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Winston Solicitors LLP Company & Commercial Blog

Sale of distribution Company
September 07 2011

Led by Gary Caplan our team has recently advised Benelux owners in the sale of their shares in CCI Distribution Limited, a distributer of data storage and multimedia products based in Harrogate. The company which has annual revenues of over £35m and 60 staff has been purchased by another larger distributor, CMS Peripherals  which is based in London. 

The transaction was a little unusual in that legal opinions also had to be obtained from Dutch and Luxemburg lawyers about the constitution of the sellers and their capacity to enter into the transaction.

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Businesses beware the Bribery Act
August 01 2011

The Bribery Act 2010 (‘the Act’) came into force on 1st July 2011, heralding a significant change to UK bribery law. Despite this, many local businesses are unaware of the implications of the legislation, or even its existence.

The Act is aimed at preventing business being achieved through bribery or, more delicately, ‘backhanders’. It is of particular importance to businesses, since a commercial organisation may now be criminally liable for failing to prevent bribery committed on its behalf.

Read more about the Business Bribery Act to understand its impact on your business - www.winstonsolicitors.co.uk/bribery-act.html

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Exercising breaks in business leases
April 08 2011

Many business leases contain break clauses and it is crucial that break notices from landlords or tenants are served properly in order to be valid.

A recent case confirmed that a landlord is not obliged to inform the server of a notice if he believes that a notice has been invalidly served. However, if he indicates that a notice is accepted despite its defects, he will not subsequently be allowed to challenge it. Landlords should, therefore, be careful about how they respond to notices. Equally, tenants should be careful about how they serve notices; each case will depend on its facts. The crucial point is whether a reasonable recipient would be confused by the error.

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New enterprise zones
April 08 2011

Leeds has been announced as one of the 21 new Enterprise Zones in England. These will all be in Local Enterprise Partnership Areas which will seek to stimulate business.activity. The exact location in Leeds has not yet been announced. Businesses which operate within these zones will be eligible for business rates relief and planning approaches are to be simplified. Superfast broadband is also to be made available and enhanced capital allowances may also be available. Hopefully this will encourage new investment and start ups in particular.

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2011 Budget
April 08 2011

For business the main highlights of the recent budget were:

  1. An increase from £5m to £10m in the lifetime limit on capital gains tax which qualifies for Entrepreneurs Relief. This affects disposals after 6 April 2011.
  2. A reduction in the main rate of corporation tax from 28% to 26% from 1 April 2011. Further 1% reductions are scheduled for the next 3 years so that the rate is reduced to 23% by April 2014.
  3. An increase in R&D relief to 200% from 175% for expenditure incurred from 1 April  2011 and a further increase to 225% from April next year. These are subject to EU state aid approval. It is also proposed that the £10,000 minimum expenditure threshold is abolished from next year.
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Penalty or genuine pre estimate of loss?
April 08 2011

Clauses in contracts which amount to ‘a penalty’ are not enforceable in law.

The High Court in Northern Ireland recently found that a contractual interest rate of 15% was unenforceable because it was a penalty. A buyer was unable to complete a purchase from a property developer due to lack of mortgage funds. The developer sued, claiming interest on the purchase price at 15%.

The Court said that the figure was not a genuine pre-estimate of the purchaser’s loss. Rather, it was a penalty designed to deter the buyer from breaching the contract. The base rate having been 5.25%, the developer would have to have shown that there was a foreseeable risk of him having to pay 9.75% above base rate for continuing borrowings if the buyer failed to complete.

The case stands in contrast to an English Court of Appeal case, in which it was stated that 15% interest was not a penalty. However, this case involved two companies, rather than a company and an individual. Therefore, it is clear that such cases will be decided on their facts.

The key question is whether the interest rate is a genuine pre-estimate of loss or a figure devised to prevent the contract being broken.

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New late payment regulations
April 08 2011

Late payment has long been recognised as a problem within the European Union. To combat the problem further, a new Late Payments Directive has been proposed. Some of the key provisions are as follows:

  • Payment within 30 days of receiving the supplier's invoice, receipt or, in certain circumstances, verification of the goods or services, whichever is latest.
  • Extensions to 60 days may be agreed between the parties.
  • Interest at 8% above base rate on late payments.
  • Automatic entitlement to 40 Euros compensation for late payment.
  • In contracts which contain ‘verification periods’ to allow purchasers to check that goods conform to the contract, interest will not start to run until this period has expired.
  • Verification periods will be limited to 30 days to prevent abuse.
  • Parties will still be able to agree to payment by installments. 

The Directive has been adopted by the European Parliament. It is expected that it will now be adopted by the EU and come into force by the end of the year. The Directive must then be implemented by the UK by early 2013.

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Cutting Compensation for Commercial Agents
October 28 2010

A recent High Court decision could mark a significant development in the court’s treatment of claims for compensation under the Commercial Agents Regulations.

The Regulations provide for an agent to receive compensation on the termination of his agency. Until now the amount of compensation has been based on the value of the agency and a figure equal to twice the annual gross commissions has often been used. However in this case the compensation was linked to the notice period which was a year. Often agency agreements will contain much shorter notice periods so from an agent’s point of view in future the compensation entitlement could be much lower. Principals also need to consider whether in future it is still appropriate to negotiate an indemnity in the agency agreement which until now has been a less expensive and more certain option than relying on the compensation route.

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New Equality Act 2010
October 28 2010

From 1 October 2010 the Equality Act replaced all previous discrimination legislation. It affects not only employers and workers but also service providers to the public and clubs, associations and societies.

Partners in firms also have similar rights not to suffer discrimination on grounds of the nine protected characteristics including age, disability and pregnancy/maternity. It is therefore even more important for partners to have partnership agreements in place so that firms can minimize the risk of having to justify policies which may be potentially discriminatory, particularly as there are at present a number of uncertainties with the new legislation.

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Merger of Office of Fair Trading
October 28 2010

Cabinet Office Minister, Francis Maude, has announced that 192 quangos and public bodies will be scrapped and 118 merged. Of particular interest to commercial practitioners is the announcement that the OFT is to be merged with the Competition Commission following a consultation by the Department of Business Innovation and Skills (BIS) and, in particular, that the OFT's consumer protection powers will be devolved to local trading standards authorities. It remains to be seen whether trading standards authorities have the resources and expertise to challenge the behaviour of traders nationally or cross-border, or to produce guidance on new legislation.

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