   |
|
The Companies Act 2006 has led to a number of changes in accounting requirements for private companies, chief amongst which are the removal of the need to hold an annual general meeting and the change in the filing deadline to nine months after their financial year end. Public companies must file their accounts with the Registrar of Companies within six months of the year end and listed companies within four months. Companies which do not hold annual general meetings must send out to members annual accounts, or summary financial statements if appropriate, by the time these are due to be filed with the Registrar. Other important changes are the removal of the option not to prepare group accounts for medium-sized groups and a new requirement that medium-sized companies must disclose their turnover. There is, however, no need for an analysis of turnover. Partner Note For further information please contact David Holt The Insolvency Act 1986 requires that the books and records of an insolvent company must be handed over by the company’s officers to the insolvency practitioner appointed to deal with the insolvent company’s affairs. Failure to do so is an offence, but there is a statutory defence to the charge, which is available when there is no intent to defraud the creditors. Failure on the part of a director to deliver up to the liquidator all documents belonging to the company that he is required by law to produce can lead to a fine or imprisonment. Recently, the court considered the question of on whom the burden of proof was placed when the statutory defence was claimed. In the view of the court, the company’s officers were likely to have a better knowledge of the circumstances that led to their non-compliance with the demand for the records than did the prosecution. The presumption of innocence therefore applied and the prosecution had to prove its case on the balance of probabilities. Says David Holt, “Although the penalties under the Act for non-compliant officers (a term that includes shadow directors) are severe, this case illustrates the point that proceedings against the officers of an insolvent company can be successfully defended when the circumstances are appropriate. This will come as a relief to directors of companies facing insolvency. If you are an officer of an insolvent company – or an advisor to such a company and are likely to be regarded as a shadow director – it is important to take professional advice as early as possible when insolvency is anticipated.” Partner Note Businesses are reminded that the Consumer Protection from Unfair Trading Regulations (CPRs) came into force on 26 May 2008. The legislation significantly increases the powers available to the authorities to crack down on offenders. Enforcement agency officers will be allowed to enter business premises without having to obtain a warrant and to seize goods and documents. In addition, an authorised officer will have the right to break open containers of any type (e.g. a locked filing cabinet) to examine goods or documents where there is a reasonable suspicion that a breach of the CPRs has been committed. Breaches of the law can lead to substantial fines and/or imprisonment. A basic guide to the Regulations is available at http://www.oft.gov.uk/shared_oft/business_leaflets/530162/oft979.pdf. Partner Note For further information please contact David Holt A recent decision by the Court of Appeal has established that a partnership can be held liable in criminal proceedings as a separate entity from its individual partners. The individual partners’ assets are protected unless complicity or negligence can be shown. The case concerned W Stevenson & Sons, a partnership involved in fish auctions, which was convicted at Truro Crown Court on various counts under the Sea Fishing (Enforcement of Community Control Measures) Order 2000. W Stevenson & Sons, along with the eight partners, sought leave to appeal against the conviction and were refused. In reaching its decision the Court of Appeal held that as business activities were conducted in the name of the partnership and the partnership had identifiable assets that were distinct from the personal assets of each partner, there was no reason why the partnership should not be treated for the purposes of criminal law as a separate entity from the individuals making it up. Given that the 2000 Order draws a clear distinction between a partnership and an individual partner, the view of the Court was that partnerships can be liable as independent entities. It followed that, where a partnership alone was indicted, any fine imposed could only