Traditionally, many such solicitors simply go back into the labour market, looking for the same thing somewhere else, hoping for better luck next time, touting around the client following they have and negotiating a salary upon this basis. Some harbour ambitions to float their own boat with more control over their day to day working lives but are put off by the expense and risk of setting up as a sole practitioner. Funding may not be easy to come by. Clients may want the comfort of knowing that they aren’t relying on a one man band.

One increasingly common option is for solicitors to work upon a self-employed consultancy basis, not as a locum, but providing their services to their clients through an established law firm such as Gannons or Cubism law which operate in this way, in a similar fashion to barristers working at chambers. The law firm takes a percentage of sums billed and collected in return for which PI cover, premises/meeting rooms, secretarial/admin/IT and accounts support and access to legal know how/precedents is provided. So far as the consultant is concerned, the firm will also need to have sufficient resources, brand and market presence to provide the comfort to the consultant’s client base needed to keep them loyal and to help her in marketing to new clients.

The firm may well have clients to refer to the consultant. Such access to clients will come with non-poaching undertakings. However, the consultant can expect not to be bound by restrictive covenants in respect of clients she introduces to the business, as she would be if she came on board as an employee.

In addition, because consultants aren’t employees, they aren’t required to behave as such. They can manage their time as they see fit and, in this age of remote access, can work at home. The promise of a “genuine work life balance” is a more genuine one that offered to employed solicitors where this usually means part time work with a strict pro rata reduction in income and home working being viewed with mistrust.

The main downside as compared to being employed is, of course, that the consultant has no fixed salary.

However, the percentages that firms offer for consultants in respect of work done for their own clients can mean that if the consultant was able to “wash her face” from her own client base then earnings will probably be greater than as an employee.

The consultant should bear in mind that any reputable firm that she wants to do business with will want some assurance that the costs that they will incur in engaging the consultant will be covered and that the person is competent. Accordingly a consultant would be well advised to prepare not only a CV but a basic business plan and have references to hand before approaching a firm to work with.

Those considering going down the consultant route should also consider setting up a personal service company to trade through. It’s tax effective for both consultants and the firms engaging them.

For the more business minded solicitors the consultant route is perhaps an attractive one, albeit that choosing the right firm to do business with needs careful consideration and a clear idea as to exactly what is on offer, outside of the bald percentage fee split.

The following are general duties which directors owe to their company:

1. To exercise reasonable care, skill and diligence.
2. To exercise independent judgement.
3. To promote the company’s success.
4. To act within his powers.
5. Not to accept a benefit from third parties.
6. To avoid conflicts of interest and duty.
7. To disclose his interest in a proposed transaction/arrangement.

Informing Companies House

A director and company secretary have a number of filing obligations with Companies House. In order to fulfill these obligations the director or secretary must:

• Complete and submit the annual return.
• Ensure the company produces and files an annual report and accounts.
• Advise of a change in registered office address.
• Advise of the appointment of a new director or company secretary.
• Send notification when the appointment of a director or the company secretary ceases.
• Advise of any changes to their personal details such as name or address.
• Inform Companies House of any relevant resolutions passed, for example to change the company name or amend the Articles of Association

Annual Return

All companies must provide an annual return to Companies House on time and in the appropriate format – this is a statutory obligation for all businesses. The annual return gives Companies House a summary of company information at a certain point in time. The annual return contains details surrounding the directors, secretary, shareholders, particular shareholdings and registered office of the company.

The annual return is a useful indication of the state of affairs of a company. It is the responsibility of a company’s directors and secretary to make sure that the annual return is filed on time and is accurate. If your company’s annual return is not filed promptly, then this can be a criminal office and consequently, your company can incur a fine or can be struck off by Companies House.

Annual Accounts

Every financial year, companies must prepare annual accounts which facilitate the analysis of the financial position of the company. It is the responsibility of the directors to ensure that their company maintains sufficient records regarding their finances. These financial records are used to arrange their annual accounts, which are ultimately an outline of their financial activities. Annual accounts must be organised in line with legal legislation and the commonly acknowledged principles of accounting. Financial statements are comprised of: a profit and loss account, a balance sheet, a directors’ report and supporting notes. Penalties for not filing your company’s annual accounts range from between £150 to £1500 for a private company.

Tax

Another factor directors must be aware of is that they are legally obliged to pay tax. The main types of tax which affect UK private limited companies are VAT, PAYE and Corporation Tax.

