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'Business Law' Category Archives

August 7th, 2019

Company and commercial law solicitors

Company and commercial lawUnderstanding company and commercial law is central to starting and running a successful business.

By having an understanding of company and commercial law, you can safeguard your business and ensure that it is appropriately structured. This would allow your business to grow safely and effectively to reach its maximum potential. However, the law can be a challenging topic to understand, which is why we’re here to help.

At Foys Solicitors, our company and commercial law team want to assist businesses of all sizes with growth, adaption to changing markets and safeguarding business interests. This passion led us to update our ‘Company and Commercial Law’ page with a reliable and easy-to-understand explanation of how we can help business owners, shareholders and directors.

On our ‘Company and Commercial Law’ page, we’ve explained the areas of company and commercial law that we cover. Here, you will find information on:

  • Incorporations & start-ups
  • Corporate Governance for limited companies
  • Acquisition and disposals
  • Shareholder and partnership arrangements
  • Company reorganisations
  • Transferring sole trader/partnership business into a limited company
  • Commercial contracts

We also explain how company and commercial law assist in business growth.

Contact Foys Solicitors for advice on company and commercial law today

Whether you want more information on our company and commercial law services or to discuss a plan of action, get in touch with Max Kennedy on 01909 500511. Max Kennedy has more than 25 years of experience in company and commercial law and is known for his jargon-free explanations and practical approach to all matters.

Alternatively, you can complete our Contact Form and we’ll be in touch with you shortly.

August 1st, 2019

Commercial dispute resolution solicitors

Company Dispute ResolutionsWith the dedicated assistance and guidance of our commercial disputes specialists, you can rely on us for a straightforward and speedy commercial dispute resolution, which is in your business’ best interests.

Commercial disputes are never pleasant and can be quite draining without proper help. At Foys Solicitors, our expert commercial dispute specialists have a passion for helping business owners, directors, employers or partners get the straightforward dispute resolution they need.

That’s why we updated our ‘Commercial Dispute Resolutions’ page with more up-to-date information concerning how we can help you.

On this page, you’ll learn about the types of commercial disputes that we cover, which is as follows:

  • Partnership/company/director disputes
  • Employer/employee disputes
  • Disputes regarding quality issues, that arise out of the sales of goods and supply of services
  • Interpretation of contracts and contractual terms
  • The recovery of unpaid monies and invoices, as well as defending such claims
  • Commercial property disputes
  • Professional negligence claims

We also explain how litigation and dispute resolution law can help protect your business.

Contact Foys Solicitors for company dispute resolution services today

For a free initial consultation or more information on our commercial dispute resolution services, give us a call on 01909 500511. You can also email us at enquiries@foys.co.uk or complete our Contact Form.

July 25th, 2019

Employment solicitors for employers

Two businessmen shaking hands

With the assistance of our employment law solicitors, advisors and experts, business owners can rely on us for sound legal support and advice regarding employment and employee-related issues.

As an employer, you must be mindful of your employees’ rights, your responsibilities to your employees, and how best to manage them. It is also in your best interests to know how you can protect yourself if necessary.

At Foys, our employment law solicitors can help employers with all of the above. Our drive for advising employers in employment law led us to update our ‘Employment Law for Employers’ page with up-to-date information about our services.

On this page, we explain the areas of employment law that we cover, including:

  • Contracts of employment
  • Employee handbooks and policies
  • Defending employment tribunal claims pursued by employees (i.e. unfair dismissal and discrimination)
  • Advice on redundancy procedures
  • Disciplinary and grievance issues
  • Dismissing or disciplining an employee
  • Drafting and dealing with settlement agreements
  • Variation of contract terms
  • Discrimination
  • Business Transfers (TUPE)
  • Breach of restrictions by employees

Contact Foys Solicitors for employment law advice today

For a free initial consultation or more information on our employment law services, give us a call on 01302 327136. Alternatively, you can email us at enquiries@foys.co.uk or complete our Contact Form.

July 11th, 2019

Commercial property solicitors

Commercial property solicitors

With the assistance of our experienced commercial property solicitors, advisors, conveyancers and more, you can rely on us for sound legal support and advice regarding commercial conveyancing.

As a commercial property owner looking to buy, sell or lease property, a good comprehension of transactional laws can ensure that you’re able to make the best decisions for your situation.

