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Things To Consider When Selling Your Business

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Selling a business is often the culmination of years of hard work. Most entrepreneurs will only go through this process once and it is important to get it right first time. Here we address the typical questions that owners might ask, when they are thinking about selling up.

What price can I expect? There are different ways of valuing a business. A valuation might be based on underlying profitability or net asset value. The simple fact though, is that a business is only worth what someone will pay for it. The price is a matter for negotiation and the figure you command may well depend on the level of interest in your business. An experienced adviser can make a huge difference here – they can help present your financials in the best light, gauge interest from potential buyers and help you navigate through the negotiations.

When should I sell? The timing will depend on your reasons for selling. You may want to retire, embark on another project or simply cash in on your investment. Whatever motivates you, start planning early. Having a well-considered exit strategy can help you successfully market your business and achieve a better price. Can you demonstrate that the business is on the up? Are profits growing and are there opportunities for expansion? Will the business be able to survive without you? Do you have mangers who will preserve relationships with clients, customers and suppliers long after you have gone? If the business relies on you, a buyer may be less willing to pay all the cash up front. You might be asked to  sign up to an “earn-out” requiring you to stay working in the business to achieve certain profit forecasts that will then dictate the price you ultimately receive.

What preparations do I need to make? Be prepared to get your house in order. A buyer will want to carry out due diligence on your business. They want to understand what they are buying and what risks and liabilities they may be taking on. To secure a good price, you will need to provide healthy financials, detailed information on your staff, properties and assets and evidence of compliance with key legislation. Your advisers can help you prepare this information and present it in the best light. Starting this process early can also help identify issues that need rectifying. You may choose to disclose major issues to the buyer upfront to avoid price chipping later on.

What will the legal process entail? Once you have found a buyer, you will enter into heads of terms. These provide a “route map” for the transaction by setting out the key commercial terms. The buyer will then commence their due diligence. You should make sure the buyer has signed a confidentiality agreement before they begin this process so that they cannot misuse the information you provide. You will then enter into a detailed sale agreement negotiated by your lawyer. The buyer will ask for a series of protections in the sale agreement and your lawyers will be instrumental in helping you ensure that your liability is kept to a minimum and that you cannot be pursued for any claims after the sale.

If you would like to speak to someone about selling your business, please contact Lucy Freeman on 0121 710 5907 or lfreeman@wilkes.co.uk

 

Government Announces Planned Increase in Probate Fees

A week after the budget the Government has announced planned changes to the way that probate fees are calculated. Currently probate fees are set at a flat rate of £215 or a lower rate of £155 if the grant of probate is sourced through a solicitor.

The planned change is for probate fees to be calculated using a banded structure, based on the value of the estate. For some estates, the change will mean no fee is payable. However, this is only the case if the estate is valued below £50,000.

For any estate above £50,000, the proposed changes will result in a higher probate fee. The biggest change will be for those estates values at over £2 million, for which the probate fee will potentially increase from £155 to £6000, an increase of over 3500%.

These changes make careful estate planning even more important. Those individuals concerned about the taxation of their estate, will now also need to consider the impact the value of their estate will have on the probate fee that will be due.

For those individuals who are in the process – or about to begin the process – of obtaining a grant of probate, in relation to a deceased person’s estate, there is an extra time pressure to obtain the grant soon or potentially face a substantially increased fee.

The Wilkes Partnership can help with estate planning for those individuals who are concerned about inheritance tax liability, increased probate fees or both. We can also help those individuals who want to obtain a grant of probate before the probate fee due increases.

Please contact Eleanor Holland at eholland@wilkes.co.uk or 0121 733 8000 if you would like more information or advice.

Unsigned Restrictive Covenants in Employment Contracts May Be Unenforceable

The recent High Court case of Tenon FM Ltd v Cawley [2018] EWHC 1972 (QB) emphasises the importance of having signed employment contracts, in particular, where they contain post-termination restrictions.

Susan Cawley was employed by Tenon in 2008 and worked her way up through the company hierarchy, eventually reaching the position of Operations Director.  In 2011 she had been given a new employment contract which contained more onerous restrictions than her original contract.  A further contract was also issued in 2012 containing identical restrictions.

