In the ring with The Bribery Act Is your business braced for the change?
a lupton fawcett periodical
Issue 1 Employment law is a two-way street. The law of the landlord. The importance of regular legal health checks. A considered approach to sourcing your tax advice. Empowering in-house counsel.
A Lupton Fawcett Periodical. Issue 1
Contents 3. Building a future in Sheffield Richard Marshall explains the city’s allure.
Welcome to the first edition of atticus, our new journal.
4. The Bribery Act pulls no punches! Has your business made provision for the changes? 6. Empowering in-house counsel Our initiative offers support & advice. 7. Health & Safety is just common sense The myths & misconceptions debunked. 8. What we do, the way we do it, and why Lupton Fawcett’s strategic plan explained. 10. The law of the landlord Why there’s always room for negotiation. 11. When was your last legal health check? Are you protected against a radical change in pre-nup law? 12. Augmenting your corporate tax advice The benefits of a considered approach. 13. Business acumen for beginners Our finishing school for young adults. 14. Employment law works both ways Why getting the right advice upfront pays.
It’s named after Atticus Finch, the hero of Harper Lee’s novel, “To Kill a Mocking Bird”. He’s a lawyer dedicated to serving his clients, yet he maintains a real grasp of wider issues, albeit in a very different context.
News in brief Family Partners Family Partners, from Lupton Fawcett, provides a range of family law services, which include preparing cohabitation agreements and pre- and post-nuptial agreements, and helping with the consequences of relationship breakdown. Relationship breakdown is a distressing and difficult time for all involved, and each individual requires a different level of support and guidance. We provide a range of services that encompass traditional, mediation, and collaborative methods, and offer links with other services, such as accountants, independent financial advisers, banks and counsellors. With the benefit of that knowledge, we recognise situations where it’s necessary to call on specialist input from experts who share our desire to provide the best level of service for clients. For more information regarding the services provided by Family Partners, please visit www.familypartners.co.uk. If you require any support or guidance with any of the issues surrounding family law, please email us at firstname.lastname@example.org or call 0113 280 2100.
Building a future in Sheffield Lupton Fawcett was drawn to Sheffield and South Yorkshire in the summer of 2009 by three main factors. Richard Marshall, Managing Director, explains the allure and how Lupton Fawcett is building for a long future in the region. Richard Marshall
Who’s behind the wheel?
Lupton Fawcett LLP Yorkshire House East Parade Leeds LS1 5BD Leeds: T: 0113 280 2000 F: 0113 245 6782 Lupton Fawcett LLP Velocity House 3 Solly Street Sheffield S1 4DE Sheffield: T: 0114 276 6607 F: 0114 276 6608 www.luptonfawcett.com
Lupton Fawcett atticus is printed on paper that uses only recycled fibre and wood from sustainably farmed sources as well as being Carbon Balanced.
Don’t know and don’t care? In that case, you definitely don’t know about the Road Traffic Act 1988. When traffic offences, such as speeding, are detected by cameras or witnesses, the police will usually send a notice to the registered keeper of the vehicle involved. The notice requires the identity of the driver to be supplied within strict time limits. It pays to keep accurate records, because failure to supply this information is an offence. Under the 1988 Act, any company secretary, director or similar officer of a company who cannot, with certainty, identify who was driving a company vehicle on a given time and day, is personally liable and, if prosecuted, could get six points on their licence and have to pay a substantial fine. The company will also face a fine of up to £1000.
The main aim of atticus is to inform and entertain but we also hope to give you an insight into Lupton Fawcett, and some of our clients and contacts, along the way. We don’t intend this to be a technical publication, but we will keep you up-to-date with any changes and trends in the law that we think are interesting or relevant. Finally, we fully expect to evolve and develop this journal over time to better reflect the kinds of articles that you would like to read, so please don’t hesitate to let us know what you think (good or bad!), and to make any suggestions for future editions. E-mail your thoughts to email@example.com
Kevin Emsley Chairman
If you require further advice about this or any motoring law matter then please contact Andrew Davidson on 0113 280 2104 or firstname.lastname@example.org
First and foremost, we had seen our client base within the region gradually increase over the years, and recognised the need to provide those clients with local access to our services. Secondly, through our clients and contacts in South Yorkshire, we were able to understand the opportunities for growth in the region’s fast-developing economy. Whilst growth has been slowed by the economic conditions of the last two years, we have no doubt that the trend remains upward and that we should be involved. Thirdly, our close relationship with Corporate Tax and Health Care specialists, Hackett Windle, led to the move to draw them under the Lupton Fawcett umbrella. This plugged the strategic corporate tax gap in our offering and strengthened our existing Health Care offering, whilst allowing them to accelerate their own development. It also gave us a toehold in Sheffield. Our aim is to deliver the very best mid-market legal services in the region by growing the Sheffield base, whilst drawing on the resources of Leeds. Leeds is also strengthened by Sheffield, producing a combined offering across two bases that provides our clients and contacts with far more than was previously available.