The commercial property team at Foys Solicitors is here to help you make those decisions. Our passion for helping property owners with their commercial property needs led us to update our commercial property solicitors page with reliable and trustworthy information.

On the page, you’ll find out how we can help you with:

  • Acquisition and disposal of freehold and leasehold property
  • Landlord and tenant matters
  • Asset management
  • Property refinancing: bridging loans, mortgages, legal charges and debentures
  • Business sales and purchases
  • Purchasing and selling business premises
  • Handling complicated renewals
  • Problematic disputes with commercial tenants

Contact Foys Solicitors commercial property team today

For a free initial consultation on our services and how we can help you, call us on 01302 327136, email us at enquiries@foys.co.uk or complete our Contact Form.

For those considering entering the commercial property world, take a look at ‘the complete guide to becoming a commercial landlord’.

May 22nd, 2019

Dealing with rent arrears as a commercial landlord

When a tenant falls behind on their rental repayments they are said to be in arrears. Typically, a rental agreement stipulates that rent be paid 30 days after the starting date. If a tenant has failed to pay the agreed-upon sum for 30 days after the rent was due, they are then one month in arrears, and so on so forth.

For all landlords, rent arrears are a business risk and a relatively common occurrence. For commercial property landlords, you would usually diligently vet the tenants to prevent the occurrence of rent arrears, but despite your best efforts, your tenant may fall into arrears as a result of cash-flow problems being experienced by the business. When rent arrears do happen, there are legal recourses that landlords can take to recover rent, interest and any costs incurred as a result of the late payment.

In this article, our specialist commercial property solicitors at Foys aim to discuss the various legal avenues open to commercial landlords whose tenants have rent in arrears and the best practices for exercising the options available.

Establishing rent arrears

First and foremost, a dialogue should be opened with the tenant to investigate the reasons for the late payment of rent. A notice should be provided in writing to advise your tenant that they are in arrears. This is also an important piece of correspondence should the situation escalate and you need to pursue debt recovery via a legal pathway.

While making contact with your tenant regarding the initial late payment is good practice, you are able to serve them with a mandatory notice after 2 months of rent arrears to demand payment. Depending on the circumstances, an eviction notice should also be prepared.

Avenues open for debt recovery

Upon establishing that your tenant is unable or unwilling to fulfil their contractual obligations, it’s best that you contact an independent commercial landlord solicitor who will discuss a number of legal recourses available that will facilitate a resolution – some more painless than others. The main things to consider before deciding on a particular avenue are:

  1. Whether you want to keep the tenant on board and are happy to negotiate or compromise with respect to receiving the full payment.
  2. Look into the tenant’s history and see whether they have been in arrears before.
  3. Is the outstanding debt considerable enough to warrant a pursuit by legal or other means?
  4. Will pursuing debt recovery drive the tenant into insolvency and therefore lessen the likelihood of you recovering your money in full?

Talking to our commercial property solicitors and weighing up these three questions will give you a better gauge of the suitability of the options available as well as a better understanding of which method will likely give you the best chance at recovering your rent and any interest in its entirety.

Payment agreement

If the tenant is able to convince you that their financial situation is only temporary, or you believe that given more time they will be able to pay you back in full, you can enter into a payment agreement with them which requires the payment of the outstanding amount in instalments.

This is the preferred option for commercial landlords who don’t want to ruin the relationship they’ve established with the tenant, but also want to receive what’s owed to them in full. This option should also be considered in areas where the rental market is not conducive to short-term lets and high tenant turnovers, so it may be in your interests to preserve the relationship when considering your long-term prospects.

It’s advisable that this payment agreement be drawn up by a lawyer so as to carefully outline the rent arrears is to be paid on top of the normal rental agreement. In the event that this agreement is reneged on, the landlord reserves the right to forfeit the lease.

Drawing down on the rent deposit

If the initial rental agreement included a rent deposit, the landlord is within their rights to draw from this deposit in order to recover rent arrears – as long as the lease contract stipulates this. The tenant must then top up the deposit within a certain amount of time. This is the best course of action for commercial landlords that require a quick recovery of outstanding rent – however, it is only a short-term solution, so if the tenant is in a precarious financial situation, it’s not always advisable.