After Ms Cawley resigned in May 2018, Tenon discovered that she had attempted to persuade a colleague to join her future employer and so it sought an interim injunction in the High Court to enforce the post-termination restrictions against her.

Despite searching, Tenon was unable to find signed copies of any of the contracts.  Ms Cawley gave evidence that this was because she had refused to sign them because she did not agree to the post termination restrictions they contained.

The High Court had to decide whether Tenon had established that there was a serious issue to be tried and whether they were likely to succeed at the final trial in establishing that the restrictive covenants actually applied to Ms Cawley.

His Honour Judge Bidder QC considered that Tenon fell at the first hurdle because it could not demonstrate that there was a signed contract or that it had provided any valuable consideration for the more onerous restrictive covenants in the later contracts.  He thought it remarkable that a large organisation such as Tenon, with an HR department and an experienced HR manager (who had since left the company), could not locate even one signed copy of Ms Cawley’s employment contract.  He also criticised Tenon’s failure to contact the former HR manager to give evidence to rebut Ms Cawley’s version of events.

He took into account that acceptance of the terms of a contract can be inferred from conduct, but the case law relied upon by Tenon suggested that it was only possible to infer an employee’s agreement to changes by continuing to work where those changes have immediate effect.  In this case, the changes would only take effect after Ms Cawley’s employment had ended.  He also noted that the 2011 and 2012 contracts expressly stated that they were effective from signature, suggesting that they were not binding if unsigned.

The judge further rejected Tenon’s argument that their agreement to continue employing Ms Cawley could be effective consideration for the new restrictions, because there was no authority for such an argument, particularly where the restrictions were more onerous.

Tenon’s costs in the proceedings were £200,000, a sum that in the view of the judge was ‘completely disproportionate’.  Tenon’s aggressive conduct in pursuing the application was a further factor in not granting the injunctive relief.  Therefore, this was not only an unsuccessful exercise for the employer, but an extremely expensive one.

Conclusions

Pam Sidhu comments:Employers need to ensure that employment contracts are signed by all employees, but especially by senior employees who are more likely to be able to cause damage to the business if they leave, because it will not be easy to persuade a court to enforce restrictions in a contract that has not been signed by an employee.  If a business attempts to introduce new post-termination restrictions during employment, it must also provide adequate consideration for the employee’s agreement to enter into them and ensure that it retains evidence of such consideration.

Businesses should also make sure that all employees at a similar level have post termination restrictions in their contracts because a lack of consistency could undermine the employer’s argument that it has a legitimate business interest to protect.

For advice on any employment related matter please contact Pam Sidhu on 0121 710 5815 or  psidhu@wilkes.co.uk.  You can also reach any member of the Employment Team on 0121 233 4333.

Employment Tribunal Fee Scrap Leads To Significant Claims Increase

The Wilkes Partnership Solicitors, Birmingham, Solihull, Supreme Court

Recent Ministry of Justice figures show a huge increase in the number of Employment Tribunal claims received, compared with the same period in 2017.

In September 2018 the MoJ published quarterly statistics for the period April to June 2018, showing a continuing trend for increasing numbers of tribunal claims. Compared against the same quarter in 2017, the number of single claims received increased by a startling 165%.

This follows on from the Supreme Court decision in July 2017 that fees in Employment Tribunals were unlawful, leading to their abolition. Since the introduction of fees in July 2013, there had been a sharp decline in the number of claims. As expected, the latest figures show this trend is now firmly in reverse.

In July 2018 ACAS published its report for 2017/18. Sir Brendan Barber, ACAS Chair, said, “The number of people deciding to pursue a tribunal claim has definitely increased since the Supreme Court decision to scrap fees. Our annual report shows that demand for our early conciliation service increased by nearly 20% and there’s been an almost 40% jump in ACAS cases that involve tribunal claims compared to the same period the previous year.”