Right across the legal sector, the process of growth by acquisition and merger is tainted by memories of the ‘slash and burn’ tactics of the 1980s and early 1990s. South Yorkshire is no different, and we hope that the care we have taken to be completely fair and transparent with all who have joined us over the years shows that our approach is different. Most importantly, we recognise that clients want to deal with people that they know and trust. We would not be able to develop our base in Sheffield but for the first-class legal talent in the area. We aim to provide our South Yorkshire clients with a better, stronger and more powerful offering, with the additional benefit of the backing and support that Lupton Fawcett brings at their disposal. We have worked hard to develop service levels that ensure that all of our clients are better served, which goes on to serve the wider community within the region.
A Lupton Fawcett Periodical. Issue 1
In the ring with the Bribery Act Tanya Forret is Director of Lupton Fawcett’s Corporate Defence and Prosecution Department, dealing with all aspects of criminal regulatory work including advocacy in the Magistrates’ and Crown Courts, specialising in corporate fraud advice and detection. She takes time out to discuss the implications of the Bribery Act 2010 for UK businesses.
Bribery and corruption have risen rapidly up the UK political agenda in recent years and, notwithstanding delays earlier in the year, it was announced that the Bribery Act will now come into force on 1st July 2011. This allows companies three months to get their house in order. On 31st March Kenneth Clarke issued further guidance on the Act, seeking to clarify the effects and to reassure businesses. The new Act will repeal existing bribery offences and, more importantly, introduce new ones. This makes it vitally important for your business to act now in order to ensure its policies and procedures still stand on the right side of the law and can be implemented prior to July. All UK companies have a new set of risks to navigate with the introduction of this legislation, as the Act introduces a new crime of ‘failure to prevent bribery’. This means that if your company is unable to demonstrate that it has implemented “adequate procedures” to prevent corrupt practices within the business, or by third parties on your behalf, you could be exposed to unlimited fines along with other collateral penalties, such as disqualification from Government business. However, the meaning of “adequate procedures” is not defined in the Act; as with many issues,
Your business must review how it behaves in order to determine the lines between giving and receiving goodwill gestures and seeking to influence business decisions. context is all. The standards that are expected of a small private company will not be the same as those expected of a large multi-national. This has been confirmed in the latest guidance, and there is a suggestion that small businesses may be able to rely on verbally informing staff of the Act. It should be remembered, however, that the Serious Fraud Office will prosecute offences; and reliance upon this guidance is not a defence. Whilst the Secretary of State has now produced the required formal guidance on the extent and meaning of “adequate procedures”, it is not prescriptive and does not set out a fail-safe checklist of requirements for companies to implement. There is likely to be a focus on the culture of an organisation, and it will be expected that there is direction of zero tolerance to bribery and corruption from the top down. Enforcement agencies, such as the Serious Fraud Office (SFO) here and the US Department of Justice, as well as others around the world, are increasingly working in partnership on cross-border cases, increasing the chance of detection of bribery and successful prosecution. Your business must review how it behaves in order to determine the lines between giving and receiving goodwill gestures and seeking to influence business decisions. It is important to remember that, from a company’s standpoint, bribery is a lot more than just a legal issue. Whilst it is driven by law, management will have to confront and manage the implementation and maintenance of the right processes, controls, governance and culture, and to encourage the necessary values and behaviours. Addressing this now is essential to ensure you effectively manage the risk to your business. The first step is to assess your exposure to bribery risk. The next step is to consider whether your existing policies and procedures address that risk. Only then will you know what needs to be done. The stakes are high (notwithstanding Government promises that the Act is not unduly onerous), and the time to act is now, to ensure you have sufficient time to prepare.
3. Partners in compliance A commercial organisation must have due diligence policies and procedures that cover all aspects of commercial transactions. The policies will need to demonstrate that appropriate enquiries and, where necessary, actions have been taken in respect of agents, intermediaries and joint ventures.
Corporate hospitality – is it allowed? 4. Clear policies and practical procedures These must cover all relevant risk areas and be applied to both employees and business partners. Clarity is required and, as with health and safety procedures, a commercial organisation will need to demonstrate knowledge and implementation of them within the organisation.
5. Be seen to be active Commercial organisations will need to demonstrate that anti-corruption measures are not just an abstract principle and that they are used in practice. They must be apparent and operational as part of the organisation’s internal controls. This could include areas as diverse as recruitment, remuneration policies, and communication and training.
6. Keep on top of it Internal monitoring and review mechanisms will need to include financial and auditing controls designed to pick up irregularities. These may include bribery reporting and incident management procedures. The extent of these mechanisms will, to a large extent, depend upon the size of the organisation in question. The guidance also makes it clear that transparency within an organisation is a significant anti-bribery mechanism and that higher-risk and/or larger organisations may feel that it is appropriate to commission an external audit of the effectiveness of anti-bribery policies which are put in place.