Serve a statutory demand

If your commercial property is being leased by a company and owes more than £750, you’re entitled to serve the tenant with a written demand for payment. This document needs to comply with statutory requirements, but once served, the tenant has 3 weeks to pay before you commence legal proceedings against them for insolvency or winding up of the company.

Forfeiture

In the event that rent has not been paid on time, usually for a period of between 14 and 21 days, a commercial landlord can “re-enter” a premises (when the tenant is not present) and change the locks – this is known as forfeiture. If the tenant is insolvent, then this is often the most economically viable option as it forces the tenant to pay up or face the potential loss of their business. Forfeiture is a tricky avenue to go down, so consulting an expert landlord solicitor such as Foys is always advisable – particularly if unsure of the rules surrounding this principle.

Pursuing a guarantor

If the tenant has a guarantor under the lease, then it is possible for a landlord to pursue them for the rent in arrears, rather than the tenant directly.

CRAR

The Commercial Rent Arrears Recovery Act 2014 is a legislative attempt to protect the rights of landlords by enabling them to employ an enforcement agency who will assume possession of a tenant’s goods for sale in order to recover debt. This is a complex process that requires various notices to be served on the tenant, and certain conditions need to have been met before the repossession can occur. CRAR should be considered carefully as it can only be used to recover rent, and entails waiving your right to forfeiture.

Issue Court Proceedings

Issuing court proceedings are often the last resort as they can be time-consuming and also expensive.

If you’re a commercial property owner or landlord who wants to know more about the possible avenues for recovering debt or you currently have a tenant whose rent is in arrears, speak to one of our specialist commercial property solicitors first. We can provide bespoke guidance as to the best practices for your commercial property, as well as assisting you with deciding on the best course of action for recovering full payment without breaking the bank.

To get in touch simply fill out our Online Form or call your local Foys Solicitors office:

If you found this interesting, check out:

This post is not legal advice and should not replace professional advice tailored to your specific circumstances. It is intended to provide information of general interest about current legal issues.

May 15th, 2019

Hosting an Airbnb: Everything a landlord needs to know


Airbnb is a global, online marketplace which matches homeowners with guests in regard to short-term homestays and/or tourism experiences in cities all over the world. It has emerged as one of the most successful and most popular rental services and hospitality companies globally thanks to its distinct advantages:

  • It allows homeowners to make extra income by renting out a room temporarily (a relatively low-risk, high-return approach).
  • It empowers travellers to seek low-cost or non-traditional accommodations.

Like other disruptive innovations, Airbnb has its fair share of controversy. The shift from hotels to Airbnb lodgings has led to cities losing out on millions on tourism taxes and once quiet neighbourhoods are being swamped with short-term sublets who may be too rowdy for one’s liking. In addition, while the ‘risk’ is deemed particularly low for those letting out their premises, the laws governing the rights and responsibilities of landlords and their guests aren’t clearly defined, and as such, this can have serious ramifications in circumstances where something does go awry.

There have been a handful of highly publicised incidents involving Airbnb guests occupying premises under false pretences, and others involving the questionable health and safety conditions of premises being rented via the room-sharing platform.

In 2016 a home rented in Putney through Airbnb was severely damaged after the guest held a party, with the same year seeing a balcony in Brighton collapse with four Airbnb guests injured in the process. Despite lawsuits being settled, the regulation of these properties is still an ongoing process – mainly due to the company’s global presence and legislation differing in many countries when it comes to health and safety and rental licencing and permissions.

Potential consequences for landlords

Airbnb operates in a legal grey area when it comes to navigating the murky waters of homeowner insurance and business related activities. Typically, a homeowner insurance policy excludes business-related activities as the property is not structured as corporate premises. This makes claims against the landlord (where a guest suffers an injury) or claims of property damage by the landlord difficult to traverse when it comes to insurance – particularly where liability is concerned. While Airbnb does offer Host Protection Insurance and has a track record of covering damage costs in the event of lessee fraud and false pretence, this doesn’t take the place of a substantial home insurance policy and as such, coverage can be problematic if a problem does arise.

Moreover, depending on where your property is located, you may be subject to specific planning regulations that dictate whether your premises is subject to additional costs as a result of letting. For instance, under UK property regulations, if a premises is available to let for 140 days or more per year it is classified as a self-catering property and consequently subject to business rates. Rates will be based on the property type, size, location and how many guests are able to stay in your listing.

