JOHN SZEPIETOWSKI https://www.szepietowski.com Fri, 23 Jul 2021 13:36:35 +0000 en-US hourly 1 https://wordpress.org/?v=5.7.2 John Szepietowski reviews Outdoor Weddings https://www.szepietowski.com/john-szepietowski-reviews-outdoor-weddings/ Fri, 23 Jul 2021 13:36:35 +0000 https://www.szepietowski.com/?p=1543 Despite what your wedding planner tells you about being able to have the fairy-tale wedding of your dreams, the formalities surrounding marriage and marriage venues are stricter than often believed.

From 1 July 2021, venues are able to hold the whole wedding or civil partnership outside. The move will be introduced through a statutory instrument, meaning that there will not be vote in Parliament to enact the change. Currently, such ceremonies can only take place in specific room or rooms of a building.

While the government line given by Lord Chancellor Robert Buckland QC is that the change to allow outdoor ceremonies will ‘allow [couples] to celebrate…in the way that they want’, the change also makes sense in terms of rejuvenating of the wedding industry in the era of Covid 19, where indoor gatherings are discouraged.

Therefore, in theory, happy couples would be able to wed legally on a beach, cliff, or even in the middle of a field.  The reality however is still quite strict, as places still must be ‘approved premises’.

In order for a premises to be used for civil marriages and civil partnerships in England and Wales, the owner or manager must apply to the local council for a ‘grant of approval’. These are valid for at least 3 years. Premises must be ‘seemly and dignified’ and comply with all the relevant fire and safety legislation. This means that certain venues are still likely to be refused.

In addition, there needs to be a designated officer to make sure all conditions are followed and the superintendent registrar or local registration authority or registrar have approved all wedding/civil partnership arrangements beforehand. No food or alcoholic drinks may be sold or consumed in the specified area 1 hour before and during proceedings. The ‘specified area’ may be hard to define if the wedding is held outside, especially where there is a vast open space or where the outer boundaries of an area are not easy to define e.g. a forest.

Ceremonies may only take place in the specified area, must not have any religious content, and be freely open to the public. Outdoor weddings should be able to comply with this aspect, as being outside is certainly more public than indoors.

It is hoped that the changes to the current law to allow ceremonies outside will also mean cheaper weddings, as cash-strapped couples do not have to hire hall space. However, the cost is unlikely to be significantly lower, as the administration costs of registrars attending the venue and the registration of the marriage or civil partnership remain the same.

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John Szepietowski visits the case of McTear Contracts Ltd v Bennett and others https://www.szepietowski.com/john-szepietowski-visits-the-case-of-mctear-contracts-ltd-v-bennett-and-others/ Thu, 22 Jul 2021 16:25:15 +0000 https://www.szepietowski.com/?p=1540 In the recent case of McTear Contracts Ltd v Bennett and others, the Employment Appeal Tribunal (‘EAT’) confirmed that employees who are engaged in services that are taken over by multiple new service providers can have their contracts of employment transferred to multiple new employers under TUPE.

This is the first significant UK decision that applies the European case of ISS Facility Services NV v Sonia Govaerts & Atalian NV, formerly Euroclean NV, and, like that case, only serves to increase the complexity surrounding TUPE.

Background

The Claimants were employed by Amey Services Limited (‘Amey’) which held a contract with North Lanarkshire Council to replace kitchens in social housing. Whilst assigned to the contract with the Council, the Claimants had been allocated to one of two teams. These two teams worked independently of each other but both worked across the whole of the Council’s geographical area.

When it came to re-tender the contract, the Council decided to split the work along geographical lines. The “north” contract was ultimately awarded to McTear Contracts Ltd (‘McTear’) and the “south” contract to Mitie Property Services UK Limited (‘Mitie’). Amey took the view that this was a service provision change to which TUPE applied, and conducted an analysis to see which team had worked the most in which geographical area. Amey allocated the employees to either McTear or Mitie depending on which geographical area their team had worked in the most. McTear and Mitie refused to take on the Claimants, who duly brought claims against McTear, Mitie and Amey.

