April 2011 News Articles
Directors of doomed development project guilty of wrongful trading
The directors of a development company have been found guilty of wrongful trading after continuing with a project long after they should have known it was bound to fail.
The case involved the directors of a company which was set up to acquire a plot of land worth £900,000 and build industrial trading units. They borrowed £437,000 on the basis that some of the units had been pre-sold. However, that overstated the position.
The directors then fell into dispute with one of the contractors brought in to work on the site.
The contractor suspended work on the project. The bank was not told about this and went ahead and honoured further payments made by the directors.
The development company then went into liquidation. The liquidator sought declarations that the directors were guilty of misfeasance, breach of fiduciary duty and wrongful trading because they had allowed work to continue on the project when they had known, or ought to have known, that it was bound to fail.
The court held that at the outset of the project, the directors had honestly believed that it would succeed. However, the position changed once work got underway. The contractors quickly carried out work to a value that exceeded the amount available to pay them.
The only honest thing to do at that stage was to stop the development so a full appraisal could be carried out and so the bank could be informed. In spite of this, the directors tried to continue until insolvency was unavoidable.
The court held that the directors should have known that there was no realistic chance of avoiding insolvent liquidation and so continuing with the development constituted wrongful trading.
Please contact us if you would like more information about the issues raised in this article or any aspect of insolvency and company law.
Additional paternity leave rights for fathers comes into effect
New rights providing additional paternity leave and pay for fathers have now come into effect.
The new rights apply to fathers whose partners gave birth on or after 3rd April this year. They allow fathers to take up to 26 weeks leave to care for their child providing they fulfil certain conditions.
The additional paternity leave can only begin 20 or more weeks after the birth of the child and once the mother has returned to work from her statutory maternity leave.
The leave will also have to be completed by the end of the 52nd week after the child’s birth, and the father will only receive the additional statutory paternity pay for the period in which his partner would have been receiving statutory maternity pay.
The father must give his employer at least eight weeks notice of when he wishes to begin the additional leave. He must also declare that he is taking the leave to care for the child.
The new rights also apply to parents who adopt a child.
Please contact us if you would like more information about additional paternity leave or any aspect of employment law.
More measures to reduce burden of red tape for businesses
The Government has announced new measures to reduce the burden of red tape for businesses.
There will be a moratorium to exempt start-up businesses and firms with fewer than 10 employees from new domestic regulations for three years.
There will also be a public audit of nearly 22,000 statutory instruments currently in existence to see if they are still useful or necessary. Businesses will be invited to voice their opinions on these regulations and say how the system could be improved.
The intention is that unnecessary or excessively burdensome regulations will be removed unless the Government department responsible for them can prove that there is a good reason why they should be retained.
Business secretary Vince Cable said: “A moratorium for the smallest and genuine start-up companies from regulations alongside the removal of obligations for flexible working and giving time off to train will be a real boost to businesses. It will let them concentrate on growing their company, not thinking about dealing with the latest request from Government.”
There will be extensive consultation with businesses and other groups before the proposed moratorium is introduced to ensure that it doesn’t result in any unintended consequences.
We shall keep clients informed of developments. In the meantime, please contact us if you would like more information about regulatory issues.
New approach to positive action on recruitment takes effect
Employers now have new rights to take positive action when looking at candidates for recruitment and promotion.
The aim is to help create a greater diversity in the workplace, but there are strict controls.
The new rules, effective from 6th April, mean that if all else is equal, an employer can select a candidate who has what is described as a ‘protected characteristic’.
However, such candidates must be of equal merit to others in the selection process. The employer must also be able to show that people with that particular characteristic are under-represented in the workforce or suffer a disadvantage because of that characteristic.
These characteristics are:
- age
- disability
- gender reassignment
- marriage and civil partnership
- pregnancy and maternity
- race, ethnic or national origin, colour and nationality
- religion/belief or lack of any religion/belief
- sex
- sexual orientation
Employers will only be able to take such positive action if it is a proportionate way of addressing an under-representation. They will not be able to choose a less suitable candidate simply because they have a protected characteristic.
Please contact us if you would like more information about this or any aspect of employment law.
Credit directive gives more protection to consumers
The new EU Consumer Credit Directive has now come into force giving more protection and power to consumers.
The directive amends the Consumer Credit Act and builds upon existing protections to give extra rights and standardised information to consumers.
The Consumer Minister, Edward Davey, said the directive is also designed to encourage lenders to act more responsibly.