This should certainly be considered and properly researched prior to advertising on Airbnb as you may be required to apply to your local council for a “change of use” to classify your property as commercial rather than residential.

If you are a responsible for the mortgage on your property, you need to ensure that subletting is permitted as the bank or mortgage company are invested in your property and as such, have a legal interest in its maintenance and upkeep.

As a landlord, your responsibilities for maintaining the property and ensuring your guests’ safety are the same under Airbnb’s rental terms and conditions. The company isn’t liable for upkeep, so ensuring that the structural integrity of your building and any fire, gas and electrical safety regulations are up to standard is your duty to the guests.

Protecting your guests, your home and yourself

If you’re planning to become an Airbnb host by listing your property on the Airbnb site, here are a few things you need to consider:

  • Check with your local council on its short-term rental legislation. In London, the Deregulation Act of 2015 allows homeowners to rent out their premises for up to 90 nights per calendar year without being considered a ‘change of use’. This means, once your property in London has been rented out for 90 days in a year, Airbnb automatically limits your listing unless you have planning permission to host more frequently.
  • If you own a leasehold property, chances are you will find a clause restricting your rights to sublet without the freeholder’s consent.
  • Check any terms and conditions in both your mortgage and insurance which may include clauses prohibiting your leasing of the premises.

Once you have established that your premises are able to be leased for short-term with Airbnb, the next step is clearly and comprehensively outlining what is allowed for guests staying at your property. This may include:

  • If you allow parties, pets or smoking.
  • Outline the ramifications if the rules are broken.
  • Ensure your insurance coverage is substantial and up-to-date.

How to resolve a dispute

The potential for a nightmare Airbnb guest is well documented, with stories gaining widespread media attention following the company’s prolific rise to success. But often not mentioned are disputes among neighbours who resent short-term guests holding wild parties and exhibiting anti-social behaviours.

If your Airbnb guests have left you with a flood of complaints from your neighbours, it’s wise to talk to them and resolve the issue directly. However, if they have taken their case to the First-Tier Tribunal (Property Chamber) which handles disputes over property and land, then it is best that you seek help from an experienced property solicitor like Foys.

At Foys Solicitors, we have a proven track record of assisting landlords in the understanding of their rights and responsibilities as well as in best protecting themselves and their finances. To get in touch simply fill out our Online Form or call your local Foys Solicitors office:

If you found this interesting, check out:

This post is not legal advice and should not replace professional advice tailored to your specific circumstances. It is intended to provide information of general interest about current legal issues.

May 8th, 2019

Just launched: The complete guide to becoming a commercial landlord

Commercial property represents an exciting investment prospect, and generating income from it is a highly attractive drawcard for potential investors. Becoming a successful commercial landlord requires a lot of effort; so finding the right advice is essential in order to make your business as efficient and profitable as possible. Whether it’s assistance in gaining better understanding of complex rental laws or the often-difficult task of finding the right tenants, Foys commercial property solicitors have compiled this essential guide to becoming a successful commercial landlord.

This comprehensive guide covers:

  • Why you should become a commercial landlord
  • Whether owning commercial property will suit you and your area
  • Costs of being a commercial landlord
  • Responsibilities of a landlord
  • Regulatory compliance
  • Setting rent and fees
  • Support for landlords
  • Finding the right tenant
  • Legal cover and insurance
  • Taxes that commercial landlords are liable for
  • Terminating a commercial lease

Foys Solicitors, the commercial property experts, offers bespoke, specialised advice catering to your specific commercial property needs. We understand the need for landlords to make the most out of their investments and assist on matters according to yours and your business’s best interests.

Contact Foys Solicitors commercial property solicitors today

For a free initial consultation, or to learn more about the legal specifics of operating commercial property, call us on 01302 327 136 or use our Online Enquiry form.

This post is not legal advice and should not replace professional advice tailored to your specific circumstances. It is intended to provide information of general interest about current legal issues.

March 6th, 2019

How to manage boardroom and shareholder disputes

Disputes are commonplace in the boardroom and amongst shareholders. This could be from something as simple as a difference of opinion on the direction of a company, to a more complex issue like a perceived conflict of interest. Irrespective of their severity, all kinds of boardroom and shareholder disputes need to be carefully and correctly managed to avoid them spiralling out of control.

