Friday, 15 January 2016

Agents versus distributors? What's the best option?

Business owners who appoint selling agents or distributors to act on their behalf must put clear rules in place to protect their assets.

Graham Davies from Martin-Kaye Solicitors, in Telford, said many businesses turned to intermediaries to boost their sales but the move could prove to be a complicated process.

“It’s vital that businesses are clear about which route they’re taking and whether the intermediaries they appoint are agents or distributors, as they two positions differ greatly,” said Graham.

An agent negotiates and signs up customers on behalf of a business, and is paid commission on the sales they make – usually on a percentage basis. A distributor on the other hand is essentially an independent contractor – the business sells its products to the third party who then sells the products on to customers of their own, adding a margin to cover their own costs and profit.

“By appointing someone else to handle your sales, you can benefit from an agent or distributor’s local knowledge and established trade connections. You can also save on the costs of having to set up your own sales operation. But you need to decide which set-up will meet the specific needs of your business most appropriately.”

Graham said there were a number of situations where an agency arrangement may be the best way forward.

“It will allow you to keep greater control of the terms of sale of your products, particularly the price, as you can retain the right to fix whatever prices you like. You will also be able to manage the agent’s decisions on which customers they choose to deal with, and there will be fewer competition law issues to contend with too.”

Graham said through an agency agreement, businesses can also maintain direct contact with their customer base.

“This is extremely important if your business offers bespoke work or highly specialised after-sales support that only you can provide as it keeps you in touch with the contacts you’ve worked so hard to build up. Typically the commission paid to an agent is also lower than the margin which a distributor will earn, so an agency deal will probably cost your business less in the longer-term too.”

Notes can be tricky - don't take the risk

Business owners have been warned that off-the-cuff interview notes could trip them up – no matter how innocent they may seem.

John Mehtam, from Martin-Kaye Solicitors in Telford, said anyone who had ever conducted job interviews would agree that it could be difficult to remember each individual candidate clearly at the end of the day.

“So it’s only natural that many interviewers like to make brief notes to remind themselves of anyone who stands out – but this can be a dangerous move.”

John said the warning was clearly illustrated by the case of a company that faced an employment tribunal brought by the chief executive’s former personal assistant.

“She found a pile of CVs on her employer’s desk and flicking through them, she found some handwritten comments he had made about the applicants. On her own CV, she was shocked to find comments that referred to her physical appearance, including her tattoos – and on other people’s CVs, he had commented on their weight and the clothes they were wearing.

“At the time, she took no further action, but when she was unexpectedly sacked after just six months, she claimed sex discrimination. And the tribunal agreed with her view that the notes made on her CV were unacceptable, and that the comments towards other women clearly showed a sexist working culture so the employer was ordered to pay her £10,500.”

John said although it was a warning, the ruling did not mean that employers could never make handwritten notes or comments during an interview.

“But as an applicant is perfectly entitled to ask to see any information you may hold on them, which would include their original application form or CV, you must always take care with what you write down.

“It’s not just remarks about someone’s appearance either that are risky – commenting on language skills, sexual orientation, disabilities or medical conditions are also a concern. So it’s far safer to make a rule never to make any written comments or observations on application forms or CVs, just to make sure you’re not caught out in the future.”

Thursday, 14 January 2016

Empty property still brings costs

Entrepreneurs with ambitious plans to redevelop their business premises could still face costly charges – even while the building is unfit for use.

That’s the warning from Anneka Sohal, of Martin-Kaye Solicitors, in Euston Way, Telford, who said owners should be aware that business rates would probably still apply during the redevelopment phase.

“If your business needs new commercial premises, a good way forward is to find a suitable vacant site and redevelop it. Careful design will ensure the redeveloped building will match the needs of your business perfectly – on the other hand though, major building work can take time, during which your building may well stand empty.

“You may presume too that during the redevelopment phase when you’re unable to use the building, that your business rates will cease to apply. But court cases in the last few months have shown that’s not the case, so business owners should prepare themselves for ongoing costs throughout the building work.”

Anneka said a recent case had involved the owners of a vacant floor in an office building who decided to redevelop the area into three self-contained flats.

“To carry out the work, the air conditioning system, ceiling tiles, sanitary ware and electrical wiring all had to be stripped out, and so the owners claimed they should not be liable for business rates due to the state of the building.

“And despite the local valuation officer disagreeing with their opinions, the Upper Tribunal Lands Chamber ruled in favour of the owners and said the building should only have a rateable value of £1.

“The officer took the case to the Court of Appeal which ruled that removing items like the sanitary ware did not make the property unfit for occupation. So they overturned the Upper Tribunal’s decision and said the owners must pay the business rates in full throughout the building works.”

Anneka said the court’s decision showed the only time the owners of a commercial building undergoing redevelopment would be free of business rates charges would be if the building was considered to be beyond economic repair.

“Business rates would be waived if the only sensible option would be to knock the building down and build something else in its place – so unless a business owner plans to start from scratch like this, then business rates will still need to be paid in full.”