Firstly, VAT (Value Added Tax) is a tax charged to consumers and provided by companies which are VAT registered in the UK – the current rate of VAT is set at 20%. You are required to register for VAT if you know your company will turnover more than £77,000 over the next 12 months. Directors must remember to register for VAT in a timely manner; otherwise they will incur a penalty.

Secondly, if you are going to hire employees within your company or pay any directors a salary, you are required to be PAYE (Pay As You Earn) registered. By law, employers are required to contribute income tax and national insurance contributions to Her Majesty’s Revenue & Customs. Income tax and national insurance are deducted from employees’ wages – this is outlined on employees’ pay slips, and then sent to the government.

Thirdly, all UK companies are legally responsible to pay corporation tax as soon as profits are made. For 2012, the small profits corporation tax rate is at 20% for companies with profits not exceeding the threshold of £300,000.

Insurance

Particular firms are legally obliged to be covered by employers’ liability insurance and public liability insurance. Employers’ liability insurance is required if your company hires employees. If one of your employees were to fall ill or become injured within the workplace, the consequent legal fees and possible damages owed will be covered by employers’ liability insurance.

Public liability insurance is mandatory if your clients visit your offices, or if you visit your clients workplace. If your business is protected by public liability insurance, then when a third party suffers an injury or illness, your business is consequently covered for damages.

Wisteria Formations is a leading online company formation agent backed by Wisteria Chartered Accountants.

Outsourcing is a process of contracting an existing function or process of a business to an independent company or consultancy and not conducting it in-house. Businesses enter into a contract for exchange of services between a business and a consultancy or an IT company etc. Usually the outsourced functions are not a core part of a business in which it specializes, such as HR in an insurance company. The main reason for outsourcing is to save costs in the long run by focusing efforts on developing the business and ensuring its proper functioning.

KPMG’s Survey

According to KPMG the demand for legal services increased recently as businesses are now trying to reduce their risk and change their existing contractual obligations. KPMG’s Legal Pulse Survey is based on answers from legal partners of the world’s top 30 international law firms. It revealed that 45% of the partners observed an increase in demand for outsourcing services and 7% suggested a decline in demand which came down from 11% the same time last year.

Figures

From the services identified as outsourced, most were development of Apps (mobile applications) at 62%, helpdesk support at 50%, accounting and finance at 26% and HR at 24% with a demand for outsourcing customer services support standing quite high as well.

Disadvantages

The disadvantages of outsourcing services are that they take longer than if done within the business itself. According to 41% of the lawyers (a figure which is up from 36% last year) participating in the KPMG’s survey it comes down to the complexity of the deals such as the marketplace causing delays. 27% of the lawyers highlighted the lack of harmonised and agreed standards of contracts, which is a consequence of the reforms with the outsourcing industry.

The fears of financial uncertainty and lack of a long-term prognosis for the business are another reason for a slow progress made with contracts. According to the survey re-negotiating prices and scope of the contracts are some of the more significant concerns.

The future

The increase in demand of legal outsourcing services is good news for the service providers but what is important for the businesses is to understand that contracts are negotiated in a way that is suitable to their nature. No two agreements will be reached in the exact same way as the services provided vary accordingly to the business’ needs. Such contracts are a strong foundation for a business and if drafted appropriately they can attribute to the success of the company. Legal advice should be obtained before strategic and long-term decisions are made. It is no surprise that organisations start to understand the value of lawyers’ knowledge and skills in drafting and negotiating contracts as well as the benefits of obtaining financial advice from accountancy firms as opposed to trying to solve all the matters in-house. Outsourcing some services, even though it may seem expensive at the time, could save businesses a substantial amount of money by preventing litigation, the need for settling contract disputes or consequences of any financial miscalculations.

If you are unsure how to close down your company, or what method to use, it is advisable you speak to a professional (this may be an insolvency practitioner or a solicitor specialising in the field).

If the Company has Outstanding Debts

If the limited company has outstanding debts then it may be applicable to consider liquidation as a method of closing the company. Liquidation involves a ‘liquidator’ being appointed to wind up the affairs of a company. It does not necessarily mean however, that all creditors of the company will be paid, even once the company ceases to exist.

There are three types of liquidation that are used to close a limited company.

Members’ Voluntary Liquidation

This is where the company shareholders decide to put the company into liquidation themselves. This is used where the company has enough assets to pay off all its outstanding debts. The shareholders appoint and pay a liquidator themselves.

Creditors’ Voluntary Liquidation

This is similar to the scenario above, except that the company will not have enough assets to pay off its debts. With this method it is the creditors who appoint and pay the liquidator. If the company has any assets they may pay the liquidator out of these.