Frequently asked questions... Baksheesh?
The Ministry of Justice previously published in their draft the six principles of bribery prevention, which are: 1. Identify the hotspots This is about recognising and monitoring bribery risks relevant to your sector and market. One area that will need particular attention is ensuring employee knowledge of risks, such as the provision and receipt of gifts and corporate hospitality.
2. Management must get involved Senior management must be responsible for ensuring that all levels of management and the workforce are aware that bribery is never acceptable. They must also take the appropriate steps to ensure that once adequate procedures for informing staff have been identified, they are implemented across the business.
objective. The question for UK business is whether or not this just makes things harder to trade abroad? The new guidance also recognises that there will be circumstances when duress may leave individuals with no choice but to make payments to protect against “loss of life, limb or liberty”. It will be interesting to see how that defence pans out.
A Middle Eastern word synonymous with corruption and bribery that is used in the West to describe “oiling the wheels” of certain business transactions conducted abroad. The Bribery Act is quite clear that allowances will not be made for local customs and practices unless they are permitted by the written law of the relevant country. Where the law is silent, the Serious Fraud Office will consider whether or not it is in the public interest to prosecute.
Facilitation payments – are they allowed? Unlike the relevant American legislation, there were no exceptions made within the Act for certain payments to foreign officials, even if their own legislation permits the payments. This has now been watered down in the latest guidance and the Government accepts that this may present problems in some areas of the world. They now state that eradicating such payments is a long-term
The guidance indicates that reasonable and proportionate hospitality or promotional expenditure, which enhances the image of a commercial organisation, will be permitted as long as it serves to allow the organisation to better market its products and services, or to establish good relationships with customers. If hospitality is provided to influence a person to grant business, it may be deemed an offence. Corporate hospitality is a substantial grey area of which the final arbiter is the prosecuting authority, a fact that will provide little comfort to those seeking to ensure compliance. In light of the above, possibly the best course of action in relation to hospitality is that where major expenditure on hospitality is contemplated, legal advice should be taken prior to such hospitality being extended, particularly where the provision of such hospitality could be misinterpreted as seeking to influence the award of business contracts.
Final thought The provision by England’s ill-fated 2018 World Cup Bid Team of 24 Mulberry handbags for the wives of FIFA executives was the subject of much comment in the national press in 2009, and has subsequently been considered in light of the Bribery Act. Although FIFA Vice President Jack Warner has subsequently returned the bag he was given, and the provision of the gift was within FIFA Guidelines, the context of these gifts is interesting in light of the new Act. Rival bidders Qatar and Australia had apparently handed out branded goody bags at the Leaders in Football Conference in London in October 2009, and Jack Warner was reported as saying, “Why isn’t there a bag from England? People are looking at these things and asking themselves questions.” Andy Anson, England’s Bid Chief Executive, was subsequently reported as saying, “If we thought there was something to be gained in giving out plastic bags, we would have done it.” Whatever the view about the circumstance surrounding the provision and receipt of these gifts, it is clear that being acceptable within FIFA Guidelines would not have automatically provided a defence and that FIFA, even though it is based outside of the UK, would, as an organisation carrying out part of its business in the UK, potentially be at risk.
A Lupton Fawcett Periodical. Issue 1
THE MYTHS OF
Empowering in-house counsel
The role of an in-house lawyer can be a solitary one, with little opportunity to share ideas and seek advice from peers outside of the business they represent. John Sykes, Director and Head of Commercial Law, reports on our innovative Maximise Business Achievement (MBA) – an initiative which aims to give in-house counsel the support they need to better represent and advise their business.
In-house lawyers are often treated with suspicion and are seen as the person who is always going to say “no” or “yes, but…” to new ideas and opportunities. Whilst they must comply with the professional obligations of a solicitor and maintain sufficient independence to fulfil the role of legal advisor effectively, a good in-house counsel will also be a valued asset to the business and an important part of the management team. Most large organisations have only small in-house counsel teams that deal with all the legal issues that come with running a business. This naturally requires an extremely wide knowledge base, including health and safety, HR and employment, commercial contracts, intellectual property, company secretarial skills and competition law compliance. They have to be sufficiently knowledgeable about all of these matters in order to advise the business in general terms and, just as importantly, to know when specific external legal advice is necessary. The role requires in-house counsel to be part legal adviser, part commercial adviser, part procurement manager and, ultimately, part budget holder. At Lupton Fawcett, we have worked with in-house counsel for many years, and recognise the challenges that come with the role. Our new Maximise Business Achievement initiative is an innovative, stimulating and value-adding exchange of ideas, knowledge and
In a risk-averse climate, it can seem as though your hands are tied by risk managers and insurers. Not so, says Graham Ford, Director and Head of Personal Injury, who sets out to debunk some of the myths surrounding health and safety.
The role requires in-house counsel to be part legal adviser, part commercial adviser, part procurement manager and, ultimately, part budget holder.
