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BUSINESSES vol 4(2) start-up, sale and purchase

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BUSINESSES vol 4(2) start-up, sale and purchase

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About this title—authors, overview

Commentary

1 The five keys to success

2 The right product

3 The right financial backing

4 The right personal support

5 The right skills

6 The right character

7 The changing challenges during the lifetime of a business

8 Stage 1—the concept stage

9 Stage 2—the development stage

10 Stage 3—the prime stage

11 Stage 4—the peak stage

12 Stage 5—decline

13 Introduction to choice of business medium

14.1 Introduction

14.2 Limited liability

14.3 Greater flexibility in separating ownership and management

14.4 Greater scope for raising finance

14.5 Continuity

15.1 Introduction

15.2 The cost and delay involved in formation

15.3 The ongoing cost of statutory compliance

15.4 Lack of privacy relating to financial and other affairs

16.1 Introduction

16.2 The number of participants in the business

16.3 Contractual capacity

16.4 The authority of agents to bind the business

17 Overview of business taxation

18 Main taxation issues

19.1 Rates of tax

19.2 Basis of assessment

19.3 Capital allowances

19.4 Loss relief

19.5 Payment of the tax

20.1 The basis for taxing partnership trade profits and losses

20.2 Rates of tax and basis of assessment

20.3 Capital allowances

20.4 Loss relief

20.5 Payment of the tax

20.6 Choice of accounting date

21.1 Rates of tax and basis of assessment

21.2 Capital allowances

21.3 Loss relief

21.4 Payment of the tax

22.1 Calculating the gain or loss

22.2 Roll-over and deferral reliefs

22.3 Calculating the tax

22.4 Loss relief

22.5 Payment of the tax

23.1 Individual taxation of partners

23.2 Calculating the gain or loss

23.3 Roll-over relief

23.4 Calculating the tax

23.5 Loss relief

23.6 Payment of the tax

24.1 Calculating the gain or loss

24.2 Roll-over relief

24.3 Calculating the tax

24.4 Loss relief

24.5 Payment of the tax

24.6 Possible double taxation of company gains

25 Introduction to personal taxation of income received by proprietors from the business

26.1 Tax neutrality of drawings

26.2 National insurance contributions

26.3 Tax relief for interest paid on loans to invest in a sole trade or partnership

27 Income received by company proprietors

28 Dividends—personal taxation of dividend income received by proprietors from the business

29 Salaries and director’s fees—personal taxation of income received by proprietors from the business

30 National insurance contributions

31 Tax relief for interest paid on loans to investors in a close company

32.1 The need for reform

32.2 Registration instead of approval

32.3 Tax relief on taxpayer’s contributions

32.4 Relaxation of the rules on investment

32.5 Authorised payments by a registered pension scheme

32.6 Taxation of pension benefits received

33.1 Registered personal pension plans

33.2 Self-invested personal pensions

33.3 Stakeholder pensions

34.1 Occupational pension schemes

34.2 Additional voluntary contributions

34.3 Small self-administered schemes

34.4 Personal pension plans

34.5 Employer-financed retirement benefits schemes

35.1 Income tax

35.2 Capital gains tax

35.3 Inheritance tax

36.1 Introduction

36.2 Income tax

36.3 Capital gains tax

36.4 Inheritance tax

37.1 Introduction

37.2 Capital gains tax

37.3 Inheritance tax

38 Income tax consequences of the death of a proprietor

39 Capital gains tax

40 Inheritance tax

41.1 Taxation of trading profits and losses

41.2 Taxation of capital profits of the business

41.3 Pension provision

41.4 Tax relief for investment in the business

41.5 Taxation of the proprietor’s realisation of their investment

41.6 Double taxation and property held outside the partnership or company

42 Creating a separate legal personality

43 Types of company under the companies legislation

44 Private and public companies

45 Forming a bespoke company

46 Buying a ready-made company

47 Overview of the documents which must be provided

48 The memorandum of association

49.1 Delivery of the application

49.2 The company name

50.1 Overview

50.2 Statement of capital and initial shareholdings

50.3 Statement of proposed officers

51.1 Accommodating provisions previously contained in the memorandum

51.2 The three main approaches to drafting articles

51.3 Likely special articles

52 Statement of compliance

53 Registration

54 Documentation provided and procedure

55 The first board meeting

56 Changes to the company’s constitution

57 Documents required for the incorporation of a limited liability partnership

58 The name of the limited liability partnership

59 Registration of a limited liability partnership

60 Membership of a limited liability partnership

61 Default provisions applying to limited liability partnerships