Increased Employment Tribunal claims putting strain on dwindling resources

However, the MoJ figures also show that the outstanding caseload has increased by 130% compared with the same quarter last year.  Following the introduction of fees, tribunal staff and judicial resource was allowed to dwindle. Now that claims are once more on the rise, users are feeling the effects of this, with long delays in dealing with correspondence and hearings sometimes being listed 12 – 18 months away. For businesses and employees involved in legal action, this is far too long a wait.

The future of Employment Tribunal Claims

To reverse this reduction in service, an exercise to recruit additional Employment Judges in England and Wales has begun across the 10 regions, with the equivalent of 54 full time judges being recruited.  That process is expected to conclude by January 2019, with the new crop of judges expected to commence work in around April 2019.

Lisa Moore comments:The latest figures continue to demonstrate that current and former employees are now far more likely to issue a claim (and use the services of ACAS as a precursor to doing so). This emphasises the importance of businesses having proper policies and procedures in place, to help manage employee expectations and protect against successful claims, as well as acting correctly when difficult situations arise and taking advice.

For advice on any employment related matter please contact Lisa Moore on 0121 710 5847 or  lmoore@wilkes.co.uk.  You can also reach any member of the Employment Team on 0121 233 4333.

Wilkes urge Midlands Firms to Ditch Secret Santa for KidsOut 2018 Giving Tree appeal

The Wilkes Partnership, Business, Law, Solicitors, Birmingham City Centre, CSR

 

Once again this Xmas, Wilkes staff are swapping novelty mugs and reindeer antlers to buy real toys for deprived children in the region – and are urging all Midlands firms to join in.

Rick Smyth, Corporate Partner at Wilkes and co-chair of KidsOut in the Midlands said “In 2017, Midlands companies generated the lion’s share of the 41,000 toys bought nationally as part of the Giving Tree appeal. That is something we, as a region, should be immensely proud of. We hope everyone will sign up their team or firm this year – and help “turn some frowns upside down.””

Gordon Moulds, CEO of KidsOut comments, “Our aim is to ensure that every child in refuge has at least some joy at Christmas, especially during a time of crisis. The Giving Tree appeal is central to us being able to deliver on this goal”. 

Rick added ”It’s so simple to help. Sign up on the website for enough tags for you, your team or even your whole firm. Hang them on your office Xmas tree (or notice board) and people can take them and buy the toys. There are lots of local drop off points and Kids Out do the rest. Easy – yet life changing. What’s not to like?”

To sign up go to: – http://www.kidsout.org.uk/how-companies-can-help/giving-tree/

You can also contact the KidsOut Fundraising team on 01525 243215 to arrange for a delivery of tags, or to make a donation directly.

Apprentice Of The Year Nominee Talks About Her Journey So Far

 

The last four years have been an absolute rollercoaster. Moving on from my legal secretary role at The Wilkes Partnership, I started my legal apprenticeship with the firm and now, three years later, I have been nominated for the Solihull Chamber Apprentice of the Year Award.

It hasn’t been easy by any stretch of the imagination, but as with any opportunity like this it never is. However the hard work has definitely been worth it. My experience just shows that whatever career route we take, we just need an opportunity to fulfil our aspirations and, have the support to achieve it.

For me, the nomination I received in September was my biggest achievement. It wasn’t something I expected to get but it was something I had worked hard for.

My own career path started differently to most that choose to be a solicitor. When most of my peers were going to study at university, I didn’t have that opportunity due to reasons outside of education.

However, that didn’t put an end to my own aspirations of working in the legal profession, and at the age of 18, I successfully applied for a trainee legal secretary role at The Wilkes Partnership.

Following a year working with the firm, I had gained confidence in my role and had picked up a greater understanding of the workload, rather than just the theory, and when I was asked if I wanted to join the apprenticeship scheme, I grasped the opportunity with both hands. Guided by Audrey Price, and with Sarah Begley and Jas Dubb mentoring me, I soon saw for myself why the scheme has such a good reputation within the legal sector and the region. And knowing that our senior partner Nigel Wood was trained at The Wilkes Partnership, is proof that the firm really does want to invest in talent.