Compulsory Liquidation

This is where the court serves an order for the company to be closed. This is usually because someone who the company owes money to has petitioned the court. The court will then appoint and pay a liquidator, although they will recover these costs from the sale of any assets which are still owned by the company. It is possible for the directors of the company to apply for an order on behalf of themselves or the shareholders (often because they do not want to, or are unable to, fund the cost required for a voluntary liquidation).

If your limited company is unable to pay off its debts it should cease trading, otherwise the directors may be liable for the company’s debts. The company is said to be insolvent. At this stage, there may be a possibility that a negotiation between the company and its creditors (or the people the company owes money to) could mean that the company can continue trading. It is important that you speak to a professional before assuming this will always be the case.

If the Company Does Not Have Outstanding Debts

Dissolution is a cost-effective, easier method of closing down a limited company where that company does not have any outstanding debts. (Please note that in certain situations it can also be used to close down companies which are insolvent).

Where a company wants to close down using this method, the first step is for that company to cease trading. All the money the company owes, whether to third-parties or to the directors/shareholders, should be repaid.  The company should then apply to HM Revenue & Customs in order to cancel its VAT registration. The next step is for the company to inform its staff, issuing them with a formal notice and sorting out their final payroll. Although the directors of the company may wish to resign at this point, one director should remain employed in order to sort out the closure.

The next step in dissolution is to prepare a final set of accounts which will need to be submitted to HM Revenue & Customs. As this may not be practical to do straight away, you will need to contact the HMRC and inform them that the final accounts will be sent shortly.

It is worth noting that the company cannot close down until its corporation tax has been paid, and any assets (money/equipment) left after all the debts have been paid is distributed amongst the shareholders.

Once these requirements have been complied with then the directors can complete an application to Companies House to have their company struck off. In order to do this, the company must have complied with the following additional requirements: it must not have traded within the last 3 months, the company name must not have been changed in the last 3 months, the company must not be the subject of any legal proceedings and the company must not have made a disposal for value of property or rights. If these requirements are satisfied, the striking off application (DS01) can be completed, with the majority of the directors signing it, along with submitted a £10 fee Companies House.

David Swede – head of the commercial law team at Darlingtons

If you need advice on closing your company, contact me for cost effective and practical help and assistance. I’ve helped many companies shut down in the best way possible, protecting the directors and shareholders and where necessary liaising with Insolvency Practitioners.

What are the main commercial advantages of mergers and acquisitions?

• Expansion of business know-how and processes. By acquiring or merging with another business, you can expand your current knowledge about a particular field. With acquisition or merger, you will get access to already experienced workforce and efficient processes in place.
• Cost-effectiveness – in long term, acquisition or particularly merger might be cheaper than building entirely new unit with brand new infrastructure and human capital. .
• Expanding into new markets – acquisitions and mergers offer great way of reaching new audiences and markets. You can buy or merge with a well-known brand in another country and gain access to new customers.
• Business portfolio diversification – businesses that specialise in certain aspects such as import and wholesale of certain goods can easily acquire retail distribution chains to diversify their operations and decrease chances of business failure.
• Business Power – merger with another business of a similar or bigger size can help your brand not only to look more global and strong but also actually provide increased financial capabilities of joint budgets.
• Monopolisation – so long as you comply with the EU laws you may want to take over your competitors and dominate certain market.
• Speed of Growth – some projects require more expertise and power than when first anticipated. In such cases, it may be more time-efficient to acquire a new business with the requisite capacity than to recruit and build the necessary resources internally.

Share vs Asset Acquisition

There are two main methods of acquisitions, namely share purchases and asset purchases. Despite achieving perhaps similar business goals, both have significantly different legal implications.

• Share Acquisition

Here, majority of shares of the target company are purchased by the acquirer. The target company remains separate legal entity preserving its all assets, liabilities, employees and obligations. Major advantage of share acquisition is that all client contracts need not to be novated or assigned. In fact, the clients do not need to be informed of the acquisition.

• Asset Purchase

With asset purchase only a specific part of the target company is bought by the acquirer. All assets, liabilities and obligations of the target company remain with it, which can be advantageous to the buyer. On the other hand, any relevant contracts with clients need to be novated and require their consent. Some clients might not be happy with the change and terminate their contracts. It is also important to note that although employees automatically do not transfer if certain conditions are met the employment continuity is preserved under the Transfer of Undertakings (Protection of Employment) Regulations. For instance if an employee worked in the acquired business unit for over 36 months and TUPE applies it would mean that his employment with you is going to continue and not be counted from start.