Foys’ company disputes resolution specialists offers solid legal advice to companies and individual clients currently dealing with boardroom or shareholder disputes. In this article, we’re going to talk through some of the steps you should take to manage a dispute, minimise its impact on the performance of your business, and protect your current and future interests.

Understanding the types of disputes

There can be a number of reasons behind why disputes happen and these can often intersect with one another to make matters more complex. Some can be very procedural, while others can be very personal. The types of disputes often found in the boardroom or among shareholders include:

  • A breakdown of relations between directors/shareholders
  • Perceived poor performance of a director/shareholder
  • Differences of opinion over a company’s direction
  • Directors perceived to be paying themselves too much remuneration
  • Concern over whether or not the board is meeting its obligations and responsibilities (e.g. legal responsibilities)
  • A conflict of interest (e.g. director involved in another business within the same industry)
  • Lack of dividend payments
  • Terms surrounding directors’ contracts
  • The selling of shares back to the company or other shareholders

Some key considerations

Before we discuss legal rights and how to manage a dispute, it’s important to outline some considerations that may impact a dispute.

One of the first missteps often made is that legal advice isn’t sought at an early stage of the dispute. Matters often escalate without an understanding of the respective parties’ legal rights, which can make matters worse and lead to complications in the future. It’s advisable to seek out a solicitor who has no involvement with your company to ensure there is no conflict of interest in the dispute.

Another element of disputes that’s typically overlooked is the relationship that those involved in the dispute have with the company. For example, a director or shareholder may be classified as an employee of the company and as such, their employment rights may impact the dispute. Here, it is necessary to have a thorough understanding of the roles of directors and shareholders within the company.

Lastly, if you are currently setting up a company and researching the possibility of what happens in a dispute, it’s worth considering whether the personal values of you and your potential partners/shareholders align with those of your future company. If you can foresee potential conflict arising due to dissonance, it is worth re-considering the make-up of the board/shareholders or drafting documentation to take these matters into account.

This is why properly drafted Articles of Association or a shareholders’ agreement is crucial in setting out the rights and responsibilities of directors and shareholders as well as the terms and conditions of how a dispute should be handled. Such a document can help directors and shareholders agree at an early stage over what should happen in the event of a dispute – thus streamlining the process. Foys specialist solicitors often work with new companies to draft such documents necessary for navigating potential minefields brought about by disputes within the company boardrooms.

Legal rights in a dispute

When seeking legal advice from a lawyer, you may be asked questions such as:

  • Are you in control of the board? If not, then who is in control of the board?
  • Have you acted in a way that can be classed as improper for your role?
  • Do you have control in shareholders’ meetings? If not, then who has control?
  • Are there any agreements or restrictions in place regarding the selling of shares by shareholders?

The answers to these key questions frame the contextual tenets and salient facts, which outline your legal rights in a dispute. In addition, make sure to read through any company documents that could impact any of the above questions. For example, your Articles of Association may specify circumstances whereby normal rules do not apply and, therefore, a unanimous agreement from the board is required in matters of decision-making. A lawyer is necessary to assist you in understanding these documents and can provide sound advice on what you should or should not do within your dispute.

In instances where misconduct is an issue or you have been deemed to have acted improperly, it is necessary to understand the implications and whether you will be personally liable for paying out on any profits or losses resulting from your actions. Examples of this include using company funds for your own personal use without proper reimbursement, or diverting a contract away from the company to another business that you own, operate or hold a stake in.

Even if you control the board, it is still possible that a minority shareholder could bring a ‘derivative action’ lawsuit against you – a legal challenge under the Companies Act 2006.

Whenever you are looking to remove a shareholder, it is important that you receive legal advice before you act. This is good practice for removing anyone from the company and proper protocol should always be followed. If you don’t, you may be faced with a protracted legal battle that could cost you a lot of money in fees and compensation.

Likewise, for minor shareholders concerned over the size of payouts being made to directors, or who are unhappy with no dividends having been paid out for quite some time, consulting legal counsel is advised. In the former instance, establishing key points such as analysing the objective criteria – to assess whether board members would be expected to receive such remuneration for their duties – is a necessity before deciding on whether to take further action. In the case of dividends, establishing the company policy surrounding the declaration of dividends needs to be done. If you are a minority shareholder and can establish that other shareholders have received dividends, then your rights as a shareholder have been breached. When this is not clear, it is important to come to a decision regarding what type of action to take under legal counsel.