Four years on, and I have experience in a range of practice areas including property, residential, employment, insolvency and M&A across both the Shirley and city centre offices. The time spent in these fields has helped me decide that I want to specialise in employment law – its people-centric approach really appeals to me. I am not convinced I would have been able to get a real feel for which practice area to focus on if it wasn’t for the hands-on training and face-to-face client time that I have had on the scheme.

The culture of the firm is to boost your confidence by trusting you to do the work with adequate supervision. It’s a fast-paced environment, and I’ve continually learned new skills.  That said, if there are moments where I’ve needed help, then Jas has always been there to offer advice – even when the office is at its busiest.

Even though I have only been an apprentice for three years, there have been many high points, and they keep on coming. From the moment I got onto the apprenticeship scheme, to this nomination, The Wilkes Partnership has supported me.

I still have three years to go on my apprenticeship, and am relishing taking all the opportunities presented to me.   The firm has given me the chance to realise my dream – and for that I plan to be here for years to come fulfilling my aspirations to become a solicitor in my chosen field.

If you would like to find out more about working at Wilkes please contact recruitment@wilkes.co.uk

Government Decides Caste Discrimination Not A Part Of Discrimination Law

The Wilkes Partnership, Employment Law Birmingham Solihull Pam Sidhu

In March last year, the Government launched a consultation on “Caste in Great Britain and Equality Law” to obtain the views of the public on how best to ensure that appropriate and proportionate legal protection exists for victims of caste discrimination.

The consultation ran in total for six months, closing in September 2017.

The Government’s response to the consultation was published in July 2018.

Pam Sidhu of The Wilkes Partnership considers the key findings.

What is caste discrimination?

Caste systems are a form of social and economic governance based on principles and customary rules.  Caste systems involve the division of people into social groups (castes) where assignments of rights are determined by birth, are fixed and hereditary.  The assignment of basic rights among various castes is both unequal and hierarchical, with those at the top enjoying most rights coupled with least duties and those at the bottom performing most duties coupled with no rights.  The system is maintained through the rigid enforcement of social ostracism (a system of social and economic penalties) in case of any deviations.

Government response to consultation

The consultation considered different ways of protecting people from caste discrimination.

The first option was to implement a duty, which was introduced by Parliament in 2013, to make caste an aspect of race discrimination under the Equality Act 2010. The second was to rely on emerging case law which, in the view of Government, showed that a statutory remedy against caste discrimination was already available through existing provisions in the Equality Act, and to invite Parliament to repeal the duty on that basis.

The consultation received over 16,000 responses, showing the importance of this issue for many people in particular communities. About 53% of respondents wanted to rely on the existing statutory remedy and repeal the duty, 22% rejected both options (mainly because they wished the Government to remove the concept of caste in British law altogether) and about 18% of respondents wanted the duty to be implemented.

The Government said its primary concern was to ensure that legal protection against caste discrimination was ‘sufficient, appropriate and proportionate’.

It said thatafter careful consideration of all the points raised in the consultation, we have decided to invite Parliament to repeal the duty because it is now sufficiently clear that the Equality Act provides this protection’.

The Government referred to the judgment of the Employment Appeal Tribunal in Tirkey v Chandhok [2015] [ICR 527] to show that someone claiming caste discrimination can rely on the existing statutory remedy (of race discrimination) where they can show that their “caste” is related to their ethnic origin, which is itself an aspect of race discrimination in the Equality Act.

The judgment is binding on all who bring a claim in an employment tribunal, has status equivalent to a High Court decision, and is based on the application of case law decided at a higher level. The Government considered that the Tirkey judgment served as a ‘welcome clarification of the existing protection under the Equality Act – helping to deter those inclined to treat others unfairly or unequally because of conceptions of caste’.

It concluded that the decision made the introduction of additional statutory protection in the Equality Act unnecessary and stated that it intends to legislate to repeal the duty for a specific reference to caste as an aspect of race discrimination in the Equality Act in due course.

In doing so, the Government said that it recognised that this was an area of domestic law which may develop further, and would monitor emerging case law in the years ahead.