The Employment Tribunal (‘ET’) applied earlier decisions of the EAT which said that where there are multiple new services providers, the employees of the old service provider transfer to the new provider that has taken on the majority of the services. On this basis the ET decided that Amey had taken the right approach and confirmed that the employees had transferred to either McTear or Mitie depending on which geographical area their team had worked in the most.

On this basis, McTear and Mitie appealed to the EAT.

Between the decision of the ET and the date of the hearing before the EAT, the Court of Justice of the European Union (CJEU) decided the Govaerts case mentioned earlier. The CJEU stated that where a business is transferred to multiple transferees, an employee’s contract of employment can transfer to each transferee in proportion to the tasks performed by that employee, provided that such a division is possible and that the individual’s rights and/or working conditions are not adversely affected i.e. the employee can end up with two or more new employers. Govaerts was decided before the end of the transition period that followed the UK’s exit from the EU and so it is retained EU law which the EAT is required to take into account when deciding cases based on legislation, like TUPE, which implements EU law in the UK.

Applying Govaerts, the EAT said in this case that the Tribunal had made a mistake in not considering the position of each Claimant individually rather than agreeing with Amey’s “team-based” approach and by not considering the possibility that some or all of the Claimants had transferred to both McTear and Mitie or that they had not transferred to either of them. It therefore sent the case back to the ET to look at each Claimants case in detail.

Problems

This case raises a number of potentially significant issues for employers on a TUPE transfer where there is more than one possible new employer.

This judgement emphasises that it is crucial to consider the position of each employee in detail to determine whether their employment transfers and, if so, who their employment transfers to, and (if there is more than one employer) what proportion of their contract of employment transfers to which. This will be a headache for the old employer’s HR team but could also be a significant issue for the new employer or employers as it could be harder to challenge decisions made by the old employer about who goes where. More information will be needed to decide this than the new employer will necessarily have access to. There is clearly a lot of scope for mistakes and therefore claims.

The CJEU said in Govaerts that if a division of the employee’s contract of employment is not possible or the individual’s rights and/or working conditions are adversely affected by the change then the contract may be terminated. Any claims resulting from such a termination will be the responsibility of the new employer(s) even if it is the individual who brings their employment to an end. Such terminations may be automatically unfair under TUPE. However, it may be possible for the new employer(s) to defend such a claim if they can establish an economic, technical or organisational reason for the termination, which can include redundancy.

In the event that employees do start to work for more than one new employer, this presents challenges of itself as employers and particularly employees will need to grapple with the fact that the employee’s employments are likely to be governed by different regimes around, for example, the taking of holidays, benefits such as pensions and arrangements for working time.

Restrictive covenants in the employee’s contract of employment with their old employer may also create problems if the employee’s employment transfers to two competing employers.

Possible solutions

Parties to a relevant transfer should try to agree in advance who goes where whenever possible. Where negotiating positions allow, parties to a business purchase or a commercial contract where services are transferring (or might transfer at a later date) should carefully consider the terms of the indemnities that they receive and those that they give to try to ensure that liabilities are diverted or at least shared fairly.

Thinking ahead about what information the parties are required to provide about employees (subject to any relevant data protection legislation) before the services or business transfer or where there may be a service provision change on termination of a contract, could also be key as having this information could give you the ability to challenge allocations of employees and/ or give you the basis on which to negotiate appropriate indemnities.

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Sole Trader, Partnership, Limited Company or Limited Liability Partnership: John Szepietowski considers which business model is the most appropriate for you? https://www.szepietowski.com/sole-trader-partnership-limited-company-or-limited-liability-partnership-john-szepietowski-considers-which-business-model-is-the-most-appropriate-for-you/ Tue, 13 Jul 2021 14:57:04 +0000 https://www.szepietowski.com/?p=1535 As you embark on setting up a business, there will undoubtedly be many questions, specifically, which business model is right for you. The way in which you set up your business can have implications for tax, how decisions are made, ownership of the business and also, the level of administration that is required. It is therefore important to select the right business model that shall suit your business plan. There shall be four types of models assessed in this blog: Sole Traders, Partnerships, Limited Company and Limited Liability Partnership.

