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Navigating the intricacies of small business management is a path that has its fair share of hurdles, as the business landscape is riddled with opportunities for missteps. Amid the numerous challenges, small business owners face legal compliance, whilst incredibly important, should be carried out with caution as mishandling it can lead to substantial repercussions and costly mistakes being made. Being legally compliant not only helps you to protect your business but also promotes it by ensuring you have the right legal documents in place to ensure your business succeeds.

Below Tollers Commercial Services Team outlines their top tips for ensuring that you protect your business, as well as a review of the essential compliance documentation that is needed for your business.

Legal Entities used by business owners:

The main types of legal entities used by business owners are:

Top Tip: Commercial contracts: having the correct contracts in place.

A common oversight among small business owners when it comes to legal compliance is not having the correct documentation in place. Having contracts in place will help reduce the risk of disputes and costly litigation. These documents may include:

Standard terms of business:

we expect that every business has a set of standard terms of business, but if they don’t then they should do. This is a vital contract for your business as it sets out the terms on which you will do business including the goods or services you provide, when they will be provided, the price, limitation of liability, warranties, payment terms etc.

Tailored contracts with customers and suppliers:

if you don’t provide homogenised goods or services then you should have tailored contracts with your customers. Although probably based around a core precedent contract you can tailor this contract for each new matter.

Non-disclosure agreements (NDAs) to protect your confidential information:

if you are going to discuss anything that includes confidential information then please have an NDA in place before that conversation, otherwise, you could find that information getting to your competitors.

Protect your key intellectual property:

In general, intellectual property falls into two types, registerable and non-registerable. If your business is based on intellectual property rights such as patents, trademarks and copyright then it is important to take specialist advice.

Shareholders agreement:

This is one of the most important documents you can have as it regulates the relationship between the directors and shareholders. This is a private contract that usually deals with the transfer of shares, dividend policies, disputes, and the sale of the company. This contract is vitally important because the law does not provide much assistance to shareholders in a dispute except for the “just and equitable” winding up of the company if matters cannot be resolved (i.e. one shareholder buying out the other). Please ask us for a free copy of our Guide to Shareholder Agreements.

Top Tip: Internal compliance:

The law sets out that certain documents must be in place in the business. Depending on the type of business you have you will need to have the following documents in place as a minimum:

Data protection and GDPR policies:

These policies outline how a business collects, processes, uses, stores and protects their customers/clients’ personal information in line with the General Data Protection Regulation (GDPR).

Privacy policy for your website:

Your website privacy policy is a legal document that informs visitors to your website about how your business collects and deals with their data, what data is collected, and how it may be shared or sold.

Registration with the ICO:

The Information Commissioner’s Office is the government body responsible for regulating data protection in the United Kingdom. Being registered is a legal requirement if your business processes any personal information and shows your compliance with data protection laws.

You can register online by visiting the ICO website here:  https://ico.org.uk/for-organisations/data-protection-fee/.

Health and safety manual:

A business’s Health and Safety manual should contain all of the policies, procedures, checklists and templates to help ensure that a business has safe systems in place to prevent accidents/injuries in the workplace.

Staff manual:

Also known as the staff handbook or employee handbook, this important collection of documents and policies provides your employees with all they need to know in regard to working for your business. It includes information on employee benefits, the business culture, codes of conduct, attendance, reporting lines, disciplinary processes and much more.

Employment contracts and compliance with employment laws and regulations:

An employment contract summarises the agreement between an employer and employee and outlines the details of their employment. These vital documents assist both parties as they create a clear understanding of what is expected during the term of employment with the business.

Insurance including employer’s liability insurance:

As a business, it is important to have business insurance in place, as this provides financial protection in regard to loss caused by events that may arise during the day-to-day running of your business and should cover matters such as legal costs, theft, accident, injury or loss of income. Employers’ liability insurance is also important as it covers your business in regard to any claims you may receive from your employees should they fall ill or get injured at work. It is a criminal offence if a business does not carry employers’ liability insurance.

Statutory registers:

Under the Companies Act 2006, all companies are required to keep statutory registers and they include:

Talk to Tollers:

These are just some of the key documents you should have in place. Depending on the nature of your business others may be required.