Under the new rules, consumers will have up to 14 days to cancel new loan agreements. They will also have the option to make partial early repayments on loans. Under the old system, they were only able to pay off the full amount early.
Lenders will have to accept more responsibility for borrowers and must give them standardised pre-contractual information to help them compare different loans.
They must also ensure that borrowers understand the details of the loan and they must carry out a thorough check on the borrower’s credit worthiness before any loan is agreed.
Mr Davey said: “The implementation of the Consumer Credit Directive will help strengthen a culture of responsible lending. With new legal rights for consumers and greater responsibility for lenders, consumers will be better able to take charge of their money.
The directive came into force on 1st February.
Please contact us if you would like more information about the issues raised in this article or any aspect of credit control.
Private rented sector ‘to continue expanding into 2012’
The demand for rental property will continue to outstrip supply until at least next year, according to research by the Association of Residential Letting Agents (ARLA).
Its operations director, Ian Potter, said: “The lack of new rental stock for the private rented sector (PRS) was the dominant factor in the market last year, and will continue well into 2012 because of the broader issues of diminishing housing supply and lending drying up.
“The Leader of the Labour Party, Ed Miliband, recently flagged research that shows 41% of young low-to-middle earners live in privately rented accommodation compared with 14% in 1988. This trend looks set to continue while mortgages are so hard to come by and the capital barriers to home ownership appear so entrenched.”
A survey carried out by ARLA found that 59% of its members believe that the demand for rental property will outstrip supply this year and into 2012.
Mr Potter said: “The PRS is taking on the burden created by diminishing housing supply – a trend that will continue for the short to medium term.
Please contact us for more information about commercial property or landlord and tenant issues.
Review rejects improved contact rights for grandparents
The Family Justice Review has rejected calls to make it easier for grandparents to seek contact with their grandchildren.
As the law stands at the moment, grandparents have to get permission from a court before they can even start to make an application for contact. It was thought the Review might recommend removing this requirement.
However, it has decided against changing the current system. The Chair of the Review, Sir David Norgrove, said in his interim report: “We have heard representations that the requirement for grandparents to seek leave of the court before making an application for contact should be removed but have concluded this should remain.
“But the importance of these and other relationships must be emphasised throughout the process of reaching parenting agreements.”
The report goes on to stress the need for parenting agreements which put the child’s needs first in terms of care, education, health, finance and contact. The Review also calls for greater use of mediation to enable parents to reach amicable agreements.
The decision not to improve legal rights for grandparents will no doubt disappoint many people but there are still several steps that can be taken in order to have to have contact with a grandchild.
The first thing should be to approach the parent who’s being obstructive and try to reach an agreement. This can be difficult if they are feeling bitter after the break-up of a relationship but in time, most people will realise the value of their child having contact with the grandparents.
If that doesn’t work then mediation with the guidance of an independent mediator might help. However, both sides have to agree so it may not always be suitable.
Legal action may then become necessary, although there’s a good chance the problem could still be resolved before you get to court. Once the application is made, family advisory officers from the court agency CAFCASS may be appointed to examine welfare issues and prepare a report.
These reports are often strong enough to persuade the obstructive parent that contact would be good for their child. If not, the matter is likely to be decided by the court.
If the court decides in favour of contact with the grandparents then the parents will have to comply.
Please contact us if you would like more information about family law issues.
New FirstBuy scheme could help 10,000 first time buyers
The Chancellor George Osborne has announced a new scheme which he says will help 10,000 first time buyers enter the property market.
Mr Osborne unveiled the FirstBuy scheme during his Budget speech. It will involve the Government and several major house builders making £250m available to help first time buyers provide a deposit on a home.
The FirstBuy scheme applies only to new build properties. The Government and the house builders will provide loans to fund 20% of the deposit. The buyer will only have to provide 5%.
This will enable them to take out a mortgage for 75% of the property. The loans are free of charge for the first five years and are repaid when the property is resold.
The Housing Minister, Grant Shapps, said first time buyers had experienced great difficulties over the last few years with many having to postpone home ownership until they were well into their thirties. One of the major problems they face is providing a large enough deposit.
He said: "By making up to £250 million available over the next two years for deposits on new build homes, this Budget shows that we are serious about sorting this out, and supporting our construction industry to build more homes, create new jobs and increase the pace of economic growth."
The Government will provide more details about how the scheme will work over the next few months and the first new homes are expected to become available from September onwards.
Please contact us if you would like more information about the issues raised in this article or any aspect of buying and selling a home.