Limited Liability Partnerships are becoming ever more commonplace so now might be a good time to look at possible pitfalls that may arise unless the LLP is founded upon an agreed basis in writing. There is no legal requirement to have a written agreement in place in a Limited Liability Partnership, as the default provisions of the 2001 LLP Regulations will apply in the absence of one, but there can be dangerous ramifications if the partners just rely on these. Here are some of the potential problems if you don’t have a written agreement in place.
Under the regulations, every partner is entitled to participate in the management of the LLP’s business as an equal, regardless of their experience or financial input into the partnership, this could lead to resentment and poor management, and so it’s probably best to create some form of decision making tree and division of responsibilities from the outset. Similarly, all partners will be entitled to an equal share in the capital and profits of the partnership regardless of how much they initially contributed, unless there’s a written agreement in place to the contrary.
General decision making regarding normal business matters are decided by a simple majority under the default provisions and changing the nature of the business would require a unanimous consent, this might lead to a level of inflexibility in a changing market so is also probably best addressed in a written agreement.
Remuneration is another possible source of contention as under the default provisions, partners have no automatic entitlement to be remunerated for their work in the LLP other than by way of profit share. This would need to be looked at in cases where some partners work in the business full time and would need paying on a regular basis.
Other contentious issues will LLPs relying on the default provisions of the 2001 regulations include the introduction of new partners into the LLP, expulsion of existing members; under the regulations, a partner can’t be expelled by a majority of the other partners unless the power to do so has been conferred by an express written agreement setting out the circumstances allowing such an expulsion; for example, if they are in material breach of the agreement, or have taken too prolonged an absence from the company.
So if you are thinking of setting up a Limited Liability Partnership, why not give us a call?
The various specialist civil courts in England and Wales will be reorganised and be officially known as the “Business and Property Courts of England and Wales” from June 2017. They will handle, amongst other matters, international dispute resolution jurisdictions. The courts included within the Business and Property Courts will be as follows:
- The Commercial Court which will continue to cover all its existing subject areas of shipping, sale of goods, insurance and reinsurance etc.
- The Admiralty Court.
- The Mercantile Court.
- The Technology and Construction Court which deals with major technology and construction cases.
- The Financial List which deals with all banking and financial market issues.
- The Companies and Insolvency Court.
- The Patents Court.
- The Intellectual Property and Enterprise Court.
- The Competition List.
The new structure will provide more flexibility while preserving the practices and procedures of these courts. Judges with suitable expertise and experience will be able to cross-deploy so as to be able to sit on cases where their expertise can be best utilised. The current situation means that judges who are experts in a particular legal field are not readily available to sit in cases in that area in another court, so, highly expert competition law judges in the Queen’s Bench Division cannot easily sit on the bulk of competition law cases that take place in the Chancery Division.
The overall intention is to enhance the U.K.’s reputation for international dispute resolution and to ensure that the U.K. continues to provide the best business court-based dispute resolution service in the post Brexit world. Business and Property Courts will be set up in Birmingham, Bristol, Cardiff, Leeds and Manchester, initially with planned future courts in Newcastle and Liverpool and these courts will enhance the connections between Business and Property work carried out both outside and within London.
Filed under Arbitration, Commercial law, Company Law, Competition Law, Construction, contract law, Copyright Law, Dispute resolution, EU Law, Intellectual Property, Legal news, UK Law
Well article 50 has been effectively triggered today. Since the referendum there has been a period of uncertainty, but the latest analysis of possible effects on businesses and the probable changes to the law can be better understood.
One of the major issues that will need to be addressed will be all the EU registered trademarks, designs and the protected food and drink designations. Currently we have a national system which closely mirrors the EU regime, but after Brexit, the EU Trade Mark and the Community Registered Design legislation will no longer apply in the UK. Also protected names such as “Stilton” cheese will no longer apply to UK products so we may see in the future, French “Stiltons” or “Melton Mowbray Pies” and UK “Champagnes” and “Parma hams”.