As a business owner receiving the best legal advice is vital. If you would like guidance to ensure your business has everything required in place and is legally compliant… Talk to Tollers on 01604 258558, our experienced Commercial Services Team is on hand to provide you with the advice you need.

When setting up a business, whether it is with friends, family or colleagues, it is very easy to fall into the mindset that nothing will go wrong at any point now or in the future. You might even assume that due to the relationship you have, you will not need a formal document in place to record your working arrangements. You might think that the idea of suggesting such a document may well give the impression that you don’t trust your new business partners. However, even the closest of business relationships can break down, leaving you with a potentially costly legal dispute.

This is where documents such as shareholders’ agreements come in, as they give individual shareholders additional protection and the confidence to embark on business ventures safe in the knowledge that all parties are protected.

In this article, we look at shareholder agreements in detail and discuss what you need to know to protect yourself and your business.

What is a shareholders’ agreement?

A shareholders’ agreement is essentially an arrangement made, usually, between all of a business’s shareholders (i.e. the shareholders in a Company, there are similar agreements for a Partnership – partnership agreement, and LLPs – member’s agreement).

The agreement outlines, amongst other things, the objective of the business, provides rules regarding the fundamental management decisions of the business, states shareholders’ obligations and rights, regulates how shares are transferred and provides information on how shareholder interests will be protected and their relationships regulated.

A shareholders’ agreement is a private document as it is not registered at Companies House and that is why this agreement is used rather than changes to the Articles of Association of the Company, which are registered at Companies House.

What protection do you have without it?

Without a shareholders’ agreement, a business’s only protection is the Articles of Association. The Articles are a legally binding document required, under the Companies Act 2006, by every public and private company in the UK. The Articles of Association are a set of rules that outline how a business will be run, how decisions are made for the business and which act as a contract between the shareholders, directors and the Business.

The Articles of Association are a business’ most important constitutional document and are put in place at the point of incorporation.

Minority shareholders also have statutory protection against any “unfair prejudice” that might be carried out by the majority shareholders (e.g. making decisions that reduce the value of the minority shareholders’ shares).

Why would you need a shareholders’ agreement?

Whilst a shareholders’ agreement is not required by law and is often seen by some as not necessary, the value it can provide is very important. Not having an agreement in place can create a lack of certainty in how to deal with different situations and scenarios and if matters escalate can often lead to disputes, which will be much more expensive than the cost of a shareholder agreement.

Tollers’ experienced Commercial Team has outlined below the benefits a Shareholders’ agreement can bring both to shareholders and a business and why it is in everyone’s best interest to have an agreement in place:

1. Ensuring proper governance of the company

The everyday management of a company is carried by the board of directors, with shareholders having little or no involvement in management decision-making. A shareholders’ agreement will specify how major decisions should be taken (e.g. capital expenditure over a specified amount). Those decisions might require the unanimous consent of the shareholders or a majority. This mechanism therefore allows the shareholders to exercise management decisions and to limit the authority of the board of directors. This ability to make fundamental management decisions becomes vital when the directors on the board are not shareholders in the company.

2. Protection for Majority shareholders

A shareholders’ agreement can be drafted to protect the interests of majority shareholders. A majority shareholder may not always take an active role in the daily running of the business or may not have a majority representation at board level. An example of protection for the majority shareholder is a “drag along” clause. The “drag along” clause enables a majority shareholder to force minority shareholder(s) to participate in the sale of the company. This is so the minority cannot stop the sale of the company.

3. Protection for Minority shareholders

Shareholders’ agreements can be drafted to protect minority shareholders and to ensure that they are not taken advantage of or that the majority shareholders do not force decisions that are not in the minority’s best interest. For example: a clause can state that certain decisions such as the appointment of other shareholders must be done with the unanimous decision of all shareholders. There can also be “tag along” clauses that ensure that the minority shareholders are not left behind in a sale.

4. Resolving Disputes

A clause can be included in the agreement for dispute resolution with the aim of helping resolve disputes between shareholders promptly and cost-effectively. Dispute avoidance is achieved by including a framework for how specific decisions are to be made.