If you were to believe the media’s reporting of health and safety, you’d be forgiven for thinking that you can’t do anything these days without a risk assessment, and that even the slightest element of risk in the workplace, like serving hot coffee, is just too risky! Well, take it from us that although this is a common enough view, it is misconceived. The Health and Safety Executive (HSE) became so concerned by this misperception, it dedicated a whole section of its website to debunking the view of “Health and Safety Gone Mad!” Check out the site on www.hse.gov.uk/ myth for the full list; but to whet your appetite, here are a couple of good examples:
opportunities, specifically designed for in-house lawyers and company secretaries. Although formal seminars and industry associations where in-house counsel can meet and receive training already exist, they are often industry-based, restricting interaction to same-sector colleagues. That’s why we have created the MBA, where in-house counsel can tap into the learning and experience of colleagues from across sectors; they can build useful relationships, share and solve problems, and generate ideas to benefit the businesses in which they work, as well as enjoying the debate. We invite select groups to five events throughout the year, where different groups meet for wider networking. The programme provides in-house counsel with a challenging and stimulating forum that stretches and develops their knowledge base through cross-sector networking, themed discussions, CPD opportunities and the establishment of peer support, so better equipping your in-house counsel to successfully juggle the many aspects of their role whilst simultaneously providing your business with excellent legal advice and protection.
The Myth Every possible risk needs a safety sign.
The Truth Using too many signs just guarantees that no one will read any of them. Safety signs are useful when there’s a significant risk that cannot be avoided or controlled in any other way. But that does not mean you should add a sign for every possible risk, however trivial.
Workers should be banned from putting up Christmas decorations in the office.
The Truth Bah humbug! Each year we hear of companies banning their workers from putting up Christmas decorations in their offices for ‘health and safety’ reasons, or requiring the work to be done by a ‘qualified’ person. Most organisations, including HSE and local councils, manage to put up their decorations, celebrating the spirit of Christmas without a fuss. They just sensibly provide their staff with suitable stepladders to put up the decorations, rather than expecting staff to balance on wheelie chairs. Another couple of great ‘facts’ are that both conkers and bonfires are strictly banned by health and safety legislation. Happily, neither of these ridiculous claims is in fact true, but they are good examples of the confusion surrounding health and safety law. This stems from the misperception that our society has a deeply-ingrained compensation culture. Despite this perception, the reality is that claims have in fact declined. As claimant lawyers act on a no win, no fee basis they will not take cases that are likely to fail because if they lose, they do not get paid. This automatically cuts out a lot of claims, as claimant lawyers are naturally reticent about taking on risky cases. Interestingly, this was backed up by a recent Government report, which found that there is no evidence of a compensation culture in the UK, just a public perception of one. The myths have caused all sorts of backlash for the HSE, and they are keen to assist organisations and
individuals to do all that is necessary to consider risk. Here are five steps to risk assessment Also, Lord Young to make your business safer: identified the need to Step 1 Identify potential hazards streamline much of the Step 2 Decide who might be harmed and how HSE requirements in his Step 3 Evaluate the risks and decide on precautions recent report to David Step 4 Record your findings and implement them Cameron, and the Prime Step 5 Review your assessment and update if necessary Minister confirmed that the Government would adopt Be aware of what is fact and what is fantasy, so that his proposals. you can get on with business without worrying over It is important to unnecessary issues. make a careful assessment of what might cause harm to people, so that you can decide whether you have taken enough precautions or should do more to prevent possible harm. Accidents and ill health affect your business through reduced output, damaged machinery and increased insurance costs.
A Lupton Fawcett Periodical. Issue 1
A number of our clients and contacts have been surprised by some of our recent activity: our acquisition of the traditional legal business of Fox Hayes in December 2009, our merger with Hackett Windle, our recruitment of 36 former Ashton Morton Slack staff, and some of our lateral hires. So why have we taken these steps, particularly in hard times and whilst making cuts elsewhere? Let me outline our strategy, and the drivers for it, in order to put these apparently conflicting steps into context.
Standing out in the crowd All law firms claim to be different but few are. This is partly because they focus wholly on what they do (provide legal services) and not enough on how they do it. I believe that we already demonstrate our difference in a number of ways. We are committed to providing solutions to problems, and understand that winning always comes at a price – but success is when it’s worth it. We also appreciate that the people in the boardroom are often the ones who actually own our corporate clients. By striving to understand their long-term goals and aspirations, we can be of real strategic value and provide solutions to help both create and preserve wealth and meet lifetime goals. We call our approach the Law of Advantage. However, at Lupton Fawcett we have taken serious lessons from the financial crisis, and we do not pretend that our business has been spared from some of the pains suffered by many of our clients. Our business, in common with all law firms has the added element of the so-called
“Clementi reforms”, the result of a root-and-branch review of how law firms can and should be owned and run. These led to the Legal Services Act, which introduces many changes including, amongst others, the ability for non-lawyers to own law firms through the introduction of outside capital. The Act will transform the legal marketplace over the next few years.