Mergers and Acquisitions: Deal Checklist

It is important to make sure that you speak to relevant professionals including lawyers and accountants about due diligence of any merger or acquisition deal.

Some of the points to worth to remember about during acquisition or merger process include:

• Checking that the target business is actually fully owned by the people that you are dealing with.
• Checking whether there have been or are any legal disputes.
• Analyse legal obligations and liabilities with customers, suppliers and employees.
• Consider the legal consequences of acquisition or merger on employment and client contracts.
• Ensure that all key facts about the target business are legally warranted by the seller. Your lawyer should request that in a formal written statement. Normally, warranted things include records about debtors and creditors, state of assets, audited company’s accounts or legal disputes.
• Ensure that the contract includes an indemnity clause in respect of any potential liabilities that may arise out of undisclosed things. This may include lawsuits or unexpected tax bills.

Reena Gokani – corporate solicitor and M & A expert

If you are considering either a merger or acquisition, Darlingtons offer a highly practical, commercial and cost effective approach at charge out rates which are highly advantageous when compared with City law firms. Contact me for further information or advice.

What is it?

The Sale of Goods Act 1979 (SOGA) aims to provide protection for consumers buying goods when their purchases are not quite what they paid for. The Act regulates the relationship between the seller and the buyer and ensures that the goods sold fit their description as well as their purpose and if they do not the seller is under an obligation to correct the wrong by providing a refund or replacement.

Some useful terminology

Goods: these are tangible assets with the exception of land and currency. Goods can be existing or future (yet to be manufactured), specific (agreed at the time of the contract) or unascertained (goods of general description such as a bag of wheat)

Contract for the sale of goods: an agreement whereby the seller agrees to sell goods and the buyer agrees to buy them for a price

Express terms: these are the terms of the contract specifically agreed between the seller and the buyer (such as a delivery date or address)

Implied terms: these are the terms of the contract which are not expressly agreed but are implied to the contract either by the means of statute, previous dealings between the parties or customs in the particular trade

Conditions: are the major terms of the contract, they are the essence of the contract and their breach can bring a contract to an end

Warranties: these are terms of a contract of a minor importance and if they are breached the contract remains in place but the injured party can claim damages

Main provisions

Subject matter of the contract: goods as described above

The price: it might be stipulated in the contract, or implied by the course of dealings between the parties. Otherwise it must be reasonable and can be agreed at valuation of the goods

Time: time is not of the essence unless the contract specifies otherwise (i.e. provides the time of payment etc.)

Sale by description: when goods are sold as described (such as through distance selling where a customer only reads a description or sees a picture as opposed to actually seeing the goods) then there is an implied term that the goods will match the description

Satisfactory quality and fitness: there is an implied term that the goods sold are of satisfactory quality if the seller sells the goods in the course of a business (such as shop). This means that the goods are of a reasonable standard, which includes:

• Safety

• Appearance and finish being free from defects

• Fitness for all purposes for which the goods are supplied (such as that running shoes are appropriate for running)

If any of the above was drawn to the buyer’s attention before the contract was made or if it was revealed when the buyer has had an opportunity to inspect the goods him or herself then the implied terms do not apply.

Fitness for purpose: if the buyer has made a purpose of his purchase known to the seller before the contract was made, then the buyer is under an obligation to make sure that the goods are appropriate for this particular purpose. This provision applies if it is reasonable for the buyer to rely on the seller’s expertise (such as buying motorbike gear from a specialist motorbike shop rather than an online trader who also sells mainly garden equipment).

Buyer’s rights

If the goods bought do not meet the satisfactory quality or fitness for purpose provisions, the buyer might be entitled to return the goods and receive a full refund or, depending on the type of goods, to have the goods replaced or repaired.

Right to reject faulty goods

The buyer has got the right to reject the goods if they are faulty but he or she must do so in a reasonable time (preferably immediately but can be up to a couple of weeks after receiving the goods). If the buyer rejects the goods he or she is entitled to get their money back.

Right to have the goods replaced or repaired

In certain circumstances depending on the nature of goods subject to the contract, the buyer has got the right to ask to have their goods repaired or replaced. The replacement or repair should not cause the buyer too much inconvenience and it is usually the seller who covers the costs of delivery or any transportation. The buyer can request replacement or repair at any time up to six weeks after receiving the goods.

A consumer has got six years from the date of purchase to make a claim as to any fault at the time of purchasing the goods.