5. Transfer of shares

If in the absence of restrictions in a shareholder agreement or the Articles of Association, shares may be transferable (there are some statutory protections). This could damage the business as an unwanted third party could purchase the shares and/or take control. This third party could be a stranger or a longstanding competitor. A common clause that can be included is that if a shareholder wants to sell their shares, the other shareholders have the right to purchase them before they are made available outside the company. If this does occur, the new shareholder is normally obliged to enter into a ‘deed of adherence’ whereby they become bound by the terms of the shareholders’ agreement. This safeguards the original shareholders and ensures that the new shareholders agree the terms already agreed between the existing shareholders.

6. Setting out the rights and obligations of shareholders

There are many factors to consider when setting out the rights and obligations of shareholders.

A shareholders’ agreement can set out what rights the shareholders possess and provide clarity on the obligations each shareholder has in the running of the company and its decision-making processes. Some of the rights the agreement can set out are:

These help to provide clarity to shareholders, avoid misunderstandings relating to roles and ensure all shareholders are treated fairly and that their interests are protected.

How Tollers can help

When seeking any legal agreement or document, it is always advisable to seek expert legal advice. This is because commonly, risks lie with what has not been included rather than what has.

Constitutional documents such as the Articles of Association or a shareholders’ agreement are tailored to work in the best interest of the business, their management and share structure. There may be templates for agreements, however, these documents are not “one size fits all”.

Receiving expert legal advice to ensure the agreement is tailored to best suit your business, the situation and the shareholders is crucial and will avoid creating possible issues in the future.

Tollers Commercial Law Team is experienced in drafting and negotiating shareholder agreements and will ensure you receive the correct documentation for your business regardless of whether it is a simple shareholders agreement or a complex all-encompassing one.

To find out how Tollers can help you and your business with a bespoke shareholders agreement… Talk to Tollers on 01604 258558 our team is on hand to guide you through the process and ensure the best solution is put in place.

As a Business Owner, Director or Partner it is important to ensure that you have a Business Lasting Power of Attorney (LPA) in place that protects your interests should you become incapacitated in any way.

If you do become incapacitated either through illness or you lose the ability to make decisions, a Business LPA will allow you to appoint a legal representative who can assist with your business dealings and ensure business continuity even if you are unable to work or are absent from the business for any reason.

A Business LPA protects your business from being exposed to risk and it can cover all manner of situations.

Have you ever thought about who would pay salaries, deal with bills, sign cheques, approve and deal with many of the day-to-day activities that you, as a senior member of staff, deal with and take for granted should you be unavailable to do so?

Most Businesses have a Continuity Plan in place that covers essential requirements should something happen that would prevent the business from operating.  These might include provisions in terms of computer systems, telephony, networking, and off-site backup, as well as more general areas such as flood, fire and even epidemic.  Each business has its own unique continuity plan, but they all have the same goal to ensure the least amount of disruption and ensure the business can continue to operate with the minimum of disruption.

As part of a Business’s Continuity, they may also make provision for what would happen if one of the key decision makers was incapacitated, but this is not always the case.

How would your business continue to function should you be incapacitated in any way?  Is this covered in your continuity plan, articles of association or a partnership agreement?  Do you need a Business LPA?

Company Directors

Depending on the size of your business and its structure, provision may have been made that deals with incapacity in the Articles of Association.  The most common provision in large companies is for the termination of a director’s appointment if he or she loses capacity.  If your business does not have this or a similar provision or if you feel it may be discriminatory, a Business LPA could be an alternative to consider which allows you to appoint a proxy should you lose capacity.

As a Sole Director, it is not as straightforward.  The loss of capacity of the Sole Director would result in no one in a position to run the business – this is where a Business LPA can help make clear your wishes.

General Partnerships

If you are a Partner, your Partnership Agreement may cover what would happen if you were incapacitated – it is always good to check to ensure that the provision is adequate as you may feel that an LPA is needed.  If this is the case it is important to ensure that advice is sought to guarantee that any clause included is not discriminatory and that the LPA you wish to put in place does not conflict with the provisions already made in your current agreement.

Limited Liability Partnerships

If you are a Partner in a Limited Liability Partnership (LLP), it may be that you operate under an Articles of Association model.  If this is the case it may be worth reviewing your Articles to ensure that any discriminatory clauses are removed and that you and the other partners take legal advice in regard to a Business LPA to ensure the minimum of disruption should any of you be incapacitated.

