June 2011 News Articles
Officer tried to sell company using misleading income figures
Buying and selling businesses can be fraught with difficulties as highlighted in a recent case before the High Court.
It involved a company that wanted to sell one of its subsidiaries. A Chief Operation Officer was appointed to oversee the sale and a purchaser was found.
The officer prepared an information memorandum which described the products manufactured by the subsidiary, listed its main customers and provided figures for actual and projected income.
However, while the negotiations were still continuing, one of the subsidiary’s most important customers telephoned the officer saying that it was taking its business elsewhere.
The officer did not tell the purchasing company about this and the sale went ahead.
When the purchaser discovered what had happened, it took legal action to have the purchase agreement rescinded on the basis that it had been misled about the figures and should have been informed in advance that a major customer was withdrawing its business.
The officer denied that there had been any deception. He said that he had not believed that the customer would take its business elsewhere. He had regarded it as merely a negotiating strategy to obtain lower prices.
However, the customer’s representatives gave evidence that when they had told the officer that they were withdrawing their business, he had asked them not tell anyone as it would make it impossible for the sale to go ahead.
The court held that the officer had intended to fraudulently misrepresent the true position and so the purchaser was entitled to rescind the purchase agreement.
Please contact us if you would like more information about the issues raised in this article.
Company’s mistake turns redundancies into unfair dismissals
Businesses need to ensure they follow the correct procedures when making redundancies.
Otherwise mistakes can lead to claims of unfair dismissal, as happened in a recent case involving a company that needed to lay off a number of staff.
The company had selection procedures in place and used them to assess which employees should be chosen for redundancy. It followed its own criteria correctly but then failed to inform the employees of their scores during the formal step 2 meeting required by the statutory dismissal and disciplinary procedures.
Three employees who were then chosen for redundancy appealed on the basis that they had not been informed of their scores.
The employment tribunal ruled that the company’s failure to provide this information breached the statutory requirements. The failure meant the employees did not know why they had been selected and so were not in a position to respond.
The tribunal said this amounted to automatic unfair dismissal. That decision has now been upheld by the Employment Appeal Tribunal.
Please contact us if you would like more information about redundancy procedures or any aspect of employment law.
Be careful about who you allow to sign your contracts
A recent case in the High Court has highlighted the need for firms to keep a tight control on who signs contracts on their behalf.
It involved a recycling firm which found itself tied into a hire contract for three years when it thought the arrangement was only on a month by month basis.
The confusion arose when a landfill manager signed a contract on the firm’s behalf to hire a high-speed shredder. The contract contained a clause saying any disputes that might arise would be referred to an adjudicator.
The firm used the shredder until it was no longer needed and then gave one month’s notice to end the hire arrangement. The hire company insisted that the contract was for three years.
The adjudicator ruled in favour of the hire company so the matter was taken to the High Court. The recycling firm said the landfill manager was not an employee and had no authority to enter into a long term contract. He only had authority to enter into monthly agreements.
However, the High Court ruled in favour of the hire company. It held that the recycling firm must have been aware that its landfill manager had arranged for a significant number of machines to be hired and used at the plant.
There was no evidence to suggest that the hire company had been made aware that the manager did not have the authority to enter into long term agreements and therefore the three-year contract had to stand.
Please contact us if you would like more information about contract matters.
Number of businesses grows despite economic downturn
The number of businesses in the UK has been growing despite the economic downturn.
That’s the picture that emerges from figures released by the Department for Business, Innovation and Skills (BIS).
The latest statistics show that the total number of businesses rose by 48,000 to 4.5m between the start of 2009 and the start of 2010. That was an increase of 1.1%.
Business and Enterprise Minister Mark Prisk said: “Private sector enterprises will create growth in our economy so it is encouraging to see that the number of businesses at the start of 2010 had increased. This was a difficult period, and these figures show the resilience of British business.
“I am determined that the Government will do everything it can to create the right environment for these businesses to now expand and grow, and also to encourage more people to set up on their own.”
It’s pleasing to see so many new businesses setting up despite the difficult economic climate.
However, if they are to succeed, start-up businesses need to consider a variety of issues from employment matters to business contracts and leasehold agreements. There could also be concerns about how to structure the business.
Getting good legal advice at the outset can prevent damaging problems emerging later.
