most important thing when you own your own business is ensuring that you get PAID. Late payments and outstanding debts disrupt cash flow which can literally kill a business. This post is all about a) preventing late payment and b) chasing up late payment. The goal should always be to never have clients owing you BUT if they do, as they occasionally will, it’s all about getting that debt settled as amicably as possible.

Prevention

Ideally you do not want to be chasing up a late payment therefore prevention is better than cure. You can protect your cash flow by making it extremely difficult for a client to make a late payment. You basically need to be honest and upfront at the outset, so that there can be no doubt as to what you are expecting to be paid and by when.  Take note of the following tips:

  1. Make sure that your clients know and understand your payment terms. Display your terms clearly in every invoice and explain how (“payment can be made by BACS transfer/SWIFT/Paypal etc”) and when (“payment is due by X date”) payment should be made. The idea is to make it as EASY as possible for your clients to pay you. You should also include information as to any late payment penalties i.e. “if your payment is more than one day late we will charge interest at a daily rate of X%”. If I know you are going to charge me interest at a daily rate of X%, I’m most likely to pay you on time. The invoice should be a one stop shop of how and when to pay, and the consequences for late payment. This is the basic starting point to getting paid and preventing client debt. If your invoices do not do this, REVISE them.
  2. Double check the details.  Your invoice details should be perfect, quoting all the information the customer needs to identify it. Include your reference code and THEIR reference code. Give a good description of the work/product that the invoice relates to. You do not want a late payment to be YOUR fault so just make sure that all the details are correct.
  3. Send your invoices out promptly. If you want your clients to pay you on time, you better invoice them on time. If you invoice me a day or week late, I’ll take that to mean that I can pay you a day or week late and then some!
  4. Do some credit checks. You should credit check all new significant clients as part of your due diligence (due what? read this), but proceed with caution. A client may be new and have no credit history, or they might have done really well in the past five years but are now on the verge of going bust. Carry out your general due diligence and use your judgment – is it likely that this company/person can afford my services/product?
  5. Make them pay a deposit. The deposit method of payment is great for damage limitation with late paying clients. If you are going to ask for deposits, make the booking of your product or services conditional upon receipt of the deposit payment up front. No deposit, no deal. After a certain point in time make that deposit non-refundable too.  The deposit provisions should be stated in the actual contractual agreement between the parties as the deposit happens at the start BEFORE the invoice which is issued after the provision of the services or product.

Chasing for payment

No business is perfect. Even your best clients can let invoices become overdue. Chasing and securing payment of an overdue invoice is a fine art in the world of business as you never want to offend a client. However, your company is entitled to the money, so don’t shy away from collecting what is due to you. Even charities hound their loyal supporters for donations!  At this point, it is all about having a uniform procedure based on a series of gradually more urgent reminders, followed by putting the matter in the hands of a debt-collector or solicitor if all else fails (absolute last resort). Here are some tips:

