Commercial Quarterly Update December 2019

The Work Christmas Party - Employers Beware!

The festive season can be the perfect time for rewarding employees with meals out, drinks dos and Christmas work parties. This is great for boosting staff morale and showing appreciation for the year’s hard work.
However, in offering such an event it is important to act as a responsible employer and be aware that the normal rules still apply. If you anticipate the risks associated with such events you can avoid running into any problems. Remember you must still provide a safe environment and you are accountable for the acts of your employees. Work Christmas parties are for the purposes of the law regarded as an extension of work, even if they take place outside of normal office hours and are not held at the workplace.
You should consider the following:
1. Company Policies - review your policies and make sure that they are up-to-date. For example, Anti-harassment and Bullying policy; Social Media policy; Equal Opportunities policy; and Alcohol and Drug Misuse policy.
2. Disciplinary and Grievance Procedures – If you find any of the Company policies have been breached it is important to have a robust disciplinary and grievance procedure to address the breach. You may find you are under a duty to investigate behaviour which has given rise to a complaint between your employees. Any unacceptable behaviour at the work Christmas party (for example, malicious use of social media which could damage the reputation of the Company or another employee, consumption of alcohol, use of illegal drugs, violence, inappropriate language or excessive physical contact) should be dealt with as a misconduct issue under your disciplinary procedure. Disgruntled employees must be aware they are able to raise a grievance if they have experienced inappropriate behaviour.
3. Alert your managers to the risks – As well as reminding them to adhere to company policies your managers should be careful about the conversations that they have with staff or the promises that they make at the work Christmas party. Any light hearted discussions about promotion, salary increase, bonuses etc may later be relied upon.
4. Be careful not to discriminate - consideration and sensitivity should be given to:-
- Different beliefs and religions – For example, catering for different religious dietary requirements such as non-alcoholic drinks and vegetarian options.
- The venue - so that the party is accessible to everyone. For example, the venue should have access for disabled staff and be suitable for staff of all ages.
- The time of day that the party is held - some staff may have primary childcare responsibilities and so are potentially restricted on the time of day that they can attend.
- Inviting a partner to attend – For example, treat staff in same-sex relationships the same as those who are in heterosexual relationships.
5. Sexual discrimination and Harassment - it is important that employees know that it is never appropriate to sexually harass or victimise another member of staff. This should be clearly set out in relevant policies.
6. Absenteeism the day after - any lateness and unauthorised absence from work the day after the work Christmas party should be dealt with under your sickness absence policy or disciplinary procedure, depending on the reason for absence. Do not single out certain employees. Consider the approach that has been taken in the past in similar circumstances. Be consistent, and communicate your expectations to employees.
If you would like further information or assistance relating to any of the issues raised in this article please contact our solicitor Francesca Bishop from our the Commercial Team on 01380 733300 or francesca.bishop@wansbroughs.com.

Share Sales: Are the filings for the company at Companies House and its Statutory Registers correct?

In recent years, we have found the sale of shares in a company can be held up by inconsistencies in the filings at Companies House and its Statutory Registers.
When selling a business the buyer will carry out a legal due diligence exercise. This allows the buyer to gather information on the business, which they are looking to buy. Building a complete picture of the business allows the buyer to make an informed assessment of the potential risks and benefits of the proposed purchase. Once the information has been received and reviewed by the buyer, any inconsistencies can impact the buyer’s decision, including whether they decide to:
a) proceed with the transaction; 
b) seek to renegotiate the terms of the transaction reflecting any liabilities or issues which arose as part of the due diligence process; 
c) withdraw from the transaction; or 
d) require the rectification of any inconsistencies and anomalies.
What are the key records we have found inconsistencies with?
1. Company or Statutory Books
A company is required to keep and update the below registers: 
a) register of shareholders; 
b) register of directors;
c) register of directors’ usual residential addresses; 
d) register of secretaries; and 
e) register of people with significant control.
A company may also keep a register of allotments and transfers (outlining the share transaction history) and a register of charges.
Routine errors, which we have found, include:
a) the register of shareholders has (and also the register of allotments and transfers are) not being updated when a share transfer occurs; 
b) the incorrect name has been entered in the registers (i.e. a spelling error, an abbreviation, a nickname or a middle name in replacement of the individual’s registered first name); 
c) shareholders’ details are entered into the register prior to a stock transfer form being duly stamped for payment of Stamp Duty; 
d) the company has been entered into the register of shareholders following a buyback of shares which were immediately cancelled; 
e) the register of people with significant control is incorrect (i.e. the correct identifier(s) are not selected); and/or 
f) the company books have not been created or updated.
The failure to maintain the company books is an offence committed by both the company and its officers. This can result in fine payable by either/both the company and its officers.
From the perspective of the buyer the correctness of the register of shareholders is a key component in their decision to purchase the company as it provides evidence of who the shareholders are, the shares held by those members, a record of the shares in issue and how title has passed throughout the history of the company.
2. Companies House
The law requires that a company maintain accurate records at Companies House. Routine errors, which we have found, include:
a) a change in the company’s share capital has not been filed correctly (i.e. form SH01 has not been filed or is incorrect or the register has not been updated where shares have been cancelled); 
b) the names of the shareholders and/or directors are spelt incorrectly; 
c) the re-designation of shares is not recorded correctly (i.e. the rights attached to the shares are inconsistent with the shareholders’ written resolution, shareholders are incorrectly detailed as holding a class of shares or there are inconsistencies between historic confirmation statements); 
d) the record of the persons with significant control is incorrect (i.e. the correct identifier(s) are not selected or have not been updated to take account of a share transfer); and/or 
e) charges which have been satisfied remain on the register.
Please note, there are set timescales for the above changes to be notified to Companies House. Failure to notify Companies House of any of the above changes within the specified timescale could also result in a penalty.
When considering selling your business, instruct us to carry out a “health check” to ensure the company books and the filings at Companies House are correct. If you are looking to sell a business and require our assistance, please contact Emma Jewell from our Commercial team on 01380 733300 or at emma.jewell@wansbroughs.com.