be levied against the assets of the partnership. The Court further held that only the convicted party could seek leave to appeal and, since the individual partners were joined with the partnership in the appeal application, they were not defendants and therefore not entitled to appeal. The partnership had not shown any arguable ground for appealing against the conviction so the application was refused. Says David Holt , “Whilst the decision meant that the partners’ personal assets could not be confiscated, those of the partnership could. The decision could have wide implications for how partnerships hold their assets.” Partner Note For further information please contact David Holt The provision of assistance by a company for the purchase of its shares has long been a difficult area of law. The practice was prohibited until the 1981 Companies Act came into force, when a ‘whitewash’ procedure was introduced which allowed private companies to give financial assistance for the purchase of their shares provided that a number of requirements were met. The problem with the provision by a company of financial assistance (e.g. a loan) for the purchase of its shares has rested in the possibility that this can, when used without sufficient scruples, undermine the interests of other shareholders and even creditors of the company. The downside of the equation is that the prevention of such assistance sometimes makes it difficult for shares to be issued and this could be to the detriment of the company. For example, it might be considered to be in the company’s interests to offer shares to an executive as an incentive, but the person concerned might be unable to raise the money to buy them. Without setting up a rather complex (and sometimes expensive and/or inappropriate) mechanism, the company’s wish to have the executive obtain an interest in its shares might be frustrated. Relief is now to hand in the form of the Companies Act 2006 which, from October 2008, will allow a private company to provide financial assistance for the purchase of its shares. Public companies are still prohibited from so doing. The right is not unlimited, however. Protection for shareholders and creditors also now depends on the requirement that the company’s directors consider whether the proposed share transaction is consistent with their duty to promote the success of the company for the benefit of the shareholders as a whole. If the proposed share transaction does not achieve that end, the directors cannot authorise it. Their duty also extends to the protection of the creditors – for example, where financial assistance is given for the acquisition of shares in a company which is insolvent, the directors could be found personally liable for any losses to creditors which may result. Says David Holt, “The relaxation of the rules does give private companies increased flexibility in dealing with their shares. However, it places the ultimate responsibility for any decision to give assistance for the acquisition of shares in the company on the directors who authorised the transaction. It is a burden which should not be discharged lightly and professional advice is recommended before such transactions are carried out. It is also likely that in cases where there is significant bank borrowing, the bank may require extra comfort to ensure its position is protected.” Partner Note Construction Industry clients are reminded that the Site Waste Management Plans Regulations 2008 came into force on 6 April 2008. In accordance with these Regulations anyone intending to carry out on one site a construction project with an estimated cost greater than £300,000 must, before work begins, prepare a Site Waste Management Plan (SWMP). SWMPs apply to all aspects of construction work, including preparatory work such as demolition and excavation, and record the amount and type of waste produced on a construction site and how it will be reused, recycled or disposed of.
The Regulations do not apply to projects planned before 6 April 2008 provided the construction work commenced before 1 July 2008. Tools to assist in developing and implementing a SWMP and guidance can be found at http://www.defra.gov.uk/environment/waste/topics/construction/pdf/swmp-toolkit.pdf. Partner Note For further information please contact Helen Korfanty Tenants have significant rights compared with occupiers of premises whose occupation is by virtue of a licence, so it is sometimes important to be sure of the basis of occupation and to be aware of the fact that tenants’ rights can be created in some circumstances when a formal lease has not been signed.
