Partners could be personally liable for business debts
The recession is highlighting the risk some partnerships face as they try to keep their businesses afloat despite falling orders and rising debts.

Many may find that if their business becomes insolvent, they could be personally liable for its debts. It can mean partners not only lose the business they have spent years building up, they may also lose their personal savings and even their homes in some cases.

This is an issue that many partners put to the back of their minds when business is good but it quickly comes to the fore when times get difficult as in the current economic downturn.

The answer could be to consider restructuring the business as a Limited Liability Partnership (LLP). There are several advantages to becoming an LLP – including possible tax benefits - but the main one in the current economic climate is that it helps to ensure that liability lies with the business itself rather than with the individual partners.

The personal assets of each partner should be protected in most circumstances if the business fails.

LLPs need to drawn up properly to be effective so partners wishing to protect their interests should seek legal advice as soon as possible. Please contact Peter Sutherland if you would like more information.

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Landlords and letting agents face stricter regulations

Landlords and letting agents face tougher regulations under new measures now being carried forward by the Government.

Ministers say they want to improve standards in the private rented sector and provide more protection for tenants, especially those affected by repossessions.

All landlords in England will have to be registered and they will have to include their registration number on tenancy agreements. They will be removed from the register for persistent poor performance in matters such as carrying out essential repairs and protecting tenants’ deposits.

The register will be run by an independent organisation and landlords will be required to update their registration each year. To reduce the administrative burden, they will be able to register via the web and will only need to provide minimal information such as their name and address and the address of the property being let.

Currently, letting and managing agents do not need to have professional credentials. Ministers say this means tenants and landlords have limited chance of redress if things go wrong. Under the new proposals, there will be increased regulation for all letting and managing agents, supervised by an independent regulator.

There will also be improved complaints and redress procedures for tenants. This will include a system to enable tenants to register complaints about landlords. If the complaints are substantial and proven then the landlord may be removed from the national register.

The Government also plans to change the law so that tenants have a minimum of two months’ notice if their home is repossessed because their landlord fails to keep up with the mortgage payments.

Housing Minister Margaret Beckett said: “We need to ensure tenants have the protection they deserve, the many decent landlords receive the support they need, and those landlords whose performance is inadequate either improve or leave the sector.”

The proposals are based on recommendations contained in the review of the private rented sector carried out last year by Julie Rugg, a member of the Centre for Housing Policy at York University.

The consultation process will close on 31^st July.

If you would like more information on this or any property matter please contact Emma Dancer.

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Employers given more scope when making redundancies
Employers can take length of service into account when selecting candidates for redundancy, the Court of Appeal has confirmed.

The court was called upon to clarify the law after Rolls Royce was faced with the prospect of laying off several of its workers. The three judges held that length of service was a legitimate point to consider even though it could give older employees an obvious advantage over younger colleagues.

However, the ruling does not mean a simple “last in, first out” approach can be adopted. The judges made it clear that while length of service could be one of a number of factors under consideration, it should not be the only criteria used.

The ruling will be welcomed by many employers who would like to consider length of service when dealing with redundancies. However, they should still tread carefully and ensure they also take other factors into account before making any decisions.

Please contact Liam Kenealy if you would like more information about this or any aspect of employment law.

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Buyers of farm lose appeal over breach of contract
It’s sometimes said that ‘if you don’t ask you don’t get’ and that seems to have been borne out by an unusual case before the Court of Appeal recently.

It involved a dispute over the sale of a farm which qualified for EU subsidies being paid over seven years beginning in 2005. The regulations allowed for the possibility of the farm being sold during this period and for the subsidies to be passed on to new owners.

When the farm came to be sold, the sale contract stipulated that the sellers would agree to take all reasonable action requested by the buyers to ensure that the subsidy payments from 2005 onwards were passed on to them as the new owners.

It then transpired that the historic element of the subsidies dating from 2005 did not pass on to the new owners as they had anticipated. They began legal proceedings on the basis that the sellers had breached the terms of the contract.