It went on to say that ‘In order to ensure that people know their rights and what sort of conduct could be unlawful under the Equality Act, we also intend to produce short guidance before the repeal legislation is introduced. We want this to be of particular use to any individual who feels they may have suffered discrimination on grounds of caste. It should also help employers, service providers and public authorities who are outside those groups most concerned with caste and who may have little awareness of caste divisions.’

Pam Sidhu comments “It is perhaps not surprising that that the Government has opted for a route that effectively preserves the status quo, especially given the small number of caste discrimination cases brought to date.  However, at first glance, the decision does appear to be a proportionate one in light of the availability of a potential remedy for claimants through existing case law.  We await sight of the Government’s guidance note with interest.”

For advice on any employment related matter please contact Pam Sidhu on 0121 710 5815 or  psidhu@wilkes.co.uk.  You can also reach any member of the Employment Team on 0121 233 4333.

Write A Will Or Say A Little Prayer

Aretha Franklin, Make a Will, Birmingham, Solihull, Solicitors

It has been reported that the late Aretha Franklin has died intestate, that is without leaving a will.  With a reputed estate of US $60m it is almost inevitable that those in her family who do not inherit under the rules of intestacy will feel aggrieved and possibly challenge in the courts whatever provision, or lack of it, is made for them.

This could have been avoided if Ms Franklin had made a will setting out clearly how her estate should be divided.

Andrew Hasnip, Partner in the Private Client Department at Wilkes, comments:  “Taking a few hours to consider, take legal advice on and make a will seems a small thing to do compared to the time, trouble and expense that can follow dying without a will.  Making a will would have enabled Ms Franklin to choose who administers her estate, who inherits, in what proportion and when they inherit”.

By contrast, Oxford businessman Richard Cousins who tragically died with his financé, his two sons and her daughter in a sea plane crash off Sydney, Australia on New Year’s Eve had made a will.  Under this the prospect of him dying without leaving family members or any other living beneficiary had been considered and resulted in £41m passing to the charity Oxfam.  In relation to this Andrew observes:  “Wills prepared for a couple with children should contemplate three scenarios: what happens when the first of the couple dies; what happens on the death of the survivor; and what happens if, as in the unfortunate case of Mr Cousins, what happens if all of the named beneficiaries  die”.

The Queen of Soul would have been wise to follow Mr Cousins’ lead rather than say a little prayer and hope for the best.

For help and advice about making a will please contact a member of the Private Client Team on 0121 233 4333 (City Centre / Birmingham) or 0121 733 8000 (Solihull/Shirley) or email ahasnip@wilkes.co.uk.

Former Trainees Qualify Into NQ Positions at Wilkes

The Wilkes Partnership, NQ Solicitors, Trainee Solicitors, Training Contracts, Birmingham, Solihull

Wilkes are delighted to announce that Abi Evans and Jack Ackrill have taken up new roles as Assistant Solicitors, having successfully completed their training contracts.

Abi and Jack join Nicola Pitt as newly qualified Assistant Solicitors with Nicola having qualified in July.

Abi joins the Real Estate team whilst Jack has joined the Contentious Probate department at our city office. Nicola is also based in Birmingham within the Private Client team.

Kate Hackett Partner and Training Principal at Wilkes said;

“2018 has been a strong year for Wilkes and we are delighted to be able to offer Abi, Jack and Nicola NQ positions within the firm. We feel that we offer our trainees great hands-on experience which allows them to hit the ground running with their legal careers”.

Alongside welcoming our new NQ solicitors, Matthew Hartas, Douglas McEvoy, Sana Ikhlaq and Charlotte Lines have joined the firm as first year trainees.

To find out more about out becoming a trainee as Wilkes click here.

Dealing With Long Leaseholds As An Executor

Katie Briggs, The Wilkes Partnership Solicitors, IPW, Birmingham, Solihull Law Firm

Katie Briggs, Assistant Solicitor in the Property Litigation team at The Wilkes Partnership provides her analysis on the role of an executor dealing with long leasehold properties and how to ensure matters are kept simple and straightforward.

Executors in distributing the estate on behalf of the deceased may need to deal with long leasehold properties which were owned by the tenant or rented out. As the terms of these leases shorten over time this affects the value when the leasehold property needs to be sold. In order for the executors to act in the best interests of the estate and realise the best value of the property, a request for a lease extension may often be necessary.