Recently, an appeal was heard from tenants who were occupying premises paying a rent of approximately one third of the market rate under a one-page agreement which was not properly executed as a lease, but which they claimed was sufficient to constitute a lease under Section 54. They claimed that as a result they had security of tenure when a new purchaser of the freehold of the unit they let sought to evict them from the premises. The case went to the Court of Appeal, which concluded that the tenants did not have a lease under Section 54 as the requirement that the rent payable was equivalent to a market rent was not met. Accordingly, the arrangement could be terminated on demand. “Had the rent payable been close to the market rent, the decision may well have been different,” says David Holt. “A landlord who had driven a harder bargain to start with might have found himself with a property that had a sitting tenant and was therefore more difficult to sell as a result. It makes sense in cases in which premises are occupied on an informal basis to put the arrangements in proper form so that questions such as this can be dealt with speedily.” Partner Note Companies can now execute documents under deed without having to have the document signed by two officers (directors or the company secretary) or affixing the company’s seal. Now, provided it is allowed under the company’s articles of association, all that is required is the signature of a single director, provided the signature is properly witnessed. Partner Note For further information please contact David Holt The Employment Act 2002 (Dispute Resolution) Regulations 2004, which require employers and employees to operate statutory minimum disciplinary, dismissal and grievance procedures, were intended to give those involved the chance to settle complaints without recourse to litigation. However, the anticipated reduction in the number of tribunal claims did not happen and the procedures have been widely criticised for being poorly drafted and overly complex. An independent review of the options for simplifying and improving all aspects of employment dispute resolution recommended that the statutory dispute resolution procedures be repealed and replaced with non-prescriptive guidelines on grievances, discipline and dismissal. To this end, the Advisory, Conciliation and Arbitration Service (ACAS) has published for consultation a revised Code of Practice providing practical guidance for employers, employees and their representatives. This sets out basic principles for handling disciplinary and grievance situations in the workplace. Failing to follow the Code will not, in itself, make a person or organisation liable to proceedings but employment tribunals will have the power to adjust by up to 25 per cent any awards made in relevant cases for unreasonable failure to comply with the Code. The Government plans to introduce the changes in workplace dispute resolution procedures in April 2009 and it is intended that the revised ACAS Code will come into effect at the same time. The draft Code of Practice can be found at http://www.acas.org.uk/CHttpHandler.ashx?id=880&p=0. The consultation closes on 25 July 2008. For further information please contact Antony Arbuthnot The Employment Equality (Age) Regulations 2006 make direct and indirect age discrimination illegal in an employment context, unless the treatment can be objectively justified. The legislation applies to discrimination against young as well as older workers. Recently, a woman who claimed that she was dismissed for being ‘too young’ won her claim of age discrimination (Wilkinson v Springwell Engineering Limited). Leanne Wilkinson was 18 years old when she began working for Springwell Engineering Limited, in Newcastle upon Tyne, as an office administrator. She was dismissed without notice during a three-month probationary period and was asked to leave the premises immediately. Miss Wilkinson claimed that her employer told her that it needed an older, more experienced person to do the job. Springwell Engineering claimed that she was dismissed on grounds of capability. The Employment Tribunal upheld Miss Wilkinson’s claim. The company had relied on a ‘stereotypical’ assumption that capability equals experience and experience equals older age. There was also a lack of any ‘orthodox procedures’ when recruiting Miss Wilkinson and when her employment was terminated. Miss Wilkinson was awarded £5,000 for injury to feelings, approximately £5,000 for loss of earnings and two weeks’ pay because the company had failed to provide her with full written particulars of her employment. The award was increased by 50 per cent because the employer had failed to follow statutory procedures. In addition, the company was ordered to provide any prospective employers with a truthful reference stating that Miss Wilkinson’s dismissal was due to a breach of the age discrimination regulations, not that she was dismissed on capability grounds. Employers are reminded that employees do not have to have worked for a specified period before they are entitled to bring a claim for discrimination. Equal opportunities training should be given so that stereotypical views linking age with competence do not go unchecked, leaving you open to a claim. Contact Antony Arbuthnot for advice on any discrimination law matter. Employers with staff in customer facing roles are advised to ensure that they have robust procedures for dealing with sexual harassment in the workplace in order to meet the challenges posed by changes to the Sex Discrimination Act 1975 that were introduced on 6 April 2008. In practice, many employers, such as bar managers and hotel and restaurant owners, will already have established ways of dealing with any unwanted behaviour towards