  1. Know when your invoices are overdue and act immediately. In some industries it is easier and more acceptable to just pick up the phone and ask “hey where’s my money?”. However if you are dealing with a new client or are operating within a more formal industry, you should write a letter of reminder stating (politely but firmly) that your invoice is now overdue and please make immediate payment. You should send this letter by email or fax followed by a hard copy in the post. This way you get the reminder to the forgetful client asap whilst providing them with a hard copy for their records. I would recommend a  letter of reminder regardless of industry norms because I’m a cautious lawyer and I believe in leaving paper trails in instances like this. In order for your reminder to have an impact, it needs to be prompt so keep a calendar of all invoice due dates and keep an eye on them. Send your reminder the day after late payment or your company’s grace period. Allow seven days for a reply.
  2. If there is no reply within seven days, send the invoice again. Send it by recorded delivery to ensure it has been received and keep your receipt as evidence that you sent it.
  3. If you still do not receive a response, make a phone call to find out what the problem is. Your client may have accounting issues or queries that it needs help with. Find out the reason for the non-payment and help them out. Negotiate if you have to and try to extract a promise of payment.  ALSO use this phone call to find out if the customer has a regular weekly or monthly pay run and find out the day on which this is done. Keep calling until you receive payment, especially two or three days before the pay run. This is where chasing payment becomes a fine art. You need to tread a fine line between harassing the client too much and keeping the pressure up. It’s best to keep up a persistent chase! “Hey Bob How are you? Pay me please”, “Hey Sheila, I’m great thanks. Spoke to Bob the other day…pay me please”.
  4. If the pay run date passes and you still do not receive payment, consider turning up in person to collect it. Of course this is not desirable and it is not even possible in some instances. This is the last resort before the ABSOLUTE last resort.
  5. If you have tried all of the above steps and you have still not received payment, you need to consult your lawyer. There is nothing like a letter from a lawyer to scare the crap out of a client. The letter should threaten to take legal action to recover the debt or to start bankruptcy or winding-up proceedings (depending on how much you are owed, in the UK, you can end a company if they haven’t paid you – read this). The letter could also threaten to use a debt collection agency. Keep a copy of all correspondence and accept that if you are at this stage, you have lost that client forever. Not so bad as a client is only worth it if they value you and they show that they value you when they PAY you.

The legal/debt collector route is your absolute last resort, but don’t be afraid to use it. However if you get to this stage, ask your solicitor’s advice and evaluate how far you should sensibly go to collect the debt before cutting your losses.

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HOW TO…write like a lawyer.

Posted on by thelegalknow

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Before you read any further I must explain that there are two schools of legal writer. The first is the school of “I want everyone and anyone to understand what I am writing so that there can be no doubt as to what has been agreed/disagreed and that YOU the CLIENT understand what you have paid for”. The second is the school of “I want to confuse you to make myself look smarter and you the CLIENT feel dumber so that you pay me whatever I ask because you have NO IDEA what’s going on”. If you have a lawyer in the second school of legal writer…get rid of them.

In the UK, the legal profession has snubbed long words and sentences. We’re even striving to move away from the ye olde latin phrases. These days if a judge reads a Defence or a letter that is not in plain English, the lawyer responsible for the drafting is in big trouble. The trick is to strike a balance between simple and clear language but without sacrificing gravitas (which lawyers love). There are a number of tricks that lawyers use to do this.