Sole Trader

As a Sole Trader, you run your business as an individual.  As such the business is not legally separate from the owner.  It is advisable if you are a Sole Trader to put a Business LPA in place to ensure that you do not expose your business to unnecessary risk.

The team at Tollers has experts that can assist with both Personal and Business LPAs and work with companies to ensure that their agreements and articles are robust and cover all that is required currently by law.  Having a Personal LPA in place will not necessarily cover your business interests and so it is important to take legal advice to ensure that your business interests are protected.

If you would like to know more about the practicalities and implications of making a Business Lasting Power of Attorney …Talk to Tollers on 01604 258558, and our Wills/Tax and Estate Planning team will be happy to advise you.

Find out more about LPAs here.

Sole Director companies are highlighted in two recent legal cases which shone the spotlight on the importance of checking and complying with the company’s articles of association.

Re Fore Fitness Investments: controversial judgement?

Re Hashmi v Lorimer-Wing and Fore Fitness Investments Holdings Ltd [2022] EWHC 191 (Ch) (Fore Fitness), a recent decision by the High Court, appeared to have broad ramifications for companies with a single director that uses the Model Articles. In this case, the judge overruled Model Article 7(2), which permits a sole director to generally act on behalf of the company without any restrictions, and determined that the company’s articles of association, as amended Model Articles, required the quorum requirement to be satisfied by the attendance of at least 2 directors at board meetings.  This decision was based on the fact that the Model Articles had been amended and bespoke clauses included.

Decisions made when there was just one director in office were therefore invalid since the articles of association had to be interpreted as requiring the appointment of at least one additional director to fulfil the requirements for quorum under the customised articles.

Many questioned the Fore Fitness judgment’s potential third-party effects on businesses that adopted or changed Model Articles, as well as the potential requirement to appoint a second director to review and ratify all of the historic decisions taken by the sole director.  The judgement also appeared to impact companies with unamended Model Articles.  In particular, lenders have been quick to include provisions in their documentation to reduce their risk when dealing with sole director companies.

Re Active Wear Limited: return to normality

Following its ruling in Fore Fitness, the High Court decided in Re Active Wear Limited [2022] EWHC 2340 (Active Wear) after taking the Fore Fitness ruling into account. Fore Fitness’s situation was slightly different from Active Wear since Active Wear adopted the Model Articles without making any changes.

Where the Model Articles are adopted, the judge in Active Wear concluded that a sole director can typically act on behalf of the company without any restrictions because Model Article 11(2) will be disapplied by Model Article 7(2).  This decision has essentially re-established the position ante-bellum and company lawyers can breathe easier again.

Conclusion

Although Active Wear provides clarity and comfort to companies with sole directors using the Model Articles, this serves as an important reminder to revisit and ensure your company’s articles of association are fit for purpose, checked, and reviewed for each transaction, and that the directors act in accordance with them.  If there is a concern that a sole director cannot form a quorum or resolve on a particular matter on their own then either a second director will need to be appointed or the articles of association will need to be amended (which may require a second director to be appointed for the quorum to call the shareholders meeting).  We have not examined the Duomatic principle or section 281(4) CA 2006 in relation to these cases although we will be pleased to discuss them with you.

If you would like some further information relating to this article or any other corporate or commercial legal matter…Talk to Tollers on 01604 258558 and out experienced team will be happy to assist.

We are often asked what Family Investment Companies (FICs) are and what benefits they bring.

What is a Family Investment Company (FIC)?

A Family Investment Company (FIC) is often used by one generation that wishes to retain control of family assets, whilst providing for future generations to benefit from that wealth.  A ‘FIC’ is a company that can either be a limited or an unlimited company used for estate planning and wealth management.  A bespoke set of articles of association and/or a Shareholders Agreement, together with a tailored share structure, make the company, whether limited or unlimited, suitable to operate as an estate and wealth planning vehicle.

Unlimited or Limited Company?

There are pros and cons for each when choosing to set up a limited or unlimited company.  An unlimited company does not provide the limited liability that many owners seek, however, its main advantage is that it can keep its financial affairs private. A limited company benefits from limiting the personal liability of shareholders, nevertheless, the accounts of a limited company are a public document and will need to be filed at Companies House, which is easily accessible and downloadable by the public. It is important to note that small companies may be eligible for audit exemption if they meet the criteria governed by the Companies Act 2006.