Dispute Resolution Clauses

What is a dispute resolution clause?
If a dispute were to arise between the parties to an agreement, before starting court proceedings the parties should review the agreement to see if there is a dispute resolution clause. A dispute resolution clause will cause the parties to attempt various forms of alternative dispute resolution (ADR) such as negotiations between senior people, mediation and arbitration, before entering into court proceedings.
Although ADR clauses have become increasingly common, the law has recognised their use for many years, as demonstrated in the case of Cable and Wireless Plc v IBM United Kingdom Ltd (2002).
What are the requirements for an ADR clause to be enforceable?
The clause must:
- be sufficiently certain; 
- cover the process for selecting the party to resolve the dispute and who is to pay that party should be defined; and 
- the ADR process should be sufficiently certain and defined.
(Holloway v Chancery Mead Ltd (2008), by Ramsey J).
The purpose of an ADR clause is to create a condition precedent to arbitral proceedings. By upholding these clauses, it can avoid unnecessary time and expense spent on court proceedings; and holds commercial parties to the agreements they make.
(Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd (2014), by Tear J).
What are the key principles?
Overall, when drafting an ADR clause in an agreement, the following principles should be followed: 
- the agreement must create an enforceable obligation to engage in ADR; 
- this must be expressed clearly as a condition precedent to court proceedings; 
- the ADR process that must be followed doesn’t have to be formal but must be clear and certain; and 
- if drafted correctly, these clauses can allow the court to stay proceedings if breached.
Why is it important to adhere to a dispute resolution clause?
In the recent case of Ohpen Operations UK Ltd v Invesco Fund Managers Ltd (2019), a dispute resolution clause was breached and Mrs Justice O’Farrell decided to stay the proceedings and refer the matter back to mediation.
In this case, the outline of the dispute resolution clause was as follows:
1. the parties agreed to use reasonable efforts to resolve disputes amicably through ordinary negotiations with reference to contract managers;
2. if that failed, then the matter was to be referred to executive committees for negotiations; and
3. if that failed, the matter was then to be referred to mediation by the Centre for Effective Dispute Resolution; or
4. after these steps, if the parties were still not happy, the case could go to court.
This clause was breached because the parties engaged in unsuccessful negotiation and then immediately the claimant issued court proceedings. The defendant then successfully issued a counterclaim and stated the court should stay the proceedings pending compliance with the ADR clause.
Therefore, it is clear the Courts will step in and require observance of such clauses and so it is vital that parties to agreements are aware of the existence and implications of containing such provisions within an agreement.
If you need any advice or assistance with what has been discussed in this article then please get in touch with Bethany Fitzgerald from our Commercial Team on 01380 733300 or email her at bethany.fitzgerald@wansbroughs.com. She can assist with a review of an existing contract; drafting a new contract; or advising on the enforceability and the obligations placed on a party under an existing contract.
Wansbroughs wish you a very Merry Christmas and a prosperous New Year.

Last updated 11/12/2019