Welcome to the Curwens Newsletter
Keeping you up to date with legal news and developments.
Our aim is to inform and support you as our business and private clients so that we can continue to work with you sucessfully in the future. If you want us to feature any particular legal topics, please contact us at enquiries@curwens.co.uk
Constructive Dismissal - Update
The Court of Appeal has handed down an important Judgement for employers to take heed of in Buckland v Bournemouth University Higher Education Corporation.
The case concerned at its heart the question of whether or not it was possible for an employer to “cure” what would otherwise have been repudiatory breach, which would, by definition, have been sufficient to entitle the employee to treat his contract of employment as having been irrevocably breached.
It Can Be Too Late to Apologise
The Court found that there was no authority in Employment Law to argue that a repudiatory breach, once complete, could be remedied to preclude acceptance.
As such, in effect once a breach has occurred which is sufficient to make an Employee view the employment relationship as irretrievably damaged, there is nothing an employer can do to “cure” that breach.
Impact on Employers
The Judgement sounds a note of caution to employers who may previously have sought to remedy any repudiatory breach which had occurred before an employee chose to resign and claim Constructive Dismissal.
From now on the Employment Tribunal will not consider whether or not the Employee’s decision to resign fell within the “Range of Reasonable Responses” open to him: Rather, each Constructive Dismissal will be viewed on an objective basis. If a repudiatory breach is found on the facts, then it will not be possible for an Employer to argue that it later took steps to cure that breach.
The Court of Appeal was unapologetic in stating that it was unwilling to consider introducing a new doctrine of “cure” into the relatively clear area of the Law of Contract, despite the fact that it recognized that the resulting situation could in future be “capable of working injustice”.
For further advice on this or any other employment related issues, please contact a member of the Curwens LLP Employment Team.
Why do I need Curwens?
If the worst happens and you're facing a tribunal claim, you can rely on Curwens to provide a comprehensive, professional and above all, cost effective employment claims handling service.
We will consult with you at every stage to decide which is the best way forward. We will not spend your money needlessly - you will be fully informed at every stage as to your chances of success.
Employment Seminars
Curwens run an occasional series of seminars covering topical subjects in Employment Law. We maintain a client mailing list for these seminars. If you would like to join it just let us know at enquiries@curwens.co.uk
We can also conduct in-house training sessions on aspects of Employment Law, including running a disciplinary hearing, maternity rights and the protection of confidential information.
For further information or to discuss any employment law issue please contact one of our experts at employment@curwens.co.uk
article by Deborah Hogan
Wills and Business Assets
Certain business assets attract significant relief from Inheritance tax at either 50% or 100% depending on the type of assets involved but what can be done on a more practical basis in order to protect your business and your beneficiaries should the worst happen. Wills specialist James Blakemore looks at the options.
If you die, what happens to your business? It is a question that must be addressed whether you are a sole trader, a partner or a director/shareholder. Your Will offers the opportunity to minimise the risk of loss of profit, dissolution of the business, unbalanced shareholder control. Most importantly, it ensures your assets pass to those you want and that they get a fair value for them.
Firstly, who is to receive the business assets or their fair value - your spouse, children, business partner or employees? Your Will is the only way to ensure that the rightful beneficiary receives their gift.
Secondly, what about the day to day operation of your business if you are not there? How will the business cope without you? Your executors are employed to administer your estate but are they best qualified to run your business? If not, you can appoint separate executors to deal with the running of the business and to give them wide powers of management, which they alone have. In essence, you can separate your personal and business assets to ensure that they are dealt with as you want and by those you trust to do the right thing.
Thirdly, what is to happen to the business, your co-directors and employees? Would you want your business to be sold as a going concern or simply dissolved to achieve the best price? Many shareholder and partnership agreements include right of pre-emption allowing other parties the first option to buy the shares or the assets of a deceased partner from their estate - however, many do not. As well as making your wishes legally binding in your Will you can also enter into a separate agreement with your business partners to deal with this.
Commonly referred to as a cross option or double option agreement, it is used in situations where a shareholder or partner has passed away or is critically ill. If you believe that the business would be best served by its assets being retained by the remaining owners and/or employees, these agreements offer the opportunity for the assets to be offered first to the owners/employees and require your executors to do this.
Clearly if you want the business to continue and your beneficiaries receive a fair price for the shares or other assets such an agreement can set out the terms of the transaction. It would usually also require each shareholder or partner to take out a suitable life and/or critical illness insurance policy, held in trust, to ensure that funds are available to purchase the business assets.
More particularly in relation to critical illness, what happens if you are unable to make decisions? Your executors will have no lawful right to deal with that as they are only appointed on your death. The answer lies in a Lasting Power of Attorney. This allows you to appoint those you wish to deal with your property and financial affairs in circumstances where you are unable to do so, allowing for the appointment of those you trust to deal with different aspects of your affairs. Much like the appointment of separate executors, you can appoint different attorneys to deal with your personal assets and others to deal with business assets. In addition, you are free to restrict or place conditions on their role.