Under the Companies Act 2006, a shareholder does have the power to take a board member to court if they believe the board member has acted in a manner that is unfairly prejudicial to the interests of the rest of the board. These are personal legal actions and, as such, are paid for by the individual parties involved in the dispute – not by the company.

If all else fails in the dispute, shareholders have the right to apply to the court to wind up a company (force an insolvent company into liquidation) – often brought about in conjunction with a petition for unfair prejudice.

What to do in the event of a dispute

Here are some key steps to take in the event of a dispute in the boardroom that can help you manage and control the situation:

  • Understand: Why has the dispute occurred? What are the parties trying to achieve? What can you practically do to resolve the issue in a manner that suits all parties?
  • Negotiate: Can the problem be resolved without an expensive, time-consuming court battle? What will make the aggrieved party stay in the business? Is mediation a worthwhile consideration? Would the aggrieved party agree to sell their shares back to the company or to other shareholders?
  • Offer: What is the company policy on buying out an aggrieved party’s shares? What would you offer to the aggrieved party to resolve the issue? Would the offer be considered reasonable in court?

By now, it should be clear why it is important that you take on legal advice as soon as possible in the event that a dispute arises.

Seek out legal advice from company dispute resolution specialists at Foys

If you want to protect your interests in a business, irrespective of whether you are directly involved in the dispute or not, you should seek out legal advice when it becomes clear that there is conflict in the boardroom.

At Foys, we represent companies, individual directors, and individual or groups of shareholders during such disputes. This can range from drafting proper documentation and policy surrounding disputes, to offering advice at the commencement of a dispute, to even acting for you in legal cases.

Our Company Disputes team offers a free initial consultation – allowing us to understand your case, work out how we can best help you, and specify any potential legal costs going forward.

To get in touch with matters relating to Company Disputes, simply fill out our Online Form or call your local Foys Solicitors office:

Other articles from Foys relating to company law include:

This post is not legal advice and should not replace professional advice tailored to your specific circumstances. It is intended to provide information of general interest about current legal issues.

February 27th, 2019

Understanding the notion of a ‘corporate personality’

The corporate world has no shortage of terminology that can be complex. For those entering the corporate world for the first time – often after transferring to a limited company from a sole trader or partnership – it’s important to learn what these terms mean to you and your business. With that being said, it’s also equally important for individuals with more experience in the field of company ownership to continue broadening their understanding of said terms.

‘Corporate personality’ is certainly one of those terms that can confound people – predominantly because it can be interpreted in so many ways. For example, it can refer to: a concept found in the Old Testament; the different personalities of people found in the corporate world; or part of a company’s corporate identity. For the purposes of this article, our company solicitors are going to discuss the legal definition of ‘corporate personality’ and the implications of such a concept in layman’s terms.

Defining corporate personality

At Foys, we work with directors and members of limited companies to assist them in understanding the legal implications of the day-to-day running of their business. One such implication is that limited companies are juridical persons. But before we get ‘lost in the weeds’, let’s work our way back from this term and define how this relates to corporate personality.

Law recognises legal entities as human (natural persons) and non-human (juridical persons). While humans become natural persons after birth, juridical persons are created when, for example, companies are incorporated. The latter can refer to entities such as firms, businesses, clubs, non-profits, and local governments. In this article, we’re going to focus on limited companies as juridical persons in the UK.

While not the first historical example of corporate personality, the history of companies as legal entities in the UK can be traced back to a legal case from the late 19th century – Salomon v A. Salomon and Company (1897).

The case surrounded the issue of personal liability – namely, that of Mr Salomon’s personal liability for the debts of a company of which he was the majority shareholder. After Mr Salomon lost in the High Court and the Court of Appeal, the House of Lords would overturn the decision. Presiding over the case, Lord Halsbury stated that a company that had been legally incorporated ‘must be treated like any other independent person with its rights and liabilities appropriate to itself’ thereby ruling that Mr Salomon was not liable for the company’s debts.

