Friday, 12 September 2008

UK first for Telford law firm

We're launching a unique telephone helpline that offers a listening ear for troubled company bosses.

The Helpline is specifically for people in business, in a bid to help them make the right decisions in the current turbulent economic climate. And the service is believed to be the first of its kind in the UK, thanks to its innovative structure and approach.

John Mehtam, our Employment Law specialist, will take the calls from worried companies, and offer free advice over the telephone and by email. “It’s impossible to ignore the headlines – every news bulletin is dominated by the doom and gloom of our turbulent economic climate. For any business, large or small, these are difficult times, and the future may seem daunting.

“But we wanted to develop a new service that could help companies steer their way through today’s increasingly difficult trading conditions.”

John said the aim of the Helpline – 0845 644 6383 – was to offer advice to businesses to help ensure they did not take decisions in the current climate that could cost them dearly. An information pack on dealing with redundancies will also be available.

"It’s absolutely crucial that bosses don’t risk their company’s future by making decisions alone without the appropriate advice, and we
can help businesses find their way through the minefield of legislation and avoid the pitfalls along the way.”

Employers who would like to find out more about the new service or receive the redundancy information pack should email

Pic: John Mehtam (left) and Graham Davies launch the new Helpline service

Don't despair with annual meetings

Companies dreading the prospect of yet another annual general meeting may have the chance to ditch them altogether.

Graham Davies, our Senior Partner, said thanks to the Companies Act 2006, the meetings could be a thing of the past for some firms.

“The previous opt-out system, where a company needed to pass a resolution to do away with the need for an AGM, has been replaced by an opt-in system. Now, a private limited company only needs to hold an AGM if it wants to, or if it has to – either because its articles say so, or because ten per cent of its shareholders demand one.”

But Graham warned that bosses should always check their company’s articles to make sure they were not acting illegally.

“The problem is what happens to all the business issues that would usually have been dealt with at the meeting, such as approval of accounts, and the retirement of directors by rotation.”

Graham said since October 2007, companies were no longer required to put their accounts before the members at an AGM. “There is still an obligation though to send them to all your company’s shareholders.”

He said companies could of course retain their AGM as it was a good opportunity to bring everyone together. “If you do plan to continue holding annual meetings, you must be aware that the rules have now changed.”

Everyone must be given 14 days’ notice of the meeting (previously it was 21 days), and any resolutions proposed will be ordinary or special (extraordinary and elective resolutions no longer exist).

“For some companies, the AGM will continue to be a useful chance to review the business and its performance – for others, if the circumstances are right, it may well now be a thing of the past.”

Comforting words on offer

Company bosses who are asked to give a guarantee that a supplier is above board could consider offering a few words of “comfort” instead.

Stuart Haynes, who leads our Commercial Team, said some companies may feel uncomfortable giving guarantees about a supplier to a third party.

“An alternative approach would be to offer a comfort letter, which does just as its name suggests. It provides comfort to a third party, usually a bank or another supplier, about the company’s financial standing and its ability to honour any proposed contracts.

“But the bonus is, that unlike a guarantee, if things go wrong later on, it should mean there is no comeback against your company or any of your directors. The whole point of this kind of letter though is that you don’t cause difficulties for yourself or your company by mistakenly creating a contract.”

He said that to be legally binding, a contract needed four elements: offer and acceptance, consideration (usually money in return for goods/services), and an intention to enter legal relations.

“But if one of these elements is missing, the letter only creates a moral obligation, rather than a formal contract.”

Stuart said it was important to make it clear that the information was not intended to be of legal effect, and to avoid giving any binding undertakings or making any promises.

Friendly advice at a cost

Friendly advice could cost you dearly if another company follows your suggestions.

Stuart Haynes, who leads our Commercial Team, said company bosses were often approached for advice by business colleagues.

“But such an informal arrangement could have serious consequences and you could even find that you are now considered to be a ‘shadow’ director. This situation occurs where someone who’s in the background and is not listed as a formal director, but has real influence over the actions the company takes.”

Stuart said the role was set out in the Companies Act 2006, and was described as someone whose directions and instructions the directors of a company were accustomed to following.

“The actual decision on whether you are a shadow director or not depends on how much the board takes and follows your advice when it comes to making key decisions. Your influence has to be over the entire board, or at least the majority of directors, and there has to be a history of influence, rather than just occasional advice.”

Stuart said problems would arise if the company you’re advising found itself in trouble either financially or otherwise.

“You could be treated as an official director, who must comply with the new duties that a typical board must follow – all of this sounds like a lot of responsibility when you were only offering to help out by sharing your knowledge.”

He said there were also many examples of shadow directors becoming personally liable for paying creditors when the company had gone bust.

“The best approach if you want to avoid being classified as a shadow director is to make sure that you only give advice to a minority of the board. Make it clear in writing that you’re not giving them a direction or instruction, but just a suggestion that they should consider for themselves."

Firms must face the music

Companies who allow staff to listen to music in the workplace should make sure they are not breaking the rules.

Our Senior Partner, Graham Davies, said the Performing Rights Society had stepped up its campaign to demand more fees from businesses who played music at work.

“They have issued a series of letters telling companies they are breaking the law if they don’t have permission to play music on site, and encouraging them to pay for a licence. But if no music is being played, or won’t be from now on, send them a letter which should close the matter for the next year.

“Don’t send a cheque if you don’t need a licence, and make sure the relevant staff in your company know they should not just automatically respond by paying the fee if it’s not necessary.”

“Homeworkers are exempt from the rules, so remote or teleworkers do not need a licence provided for them even if they use a room specifically for work. But this exemption only applies if they are on their own, and don’t see any colleagues or customers on the premises.”

“Even if your staff bring in their own radio, if it’s on your premises, it’s the premises that will need the licence and not the individual member of staff. You could of course allow staff to listen to music on their own portable equipment, via headphones, and this would be exempt from the law as it would be considered that the music is not being ‘performed’ publicly.

“But of course, for operational or health and safety reasons, this may not be appropriate, so take care with the solutions you choose.”