  1. Short, simple sentences. You can always deduct words! Challenge yourself by continuously asking, can I say this in a simpler way? Get rid of all superfluous introductions too. For example, “It is noted that” (get straight to it), “We should be grateful if you would” (just say please), “As aforementioned” (what??). Ok so SOMETIMES you can’t help but use an introduction such as “Further to your request” but at least this is helpful as it gives a context for why you are writing. If the words do not add value to what you are writing, get rid of them. Here’s an example. Compare “It is noted that you have persistently refused to pay” with “You have persistently failed to pay”. Which one is stronger and clearer?
  2. Define your terms. If you are referring to a really long word over and over again, just define it! For example, Apple Bubblegum Flavour Limited can be defined as “ABFL” like this “Our subsidiary company, Apple Bubblegum Flavour Limited (“ABFL”) is a profitable business”. From then on, instead of writing the full title of Apple Bubblegum Flavour Limited you can just write “ABFL”. Let’s look at another example. Tropical Adventures Limited can be defined like this, “Tropical Adventures Limited (“Tropical Adventures”) is a company specialising in coordinating adventurous holidays”. You can define a term in pretty much any way you want EXCEPT that you must actually USE the defined term in your writing and you MUST be CONSISTENT in your use of the defined term. For example, the defined term Tropical Adventures must be referred to as Tropical Adventures throughout the document and cannot suddenly be referred to as “TA”. In my opinion, defined terms can only be used by the very able of writers as whilst they are helpful, they can also be disruptive if you have too many or if you define them in a weird way. Define your terms in a way that helps the writing FLOW and not read like CODE.
  3. NEVER use emotive language. For your credibility’s sake avoid it! Stay away from language that you should only read in Harry Potter (surprised, annoyed, amazed etc). Also don’t make easy overstatements such as “clearly”, “obviously”, and “extremely”. Words like these lack detail and add nothing. For example compare “You received our bill on 7 October 2015” with “You clearly received our bill on 7 October 2015”. What did you notice? The use of the word “clearly” makes the writer appear weak and childish. I mean either something is clear or it is not! Don’t agree? Read this “We find your lack of response extremely rude”  and now this “We find your lack of response rude.” Which version sounds more sure of itself? The LATTER!
  4. Number your paragraphs. The best thing about numbered paragraphs is that you can cross reference! Say for example you are writing a really long complaint to a supplier. You have a strong introduction which sets out in four paragraphs the details of your grievance. You get to the end of your letter after setting out the solution you want. At this point you need to really bring it home to the reader just WHY you are justified in wanting that solution. Are you going to set out your grievance again? NO! You can simply state as follows “As set out in paragraph 3 above, your company has failed to carry out its obligations under the contract. As a result of this breach, we invite you to compensate our company in the sum of £500”. BOOM! You can even number your paragraphs in emails. Imagine this, you’ve drafted a detailed email to a potential investor/client setting out the terms upon which you are willing to negotiate. You should WANT to HELP the investor/client to consider each of your points properly. If you number the paragraphs, the potential investor/client can simply reply with “Dear Jack, I agree with paragraphs 1-7 and paragraph 9 but I’m afraid I cannot commit to paragraphs 8 and 10.” Again, BOOM! Just like that you have narrowed down the negotiation to the key issues (paragraphs 8 and 10) by one considerate email.
  5. Headings. Headings are great as they focus the reader’s attention on key issues that you want to get across and they also prepare the reader for the particular topic or sub topic. Let’s look again at my example at point 4 above (see what I did there…I cross referenced). You are writing a grievance letter to a supplier. How can you focus their attention? You can use headings as follows: Your breach, Loss caused, Solution and Next Steps. Or if you are writing a negotiation paper for a meeting you might use the following headings: Services, Duration of Services and Remuneration.
  6. Font and font size. Please do not write in Times New Roman (just too stuffy and is the automatic format of those who have not really thought about their business identity, unless of course your business identity is stuffy…) or Comic Sans (this font is for children). Pick a font like Arial, Tahoma or Calibri. These fonts are clear and encourage the reader to read what you have written. I personally prefer font size ten. Not too big and not too small. Also create a “house style” for your company. House style will be the formatting that your company uses in all of its correspondence and documentation. This helps with branding and it also protects your business as it grows. If you have a house style, all the employees are writing in the same format and structure.

So there you have it, my tips on how to write like a lawyer, but what I really should have called this post is how to write like a GOOD lawyer. Some lawyers love the serious long words and old school phrases but in my opinion such writing excludes the client, and it’s all about working collaboratively with the client!

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HOW TO… pay yourself!

Posted on by thelegalknow

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When you are the owner of your own business, it is all about ensuring that you are paying yourself in the most tax efficient way. There are a few options and you should go through them with your ACCOUNTANT (yes you should have one of these). It will also depend on your legal set up (sole traders and partnerships, read no further but limited companies this is for you). Set out below is a basic guide of how you can pay yourself effectively in your limited company in the UK.

A The Elements

  1. Employee

As a director of a limited liability company, you are an employee for tax purposes. You will be paid a SALARY. This means that, as with all employees, you need to register with HMRC to use PAYE to pay your salary – full details can be found on the HMRC website HERE.

Your company (remember that it is a separate legal identity even if it is literally YOU) will need to deduct income tax and National Insurance Contributions (“NICs”), from your salary and pay these deductions to HMRC, on a monthly (or possibly quarterly if the amounts are low enough) basis.  The aim is to keep these outgoings as low as possible in order to fall within a low tax bracket, effectively reducing the amount of income tax and NICs that you pay.

  1. Dividend

A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock or other property.