62 Types of regulatory agreement

63 International agreements

64 Advantages and disadvantages of a written partnership agreement

65 The default code in the Partnership Act 1890

66.1 Default provisions

66.2 Drafting issues

67.1 Default provisions

67.2 Drafting issues

68.1 Default provisions

68.2 Drafting issues

69.1 Default provisions

70.1 Default provisions

70.2 Drafting issues

71 Participation in management

72.1 Default provisions

72.2 Drafting issues—decisions requiring unanimity

72.3 Drafting issues—decisions which may be made by an individual partner

72.4 Drafting issues—decisions which require a majority

72.5 Drafting issues—other machinery for decision making

73 Meetings

74 Recording decisions

75 Dispute resolution

76.1 The common law position

76.2 Provisions in the Partnership Act 1890

77.1 Overview of possible clauses

77.2 ‘Whole time and attention’ clauses

77.3 Negative covenants

78.1 The statutory agency

78.2 Other cases where the firm is liable

78.3 Drafting partnership agreement clauses regarding unauthorised dealings

79.1 Liability of an individual partner where the firm is liable

79.2 Liability of outgoing partner for obligations incurred after departure

79.3 Drafting partnership agreement clauses on the liability of partners leaving the partnership

80 Holding out

81 Effect of retirement on the partnership

82 Drafting a retirement clause

83 Drafting an option to purchase

84 Restrictive covenants

85 Bankruptcy and death

86 Expulsion

87 Effect of dissolution

88 Allocation of profits on dissolution

89 Similarities between a limited liability partnership membership agreement and a general partnership agreement

90 Registering the limited liability partnership

91 Commencement and duration

92 Designated members

93 Accounting provisions

94 Members’ contributions and rights

95 Winding up

96 Notices

97 The statutory contract under the Companies Act 2006

98 Changing the statutory contract

99.1 The parties’ expectations

99.2 Decision making

100.1 Invalid amendments

100.2 Other limitations on amending the articles

101.1 Russell v Northern Bank

101.2 Impact on the drafting of a shareholders’ agreement

102 The need for consistency between the articles and the shareholders’ agreement

103 Ensuring consistency between the shareholders’ agreement and any subsidiary agreements

104 Summary of preliminary drafting points

105 Customising a shelf company

106 Initial capital

107 Further finance from the company’s shareholders

108 Further finance from outside the shareholders

109.1 The desirability of a distribution policy

109.2 Default provisions in the shareholders’ agreement

110 The need for restrictions on board and shareholders’ decisions

111.1 Restrictions which should be accepted by the shareholders alone

111.2 General running of the business

111.3 Financial policy

111.4 Transactions involving directors, employees and consultants

111.5 Litigation

112 Ensuring that the shareholders have adequate information to make decisions

113 The need for deadlock provisions

114 The aim of deadlock provisions

115.1 When the deadlock provisions are to apply

115.2 Third-party references

115.3 Escalation clauses

115.4 Russian roulette

115.5 Winding up of the company

116 Damages, specific performance and injunctions

117 Termination of the shareholders’ agreement for breach etc

118 Dispute resolution

119 The need for restrictions on transfer

120.1 The transfer notice

120.2 Valuation of the shares

120.3 Notification and offers

120.4 Completion

121 Location of pre-emption procedures

122.1 Possible clauses in a shareholders’ agreement

122.2 General principles relating to restrictive covenants

122.3 Application to shareholders’ agreements

123 Termination of the business

124 Winding up of the company

125 The main remedies for breach of a shareholders’ agreement

126.1 Damages

126.2 Equitable remedies

127 Leaving the company

128.1 The provisions of the Companies Act 2006 Section 994

128.2 The meaning of unfair prejudice

128.3 Unfair prejudice in the context of a shareholders’ agreement

128.4 Remedies for unfair prejudice

128.5 Valuation of the company’s business

128.6 Discounts and premiums

128.7 Problems in petitioning for breach of a shareholders’ agreement

129 Petitioning for the winding up of the company

130 The purpose of the business plan

131 Assembling the raw material for the business plan

132 Introduction to long-term finance sources

133 Share and loan capital from the proprietors and other related parties

134 Secured bank loan

135 Bank and other loans

136.1 Advantages and disadvantages of private equity finance

136.2 Sources of private equity finance

137 Bank overdraft

138 Trade credit

139 Invoice discounting and invoice factoring

140 Introduction to capital requirements

141 Leasing and hire purchase of plant, machinery and other assets

142.1 Inability to purchase