The case went all the way to the Court of Appeal which has now ruled in favour of the sellers. It held that the sellers’ obligation under the clause would only arise when the buyers requested them to take action to ensure that payments were passed on.

In order to prove there had been a breach of contract, therefore, the buyers would need to allege and prove that they had made such a request and the sellers had failed to comply. However, the buyers had not made such an allegation when outlining their claim.

They did make such allegations in their submission to the court but they had not provided any evidence. It was therefore impossible for the court to conclude that the sellers had refused any request which would mean they had breached the contract.

If you feel that a contract has been breached and you would like to speak to an expert please contact either Faizal Essat or Marcus Brown. We offer a FREE 30 minute consultation – to take advantage call Faizal Essat on 0115 988 6707 or Marcus Brown on 0115 988 6728.

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Former franchisee broke restrictive covenant
A car repair company has won its case in the Court of Appeal to stop a former franchisee operating a rival business in breach of a restrictive covenant.

The company offered franchises allowing businesses to use its name, products and expertise in specified areas. The agreements contained a restrictive covenant which prevented anyone who terminated the franchise from setting up a rival business in the same area for a period of 12 months.

The franchisee in this case decided not to renew his franchise but then continued operating a car repair business on the same premises, although he didn’t use the franchise company’s name or any of its products.

The company took legal action but the judge held that the restrictive covenant only prevented the former franchisee from competing once a new franchisee took over the area. If there was no immediate successor then he was entitled to continue working.

However, the Court of Appeal has now overturned that ruling. It held that the purpose of the covenant was to protect goodwill and it made no sense to deny that protection at the time it was needed most. The former franchisee would have built up his own goodwill while trading under the company’s banner and so would pose a threat to the company if he was allowed to continue trading.

The restrictive covenant was needed to allow the franchise company time to find a new franchisee to cover the area.

For more information please contact either Faizal Essat or Marcus Brown.

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Eleven major companies sign up to prompt payment code
As cash flow problems continue to threaten the stability of many firms, eleven major companies have agreed to sign up to the Government’s Prompt Payment Code.

They include high profile names such as Barclays, Sony UK and B&Q. The pledge means they agree to pay their suppliers on time within the terms agreed at the outset of the contract.

They also promise not to change the payment terms retrospectively.

Explaining the need for the code, the Business Minister Shriti Vadera said: “Late payment can be the final straw for small businesses in the current climate so the commitment by major companies heading up supply chains to pay on time is a win for all businesses.”

The move is a step in the right direction but it still leaves thousands of firms struggling to cope with the problem of late payments. Firms in this situation should seek legal advice to help them recover debts as quickly as possible.

A solicitor can draft a letter requesting payment and outlining what action may be taken if the debt is not settled. For example, under the Late Payment of Commercial Debts (Interest) Act 1998, firms are allowed to charge interest on overdue invoices. This punitive charge is currently 8% above base rate. Firms are also entitled to levy a statutory late payment fee of between £40 and £100 depending on the size of the debt.

A solicitor’s letter is often enough to ensure payment because most companies will settle immediately when they see you are serious about exercising your rights. For more entrenched cases, it may be necessary to initiate legal proceedings but most companies will still settle before the matter gets to court.

Please contact Marcus Brown or Fazial Essat if you would like more information about recovering debts. We offer a FREE 30 minute consultation.

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Employers to be named and shamed if they default on tribunal awards
Employers who fail to pay awards made by employment tribunals will now find themselves named and shamed as part of a government clampdown.

Offending individuals or firms will be entered in the Registrar of Judgments if they fail to pay after being taken to court to enforce the award. The registrar can be searched by members of the public and by credit reference agencies.

The move is intended to give more weight to tribunal rulings and reduce the time people have to wait to receive payments.

The Justice Minister Bridget Prentice said: “A few unscrupulous individuals are defying or delaying payment after tribunal rulings and we will not hesitate to name and shame them. Delays like this prolong the ordeal and force successful claimants to continue with court action to recover their money.”

For any query regarding employment law please contact Liam Kenealy or call 0115 988 6721 to take advantage of our FREE 30 minute consultation.

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