A company’s net profits can be allocated to shareholders via a dividend, or kept within the company as retained earnings. Dividends attract corporation tax payable by the company and may also raise a personal tax liability in the way of income tax. The corporation tax liability is calculated and paid to HMRC at the end of the company’s financial year and takes into account the overall profit of the company and any dividends that have been made over the period. In this respect it is difficult to estimate the amount of corporation tax payable when the dividend is issued so BEWARE that you must ensure that the company has the available profit to make the net dividend payment AND the additional tax liability. If a company pays a dividend that cannot be supported by its profits then it is technically insolvent (AAAAARGH!).

The good news is that currently only higher or additional rate taxpayers pay tax on dividends (with a 10% reduction which represents a 10% tax credit).

  1. Corporation Tax

Corporation Tax is a corporate tax levied in the United Kingdom on the profits made by companies and on the profits of any foreign company with a UK branch or office.

Taxable profits for Corporation Tax include the money your company or association makes from:

  • doing business (‘trading profits’)
  • investments
  • selling assets for more than they cost (‘chargeable gains’)

If your company is based in the UK, it pays Corporation Tax on all its profits from the UK and abroad.

If your company isn’t based in the UK but has an office or branch here, it only pays Corporation Tax on profits from its UK activities.

B The Solution

The popular solution is to pay yourself using a mixture of salary and dividends. Dividends are National Insurance exempt so you do NOT pay NICs on them. They thus represent an attractive method for taking funds out of a business.

Sounds pretty simple HOWEVER the ever changing beast that is tax is never simple. The level of salary you draw is dictated by other factors too, such as pension requirements, if you draw too low a salary you may not be able to make the level of pension contributions you would like even if your overall pay is pretty high. Also, you can only take dividends out of your post-Corporation Tax profits, i.e. from the money that you have actually earned, whereas a salary can be paid out of future earnings (e.g. by borrowing money from your bank) – if you pay yourself too small a salary, relying on a monthly dividend to cover your living expenses, then a lean month could leave you short of cash. Therefore as previously mentioned, you need an ACCOUNTANT.

C How do I issue a Dividend?
Here are the basic procedures for issuing a dividend.

  • Ensure that there are sufficient profits in the company to allow for the dividend. Print a balance sheet and profit and loss account for the period to remove any doubt.
  • Call a meeting of the directors to minute the decision and details of the dividend.
  • Generate a tax voucher for each shareholder. A tax voucher is a simple statement showing the company and shareholder details along with the individual’s shareholding net dividend amount and tax credit.
  • Issue the dividend payments along with the tax vouchers and file the board minutes and accounts at the registered office.

You can guess what I’m going to say though, you should (if you really want to be good) at the VERY LEAST, do this with a lawyer for the FIRST time. Then once you’ve got the hang of it, you’re good to go!

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Do you really care about your business? 

Posted on by thelegalknow

Sounds like a silly question right? But do you? You DO. Oh that’s great. Perfect. Then you must have a lawyer! At this point some of you are saying yes and some of you are saying no but in my opinion you should all be saying YES!!

Getting a lawyer at the outset does three magic things:

  1. Prevents catastrophic errors happening – for example signing contracts that are cleverly designed to steal your product, intellectual property or your profits, and ensuring that your business is compliant. The truth is that when you have an amazing business, everybody will want to be involved in it. When you’re just starting out, whether you like it or not, you are easy prey. The bigger businesses, the more experienced investors WILL try and get much more for their money. A lawyer will identify this and protect YOU. And what about non-compliance? Well non-compliance is costing Volkswagen a potential $17billion. They only set aside $6billion to deal with this. This is a perfect example of the consequences for breach of the laws and regulations in your industry. The law will collect payment for breach and it doesn’t care if it kills your business in doing so. A lawyer will highlight these risks to you.
  2. Speeds up the growth of your business – yes having a lawyer actually speeds up the growth of your business because you are letting the pros do what the pros do best allowing you to FOCUS on enhancing your business in the way that you know best! Everything that you need in order to be legally functioning, just happens without YOU spending precious management time trying to do it yourself. NOW you are probably thinking, hey, you always say BE LEGALLY SMART.. yes I do and a part of being legally smart is NOT trying to be a lawyer. Legally smart is about being informed so that you can give clever, well thought out instructions to your lawyer so that you do not suffer at the hand of the billable hour… “Yes the fee is high because I had to look into  X and Y and Z” compared with “No problem, I can do that for you…how long? I can get a draft to you by close of business today”.
  3. Gets you a great bargain in the long term – the client/lawyer relationship is a precious one. It is one of trust and mutual respect. What most clients ought to realise however is that lawyers take the work of their clients PERSONALLY. Once you have given a few instructions, growing THEIR business, lawyers respond in kind, prioritising YOUR business, offering free services, offering discounted rates. Looking out for you without being prompted. This is the ultimate goal for any business, to have an established relationship with a law firm because that’s when the fees get cheaper!