Although the government has stated it will transpose much of EU law into UK law (The Great Repeal Act), this is not a simple as it sounds, there are many, many, alterations needed for the Laws to continue to make sense in the UK only and it remains unclear what will happen to current EU Trade Marks and Community Registered Designs. In any event, it’s possible that the UK Intellectual Property Office could be inundated with new and renewed registrations.
Data protection is another area of concern; currently the UK is committed to implementing the General Data Protection Regulation, but this may not be enough to prevent future problems with the EU as there may be legal challenges within the EU to recognise non-EU country’s data laws. On possible solution would be to have individuals either specifically give their informed consent to transfer their data or add clauses to contract that may involve data transfer.
Regulated industries are also likely to be affected; currently London houses the headquarters of the EU pharmaceuticals and veterinary products regulator, the European Medicines Agency, but this must change post Brexit which might mean delays to the clinical testing or marketing of new products in the UK. This might also apply in other heavily regulated sectors like the motor and aviation industries.
Businesses will encounter difficulties in many areas planning for the future with the legal outlook so uncertain. Although this brief overview doesn’t cover the thorny subjects of immigration restrictions and trade barriers, business needs certainty, which will only happen as the negotiations begin in earnest and the Government’s approach to tidying up the legal mess that Brexit involves becomes clearer.
What is certain is that if you are planning to enter into, or have existing long term agreements with partners in the EU you may need to consider the implications for those agreements. Some changes can sensibly be made now to deal with a post-Brexit world, so why not give us a call.
Contractual disputes can be costly and time consuming, if you are not careful you could end up in court and damage your or the other company’s business relationships and reputation. Unfortunately all businesses will have a contractual dispute sooner or later. Contracts must include a series of elements to make them valid and both parties need to be clear about and have a solid understanding, and most importantly, mutually agree the terms of that contract; without a mutual agreement, the contract is not legally valid and can be contested in court. All contracts must have an element of an offer being made, an acceptance of that offer and a form of payment for the goods or services concerning that offer. Contractual disputes often develop during this process and can involve anyone; your employees, your business partners, your clients and your suppliers.
Common types of disputes involve issues that arise from:
- When someone reviews your contract and/or an offer you’ve made in that contract
- Disagreements regarding the meaning of a contract’s technical terms
- Mistakes and errors regarding the terms in the contract
- A conflict arising involving your employees and/or business partners
- Failure to stand by an original agreement made months or years earlier
- Failure to perform a duty expressed in a contract, a breach, such as failing to deliver goods within an agreed timescale.
If any of the above should happen, it’s vital to try to resolve the dispute as best you can immediately and by mutual agreement but if that’s not possible it’s best to get the best legal support to help you find the right resolution for your business. Any solution or resolution should not be so time-consuming that it will affect the normal running of your company; it should not be too costly which can adversely affect your company finances and aim to handle the matter carefully, so avoiding damage to business relationships and your reputation and lastly, try to find a solution that doesn’t result in the dispute going to court.
There are two types of remedies in a contractual dispute; legal and equitable. Legal remedies allow for the victim in a dispute to obtain monetary damages for the breach for any loss they have suffered as a result. Equitable remedies on the other hand, are attempts to find a solution to resolve the dispute that isn’t related to money. An Equitable remedy could include:
- The cancellation of an old breached contract and replacing it with a new one to account for the changed or different needs of each party.
- Rewriting part or all of a contract to correct any errors or misrepresentation of technical terms
- Requesting that a breaching party perform the duties agreed to in the contract, i.e. providing goods or services as originally agreed.
Getting good legal support is crucial during a contractual dispute to help you collect and analyse the relevant evidence, investigate specific details and document essential information to conclude a dispute effectively, so if you are involved in a contractual dispute, give us a call.
The brief and simple answer is “yes” if you want to stop others passing off their goods and services as your own. The technical definition of “Passing off” states that it occurs when someone in the course of trade creates an impression that their goods or services emanate from that of another business, so leading to customer confusion. This is actionable in law using a Passing off action. Usually a passing off action arises where the branding of a business is copied, although it can encompass more general attempts to replicate another business.