A residential tenant of a flat has the right to request a new lease under the Leasehold Reform, Housing and Urban Development Act 1993 often referred to as a lease extension. In order to do so the tenant must hold the property under a long lease, the property must be a flat in a qualifying building and the tenant must have been the legal owner for at least two years before requesting a new lease.

The process of a lease extension requires a formal notice to be served on the freeholder, however, executors are required to keep liabilities to the estate as low as possible and this process can be technical and expensive requiring specialist legal expertise. This is simply in order to achieve the best value for the leasehold property so it can then be sold.

This summer, however, the courts reviewed the legislation and in particular provisions for executors requesting a new long lease from the freeholder clarifying some important deadlines which will assist executors dealing with an estate.

The case was brought by the purchaser of the long lease against the freeholder. The executors had arranged and agreed the sale to the purchaser on the basis of the request for the new lease. This increased the value and assets of the estate. The freeholder refused to accept the purchaser’s right to request a new lease and the notice which had been served by the executors prior to the sale.

Prior to this case there had been an understanding that executors or personal representatives needed to request a new tenancy on behalf of the deceased who qualified within two years of the grant of probate or letters of administrations. This was believed to be a strict time limit for executors to follow under the legislation. Once requested the benefit of that notice would be assigned to a purchaser usually at the same time as completion.

In this particular case the deceased died in 2007 and the grant of probate was obtained in 2010. The leasehold property was only sold in April 2016 with the transfer registered with the Land Registry later in June 2016. The executors had served a notice on the freeholder to request a new lease prior to the transfer being registered but after the property had been sold. The notice had been served on the basis they had been a qualifying tenant for a two year period. As executors there is no automatic requirement to transfer the title of the property from the deceased to the executors prior to selling the property.

The freeholder disputed the notice served by the executors as it was more than 2 years after the Grant of Probate and had been served after the lease had been sold (albeit not yet registered with the Land Registry).

The county court found in favour of the freeholder that the notice should have been served within 2 years of the grant of probate. The court further indicated that if that had not been an issue the court would have decided the notice was valid. The executors serving the notice after sale but prior to registration did not invalidate the notice. As a result the purchaser of the lease appealed the decision and the freeholder appealed the second point made by the court.

The court confirmed on appeal that the intention of parliament for requiring notice to be served within 2 years of the grant of probate was an additional right to executors and did not limit the general right to request a lease extension once they themselves had held the lease for at least two years. This would apply to a scenario where the deceased was eligible to request a new lease but the executors themselves had not owned the property on trust for the minimum 2 year period. This then allows executors to serve the notice and sell the leasehold property earlier than the legislation would ordinarily allow.

This relieves the pressure placed upon executors so as to ensure that a notice does not need to be served on the freeholder requesting a new lease until a purchaser of the long leasehold flat has been secured. Subsequently that notice can be assigned to the purchaser who would deal with the new lease negotiations further limiting the need for an executor to take any further action for a lease extension or increase costs to the estate.

The court gave guidance to executors dealing with any long lease extensions which form part of an estate. For best practice a notice should be served on the freeholder prior to completing the sale of the leasehold. This would have avoided any further argument being raised by the freeholder that the notice was invalid. Although it should be noted that this was unsuccessful by the freeholder in any event.

This case of Villarosa v Ryan [2018] shows a sensible judgement and clear interpretation of parliament’s intention with the legislation. That is not to implement further obstacles for executors in dealing with estates but to assist them. Keeping the risk and liabilities to the estate at a minimum.

If you have any enquiries regarding an estate involving a long leasehold which will need to be sold and have a lease extended or any issue related to property litigation or contentious probate please get in touch with us at The Wilkes Partnership. We have specialist departments dealing with both areas of law who will be able to be to assist you in keeping matters straightforward and minimising any personal risks to the executors.

If you wish to discuss any aspect of Will drafting, interpretation issues or disputes/obligations of being an Executor, please get in touch with Katie Briggs on 0121 233 4333 or via email on kbriggs@wilkes.co.uk

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