Sole Trader

A Sole Trader is someone that operates a business on their own and as an employed person. The individual shall have the right to make all the decisions impacting the business and the individual shall own all assets of the business. However, as the individual and business are treated as the same entity, the individual is responsible for paying income tax on all the profits of the business and has unlimited liability for the debts of the business.

However, there are various benefits to being a Sole Trader. Firstly, the individual shall not need to register the business with HMRC, but, would simply need to inform HMRC that they are operating and are self-employed for tax purposes. Secondly, there are far less administrative matters to deal with as a sole trader and there are far less complications when desiring to take money out of the business, as all profits belong to the owner. Lastly, there is no need to file annual accounts or submit a confirmation statement.

However, like all business models, there are shortfalls to being a Sole Trader. As there is unlimited liability for business debts, the owner has sole liability to pay the debts. In addition, a Sole Trader lacks status of incorporated forms and most importantly, there is no day-to-day support.

Entering a Partnership

A Partnership is governed principally by the Partnership Act 1890, it occurs where two or more persons run and own a business together with a view to make a profit. A Partnership is unincorporated and is not a body corporate. A Partnership Agreement will be the legal doctrine that governs the Partnership and will be the document that decides how the partnership is run. Terms within a Partnership Agreement can be expressed or implied, the Partnership Act 1890 will imply terms into a partnership in the absence of express/implied agreement. Certain provisions of the Partnership Act 1890 cannot be varied, for example, Partner’s liability and illegal Partnership. Certain provisions that may be expressly included in the Partnership Agreement are retirement, governing the question of when a partner can retire and of payment for their share by the other remaining partners and in addition, the role of all Partners in the Partnership.

A Partnership is very easy to form and only requires two people. An advantage of forming a Partnership is that the owners have freedom to run the Partnership as they view fit. Contrary to Sole Traders, a Partnership brings collective decision making, which in turn leads to shared profits between all Partners.

Similarly, to Sole Traders, there is unlimited liability for the firm’s debts. Further, decision making can be quite cumbersome, and a lack of written expressed agreements may lead to uncertainty. A Partnership lacks the status of incorporated forms and a leaving Partner must be bought out by the remaining Partners, which may not favourable.

Whilst a Partnership can bring many advantages, similarly to Sole Traders, the Partners and the business are treated as the same entity and therefore, Partners will be personally liable to pay any debts that have been incurred by the business. However, Partnerships are straightforward to set up and are more flexible than limited companies in structure.

Limited Company

A Company in the United Kingdom is formed by registered certain documents with a public official, in accordance with the Companies act 2006. As opposed to the aforementioned two business models, a company is a separate legal entity and any debts incurred by the Company are the Companies debts. Decisions are made either by the Company’s directors or shareholders. Directors run the company on a day-to-day business and make decisions that shall impact the company and shareholders are the owners of the business that will make the major decisions impacting the company. The Company is not subject to income tax, but corporation tax. Liability is limited to the company’s constitution- Companies Act 2006; this can be limited by shares (which is more usual) or by guarantee.

A company form brings significant benefits, for directors and shareholders, there is limited liability for business debts. Furthermore, there is a greater status than other business models considered and lastly, there is potentially a larger pool of investors.

However, the process of setting up a Company is much more considered than the previous two models discussed. As noted, the Company must be incorporated with Companies House and the Articles of Association for the Company must be filed with this. As well as this, there are extra-legal duties and potential liability for directors, if the director’s duties are not complied with, such as acting in the best interests of the company. As a Company, information must be made public, including the finances of the company and in addition, information of the directors and shareholders.

Limited Liability Partnership

A form of unincorporated business is established under the Limited Partnerships Act 1907. It is similar to a Partnership in that there must be at least one general Partner who has unlimited liability for the debts of the Partnership. However, a Limited Liability Partnership (LLP) is permitted to have a limited Partner whose liability is limited to the amount that they initially invested, providing that the individual is not controlling or managing the LLP, not having the power to make binding decisions and not removing their contribution to the LLP for as long as they remain in the business. Unlike ordinary Partnerships, LLP’s must be registered with the Registrar of Companies.

LLP’s bring many benefits, but most importantly, there is limited liability for business debts for the Partner’s. Similarly, to ordinary Partnerships, the Partners have the freedom to run the Partnership as they view fit and have the support of joint decision-making.