Double trouble The financial climate generated immediate issues that required fast solutions, whilst the Clementi reforms raised challenges that require longer-term solutions. Our response to the combined impact of these factors has been a complete overhaul of our strategy, so that we now feel well placed to provide a far stronger and betterdifferentiated firm. We are growing into an organisation capable of giving more to our increasingly-demanding clients, with a clear objective of retaining them for the long-term. Just like our clients’ businesses, we have had to make difficult decisions to deal with the economic climate. We too have had to make adjustments, trim fat where possible, and manage our working capital with more care and attention. This approach is already paying off, and is helping us to achieve our mission of becoming our region’s mid-market law firm of choice. We continue to offer wealth creation and wealth preservation services for the extremely large mid-market, whilst providing niche services to larger organisations.
Intelligent design We recognise that we have a long journey ahead and that this is hotly-contested territory. Our goal will only be achieved if approached as a long-term objective. So, we are working hard to tailor our offering by filling all and any gaps in our services that our clients require. We are building a fuller and more relevant offering than our competitors, one that is specifically and intelligently planned around our clients’ needs. This can then be delivered in a way that truly benefits our clients through the Law of Advantage.
What we do, the way we do it, and why
Richard Marshall is Lupton Fawcett’s Managing Director, and recognised as an expert in his field by both The Legal 500, and the Chambers Guide to the Legal Profession. He explains how events of the recent past have shaped the firm’s decision-making when planning for the future.
To achieve these goals, we are building an infrastructure that will support upwards of three hundred lawyers. This will allow us to: – Build our client base, which will require us to build a more diverse and complete offering, where all services are available to all clients on demand – Build and maintain a strong, wellcommunicated and successful brand that gives our clients confidence when they work with us – Provide all of the support systems needed to run our business efficiently and in the best way for our clients – Further develop panel positions with the banks and other institutions – upping our profile and further strengthening the brand – Produce an organisation capable of thriving in a post-Clementi world that our clients know will be there for them throughout their careers
We are building a fuller and more relevant offering than our competitors, one that is specifically and intelligently planned around our clients’ needs.
Strategic growth It is not easy to achieve this growth organically and we have recognised that it can best be achieved through acquisition and merger, assisted by strong lateral hires. Although further steps are needed, we have already made significant progress through the steps taken in Leeds and through our arrival and growth in Sheffield. To succeed in the short-term, we must tightly manage our business. Equally, to be resilient in the future we must strive towards our long-term objectives. Ultimately, we must be ready for the challenges of a fast-developing market, the ever more sophisticated needs of our clients, and the impact of the Clementi reforms. I hope that this overview has given you an insight into our thinking and strategy, demonstrating our real commitment to better serve you in a meaningful way. I have also tried to show that ours is a business that lives and breathes all the same issues as our clients, which is why we are so well placed to understand and respond to yours.
A Lupton Fawcett Periodical. Issue 1
When businesses are looking to rationalise costs, focus usually falls on suppliers as an obvious first step to controlling expenditure. It is important to remember, though, that your business’s landlord is just like any other supplier, and with the right help and advice there’s always room for negotiation and change. This is particularly true for the retail sector which, depending on the scale of operations, can have a number of different retail space suppliers (landlords) in very different locations. Retail also has the added complication of finding itself under increased pressure to perform from the financial media, who look to major high street retailers as a barometer of the economy. This in turn draws the attentions of any number of outside agencies, which have the power to influence share price and therefore a business’s value. One such major prudent high street retailer is Austin Reed who, along with its sister brands, Country Casuals and Viyella, has recently had meaningful discussions with its landlords. Experience has shown that landlords of retail space, whether in new shopping centres or new inner city developments such as Liverpool Metro, Gloucester Quays and Derby, have been both constructive and helpful.
The law of the landlord
In these uncertain times, all businesses are looking at reducing any unnecessary costs. David Bowden, Director of Commercial Property, reports that too few are negotiating with landlords to agree flexible terms that are beneficial to both parties.
Recent negotiations have included the following clauses previously unseen in most new retail leases, and which should be on every new tenant’s shopping list: – Rental based on a percentage of turnover only, with no minimum or base rental – Rental to include any number of the usual additional extras, including service charge, insurance, rates and, in some cases, utilities – A contribution to fitting out the new unit, or an inducement to take the unit depending on the tenant’s financial and tax position Not all of these will be available in one tranche, but a smart tenant should be able to select from this menu to make their own costs manageable and the new unit profitable. There are two major bargaining chips that you should bring to the table when beginning negotiations for a lease on a new unit: the landlord’s new development needs occupiers to support footfall and, more importantly, their financial model will be built on long-term projections, with their first payday being the first five-year rent review of the lease. It is vital that you are diligent and well-advised during these negotiations. In particular, beware of unworkable break clauses that don’t allow you to walk away if the five-year rent review makes continued occupation of the unit unrealistic. If you are a tenant of a single shop or a portfolio of single units, you should not be worried about entering into negotiations with your landlord. They will often consider more flexible payment systems as this can add value to their own portfolio through longer-term contractual commitments. If there are less than five years left on the lease, you could consider re-gearing to a longer term with negotiable capital payment, rental holidays or monthly payment terms. The Austin Reed Group, for example, has an ongoing programme of lease re-gearing that is financing the refitting of units and store improvements. The lesson here is that your landlord/s should have your business’s best interests at heart; after all, if your business does well, their own interests are also served. This is not always the case however; and having the right legal representation on your side when entering into negotiations will have long-lasting financial benefits to your business, and bring your relationship with your landlord/s up-to-date with modern practices and opportunities.