Thus, the concept of ‘corporate personality’ was defined – a term used to separate a company from its directors, members, and shareholders.

Implications of companies having a corporate personality

When a limited company is registered with Companies House, it becomes a legal entity. This means that limited companies have certain rights, responsibilities, obligations and privileges – including the right to sue, the right to be sued, the right to own property, and the right to enter into a contract – similar to those of a human.

How, then, does ‘corporate personality’ impact directors, shareholders, and other members? Well, it’s important to understand that this legally defines directors, shareholders, and other members as legal entities separate to the entity that is the limited company. Therefore, a company’s finances, assets, and liabilities are its own – not those of its owners. The company is accountable for itself – that is to say, rather than the directors or shareholders owning the company property, for example, the company owns this in its own right.

In essence, this means that unless directors or shareholders act wrongly in their duties and are found guilty of misconduct, they cannot be held personally liable for any debts or liabilities incurred by the company. This is to, in spirit, encourage entrepreneurship.

Why corporate personality is disregarded

Despite the enshrinement of companies as separate legal entities, there are examples of when this distinction, and the rights it affords, has been disregarded – commonly referred to as ‘piercing the corporate veil’ or ‘lifting the corporate veil’. While rare within the UK context, this often happens as a means of, essentially, treating the rights or liabilities of a company as that of its shareholders.

Simply put: as sentient beings, humans are cognisant of their rights and responsibilities; non-human legal entities (such as companies) are not. Companies rely on the integrity of their respective directors to make decisions that are in the best interests of the company’s health – as set out in the Companies Act 2006.

So if, for example, a director is trying to conceal the reality of a situation within a company or evade an action that affects the company, the Act stipulates that the company is not consenting to this behaviour. Again, this comes down to misconduct, in which case it is determined that the individuals behind the company (i.e. directors, shareholders, and other members) should take on the rights and liabilities of the company.

Often lifting the veil of incorporation is required in order to gain insight into a company’s ‘intent’. Though it may technically infringe upon the rights of a company as a non-human legal entity, in such situations this is construed as merely a way of establishing the truthfulness surrounding a legal case in order to properly direct the issue of culpability.

Examples of lifting the veil

There may be a piercing of the veil if a case involves statutory provisions. An example of these provisions can be found within the Insolvency Act 1986. Sections 213 and 214 of the Act relate to an offence whereby directors and other members have been charged with the offence of ‘fraudulent trading’. The existence of such trading would take the liability of the company’s debts away from the company and place it with the directors and other members – due to, as previously mentioned, said directors and members acting wrongfully in their duties.

Other examples and considerations include contracting of members around limited liability, a company acting as an agent to a member, the ‘concealment principle’ and ‘evasion principle’, reverse piercing, interposing a company, or the rights of a group of companies as a single entity.

What does this mean for you?

Assuming you’re involved in a limited company as a director or shareholder, ‘corporate personality’ essentially protects your rights should the company become liable to pay off a debt. This is reliant on there being no evidence of misconduct or misbehaviour from yourself or another director or shareholder acting in the company’s interests.

If you are considering incorporating a sole trader or partnership business as a limited company, Foys solicitors can provide further explanation of the notion of corporate personality, as well as giving bespoke, insightful advice about your rights and responsibilities and those of the potential company.

Foys: expert company law and corporate law solicitors

With over 100 years of legal cases involving the issue of corporate personality in relation to UK companies, it’s important to retain the services of legal counsel with extensive experience and knowledge in company law.

Foys’ company and commercial law team provide the necessary legal support and advice to help companies, directors, shareholders, and other members with issues relating to corporate personality, lifting the veil, or other company law matters.

We are committed to giving you a more thorough understanding of the laws that affect you and your business, while also providing legal advice on everyday company matters.

To find out more on how we can provide your business with company and commercial legal expertise, simply fill out our Online Form, or call your local Foys Solicitors office:

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This post is not legal advice and should not replace professional advice tailored to your specific circumstances. It is intended to provide information of general interest about current legal issues.

February 20th, 2019

The implications of setting up a Limited Company

The decision to set up a new limited company, either from scratch or growing from a sole trader business or partnership, is a significant step that signals how you intend to run your business in the future. There is a plethora of financial and legal implications that need to be considered, as well as a number of statutory requirements that limited company directors are required to meet.