To form a LLP, the Partnership must be registered and information, including your finances, must be made public. As expected, there are additional formalities and costs to run the Partnership.

 

 

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John Szepietowski considers issues of Diplomatic Law https://www.szepietowski.com/john-szepietowski-considers-issues-of-diplomatic-law/ Fri, 09 Jul 2021 13:05:41 +0000 https://www.szepietowski.com/?p=1532 John Szepietowski has acted for Foreign Embassies in London and engaged with the UK Foreign Commonwealth and Development Office over the appointment of certain individuals to the Diplomatic list. John Szepietowski has also advised a Foreign Embassy in relation to its choice of UK property acquisition and advised as to it’s status under both UK laws and foreign conventions on Consular law.

The immunities granted to diplomatic staff, and their families, are set out in the 1961 Vienna Convention on Diplomatic Relations (VCDR), the Vienna Convention on Consular Relations 1963 (VCCR) and Consular Relations Act 1968. The relevant provisions of the Conventions are applied in the UK by Section 2 of the Diplomatic Privileges Act 1964 (DPA 1964).

Whilst staff cannot be nationals of the UK or hold permanent UK residency, dual UK-Commonwealth nationals, who are recognised by Her Majesty’s Government as members of their mission, are entitled to the immunity and inviolability to which that person would be entitled if they were not a British national. This does not extend to any of their dependents who may also be dual UK Commonwealth nationals.

Article 29 of the VCDR states that:

“The person of a diplomatic agent shall be inviolable. He shall not be liable to any form of arrest or detention. The receiving state shall treat him with due respect and shall take all appropriate steps to prevent any attack on his person, freedom or dignity.”

Immunity is dependent on rank and ranges from immunity from criminal and civil and administrative jurisdiction to immunity for official acts only.

Criminal immunity and inviolability in the UK is conferred on all Diplomatic Agents and Administrative and Technical Staff of foreign diplomatic missions and on all Consular Officers and Consular Employees at London-based foreign consular missions. To qualify for this immunity and inviolability, the staff must be: (1) accepted by Her Majesty’s Government (HMG) as the receiving State; and (2) notified to the Foreign and Commonwealth Office (FCO).

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John Szepietowski Considers the Decision to Remove a Child from a Will https://www.szepietowski.com/john-szepietowski-considers-the-decision-to-remove-a-child-from-a-will/ Wed, 07 Jul 2021 08:51:09 +0000 https://www.szepietowski.com/?p=1528 John Szepietowski of Audley Chaucer Solicitors advises that the decision to remove a child from a will is a deeply impactful decision with long-lasting ramifications.

The testator (person making the will) may not feel that their child ‘deserves’ anything from their estate. This could be due to a lack of a close bond to their child, and maybe even active dislike. While the parent-child bond is often held sacred, the ideal does not always match the reality. A lack of care towards the parent in later life, such as in frailty or ill-health, may result in the parents taking their version of revenge on the child, especially if that child’s share is then redistributed to their siblings

Estrangement is another reason. If the child is no more than a stranger, especially if there have been long periods of no, or only sporadic, contact, then the testator may feel no positive obligation towards them to provide for them in their will. The testator may not even know where the child lives, especially if they have flown far from the nest or even abroad.

Alternatively, the child in question may be sufficiently independent that the testator feels that the child does not ‘need’ the testator’s wealth. The testator may want to instead distribute their estate to less fortunate friends and relatives, such siblings of the disinherited child.

Wills are a difficult topic to discuss – no one likes thinking about their impending demise. The division of one’s assets is a thorny issue, as testators may be reluctant to discuss the amount of their wealth, and it may be a source of embarrassment. If a testator is wealthy and that is made known, they may worry that they are perceived as miserly or ungenerous, or find others begin requesting financial assistance from them. If there is little in their estate, they might not want to be pitied nor considered to be reckless with money. Furthermore, once the contents of a will is discussed, the testator may feel as if their relatives are just ‘waiting from them to die’.

