Andrew Dongworth, senior associate solicitor, company and commercial law, at HRJ Foreman Laws Solicitors, Welwyn Garden City office, highlights the top three areas to kick start a legal health check for your business.

To watch the video ‘What are the top 3 items to kick start your legal health check’ click here.

1. Shareholders’ agreement

A shareholders’ agreement is a document that is put together between different shareholders in a limited company. The agreement will contain provisions about who are going to be the directors of the company and any decisions that need to be taken by the unanimity of the shareholders, rather than by a simple majority. It is important to ensure your shareholders’ agreement considers the worst case scenarios that might happen. While we hope we never need to refer to it, a crisis can happen to any business at any time. For example, what if the business relationship breaks down between the shareholders and they can no longer work together, or a senior shareholder passes away? What if a third party wants to buy the business but one minority shareholder doesn’t want to sell? You can include provisions for all these situations in a shareholders’ agreement and prevent costly and timely litigation arising after the event.

2. Legal documents, policies and contracts

It is essential to ensure your business is up to date with its various polices, documents and contracts. Do they apply to your business operations today? Are your terms and conditions of sale properly structured and do they consider any issues that may be particular to your business? If you have begun trading online, are you meeting the correct legal requirements?

Are your employment contracts up to date? For many companies, their employment contracts have not been updated for many years or they may not even have a formal contract in place for every employee. Fundamentally, it is required by the law but also it will help you in a situation where there is an employee issue.

Employment handbooks, policies and procedures are also very important as they can relate to disciplinary policies, grievance policies, privacy and data protection policies.

It may be tempting to download free contracts or policies from the internet, but this is a risky business. They are unlikely to apply specifically to your business. We have seen companies find themselves in tied up in costly litigation because they were using terms and conditions of business that were not governed by English Law and therefore did not protect them. Prevention is better than cure, so have a chat with one of the company and commercial legal team to ensure your legal documents are bespoke to your business.

3. Commercial lease

If you are a company that has commercial premises, you need to be aware of the contents of your commercial lease. What are your break dates, rent review dates and potential termination dates of the lease? It’s important to know that if you need to serve notice to break the lease at a certain date, you don’t miss your date and therefore miss your opportunity. If your lease is due to be renewed, you need to know whether you have got a right to renew under the Landlord and Tenant Act or whether it is simply a case that the Landlord could ask you to leave at the end of the lease term.

We also recommend seeking legal advice about responsibility clauses for the landlord and tenant in your lease. This will include improvements to the property, maintenance, repair and dilapidations, as well as clauses to protect both parties in the event of rent arrears or breaches of the lease.

Forearmed is forewarned and it is important to know what is stated in your lease so that you can plan for the future.

To watch another video in our series called ‘Legal Tips for Selling Your Business’ click here.

For legal advice email info@hrjforemanlaws.co.uk or call Welwyn Garden City 01707 887701, Hitchin 01462 458711

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