Your Will is important to ensure that those you want to benefit from your estate do so, without the interference of outdated statutory rules. It is equally important to ensure that your Will reflects that both your wishes in relation to your business are carried out and offers comfort to your beneficiaries and business partners by ensuring that which you have worked so hard to achieve is not lost.
Can we help you? Our commercial and private client teams can advise on drawing up Cross Option agreements, Wills, Trust Deeds and Powers of Attorney. Contact us today for more certainty. James.blakemore@curwens.co.uk or 01992 631461
Company Commercial
Should you change your articles of association as a result of the
Companies Act 2006?
Now that the Companies Act 2006 is fully in force, Simon Moffat, an Associate in the Company and Commercial Team, considers whether companies should be changing their articles of association in light of the 2006 Act.
It is not compulsory to update your articles, but I explain briefly here why, in the long run, it would be simpler and cheaper (and may even avoid litigation) to have your articles updated now.
Have your articles been overridden by the 2006 Act?
The 2006 Act generally overrides a company’s articles, unless a particular section states that it is subject to a company’s articles. So now, when looking at your articles, your directors and members will not know whether a particular provision is effective.
For example, a proxy for a shareholder is now entitled to attend, speak and vote at a shareholders’ meeting, on a show of hands as well as on a poll, whatever the articles say. Any articles that state or imply that proxies may only vote on a poll (as many of them do) will be misleading.
Removal of objects clause from your Memorandum of Association
One of the changes introduced by the 2006 Act on 1 October 2009, was that a company may have unrestricted objects. However, any existing objects clause contained in your memorandum of association will be deemed to form part of your articles.
In simple terms, an objects clause is a list of the things that your company is authorised to do. As it used to be a requirement under the Companies Act 1985 that a company carry on its business within the scope of its objects clause, companies made sure that the list was as extensive as possible to ensure that they did not do anything that was not on the list (i.e. which would have been unauthorised).
Accordingly, in order to take advantage of this change and not have to worry about whether your company’s actions fall within the objects of the company, you will need to amend your articles to remove your existing objects clause which is now deemed to be part of your articles.
Taking advantage of new flexible procedural provisions of the 2006 Act
The 2006 Act allows you flexibility in certain areas of company procedure provided that your articles contain an appropriate provision to cover it. For example:
• you can specify shorter notice periods for holding general meetings than in some previous circumstances; and
• your articles can specify an alternative procedure for changing your company's name (in addition to the ability to change it by special resolution).
Also, directors now have a duty to avoid situations which conflict with the company’s interests. However the duty is not infringed if the matter has been authorised by the directors.
The directors of a private company incorporated on or after 1 October 2008 have an automatic power of authorisation unless their articles contain conflicting provisions, but companies incorporated prior to this date need either to pass an ordinary resolution or amend their articles to take advantage of this power.
You should amend your articles to make sure that the provisions dealing with directors’ conflicts of interest are clear and remove any provisions which would prevent the directors from taking advantage of the provisions of the 2006 Act.
Removal of unnecessary restrictions and obligations
Articles adopted under the 1985 Act are also likely to contain restrictions and obligations which are not required under the 2006 Act, although a company could choose to retain them. One example is the concept of authorised share capital, which acts as a restriction on the number of shares a company can issue. For private companies, other examples include provisions requiring annual general meetings to be held or requiring the company to have a company secretary.
Also existing articles are likely to contain certain provisions required by the 1985 Act to be in your articles in order to take advantage of such legislation which are not required by the 2006 Act. Examples include authorities for the company to purchase its own shares or to reduce its share capital.
Restrictions on further allotments
From 1 October 2009, the directors of a private company with only one class of shares will no longer need shareholder authority to allot new shares, provided that there are no conflicting provisions in the articles. This provision will apply automatically to companies incorporated on or after 1 October 2009, but existing companies will need to pass an ordinary resolution to take advantage and to check there is nothing in their articles which would prevent directors exercising the power.
If you want to keep such a restriction on allotments of shares then you will need to ensure your articles contain the relevant restriction.
Simplification of Regulations
The 2006 Act provides for potentially beneficial changes which will only apply to your company as long as your articles do not state something to the contrary (in effect your articles will override the 2006 Act in those instances).
You should therefore amend your articles to take advantage of these potentially beneficial changes.
Conclusion
Due to the affect on your articles of the 2006 Act, we recommend that you should seriously consider updating your articles now in order to:
• take advantage of certain relaxations in regulations and new powers; and
• ensure there are no redundant, conflicting or outdated regulations.
Should you decide to take action now, then please contact Simon Moffat to discuss your requirements on 01992 463 727 or by e-mail at simon.moffat@curwens.co.uk
article by Simon Moffat
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Disclaimer - this newsletter has been provided by Curwens LLP as general guidance only and cannot be taken as legal advice. Curwens LLP will not be liable for any loss, direct or consequential, suffered by anyone acting or omitting to act as a result of the contents of this newsletter. Curwens LLP will be happy to give you legal advice on any of the above points and can be reached on our contact details below.
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