However, if a child is cut out of a will, and the matter has not been previously discussed, the child in question may feel deliberately excluded and penalised, especially if their siblings or others to whom they are close substantially benefit. This can lead to resentment not only towards the deceased, and thereby tainting one-loved memories, but also towards those who have gained from the estate. As the deceased is no longer with them, the child is unable to confront their parent and is left with ever-lingering questions.

When it comes to wills, families would ideally address matters head on: discussing not only how much wealth the testator has, but also how much should go to each child (or friend) and why. If all those affected by the will are in agreement prior to death, then there is less of a risk of contentious probate and a breakdown of relationships. All things considered, the last of the testator’s wishes would be to cause misery to the people they left behind.

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John Szepietowski discusses the early termination of commercial leases https://www.szepietowski.com/john-szepietowski-discusses-the-early-termination-of-commercial-leases/ Tue, 29 Jun 2021 16:07:43 +0000 https://www.szepietowski.com/?p=1525 Coronavirus has had a significant impact on almost every business in the United Kingdom. For many businesses, it means their business premises are surplus to requirements. However, there are many reasons, not directly related to Covid-19, that may mean you wish to exit a commercial lease. Perhaps your operations have downsized or expanded and thus, the place is no longer fit for purpose. Regardless of the circumstances, there are several remedies that may be applicable to you to end your commercial lease early.

Surrendering a commercial lease

It may be the case that you have an amicable relationship with your Landlord and therefore, the Landlord may be sympathetic towards your situation and allow you to surrender the lease. However, if the Landlord is unwilling to come to such an arrangement, there are more formal legal remedies available.

A break clause in the lease

A break clause is a provision in a lease which enables either the landlord or the tenant (in some cases, both) to end the lease early. It may arise on one or more specified dates or be exercisable during any time during the term on a ‘rolling’ basis.

If there is a break clause in your lease, you will need to adhere to its terms which may stipulate a period of notice and how you should notify your landlord. For example, you may need to provide your landlord with several months’ notice in writing, or you may need to notify your landlord at a specific address. These requirements must be met as failure to do so could invalidate your exit from the lease.

The assignment of a commercial lease

The process of assignment of a lease is the transfer of a lease by the current tenant to a new tenant. To do this, you will need to find a potential new tenant yourself. The landlord will expect this new tenant to meet the same expectations that were originally set for your business and it is likely that the landlord’s consent will be required before the assignment can be completed.

Whilst your landlord cannot reasonably withhold their consent for the assignment, they are under no obligation to give their consent if the new tenant does not meet the terms set out in the contract. The landlord shall likely impose restrictions around the assignment, for example, not allowing lease assignments if the contract is for a short period and not allowing the lease to be assigned if the lease is ending within a few years.

Upon the lease being assigned, the assignee will become the new tenant and will be responsible for ensuring compliance with all of the tenant’s obligations in the lease.

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John Szepietowski discusses the Residence Nil Rate Band https://www.szepietowski.com/john-szepietowski-discusses-the-residence-nil-rate-band/ Tue, 29 Jun 2021 15:05:18 +0000 https://www.szepietowski.com/?p=1522 Inheritance Tax is charged on your death at the rate of 40% based upon the value of your assets. This 40% rate is only charged on any value exceeding the Nil Rate Band, which presently stands at £325,000 (as at February 2021). The Nil Rate Band is the amount which is chargeable to Inheritance Tax (‘IHT’) at the rate of 0%. From 6 April 2017, an additional Residence Nil Rate Band applies so that less IHT may be paid when the family home is left to direct lineal descendants, such as children and grandchildren, this currently stands at £175,000.

The terms of your Will can impact the ability for your estate to claim the Residence Nil Rate Band on your death and therefore, it is important to review your Will to ensure that your estate benefits from this relief.

Will my estate benefit from the Residence Nil Rate Band?

The Residence Nil Rate Band (RNRB) can be claimed on the estate of a person who dies on or after 6 April 2017. In the case of a person that dies before that date, their surviving spouse or civil partner may be able to carry forward the deceased’s spouse/partner’s RNRB to be used when the surviving spouse/partner dies.