The structure of Family Investment Companies (FICs).

Family Investment Companies offer a different structure in which families can pass wealth on to future generations whilst retaining control over the investments and assets.

Typically, Family Investment Companies will have a mixture of voting shares and non-voting shares, as well as different classes of shares (which allow for different dividends to be distributed to different shareholders). It is important to note that just giving a share a different name is not sufficient to create a different class; the shares must have different entitlements as well. Preference shares and redeemable preference shares are often seen in a Family Investment Company as they provide their holders with a preferential right to income ahead of ordinary shares.  The shares will normally only be owned by family members and family trusts.  The articles of association and/or a Shareholders Agreement can be tailored to the family’s needs.  Articles are publicly available documents held by Companies House, whereas a Shareholders Agreement is a private agreement between the shareholders (and the company).  These will contain provisions regulating the relationship between the shareholders and safeguarding the control of the company and the assets.  Some other provisions may include; appointment and removal of directors, share rights, transfer of shares, dividend policy, valuation of shares, dispute resolution, and compulsory transfer of shares in certain situations.

This structure allows certain family members to maintain control over the assets, while the FIC is growing wealth, in a tax-efficient manner.

Reasons why you may find a Family Investment Company (FIC) useful.

Family Investment Companies can be used instead of, or in addition to, typical estate planning vehicles. When deciding if a Family Investment Company is the right option for your family, it is imperative to obtain clear professional guidance and advice as each family is different with its own specific needs, dynamics, and objectives. Professional tax advice is recommended when considering any form of estate planning

Estate planning is forever evolving and developing. Great care should be taken to ensure the success and future-proofing of your family wealth.

Tollers have significant experience working with independent financial advisors, tax specialists and accountants in the creation and implementation of Family Investment Companies (FICs).

If you would like to discuss Family Investment Companies further… Talk to Tollers on 01604 258858 and our knowledgeable and experienced team will guide you through the process in order that you can choose the right vehicle for your needs.

 

At Tollers we are often asked to design share structures for new shareholders coming into an established business when the new shareholder is not paying for the shares. The existing shareholders do not want to give up the value they have created in the company but would like the new shareholder to benefit from future growth.

Growth shares:

The term “growth shares” is a loose label to describe the structuring of shares to allow a shareholder to benefit only from growth in the value of the company from the time the shares are issued. For example, if the company is currently valued at £1 million, the growth shares would participate in growth above £1 million.

Hurdle shares:

The term “hurdle shares” is used for a share structure where the shareholder benefits from growth in the value of the company above a hurdle which exceeds the current value of the company. For example, if the company is valued at £1m, then the new shareholder would only get the benefit if the valuation was above, say, £2m.

Flowering shares:

The term “flowering shares” is used to describe shares that allow shareholders to participate in the value of the company, if and when a specific condition is met. For example, exceeding a profit target or a sale price on the disposal of the company.

There are three main commercial rights that we normally look at when structuring growth shares: (1) dividends (2) voting (3) rights to the proceeds of sale of the share.

Dividends and voting:

Our team would normally suggest that a new class of shares is created for the company, and these shares are the growth shares such that the original shareholders will hold ordinary shares and the new shareholder will hold ‘A’ shares with different rights attached. One of the main reasons for this is to allow the directors to distribute a different dividend to each class of shares. A separate dividends policy in the Shareholders Agreement will specify the amounts.

Rights on sale of the company:

We normally recommend that the growth shares are entitled to a share of the purchase price once the Ordinary shareholders have received a defined amount (usually the valuate of the company at the point the A shares are issued).

If you need advice or guidance on the best share structure for potential new shareholders…Talk to Tollers on 01604 258558, our Commercial Law team is on hand to assist and guide you through the process of identifying the best share structure for your business.

Shareholder agreements and how we can help.

Non-Fungible Tokens (NTFs) have risen to prominence over recent months although they have been around for some time. The news feeds have included stories about huge sums being paid at auction for digital artworks but NFTs have also been used for digital fashion goods (yes, digital only trainers by Gucci are a thing), trading cards, in connection with the release of new music and the BBC has reported in a recent “Click” broadcast, the funding of new films.

What is not clear to many people is exactly what an NTF is.