Ok, so some of you will literally just be starting out and you cannot afford a lawyer, in that instance there are many things you can do. If you are confident in your product/service, approach a law firm you like the look of and that you envisage you should be able to afford in about 6 months’ time and ask them if they would be interested in assisting you with a few starter contracts/services pro bono (meaning free). Pitch your business to them, explain that you like their work and can see a genuine client/lawyer relationship developing. Some law firms will show you the door but others, and I’d be one of them, would be intrigued and would do you that favour. Alternatively there are lots of firms that offer start up packages and individual standard form contracts that you can purchase and adapt. This is the next best thing to having a lawyer as such contracts are usually drafted to include key provisions. However this option should not be a long term circumstance. If you are serious about your business, your goal should always be to have a lawyer, eventually a team of lawyers protecting and enhancing your business albeit guided by YOU, the LEGALLY SMART one.

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Essential Contracts: An Overview

Posted on by thelegalknow

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Right so you’ve set up a business. Great! HOWEVER, don’t pat yourself on the back just yet. You need to ensure that you are legally ready to actually start FUNCTIONING as a business. So what am I talking about? I’m talking about those ESSENTIAL CONTRACTS that you should have READY at your fingertips so that you don’t a) look like an amateur (even though you may actually be an amateur) b) fall prey to the lawyers for the other side (if they present you with their standard contracts first, they MAY get the upper hand…depends on whether you’re legally smart or not) or C) miss out on fantastic opportunities because you don’t have the necessary documents ready and rearing to go.

There are many standard contracts a company should have depending on the industry within which the company operates. However here is a list of contracts that are applicable to all industries.

1. Shareholder Agreements

In the UK, if you are setting up a limited company, you will need a Shareholder Agreement. This contract regulates the dealings between the shareholders of the company. It sets out who owns what and who can vote and make decisions on what. It also sets out what particular shareholders cannot do. It effectively contains the framework for operating the company. This document should be drafted and agreed by all shareholders of a company at the outset. NEVER assume that just because you are friends or respectable members of society that things will not, one day, get ugly (this is business we’re talking about). A shareholder agreement protects every one.

2. Investor Agreements

Money, money, money…MONEY! If somebody is investing or loaning money to your company they will want to see the terms written down….SIMPLE. If you don’t have a standard form of this document ready for negotiation, you could run the risk of not being taken seriously and missing out on a great opportunity to gain capital for your business. An investor will want to know specific things and they will want to see these specific things neatly set out in concrete. What shares do they get? What is the value of those shares? Will those shares get diluted if more money comes in? What control do they get? What are the procedures for running the company? What is an exit for the investor if they want out? Setting these terms out clearly also protects YOU.

3. Website Terms and Conditions

Do you have a website? Of course you DO. You’re not living in the stone age BUT did you know that you cannot just have a website, you need a collection of documents covering the way that the website is run. Consumers/clients/customers need to see your policies on data, privacy, cookies and cancellation. Make sure you draft Terms and Conditions that are bespoke to your company. DO NOT copy and paste from another company’s Terms and Conditions – something in the small print WILL come back to bite you later. Instead, think about what terms you need in place that are relevant to what you offer and to how you run your business for example “this company operates on a 12 day cooling off period, if you change your mind within 12 days of ordering, we will cancel the contract, no strings attached” or “bookings are only confirmed upon receipt of a confirmation email from our head office”.

