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Mice Net : February 2009
legal issues now is the time to… STORY BY MATT CROUCH MATT CROUCH SAYS we should look beyond the current economic climate and plan for the future. don’t know about you but I for one am over reading articles that just add to the doom and gloom – reminding you that 12 months ago the burning economic issue was the labour shortage and now we have rising unemployment. I’ve had enough reminders about stock market volatility and commentators who bemoan that consumer confidence falling are just contributing to the problem! Instead of adding my little piece of curmudgeonly I thought I would make some practical and positive suggestions that just might help you avoid being a casualty of the times. Indeed they are things you should be doing even in the good times! So here goes – the top 11 tips for “Now is the time to…” Tip #1 – Now is the time to get your business structure right. If you have been trading as a partnership or as a sole trader, you and your assets are personally at risk. Worse still if you are in a partnership you are jointly and severally liable for the acts and omissions of your partners. If you are in this category you should seriously consider folding your business into a company structure. There are many advantages to using a company as the vehicle for your business but surely top of the list is the virtue of limited liability for shareholders. Tip #2 – Now is the time to ensure that your internal arrangements are appropriately documented. Even if you already operate under a corporate structure, have you got a shareholders agreement in place? We are told that most stress in marriages arises over financial matters – the same is true of business relationships. A shareholders agreement can provide business “partners” the security that a married couple might get from a pre-nuptial agreement. It would typically cover a range of issues that can become contentious, particularly when money is tight – such as the policy on borrowings, personal guarantees, dividend policy, admission of new shareholders and decision-making on a range of issues. Tip #3 – Now is the time to get your customer contracts right. I I 60 mice.net know you have been putting it off and it sounds like an expense you’d rather avoid, but truly, a well written contract between you and your customers can save your bacon. Not only can appropriate limitations of liability potentially save you from potentially business- ending law suits, but you can include appropriate credit and debtor control measures (see below!) – it can be the start of some good habits for the new year... Tip #4 – Now is the time to get your supplier contracts right. Right now might be the best opportunity you have ever had to renegotiate with your suppliers – buyer is king and I am not just talking about pricing and payment terms. More favourable terms and conditions should be pursued also. As buyer you have just as much right to initiate the terms and conditions of contract with your suppliers. Tip #5 – Now is the time to remember what I have been hammering in this column for some time – ie avoid signing indemnities and accepting harsh liability clauses wherever you can. Remember that you will be exposing your business to a liability greater than the ordinary principles of common law provide, and worse, your insurance will almost certainly not cover you for that liability. Tip #6 – Now is the time to implement appropriate credit and debtor control measures. Service providers should be wary of doing work for customers who pay slowly or not at all! This sound obvious but when business is slow the temptation is to do work for anyone who asks. You should consider a policy – with trading terms in support – to suspend work where a customer is behind on payment of fees, or to allow only a specified amount of work in progress to be performed without some funds at least being paid on account. Make sure the policy is applied (and complied with) across your whole organisation. It is of little use if some members of staff apply such a policy and others ignore it. Tip #7 – Now is the time to check your insurance. Is your business