An NFT is a publicly verified record of authenticity in relation to the asset it represents. An NFT cannot be replaced or reproduced, as something that is non-fungible is unique. By using NFTs the authenticity of digital assets can be verified and protected.

Ownership of the NFT does not give ownership of the underlying asset. The intellectual property in the underlying asset will remain with the current owner. The terms of ownership of the NFT will be subject to a contract with the owner of the underlying asset which will set out the terms of rights granted – whether to display a piece of artwork, to reproduce it, commercialise it or use it. If considering buying an NFT it is imperative to look into the rights being granted so that you know what you are able to do and what is restricted. This will have a direct impact on the value of the NFT.

A record of ownership of each NFT is stored via a blockchain, which is a type of ledger or database, that is duplicated and distributed across a network of thousands of computers.

The market for NFTs is digital and at present buyer needs to use cryptocurrency for the transaction. This itself leads to issues as the market for cryptocurrency is volatile and a seller may not realise the anticipated value for the NFT. There have been recent reports of UK banks taking months to vet holders of crypto assets before they are allowed to open an account and convert their cryptocurrency into cash due to money laundering and tax concerns.

NFTs remain unregulated at present and it is likely that in future the financial institutions will take heed. There is some suggestion that NFTS should fall within the scope of online trading laws or regulated investments but this has yet to be determined.

If you have any questions about Non-Fungible Tokens (NFTs)…Talk to Tollers on 01604 258558 and ask to speak to our legal specialists in our Corporate and Commercial team who will be happy to help.

More about NFTs…

In 2018 we published an article on the question of whether Software should be categorized as goods or services in the context of The Commercial Agents (Council Directive) Regulations 1993 (as amended) (the Regulations).

The Regulations are the implementation into UK law of the Commercial Agents Directive (86/653/EEC) (the Directive) which provides protections to commercial agents including the right to receive a payment on termination of the agent’s appointment, subject to certain exceptions. The question of whether software is goods or services is important in this context as the Regulations only apply to the sale or purchase of goods. The position of an agent selling or buying software on behalf of a principal was therefore unclear.

In 2018 the Court of Appeal ruled in the case of Computer Associates UK Ltd v Software Incubator Ltd [2018] that intangible software was not goods for the purposes of the Regulations but that in the light of technological advances since the Regulations came into force the distinction between tangible and intangible goods seemed artificial. Software Incubator appealed this decision to the Supreme Court.

As the case came before the Supreme Court before the end of the Brexit transition period and the Regulations are the enactment into British law of the Directive the Supreme Court referred 2 questions to the European Court of Justice (ECJ).

The ECJ delivered its judgment on this matter on 16 September 2021. In its judgment the ECJ ruled that:

On that basis and in line with the ECJ’s existing case-law, the term “goods” was held to mean products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions. As a result of this general definition, “goods” can include computer software as computer software has a commercial value and is capable of forming the subject of a commercial transaction.

It was also held that software can be classified as “goods” irrespective of whether it is supplied on a tangible medium or by electronic download.

The concept of “sale of goods” referred to in Article 1(2) of the Directive is therefore to be interpreted as meaning that it can cover the supply, in return for payment of a fee, of computer software to a customer by electronic means where that supply is accompanied by the grant of a perpetual licence to use that software.

In relation to Computer Associates UK Ltd v Software Incubator Ltd the Supreme Court will make its final ruling based upon the decision of the ECJ. Software houses that make use of commercial agents must take note of the ECJ ruling and also the final outcome of the case in the Supreme Court and make provision for future claims under the Regulations by their agents as appointments are terminated or expire.

For the moment it appears that this longstanding query on the status of software has been resolved.

For further advice in relation to commercial agents… Talk to Tollers on 01604 258558 and ask to speak to the specialists in our Corporate and Commercial team who will be happy to help

Is Software Goods Or Services – Tollers Solicitors – Commerical Law

 

 

We are regularly asked about dealing with data in the new world of trading post Brexit, as businesses continue to trade internationally. Whilst data protection compliance has become an important issue for businesses since the advent of GDPR and the Data Protection Act in 2018 there are issues that need to be addressed when dealing with data relating to EU nationals. In this article we look at some of the key questions about transferring or processing personal data internationally.