4. Non-Disclosure Agreements

Your business is your secret. Everything from your trademarks, patents, copyright, software, recipes, formulas, processes, financial information and so forth is your business IDENTITY. Don’t make it easy for people to steal your identity. This is what makes you unique – McDonalds, Apple, Nintendo! Before prospective investors, trade partners and purchasers will deal with you, they often need to know more about you – a Non-Disclosure Agreement offers you some protection in relation to the information that you disclose. It is a deterrent against breach of confidentiality by the other party. If they breach it, you can take them to court and sue them for virtually all damage ensuing from that breach…the price to pay could be very costly, consequently, they won’t want to breach it and your business identity is SAFE.

5. Employment or Consulting Agreements

If you have employees or consultants, you need a document that clearly sets out your relationship. There are many considerations that you as an employer will need to consider and set out clearly in line with the law. For example the process of terminating the contract, dealing with employee data, dealing with disciplinary matters, and (currently at the fore front in the UK) employee pension rights. Additionally, considerations such as wages, bonuses, working hours, holiday, sick pay, shares etc. all need to be addressed and codified somewhere clearly. This is where you really need a lawyer. There are some benefits to engaging contractors over employees (basically that you are not responsible for them) BUT just because you label someone a contractor does NOT mean that they are LEGALLY a CONTRACTOR. If they are working full time and only for you, tax and the law may classify them as an employee. So again YOU NEED A LAWYER HERE.

So there you have it. This is NOT a comprehensive list BUT it is a very good start. If you operate in another jurisdiction, such as the USA or Singapore or Dubai, the above themes and considerations are pretty universal save for any legal particulars. So go and put your house in order. You can actually buy most of the templates to the above agreements online HOWEVER whilst you can certainly make a start on them ALWAYS get a lawyer to give them at LEAST the once over, remember these documents are ESSENTIAL so you kind of want to get them right.

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Beware the Double D’s – Directors’ Duties!

Posted on by thelegalknow


If you are a director of a UK company that is a big deal. To whom much is given much is EXPECTED and the Companies Act 2006 did not forget about this! Shareholders of a company delegate the day-to-day management of the company to the directors so EFFECTIVELY the directors ARE the company. This is why the law has prescribed certain expectations for directors.

BASIC POWERS

Firstly, let’s ensure that you understand the basic power and authority of directors.

Directors work as a board (basically a team). The BOARD OF DIRECTORS may (if the articles of association permit, as they generally will) delegate powers to a committee of board members (sub team) or to an individual director (so this individual director can make particular decisions without referring to the board).

An EXECUTIVE DIRECTOR is an employee (of the company) with specific powers delegated to them either by a resolution (decision) of the board or under their service contracts.

A NON-EXECUTIVE director is, as the name implies, a director to whom no executive powers have been granted by the board. HOWEVER they can VOTE at board meetings and still have the same duties as executive directors. A non-executive director is usually an expert of some sort who acts as a check on the executive directors by using their particular expertise to vote at board meetings.

A MANAGING DIRECTOR (sometimes called a chief executive) is granted more extensive executive powers by the company’s articles of association or by board resolution. As the name suggests,  a managing director manages the other directors.

IF you are a director, you should know and understand the extent of your powers within your company or else you could fall foul of an array of liability. The golden rule is to never act beyond your powers. Take any issues to the board if you are unsure.

STATUTORY DUTIES

As stated in my previous post, the Companies Act 2006 is really your wikipedia for UK Company Law and it is a great start for understanding your role as a director. A director’s general duties are owed to the company and NOT to the individual shareholders. It is the company that will have the right of action against a director if he or she misuses their position.