The importance of legal check-ups The interpretation of the law is subject to constant review. Anne Braithwaite, Director and Head of Family Partners, says this gives you all the more reason to reassess your legal situation with every major change in your personal circumstances.
Over time, laws change. They are altered by legislation and reinterpreted by High Court rulings, which has the same effect. The impact on your private life and personal wealth might not be immediately apparent, but it can be profound. A recent example of how a seemingly trivial decision can have a massive impact on the legal status of thousands is the divorce case of Radmacher v Granatino. The Supreme Court, in deciding the case, redefined the UK’s law on pre-nuptials without first waiting for Parliament to change it. Before Radmacher, pre-nuptial agreements were subject to the caveat that they gave no guarantees for the future if your marriage ended in divorce. This is no longer the case however, as their Lordships have made it clear that if there is a properly-drawn-up pre-nuptial agreement, divorce courts will assume that the parties meant it to be followed if their marriage broke down, and will therefore use this as a decisive weight for the outcome of any disputes. You would be forgiven for thinking that this makes a pre-nuptial a sure thing, but in the UK they still need to be judged as being “fair” by a court in order to be implemented. As yet, there is no definition of what is meant by “fair”, and this safeguard has been put in place to account for changes in people’s circumstances. Entirely reasonable arrangements for two people in their late twenties, with their own careers
A pre-nuptial agreement is an attempt to insure you against uncertainty in the event of divorce, and you wouldn’t leave your insurance provisions un-reviewed.
and earning power, could create a gross inequality ten years down the line. They might have had a couple of children, for example, and decided that one of them will stay at home or work part-time in order to focus on childcare. Unless their pre-nuptial provided for just such a situation or has been reviewed and updated as their circumstances changed (called a post-nuptial), adherence to the original arrangements might produce an overall unfair outcome, leaving one person at a substantial financial disadvantage. It is within these grey areas, where arrangements are out-of-date or simply don’t take changing circumstances into consideration, that they become subject to the scrutiny and interpretation of the courts. This can leave one party feeling that a judgement is unfair or hasn’t followed the spirit of the arrangement as they understood it. This is why it is vitally important to ensure that your pre-nuptial arrangement is properly negotiated through lawyers who have knowledge of all the finances and can build in provisions for foreseeable changes, such as the birth of children. It’s also a good idea to set a date for when the arrangements will be reviewed, usually after a number of years, and make sure that you stick to this date. Remember that a pre-nuptial agreement is an attempt to insure you against uncertainty in the event of divorce, and just as you wouldn’t leave your insurance provisions un-reviewed, neither should you neglect to keep your pre- or post-nuptial agreements up-to-date. Your individual circumstances will change over time, with marriages, births, deaths, promotions, divorces, redundancies and inheritances all impacting on your life. Without periodic review, it is unlikely that your old pre-nuptial arrangements will pass the “fairness” test in a divorce court. The Radmacher decision has given pre- and post-nuptial agreements a status in UK divorce law that they did not have before, and further refinement will undoubtedly emerge in future cases. No one likes to dwell on the possibility of divorce, and the whole idea of a pre-nuptial is often seen as a crass, American import, but it is about protecting what’s fair and appropriate for both parties. The criteria for establishing “fairness” will also change over time, making it even more important for a pre-nuptial to be updated with periodic review and any changes formally secured. This is just one example of how small changes, that you might not even be aware of, can change your legal status or security in specific circumstances. Although it is extremely difficult to protect yourself against every possible eventuality, you can ensure that you have the best protection available, by keeping up-to-date with reviews and having periodic legal health checks.
A Lupton Fawcett Periodical. Issue 1
Can you remember your first ever job interview? Did you sail effortlessly into a fast-tracked career or did you have to slog it out in the trenches before getting to where you are today? Have you always conducted yourself with erudition and panache or do you still wince when remembering a particularly embarrassing faux pas of your youth? Perhaps the most important question should be, “What if you knew then what you know now…?”
Tax advice that hits the mark Adrian Hackett, Director in the Corporate Finance Department and head of Lupton Fawcett’s tax team, discusses the importance of a considered approach to sourcing tax advice.