Following the end of the Brexit transition period can data be transferred from the UK to an EU member state?

Yes. The Data Protection Act 2018 allows for transfers of personal data from the UK to EU and EEA member states.

What about transfers from EEA countries to the UK?

On 28 June 2021 the EU Commission (the Commission) published an adequacy decision which recognises that the UK provides adequate protection for personal data under EU GDPR.  This decision is expected to last until the end of June 2025 but could be withdrawn before this date if the Commission determines that UK data protection law no longer provides an adequate level of protection. Assuming that the adequacy decision is not withdrawn it will be reviewed by the Commission and extended for up to four years.

What if my business involves offering goods or services to individuals in the EU?

If you are based in the UK but do not have an office, branch or other establishment in any of the EU or EEA states then you need to continue to comply with EU GDPR.

EU GDPR imposes an obligation on you to appoint a representative in the EEA. This representative should be set up in an EU or EEA state where some of the individuals that you deal with are located.

The representative could be an individual, a company or another form of organisation established in the EEA.

Are there any exemptions to the requirement to appoint a representative?

Yes there are.

If you are based outside the UK do you need to appoint a UK representative?

If you are based outside of the UK but do not have an office, branch or other establishment in the UK then you need to comply with UK data protection laws including the UK version of GDPR.

If you offer goods and services to UK individuals in the UK or you monitor the behaviour of individuals in the UK then you must appoint a representative in the UK. This representative can be an individual or a company or organisation established in the UK.

Does the representative need written terms of appointment?

Yes they do – whether they are in the UK or in the EEA.

What is the role of the representative?

The role of the representative is to represent you in connection with your data protection responsibilities for example in relation to the exercise of data subject rights and also to be a contact point for data protection authorities in the jurisdictions where data subjects are based.

The representative is required to keep a record of processing activities and this must be provided to relevant data protection authorities on request.

The representative should be identified in your privacy notice or any other information provided by you to the data subjects with reference to data protection.

Is the representative responsible for breaches by the entity that appoints it?

This question was recently considered by the High Court in relation to the UK representative of a US company. In that case the court ruled that the representative cannot be liable for the appointing company’s breaches.

For further advice in relation to data protection and dealing with data in the EU…Talk to Tollers on 01604 258558 and ask to speak to the specialists in our Corporate and Commercial team who will be happy to help and guide you through.

https://www.tollers.co.uk/corporate-law/

Restrictive covenants are included in many different types of agreement including employment, consultancy and partnership agreements, business sale agreements and franchise agreements.

In each case, the restrictions have to be considered in the context of the transaction or agreement to which they relate, but it is always the case that a restriction must protect the legitimate business interests of the party seeking to enforce the restriction (and go no further than that) and they must not conflict with the public interest. What is and what is not enforceable will differ widely between different types of agreement and the courts will always consider the conflict between the freedom to contract and the freedom to trade.

Post-termination restrictions in a franchise agreement have recently been reviewed by the High Court. In that case [Dwyer (UK Franchising) Ltd v Fredbar Ltd], the franchise agreement provided that the franchisee and the owner of that business were not allowed to operate a business similar to or competitive with the franchised business within the exclusive franchise territory (Cardiff) or within a radius of five miles of Cardiff for a period of 12 months after termination of the franchise agreement.

The Judge held that these restrictions would prevent the franchisee and its owner from operating a plumbing and drainage business within Cardiff without exception. This meant that the franchisee could not act as a subcontractor and the owner of the business could not be employed by a plumbing and drainage business. This was found by the court to be unreasonable as it was reasonably foreseeable that the restrictions would increase the risk of the owner being unemployed during the 12 month restricted period with the consequences that may flow from that, including the inability to service the mortgage on his family home.

In relation to the radius of five miles, again the Court found this to be unreasonable as the franchisee had not provided services within that area.

Whilst all cases are judged on their own particular facts, this case serves as a reminder that restrictions must be reasonable to be enforceable and they should always take into account the circumstances of both parties.

For further advice on restrictive covenants… Talk to Tollers on 01604 258558 and speak to the experienced specialists in our Corporate and Commercial team who will be happy to help with all your requirements.

https://en.wikipedia.org/wiki/Covenant_(law)

https://www.tollers.co.uk/legal-services-for-business/

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