The Companies Act 2006 codifies certain key duties, as follows:

  1. Duty to act within powers (section 171);
  2. Duty to promote the success of the company (section 172);
  3. Duty to exercise independent judgment (section 173);
  4. Duty to exercise reasonable care, skill and diligence (section 174);
  5. Duty to avoid conflicts of interest (section 175);
  6. Duty not to accept benefits from third parties (section 176); and
  7. Duty to declare interest in proposed transaction or arrangement (sections 177 to 185).

All of the above are designed to prevent directors abusing the position they hold within a company. Some of them may seem pretty obvious but you’d be surprised! Parliament didn’t pass the Company Directors’ Disqualification Act 1986 for nothing! In my experience, directors generally tend to fail to understand the restraints of 6 and 7 (go read these sections).

CODE OF CONDUCT

Alongside the statutory duties there is also what is known as the ‘code of conduct’ for directors. These include but are not limited to:

  • The likely consequence of any decision in the long term – so you have to demonstrate that you have thought about the future impact of your decisions for the company;
  • The interests of the company’s employees;
  • The need to act fairly as between members of the company; and
  • The impact of the company’s operations on the community and the environment.

Basically, directors have a lot to consider when they act. WHY should you CARE? Well sadly, directors are personally liable if they fail to comply with their duties. PERSONALLY (urgh) AND a director can even face criminal charges. That said, if you are a director, you can protect yourself by always taking difficult decisions to the board – you know, a problem shared is a problem halved…BUT if you ALONE are the board, it is important to document WHY you make a particular decision, to demonstrate that you have considered the code of conduct and the statutory duties.

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Introducing the Companies Act 2006

Posted on by thelegalknow


If you are a UK company, the Companies Act 2006 is the main piece of legislation that GOVERNS YOU in the UK.

With approximately 1,300 sections, the Companies Act 2006 was passed in order to modernise and simplify company law, codify directors’ duties, grant improved rights to shareholders and simplify the administrative burden carried by UK companies. It is basically your “go to” for all things company law! Although some lawyers criticise it for being too detailed and trying to cover every eventuality, I actually kind of like it! You can navigate it relatively easily and well, it’s all there! SO if you have a UK company and are at a loss with UK Company Law, the Companies Act 2006 is a good resource to turn to. You can access it right HERE for FREE.

So what can you look forward to educating yourself about in the Companies Act 2006? Well, amongst many (many, many, many – it is the longest piece of legislation in the UK) other things, it sets out the following:

1. a company’s formation (modernised to facilitate incorporation over the Internet…so er…what are you waiting for?);

2. a company’s duties including those that can be fulfilled electronically (YES, so much easier);

3. a company’s communications with its shareholders (this can be done electronically via a website – again, way EASIER);

4. directors’ duties (codified for the first time) including an obligation to promote the success of the company (yup you are OBLIGED to do this by  English LAW), to consider the community and the environment (this is CORPORATE RESPONSIBILITY), the interests of employees, and to be fair to shareholders (this is arguably why Google restructured its business);

5. the rights of indirect shareholders, including the right to sue the company’s director(s) if fraud or negligence is suspected;

6. company naming rules and company governance e.g. limited companies are no longer required to have a company secretary, and can be run by one director;

7. company ‘model’ Articles of Association, provided by Companies House (this is your company’s CONSTITUTION);

8. share capital rules (simplified for private companies); and

9. formalities for execution of documents.

This epic piece of legislation may be very detailed and a bit daunting at first BUT I think it is incredibly useful – it is basically Wikipedia for UK Company Law. If you have a query about your company and its operations, skim through the index of the Companies Act 2006 and see what you can find out THEN follow up with your lawyer IF you have to!

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What exactly did Google do?

Posted on by thelegalknow

In a nutshell Google is RESTRUCTURING its business. Restructure basically means to “organise differently”. The new structure will be introduced in phases in the upcoming months.