We have helped numerous new businesses get off the ground and are able to offer advice on such matters as whether to set up as a sole trader, partnership or a new company. We also have valuable contacts including accountants, surveyors, valuers and financial advisers who can provide added value to the services we provide.
Please contact us if you would like more information about starting up a new business.
Tenancy deposit protection ‘still misunderstood by landlords’
It is now four years since tenancy deposit protection schemes were introduced yet some people still don’t realise they are a legal requirement, according to the Residential Landlords Association (RLA).
The RLA says it still gets calls from landlords and managing agents who have misunderstood the schemes and how they work.
One landlord thought he was exempt because he had a licensed Home in Multiple Occupation (HMO). Another HMO landlord wrongly believed that he didn’t have to protect tenants’ deposits until he had rented out all his available rooms.
The RLA also came across a managing agent who didn’t know the legal requirements even though he was responsible for nearly 200 properties.
Tenancy deposit protection was introduced under the Housing Act 2004. When a tenant pays a deposit, the landlord must arrange for it to be protected within an authorised scheme within 14 days.
He must also within 14 days, comply with any “initial requirements” imposed on him by the selected scheme and give the tenant certain information required under the Act including which scheme has been chosen.
If the landlord doesn’t comply with these initial requirements, the tenant can apply for an order that the deposit be repaid to him or placed in a scheme. If the court makes such an order, it must also order that the landlord pays a sum of three times the deposit to the tenant.
Please contact us if you would like more information about the issues raised in this article.
Many young people fear they will never buy a home
New research has shown that 77% of young non-homeowners would like to buy a house or a flat of their own.
In spite of this, 64% fear they have no prospect of ever doing so.
The survey of 8,000 people aged between 20 and 45 was carried out by the National Centre for Social Research on behalf of the Halifax.
It revealed that most young people are pessimistic about ever being able to buy and fear that they will have to rent for the rest of their lives.
They feel that banks are not prepared to lend to them, or else ask for large deposits which they cannot provide. It means than many young people simply give up trying.
Only 5% said they were making sacrifices to save for a deposit; most said they had no spare cash or were trying but failing to put anything aside.
Stephen Noakes, Commercial Director, Halifax Mortgages, said: “Our research indicates just how many potential first time buyers are not making it to the application stage because of a fear of being declined.
“We would like to help aspirational home buyers to realise they do have options, that they can apply for a mortgage, and that it is still possible to get onto the property ladder.”
The Halifax says it approves 8 out of 10 mortgage applications from first time buyers. Other banks and building societies are also starting to lend more.
Many young people get round the problem by using options such as shared equity schemes, buying with friends or getting help from parents or grandparents.
All of these approaches can help, although it’s important to make sure everyone understands all the legal implications, even when buying with friends or with the help of family members.
Please contact us if you would more information about buying or selling a home.
Husband used sham company transfer to hide property from wife
A husband has failed in his attempt to use a sham company transfer to hide a valuable property from his wife during divorce proceedings.
The case arose after the husband used a company he owned to buy the property worth between £600,000 and £800,000. He then transferred the company to a third party.
During the proceedings, however, the court held that the transfer of the company was a sham because the husband retained the beneficial ownership. He had simply been trying to conceal his interest in the property from his wife so that she would not be able to claim a share.
The court held that the property would make a significant difference to the wife’s financial claims and should be added to the matrimonial pot when considering how much support she should receive for herself and her children.
That decision has now been upheld by the Court of Appeal.
Please contact us if you would like more information about matrimonial law and divorce proceedings.
Road accident victim awarded £595,000 compensation
A woman who sustained whiplash injuries in a road accident and later developed fibromyalgia has been awarded £595,000 in compensation.
The woman’s car was stationary when it was hit in the rear by another vehicle.
At first it was thought that she had only sustained routine whiplash injuries which would quickly get better.
However, the pain didn’t ease as expected. It became more intense and widespread. She was later diagnosed as suffering from fibromyalgia which had been brought on as a result of the accident.
She was unable to continue working and needed considerable help with everyday chores such as cleaning, shopping, washing, personal grooming and childcare. She occasionally needed to use a wheelchair and had to move to a single storey home.
Medical experts said she would need care for the rest of her life.
She brought an action against the driver of the other vehicle who admitted liability.
Compensation of £595,000 was agreed in an out-of-court settlement.
Please contact us if you would like more information about making a personal injury claim.