Whilst HMRC are tending to blur the line between tax evasion and tax avoidance, there are still a number of opportunities to work with other advisers to take advantage of exemptions and reliefs without “pushing the envelope” towards aggressive tax planning.
We are often called on to help clients in conjunction with their regular tax advisers who, in most cases, have historical working knowledge of the tax affairs of the client. They are usually the advisers who assist the client with completion of annual tax returns and correspondence with Her Majesty’s Revenue and Customs (HMRC). The level of assistance that we are required to give depends largely on the experience and expertise of the other tax advisers. Where this is extensive, we are generally only required to help with documentation or representation in front of the tax commissioners or courts. In other cases, we are able to assist tax practitioners who are looking at situations outside their sphere of experience. We also have a wider role for some niche corporate finance boutiques for whom we effectively act as in-house tax team. As a larger, multi-disciplinary team we are able to produce creative solutions that the regular adviser may not have considered. Whilst HMRC are tending to blur the line between tax evasion and tax avoidance, there are still a number of opportunities to work with other advisers to take advantage of exemptions and reliefs without “pushing the envelope” towards aggressive tax planning.
Two recent examples illustrate this point. Splitting trades to facilitate a sale We were asked to advise in relation to a sale of a trading company which also undertook a second business of farming. The purchaser was not interested in acquiring the farming business, which had sizeable property holdings. Any extraction of the farming business and its property before or after completion could have given rise to a substantial chargeable gain within the company along with a sizeable stamp duty land tax liability. A pre-completion disposition, if not at market value, could also have been classed as a dividend or distribution, which could have led to shareholder tax liabilities. By use of legislative procedure, we were able to set up two separate companies, each holding one business but both with the same shareholders as the original company. This approach allowed our clients to avoid a taxable gain as well as the stamp duty.
Personal gain A second example related to a successful business run by three partners. They were concerned about the additional income tax liabilities likely to arise as a result of the 50% higher rate, as well as their potential personal liability to customers in the light of the larger assignments with which they were being entrusted. Again, we were able to advise on transferring the business to a limited company without the partners incurring a capital gains tax liability on disposal, by taking advantage of a relief.
In a similar instance we did advise the client to choose to pay capital gains tax on the transferred value of the goodwill for three reasons. 1. Entrepreneurs Relief was available, meaning that the effective rate of tax on the partners in respect of the value of the goodwill was 10% (the goodwill being valued at less than £5m in respect of each partner). 2. The consequent loan account in the company arising from acquisition of the goodwill, which the company had not paid for, could then be drawn down by the former partners without any further income tax liability. 3. Amortisation of the goodwill over five years meant that the trading profits of the limited company subject to corporation tax were reduced by a significant amount during that period. In order to take advantage of these and other legislative benefits designed to assist your business, it’s vital to plan strategically when seeking solutions. Although a company’s regular tax adviser may bring a wealth of knowledge regarding the business, they might not possess the wider knowledge or support needed to find the most advantageous resolution to every situation. To this end, it is always worth reviewing where you draw tax advice from, as this will help you to find the solutions that are most beneficial to your business in each case.
Business acumen for beginners Finding a job in today’s market place, with hordes of similarly-qualified individuals all chasing limited positions, can be extremely daunting for young adults who are just starting out on their careers. Philip Drazen, Director, reports on our Instant ‘BA’ course which aims to tip the scales in their favour by giving them essential skills not taught at any university.
Our free instant Business Acumen (BA) course is our antidote to beginners’ mistakes, and comprises a two-day ‘finishing school’ type programme for young adults who are either at university or about to be, and is open to the families of our clients and contacts. Set in a local hotel, the students are introduced to the business world by a series of tailored workshops designed to give them an extra edge over their peers when they have finished university and are beginning their careers.
The Business Development team at Lupton Fawcett have identified key areas that would be most beneficial to young adults about to embark on their careers, and have designed the workshops to include: – How to network and build contacts – How to build a powerful CV – How to ensure their internet history is clean – How to dress for success – Why they should find an experienced business mentor – How to write a business plan – How to work as part of a team – How to dine and order wine without embarrassment – Why it is necessary to have a strategic accountant, lawyer, banker and financial adviser Philip Drazen, comments, “This is our way of giving something back to our clients and contacts. The course is completely free and it is designed to help students build their confidence when they eventually branch out into their chosen careers. Young people today are increasingly required to expand on their capabilities, so we want to give tomorrow’s business leaders a springboard of skills in addition to their academic knowledge.” You can find out more about our innovative BA courses by contacting Philip Drazen on 0113 280 2088 or email him at email@example.com.
A Lupton Fawcett Periodical. Issue 1
A two-way street Handbooks
Employees might have more rights now than ever before but, says Director of Employment Law, Andrew Gilchrist, it is high time for employers to start using Employment Law to their advantage. Changes to Employment Law are often seen as a hindrance to a business’s ability to turn a profit. If you think that Employment Law only benefits your employees, it might be time to consider how the changes of recent years actually work both ways and can also benefit you. We are sometimes approached to resolve situations that have already escalated to a point where damage limitation is the employer’s best outcome. In this issue we will share some of the most common misconceptions and demonstrate how, with the right advice at the outset, Employment Law can be beneficial to your business and to those that you employ.