As a result of the new structure Google will NO LONGER be the top dog company, this will be Alphabet. Alphabet will become the parent company and Google will become a subsidiary of Alphabet. Google will still own search, ads, maps, apps, YouTube and Android BUT many of its more “out there” ventures will join Google in becoming separate subsidiaries of Alphabet. For example Google X (the more experimental, top secret business e.g. self-driving cars and chip-embedded contact lenses), Calico (the company with the mission of tackling age and extended human lifespan) and Nest Labs (smart homes) will be transferred to the ownership of Alphabet to become independent entities.

So WHY would a company restructure its business?

Quite simply, to CLEAN UP. Restructuring is usually implemented when there are significant problems or risks in a company, which are causing or will cause some form of financial harm that could put the overall business in jeopardy. Restructuring is a form of risk management. The truth is, Google was housing a mixed bag of businesses which affected its accountability to and potentially its profitability for, its investors. A longstanding concern on Wall Street was the lack of transparency on how the Google businesses were operating. The crazy, loss-making experiments were seen as a costly distraction to the company’s highly profitable core search and internet advertising businesses. HOWEVER the new structure separates these unconventional business ventures from the safer, money-making companies, thus improving oversight and management which is good for investor relations. As Larry Page (CEO of Alphabet) stated in a blog post accompanying the announcement, “Our company is operating well today, but we think we can make it cleaner and more accountable”.

What can YOU learn from this?

As your business grows you will find yourself wanting to explore new avenues and take on new ventures, just like Google did. At this point your current business structure may not cut it, you may need to set up a subsidiary or two to manage risk and exposure. RESTRUCTURING enables you to tidy up your business by effectively allocating risk. This keeps your financial backers happy and in the long term this keeps YOU happy as you have the legal and financial FREEDOM to explore new things, just like Larry and Sergey!

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Read the SMALL print

Posted on by thelegalknow


Yup! It’s as simple as that. Read the small print! Read the disclaimers (this blog has one). Read the exclusion clauses. Read the terms and conditions.

I get so annoyed when I see companies or blogs or ANYTHING referring to the small print as “legal mumbo jumbo”. I can assure you that the small print it is NOT mumbo jumbo. It is a coherent stream of dos and don’ts that could NEGATIVELY affect your business – the SMALL print can have BIG consequences!

So do yourself a favour and take the time to read and understand the small print. Ask questions too! If you see something you don’t like, can you get a waiver? Can you negotiate out of it? Or maybe it’s not worth going ahead with at all? Again, reading and understanding contracts, offers etc gives your business options.

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3 ways to get the most out of your lawyer

Posted on by thelegalknow

1. Educate your lawyer about your business – We may know the law (that’s our job) but we do not necessarily know YOUR business. Educate us. Bring us in to the office, let us play around with the product or let us taste the food! Basically, don’t let your lawyer work on assumptions. If you want a tailored, personal service from your lawyer, you have to help them to understand YOU, your EMPLOYEES and your BUSINESS.


2. Maintain good housekeeping – Lawyers will always need to see the paperwork so do yourself a favour and get the paperwork ready. Get all your business contracts together in one place. If possible categorise them by product, by year or by client, whichever, so long as it is ORGANISED! Get every receipt and financial document in a finance folder (electronic is fine) and put all key correspondence (letter, email, text) in a tidy place. Good document management enables your lawyer to hit the ground running from the minute you instruct them. The SOONER you start the better as there is nothing worse than trawling through years of paper/emails. Good document management is also a life saver when you want to attract investors or apply for a loan. This is the famous paper trail!

3. Give realistic deadlines – Most good lawyers will always want to do a Rolls-Royce job. If you need your lawyer to help you review a contract or draft an agreement or settle a dispute, give them as much NOTICE as possible and ASK your lawyer how long they will need. This puts the onus on the lawyer to manage their time and to assess the situation efficiently. If you give your lawyer a day to build Rome you will most likely receive a job riddled with errors or even worse, a great piece of work BUT a disgruntled lawyer who starts to put you at the bottom of the pile and er…dodge your calls.

Do these three things and your lawyer will respect you and work hard for you!

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