Although a passing off action will provide some protection against unauthorized use of your business name or logo if they have not been registered as trademarks, your brand/company remedies in law are much more certain if you can argue that your trademark has been infringed, but this does involve having a registered trademark.
Having a registered trademark makes it easier and cheaper to take action to stop other businesses from using your name or other branding. If you have not registered a trademark the law of passing off is your only recourse.
In order to prove Passing off you will need to establish that:
- Your name and/or logo have built up a reputation and consequently there is a measure of “good will” attached to the brand.
- A disconnected third party has used your branding in such a way that potential and or actual customers could be misled into believing that the goods or services on offer were those of your business.
- You have suffered some form of loss, either financial or reputational, by the other person’s use of your branding.
Establishing the above can be difficult and expensive so it’s best to get specialist legal advice so if you are affected, why not give us a call?
In most cases “boardroom battles” sort themselves out without any need for a recourse to law but there can be instances when a company director must be dismissed and this can be a complex process as a Director is not a normal employee.
Director’s of companies, from SMEs upwards, usually have up to three functions; a Director, an Employee and a Shareholder and in order to dismiss, they must be removed from each role.
The removal of a Director often depends on what is in the company’s Articles; if the Articles empower a Board to dismiss a director, and the majority of directors agree that the individual should go, then this can be decided at a board meeting. If not, the Companies Act gives this power to the Shareholders. Shareholders with more than 50% of the voting power can resolve to remove a director, but there is a special procedure to follow with complicated notice provisions so make sure you check the provisions in the Companies Act first.
As a Director can also be an employee, the company can dismiss a Director in the same way as it can dismiss any other employee. However a majority of the members of the Board must still vote for the director’s employment to end at a board meeting. If a director’s employment is terminated, there is always the risk that they could take the company to an employment tribunal but many companies think this is a risk worth taking.
Lastly you need to consider whether the Director is also a shareholder; check the shareholder’s agreement or the Company Articles for a clause that states that if a director ceases to be a director, they must automatically surrender their shares and how these shares are valued at that moment. If there’s no such clause then the director cannot be removed as a shareholder and alternative arrangements will need to be considered, such as buying back the shares.
Ultimately regardless of the situation it’s always best to try to resolve the matter with the director in question. If you have the power, explain to them that you can go through the above procedures to remove them and given that they cannot prevent it, it may be better for them to negotiate an exit. If you don’t have the power but feel you cannot work with them, then negotiation is still an option; you may still be able to agree an exit.
As always if you need help and advice, give us a call.
We recently ran across an interesting article from Companies House regarding registration of limited liability companies.
Overall this is an easy and straightforward process, the Companies Act 2006 states that in return for limited liability, companies must be transparent about who owns shares, who runs them, etc. The Act also requires Companies House to make this information available to the general public so this raises the question of how to provide the information required by law, whilst protecting personal information you may not want disclosing?
The most obvious piece of information you’d want to keep private is your home address, so before registering your company at Companies House consider which address/addresses you are going to use. Upon incorporation of your company, the Act requires you to provide an address for each of the following:
- a registered office address (i.e. the company’s address)
- a service address (where company officers can be contacted)
- a ‘usual residential address’ (of the directors/LLP members)
- an address of the initial subscribers.
The act requires company officers to provide their usual residential address, but this is not normally shown on the public record, although it is made available to credit reference agencies and various statutory bodies. If you do register your residential address as your service address, registered office or subscriber address then it will always appear as a part of the public record even if you change it at a later date, so please think carefully about this before you register your company.
Fortunately there are solicitors and accountants who offer an address hosting service for a fee.
Another factor to consider is the public availability of your signature. When you file documents with Companies House, the Companies Act 2006 requires most documents to be authenticated using a signature which will be publically visible. One way to avoid this happening is to file your documents electronically using the authentication code supplied by Companies House when you register your company. Statistics released by Companies house state that of the documents filed with them in 2015, almost 95% could have just as easily been filed on line; something to seriously consider.
As always, if you need any help or advice on this or any other legal matter, give us a call.