staff which also attempt to defuse the situation. However, it is now unlawful for an employer to fail to take reasonably practicable steps to protect an employee from unwanted conduct relating to their sex, by a third party, where such harassment is known to have occurred on at least two other occasions. The person responsible for the harassment does not have to be the same on each occasion. As a first step, make sure that you have a policy in place for dealing with incidents of sexual harassment and intimidation involving customers, suppliers or members of the public and that this is communicated to all staff. Where possible, display signs making it clear that the harassment of workers will not be tolerated, so that all visitors to your premises are in no doubt that you operate a zero tolerance policy in this regard. Managers should be trained in how to deal with complaints from staff, how to monitor the ongoing situation to ensure that the member of staff is satisfied with the steps that have been taken and how to prevent further incidents arising. The type of action necessary if a member of staff is subjected to sexual harassment will depend on the nature of your business. Barring someone from a pub or restaurant is an obvious way of trying to protect staff from a further incident involving that customer at least. However, a complaint of harassment involving a long-standing supplier or customer, the loss of whose business would be unwelcome, will require sensitive handling if the employer is to comply with its legal duty to the member of staff to act to prevent a recurrence of the unwanted behaviour at the same time as retaining the business. Protecting your business is not a defence. One can also envisage difficulties arising when a worker’s job is to socialise with clients or prospective clients, for example at corporate events, especially where alcohol is provided. But it is important to remember that there is no limit to the amount of compensation payable in claims of this kind and the settlement can include damages for injury to feelings as well as for any loss the employee has suffered. Says Antony Arbuthnot, “The first cases brought under the new law will provide guidance on this issue. Meanwhile, it is important for employers to anticipate problems that could arise and have measures in place to deal with them swiftly. Contact us for individual advice on strategies to adopt to ensure that you take all practicable steps to protect your staff.” Partner Note Under Section 57A of the Employment Rights Act 1996, all employees are entitled to take a reasonable amount of unpaid time off work to deal with emergencies involving a dependant and not to be dismissed or victimised for doing so. The emergency must involve a dependant who is a child, parent, husband, wife, civil partner or other household member or somebody for whom the employee has primary caring responsibility. Unless the particular circumstances make it impossible, the right to time off in such cases is subject to the employee telling the employer the reason for the absence, as soon as is reasonably practicable, and for how long he or she expects to be absent. The law makes no provision as to how much time is ‘reasonable’ although guidance on the website of the Department for Business, Enterprise and Regulatory Reform (DBERR) notes that this will vary according to the circumstances of the emergency but ‘for most cases, one or two days should be sufficient to deal with the problem’. In a recent unfair dismissal case (Cortest Ltd. v O’Toole) the Employment Appeal Tribunal (EAT) gave guidance on this issue. Mr O’Toole worked for Cortest Ltd. as a street lighting engineer. His partner was struggling to cope with their domestic situation and when things reached crisis point, he requested a month or so off work to look after the couple’s three children in order to give his partner the rest she needed. Her mother worked full-time and so was unable to step in to help. The Employment Tribunal (ET) found that the amount of time off work requested was reasonable under Section 57A, albeit at the top end of what might be permitted. On appeal, the EAT ruled that the ET was in error. The purpose of the legislation is to cover emergencies and to enable alternative care arrangements to be put in place. In this case, there was no evidence that alternative child care arrangements were sought – for example enlisting the help of a friend or relative. Section 57A does not permit a parent to take time off to become a child minder for a period of time but was created for emergency situations and to provide a ‘short breathing space’. Antony Arbuthnot says, “We can advise you on making sure your employee guidance covers requests for time off to care for dependants and makes clear the circumstances in which this right applies.” The DBERR guidance can be found at http://www.berr.gov.uk/employment/workandfamilies/time-off/faq-tofd/page26053.html. A recent case serves as a reminder of the importance of circulating and abiding by your internal policies and procedures. The Employment Appeal Tribunal ruled that the dismissal of a council employee who had consumed alcohol whilst on duty was unfair because the council had failed to make known its published alcohol policy and had not followed it when dismissing him (Sinclair v Wandsworth Council). For further information please contact Antony Arbuthnot **** The information contained in this newsletter is intended for general guidance only. It provides useful information in a concise form and is not a substitute for obtaining professional advice. We respect your time online and your privacy. If you would not like to receive any further newsletters then please send an email to opt-out.newsletter@bwblegal.com with 'unsubscribe | ||