142.2 Advantages and disadvantages of leasing premises

142.3 Security of tenure

142.4 The terms of the lease

142.5 Finding the right premises

143 Introduction to government finance for new businesses

144.1 Government grants and support

144.2 What kind of grants are available?

144.3 Grant eligibility

145 General style

146.1 The business proposition

146.2 The management team and other personnel

146.3 The business’s operations

146.4 The financial plan

146.5 The servicing of the investment

147.1 Introduction to business stationery

147.2 Disclosure of the company name

147.3 Disclosure of other company information

147.4 Inclusion of directors’ names on business letters

148 Sole traders

149.1 General partnerships

149.2 Limited liability partnerships

150 Misleading statements in advertising—introduction

151.1 Overview

151.2 The general prohibition

151.3 Misleading actions

151.4 Misleading omissions

151.5 Aggressive commercial practices

151.6 The Schedule 1 prohibitions

151.7 Enforcement and penalties

152 Codes of practice

153.1 Introduction

153.2 Misleading advertising

153.3 Comparative advertising

153.4 Enforcement and penalties

154.1 Actions in contract

154.2 Misrepresentation and negligent misstatement

154.3 Intellectual property issues relating to advertisements

155.1 Introduction to standard terms conditions

155.2 The ‘battle of the forms’

155.3 Use of ‘prevail’ clauses

155.4 Exploiting the ‘battle of the forms’

156.1 The purpose of standard terms

156.2 Restrictions on the drafting of standard terms

157.2 Delivery in domestic contracts

157.3 Delivery in international contracts

157.4 Termination clauses

158 The desirability of having a written employment contract

159.1 Inadequacy as a contract substitute

159.2 The prescribed particulars

160 Other requirements as to writing

161 Scope of the section

162 The choice

163.1 Full- or part-time workers

163.2 Fixed-term contracts

163.3 Temporary staff

163.4 Freelancers and outside contractors

163.5 ‘Zero-hours contracts’

164 The legal tests

165 The tax position

166 Introduction to discrimination

167.1 Background—the Discrimination Law Review and the Equality Act

167.2 Overview of the Act

167.3 The key concepts of the Act—protected characteristics

167.4 The key concepts of the Act—prohibited conduct

167.5 Sex equality clauses

169 Discrimination in recruitment or selection

170 Introduction

171 The different ways of selling a business

172 Advantages of a share purchase

173 Advantages of an asset purchase

174 Scope

175 Confidentiality undertaking

176 ‘Lock-out’ provisions

177 Identifying which assets are to be transferred

178 Buyer’s enquiries generally

179 Enquiries before contract

180 Accountants’ investigation and report

181 Property matters

182 Environmental matters

183 Submission of warranties

184 Disclosure letter

185 Structure of the agreement

186 Assets and liabilities—premises

187 Assets and liabilities—stocks and equipment

188 Assets and liabilities—book debts and creditors

189 The benefit of contracts including hire purchase and leasing agreements

190 Intellectual property

191 Computer hardware and software

192 Goodwill

193.1 Apportionment

193.2 Completion accounts

194 Completion formalities

195 Cross indemnities

196 Conditions precedent

197 Insurance

198.1 The need for restrictive covenants

198.2 The courts’ attitude to restrictive covenants

198.3 Drafting for reasonableness

198.4 Drafting for severance

198.5 The impact of Article 101 of the Treaty on the Functioning of the European Union and the Competition Act 1998

198.6 Tax implications of payments made under a restrictive covenant

199.1 Restricting the seller’s liability for breach of warranties

199.2 Excluding the seller’s liability for misrepresentation

200 VAT

201 Boilerplate clauses

202 The Transfer of Undertakings (Protection of Employment) Regulations 2006

203 Relevant transfers

204.1 General rules

204.2 Effect on collective agreements and trade union recognition

204.3 Employee’s right to object to the transfer of their contract

204.4 Occupational pension rights

204.5 Changes to the employee’s terms and conditions

204.6 Transfer of an insolvent business

205 Unfair dismissal in connection with a transfer

206 Redundancy in connection with a transfer

207 Disclosure of ‘employee liability information’

208 Consultations with the affected workforce

209.1 Trading profits and losses

209.2 Capital gains and losses

209.3 Extracting money from a seller company

210 The buyer

211 Method of transfer

212 Issues to be considered on the incorporation of a business

213 Income tax implications for the seller

214 Capital gains tax implications for the seller

215 VAT implications of selling to a connected company

216 The purchasing company

217.1 Capital gains

217.2 Stamp duty land tax/land transaction tax

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