Your estate will benefit from the RNRB if you leave your interest in the family home to direct descendants, such as children or grandchildren and some other individuals, such as stepchildren (qualifying beneficiaries). The RNRB could help those who inherit your assets make an additional IHT saving by increasing the part of your estate that is taxed at 0% rather than 40%.

The RNRB can be claimed if all of the following apply to you: you die on or after 6 April 2017; you leave an estate valued at less than an upper limit, which is initially £2 million but is set to rise with inflation from 6 April 2021, the RNRB is tapered down for estates worth more than this; and you leave your home to qualifying beneficiaries.

It is customary that the partner’s/spouses leave their home to the surviving spouse/partner and as such, on the deaths of both individuals, there will be thus be two RNRB’s that the estate can claim.

What if I sell my home?

The RNRB will remain available where you have sold your property and downsized to a less valuable property, or even if you no longer own a property, provided that you sold your home on or after 8 July 2015 and at least part of your estate is inherited by a qualifying beneficiary.

What if I have more than one home?

The RNRB will apply to your main residency home, thus, the property where you spent the majority of your time at. However, if your executors are unsure of this, the executors must choose which property they seek to apply the RNRB to.

Review your Will or make one

To ensure you maximise the tax-saving effect of the RNRB we strongly recommend that you review your Will or subsequently, if you do not have a Will in place, you should seek to make one. The conditions for claiming the RNRB are complicated and you should seek expert advice to ensure that your family can benefit from the enhanced Nil Rate Band when you or your spouse/partner die.

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Audley Chaucer Celebrate ‘Triple Boost’ https://www.szepietowski.com/audley-chaucer-celebrate-triple-boost/ Fri, 25 Jun 2021 15:48:04 +0000 https://www.szepietowski.com/?p=1518 “The team at a successful Surrey solicitors is celebrating a triple boost.

Esher-based Audley Chaucer plans to head to bigger offices in the town later this summer, creating six new jobs to add to a 12-strong workforce.

The move from the current home at Bewley House, Park Road, follows being named best full-service law firm in South East England at the 2021 SME News Legal Awards”.

Please view the full article here.

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John Szepietowski Considers the Funding of Divorce Proceedings https://www.szepietowski.com/john-szepietowski-considers-the-funding-of-divorce-proceedings/ Tue, 22 Jun 2021 08:14:28 +0000 https://www.szepietowski.com/?p=1515 There are many tough decisions that need to be made when a relationship irretrievably breaks down. These invariably concern you, your family, your home, and your finances. A decision should also be made on how to fund the legal proceedings One of the first financial considerations many must make is deciding how to fund the divorce. This can be extremely problematic in some cases, especially, in cases where one spouse controls all or most of the family wealth.

Whilst public funding is no longer available in Family law matters (except in domestic abuse cases), there are a variety of alternative options available to ensure legal fees are met, allowing you to engage in divorce proceedings.

Your own resources

You may have income or savings of your own which can help pay for legal fees as and when they are incurred. This form of payment may be non-viable, as drawing money from investments may incur penalty charges for liquidating without sufficient notice, however, the penalty may be cheaper than borrowing money.

Legal Expense Insurance

Some insurance companies will offer legal expense insurance when you buy home or motor insurance, which can help fund or cover the costs of your legal fees, depending on the area of law, and how much you are covered for.

You can also buy legal expenses insurance on its own specifically for family law matters, without it being a bolt-on to another insurance policy.

Commercial Loans

Obtaining a loan from your bank or another commercial lender may need to be considered to privately fund legal fees. Some banks will fund your costs if you undertake to repay them out of your financial settlement. Banks may also agree to ‘roll up’ the interest payments into the final payment. Therefore, repayment shall not be due until the case concludes.

Litigation Loans

Litigation loans for divorce matters are offered by specialist providers. Audley Chaucer can introduce you to a number of such providers. The aim of such providers is to provide a loan facility to help pay the legal costs of individuals going through a divorce. The loan is used solely to pay legal costs and disbursements. This type of loan does differ to commercial loans as the funds are paid directly to the solicitors firm to fund your case. The final loan balance will usually be paid off directly by your solicitor once you receive your financial settlement at the end of the case.