Managing under-performing employees can be a serious drain on a business’s resources, efficiency and morale. If handled badly it can increase levels of sickness absence, create disruption and demotivate co-workers, as well as resulting in Employment Tribunal claims which may be difficult and expensive to defend. If handled well it can turn unhappy and inefficient employees into positive contributors, or when necessary they can be managed out of the business in an orderly way which minimises the scope for them to bring claims against their former employer. Carefully-planned employee management processes are an essential part of any successful business. Proper training of managers, and well-designed procedures for them to follow, will enable under-performance to be identified at an early stage, and managed to an appropriate outcome with a minimum of disruption and cost to the business. We have the experience and the expertise to help you create the personnel management processes that are right for your business, to train your key managers,
and to assist them in making sure the systems are applied correctly where required. We also offer ongoing learning and experience-sharing opportunities to HR managers through our popular HR Network programme. An ounce of prevention really can be worth a pound of cure.
Frequent absence If an employee has frequent unexplained absences, you should discuss the causes and try to agree ways of managing improvements to their attendance. If the situation doesn’t improve, or if there is no valid explanation for the absence, inform them that it is not satisfactory, and set attendance targets. If these targets are not achieved, follow the same procedure as detailed above, with two formal warnings leading to notice of termination if there is no improvement. This requires you to strike a balance between what is fair for employees and maintaining the productivity or service levels of your business that your customers demand. In circumstances where the frequent absence is for completely legitimate reasons, you will need to take certain steps before considering dismissal, and you should always seek legal advice if in any doubt.
Harassment You are probably aware that the Equality Act 2010 gives your employees the right to bring claims for harassment against your business when they have been harassed at work by colleagues, customers or suppliers. This places a huge burden on employers, but provisions within the Act may protect you and your business. If you take reasonable steps to prevent harassment, you may be able to assert a statutory defence against many claims. Staff handbooks are just one such precaution, as we will explain.
Statements of terms and conditions are generally included within an employee’s contract, but far less common are work handbooks. These offer a valuable first line of defence, enabling you to run your business in a far more profitable and efficient way. Just one example is a Dignity at Work policy that protects employees from harassment at work. This not only makes your business a more pleasant place to work, but it also allows you to invoke the “statutory defence” against claims of harassment, potentially saving thousands of pounds.
Restrictive covenants Restrictive covenants are contractually-agreed limitations on what an employee can do following the end of the time spent working for an employer; they are potentially valuable assets of the employer’s business, and give you a great opportunity to use Employment Law to your business’s benefit; but, more often than not, a lack of planning can render the covenants unenforceable and worthless. Although most employers recognise that restrictive covenants are useful and include them within their contracts of employment, they often find that they are unenforceable. This is usually because the restrictions are too general and do not take the circumstances of the specific employee into account. In order for a restrictive covenant to be enforceable, it must be properly drafted and carry bespoke restrictions. Consider how much it would cost your business if the employee left, taking important clients with them. In some cases this cost can run to thousands of pounds, making it worth your while to invest in bespoke restrictive covenants for employees.
TUPE Many of you will be familiar with the Transfer of Undertakings (Protection of Employment) Regulations 2006. Whilst they apply to many sales/acquisitions, they also apply to outsourcing arrangements. As the Regulations apply to the employees who are “assigned” to the function that is outsourced, they can often cause problems when the employer wishes to bring the function back in-house. In these circumstances, it is not uncommon for the
Strike a balance between what is fair for employees and maintaining the productivity or service levels of your business that your customers demand.
company to whom the function has been outsourced to move its employees around so that its under-performing employees become “assigned” to the outsourced function, and as a result transfer back in-house at the end of the outsourcing contract. If there is a risk that this may happen when you’re outsourcing a function, you need to include appropriate clauses within your outsourcing agreement to ensure that it is properly managed.
Forewarned is forearmed In conclusion, the more thought, planning and preparation that you invest in Employment Law, the more protection that your business will have. Build the foundations of best practice into the very fabric of your business with clearly defined and communicated procedures and policies, and you are far less likely to feel at the mercy of Employment Law. Employers who simply react to situations will be caught out sooner or later and will view Employment Law as only being for the benefit of employees. Our approach to Employment Law is to use it for the benefit of our clients. We recognise that you want commercial solutions, and that is what we aim to provide. Whilst it is certainly the case that employees have more rights and greater protection than ever before, as an employer you have rights too. In short, if you understand the law and its role within the workplace, you can identify how to plan to make it work to the advantage of your business.
Handbooks Restrictive Convenants
We work with some of the biggest names in the business. Such as Ken, Mark and Keith.
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