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Issues arising as your business grows

As a business grows it will need procedures, structures and documents beyond those required when
there were just a handful of people intimately involved in the business. These will develop over time,
and some will become more important than others. Typical issues include:

The business structure

If started as a sole trader’s business or as a partnership, at what stage should it be converted to a
company? As the business diversifies, should any new business be put into a separate company?Should a group structure be created?

Legal compliance for a more complex company

As the number of directors and/or shareholders grows, more formal procedures are required
for board meetings and general meetings, and compliance with the Companies Acts and other
legislation becomes more important and more complex. How much notice do we have to give for
board meetings or general meetings? What should the notice say? What rules are there about a
contract in which a director has an interest? What if we have a shareholder who does not agree with
the way the company is being run?

Employment issues

As the number of employees increases, it becomes more important to ensure that employment
procedures and documentation are to the highest standards. What terms should be included in
service contracts? What are the legal implications of having (or not having) a staff manual? How
do we make sure we comply with the latest non-discrimination issues? What legal issues are there
when recruiting or promoting staff? How should we deal with a disciplinary issue?

Business transactions

Relations with customers need to be conducted within a clear legal framework. Does the business
have appropriate terms and conditions of business? Are there procedures in place to ensure that
they are included in every contract? Is there an effective complaints procedure? Are there health
and safety issues? Is comprehensive liability insurance in place, and do the company’s procedures
meet the insurer’s requirements? If work is sub-contracted out, are there proper contracts in place?
If agents are appointed, are the terms on which they act for the company properly set out?

Doing business on the Internet

Selling on-line is one of the most effective ways of growing the business, but it is subject to rapidly
increasing legal regulation. Does our website contain all the information now required? Does its
procedures comply with the new regulations? Who owns the copyright to our website? Do we
understand the rights of a consumer who buys on-line, including the right to cancel the contract?

Protecting brand names

The name of the business and any product names used are valuable assets that should be protected.
This is increasingly the case as the business grows and its brands become established. Are the names vulnerable to abuse by other companies? Should we have trade mark protection? If we were
to sell the business could we show exclusive use of our brand names?

Property issues

If growth means acquiring new premises, the terms on which these are acquired need careful consideration. Are there restrictions on the use of the premises? Does the lease contain hidden
onerous terms? How are the maintenance charges calculated?

Bringing in new directors

A growing business may need new people at the top. Should any senior employees be promoted?
On what terms should any new person be given? Should he or she be given the opportunity to
acquire shares? What responsibilities do directors have?

Raising finance

If outside investment is needed the terms on which it is supplied must be negotiated and may be
complex. What terms will apply to a loan? How do we make sure we retain control while issuing
shares to outsiders? What classes of shares could be used? What terms can be included in the
shareholders’ agreement?

Selling the business

In due course the opportunity may arise to make an advantageous sale of the business. On what
terms can it be sold? Have we inadvertently created any problems that may upset a sale? What
restrictions will the purchaser want on future competition from the existing directors?

Estate Planning

As the value of the business grows, how can this be passed on to the next generation? Should this
take place during life or on death? What would happen to the business on death? What if young
children or family members not involved with the business are to inherit? Could co-shareholders or
business partners buy the deceased’s share of the business? Will the business benefit from advantageous
Inheritance Tax reliefs?

What next?

Every business is different and its legal needs change with circumstances. A legal ‘health check’
will provide you with an expert review of the legal documents and procedures essential to your

For further information, please contact Jonathan Waters.


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