Sears Tooth Agreement

A Sears Tooth Agreement is an agreement entered into between yourself and your solicitor, whereby legal fees are paid to the solicitor upon settlement of the case, before the remaining funds are transferred to you. It is likely that interest shall also be payable on the debt accrued. We at Audley Chaucer will consider entering into such an agreement with you.

Legal Services Payment Order

In some circumstances, the Court may grant a Legal Services Payment Order (‘LSPO’) meaning your spouse must fund your legal fees, either through monthly instalments or a lump sum payment. There are strict requirements that must be satisfied in order for a court to grant a LSPO, the most prominent being that you have no other source of funds available to you to pay your own legal fees.

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John Szepietowski considers a Directors’ Duties to its Company https://www.szepietowski.com/john-szepietowski-considers-a-directors-duties-to-its-company/ Wed, 16 Jun 2021 15:01:18 +0000 https://www.szepietowski.com/?p=1510 There are seven general directors’ duties owed to a company. These duties, under the Companies Act 2006 are owed to the company and with limited exceptions (principally derivative claims by the shareholders), only the company can enforce them. Other rules of company law may apply, including a duty for directors to consider or act in the interests of creditors.

The Seven General Duties

To Act within Powers

This duty derives from section 171 of the Companies Act 2006 (CA 2006). The powers of the directors are contained in a company’s constitution, directors must act in accordance with the constitution and only exercise their powers for the purpose for which they are conferred. It is therefore important that directors are familiar with their company’s constitution. The constitution may entitle the shareholders to direct directors to take (or limit) specific actions.

To Promote the Success of the Company

A director must act in a way that they consider, in good faith, to promote the success of the company for the benefit of the members as a whole. It is a subjective test and the director must have had at the time thought it would promote the success of the company and must have regard to the list set out in section 172 CA 2006: the likely long term consequences; interests of the employees; need to foster good business relationships; impact on the environment and the community; the maintenance of the company’s reputation; act fairly between the members and any other relevant circumstances.

To Exercise Independent Judgment

Directors are required to act independently, without subordinating their powers of the will of others. Directors can take legal and financial advice, but must not fetter discretion. There are exemptions to the rule set out in s173 CA 2006, whereby the director is acting in accordance with an arrangement entered into by the company and also, a judgment that is authorised by the constitution.

To Exercise Due Care, Skill and Diligence

In carrying out their responsibilities, directors must exercise reasonable care, skill and diligence (s174 CA 2006). This involves a minimum objective standard of what would reasonably be expected generally of someone performing the director’s functions, taking an objective viewpoint. This is supplemented and raised by a subjective standard that takes into account the general knowledge, skill and experience that the director has. Under the objective test, more might be expected of a director with an executive function. Under the subjective test, more could be expected of a director having specific relevant knowledge, skills and experience. Directors should be sufficiently familiar with the company’s affairs, including its financial position, to meet their responsibilities for the management of the company’s business and should ensure that they have relevant information for this purpose.

To Avoid Conflicts of Interest

Directors must avoid any situation in which they have, or can have, a direct or indirect interest that conflicts or may conflict with the interests of the company. In particular, a director must not make a profit from being a director, unless it is authorised by the company. There are exceptions to this duty: where the interest is created by a contract between the company and director; the board authorised the matter giving rise to the conflict; and the situation cannot reasonably be regarded as giving rise to a conflict.

Not to Accept Benefits from Third Parties

This is a broad and strict duty which prevents a director from accepting a benefit from a third party conferred by reason of the director being a director or doing or omitting to do anything as a director. It would include, but is not limited to, taking gifts as a form of bribery. A third party is any person other than the company. The duty continues to apply to former directors in relation to acts or omissions when a Director.

To Declare Interests in Transactions or Arrangements with the Company

If a director is in any way directly or indirectly interested in a proposed transaction or arrangement with the company, the director must declare the nature and extent of the interest to the other directors and this declaration must be made before the company enters into the transaction of arrangement. A director need not declare an interest in some cases, for instance, if the other directors are, or ought to be, aware of the interest. Where a director becomes, or ought reasonably to become, aware of an interest arising after the company has entered into a transaction or arrangement, the director must declare it as soon as is reasonably practicable.

 

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