In this article, Foys’ specialist company and commercial solicitors discuss some of the reasons as to why limited companies are often chosen over partnerships, and detail the legal and financial implications that this process entails.

Why start a limited company?

For anyone considering setting up a new limited company, or transferring their sole trader/partnership business to a limited company, it’s important to consider the advantages and disadvantages of such a venture.

Common reasons why you want to set up a limited company include:

  • Limit your liability – your business is a legal entity and is separate from you. Your suppliers, clients, and employees enter into contracts with the corporate entity instead of you, and therefore you aren’t personally responsible for its debts, lawsuits and other adverse implications.
  • Tax consideration – the current corporation tax rate in the UK is 19% and will reduce to 17% for the year starting 1 April 2020; this is regardless of a profit of £10,000 or £100,000. Sole traders pay tax on personal income – and in tax year 2019/20, the basic rate is 20% on any income up to £37,500; 40% on income from £37,501 to £50,000.
  • Reputation – a limited company tends to carry more weight and has a better professional appeal than a sole trader. Your suppliers, customers, partners and employees may also perceive that a limited company is more credible than a sole trader.

In terms of the disadvantages, privacy is a commonly mentioned issue. Running a limited company means you are required to submit information about your company and yourself to Companies House, which can be viewed publicly and will include various personal details.

Also, as a director, you are directly culpable for your legal responsibilities as defined under the Companies Act 2006 – such as filing company records and reporting changes to Companies House and HMRC.

Legal obligations

There is a distinct nexus between the legal and financial considerations of a limited company. Many of the financial and tax obligations intersect with the legal considerations that you must make. For example, filing the return of company accounts to Companies House is statutory, as is the keeping of company documents and the reporting of any changes to Companies House.

One interesting legal dimension pertaining to the limited company is that your duties as a director are codified in the Companies Act 2006. This states that you must make decisions that are in the company’s best interests, the interests of the employees and the interests of shareholders – rather than your own. This means you are obligated to notify other directors and/or shareholders if you stand to benefit from a company transaction or if there is a conflict of interest. You must also avoid accepting benefits from third parties.

A confirmation statement (previously known as an annual return) must also be submitted annually to Companies House. This should essentially confirm that all of the details on file at Companies House are correct, including a register of persons with significant control (PSC) of the company. If there are any changes to your business after this has been filed, you must let Companies House know as soon as possible.

Lastly, you have to stay up-to-date on any regulations or laws that impact your business – such as matters of employment – as well as those that relate to your industry.

Required legal documentation

If starting a limited company or incorporating your sole trader or partnership business as a limited company is the right option for you, then we recommend seeking specialist legal support. A company solicitor typically assists with drawing up the following documentation:

  • Shareholders’ Agreement is a contract outlining the roles, rights and obligations of the limited company’s owners.
  • Memorandum of Association outlines the shareholders’ agreement to form the limited company.
  • Articles of Association detail the agreed upon written rules of running the company to be sent to Companies House.

If the document has to be changed for any reason, then you’ll need a lawyer to re-draft the document and notify Companies House of any changes, who will then pass this on to HMRC.

This serves the purpose of setting out your rights as a shareholder as well as protecting your shares in the company and can be exercised by one of our specialist company lawyers.

How company solicitors at Foys can help with your limited company

At Foys Solicitors, we understand how complicated it can be to set up a limited company or incorporate a sole trader or partnership business to a limited company and we can definitely help.

We have a proven track record of working with limited companies to ensure that they are meeting their statutory requirements as set out by the Companies Act 2006.

Our company lawyers offer legal advice on matters such as:

  • Questions relating to regulations and statutory expectations
  • Director disputes
  • Crafting shareholders’ agreements
  • Drawing up a memorandum of association and articles of association
  • Employment law matters
  • Commercial property transactions

We will work to safeguard your company against any legal complications while striving to help you grow and adapt your business to the challenges that lie ahead.

For us to understand your business better and offer our expert, bespoke guidance, we offer a free initial consultation that can be held at one of our many local offices.

To find out more or to book your free initial consultation, simply fill out our Online Form, or call your local Foys Solicitors office:

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This post is not legal advice and should not replace professional advice tailored to your specific circumstances. It is intended to provide information of general interest about current legal issues.