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Cohabitation law recap

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Cohabiting couples can find themselves in a very vulnerable situation if their relationship breaks down, and need greater legal rights to ensure they are protected in the event of a break up.

This is the view of family law organisation Resolution, which represents 6,500 family law professionals in England and Wales. Resolution has repeated its call for changes to the law in England and Wales so that unmarried couples do not suffer unnecessarily should they separate.

Growth in cohabitation

The call comes as new figures from the UK Census have revealed that more and more couples are living together without being married.

The recent data, published by the Office for National Statistics, has shown that the number of households containing one cohabiting couple has jumped by half a million in ten years, from 1.8 million in 2001, to 2.3 million in 2011 – a rise of nearly 30%.

And yet, despite this growing social trend, the current laws do not offer these couples the same family law rights and protection as married couples upon separation, claims Resolution. Continue reading →

Income Protection Insurance – sounds good in theory

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Income protection insurance is meant to protect customers by providing a tax-free income in the event that you are unable to work (because you have suffered an injury/illness). On paper, it therefore seems like a great way to protect your income in the event of any unfortunate, unforeseen circumstances in the future. The problem lies in the fact that many who have taken out this income insurance, and then find themselves unable to work, have found it virtually impossible to then make a claim.

One of the main reasons which make it so hard to successfully claim with this type of insurance is the method in which insurers assess policyholder’s ability to work. Those that took out this type of insurance on a ‘work-task’ basis means that before they will be able to make a claim, they will need to perform a series of tasks, to demonstrate to the insurance company that they really are unable to work.

The types of tasks insurance companies ask their policyholders to perform can involve using a pen/keyboard with either of their hands or with an aid, walking 200 metres on a level surface with an aid without stopping or suffering pain, or having sufficient eyesight (with aids) to read 16 point print. Many have criticised these tests, as only those are severely incapacitated would struggle to pass them. Additionally, these tests do not take into consideration an individual’s mental health, and whether they are emotionally and psychologically fit to work.

Situations therefore arise where individuals who are suffering from psychological illness/stress are unable to work, and deemed so by their GPs, and yet are unable to claim on their income insurance policies as they are still able to perform the basic, technical tasks these policies lay down. Many critics have claimed that these basic tasks should be abolished, in favour of more realistic indicators of a person’s health. Furthermore, it should be highlighted that physical and psychological illness are two very different types of health concerns, and should not just be lumped together using a test for both. Psychological illness requires a much more delicate, emotionally focused type of testing, and the nature of the tasks asked by insurance companies to policy holders should reflect that.

At the moment, insurance companies may attempt to justify their work task based method by claiming that it prevents a number of fraudulent claims, preventing a misuse of the system. Instead, this seems to be a thin smoke screen by which companies can ensure they pay out only minimal claims to the few that cannot pass the basic tests. For those policyholders that have been regularly paying their premiums in an attempt to be risk averse and secure their futures, this seems like a kick in the teeth when they are prevented from claiming because they can pass a test which requires them to read 16 point writing.

It is therefore advisable that people with income protection insurance review their policies to find out on what grounds they can make a claim should they need to. If they discover that their policies are on a work-task basis, they should consider switching policies where they will be getting a fairer policy for their money.

Data Protection Act 1988

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The Data Protection Act 1998 was passed by Parliament in an attempt to control the way information is handled and stored, giving legal rights to individuals who have personal information stored on computers and in paper databases by other people/organisations and the government.

How Does the Act Protect my Data?

The Act incorporates 8 ‘data protection principles’, which require any institution, whether it be governmental or private, that collects an individual’s personal information, to keep that information safe.

Principle 1: Processing Data Fairly and Lawfully

This is one of the eight principles which are at the heart of data protection. The main goal is to ensure that the individual’s data which is being processed is protected.

Under this principle, you must possess legal grounds for gathering and handling personal data. You must ensure you use this data only in a lawful manner, and prevent data use which may have negative effects on the individual whose data it is, which are completely unjustified. You must also be transparent as to how you are going to utilize the data which is collected. Additionally, you must make sure you only handle an individual’s personal data in a way which is reasonably expected.

Principle 2: Processing Personal Data for Specified Purposes

This principle ensures that organisations must give clear reasons behind why they are collecting your personal data.

Principle 3: The Amount of Personal Data that can be Held

Organisations must ensure that the personal information they hold on individuals is sufficient for the purpose it is being held. Additionally, organisations should not hold additional information than is necessary for the stated purpose.

Principle 4: Keeping Personal Data Accurate and Current

Although the Act realises it is impossible to re-check all pieces of personal information, it does place a duty on organisations to take reasonable steps in checking the accuracy of personal data they have collected. Organisations should ensure that the source of the data is clear, and that they consider whether they need to update data, or consider challenges to a piece of information’s accuracy.

Principle 5: Retaining Personal Data

This principle states that there is no set maximum time limit that an organisation can store personal data. Instead, an organisation cannot hold personal data for longer than is necessary for it to fulfil its stated purpose. Another information that needs to be deleted/disposed of should be done so securely.

Principle 6: Individuals’ Rights

This principle provides individuals with a right to access the information organisations hold on them, and also object to the processing of any information which may be distressing/damaging. Individuals also have the right to stop information used for direct marketing, and a right to challenge an automated machine making decisions in relation to their personal data.

Individuals have the right to pursue damages from any organisation which is in breach of this Act.

Principle 7: Information Security

The measures which are appropriate to securing information will vary depending on the type of organisation and its circumstances. Organisations should therefore use a risk-based approach in deciding what level of security the organisation needs.

Principle 8: Sending Personal Data Outside the European Economic Area

This principle states that personal data shall not be transferred outside the European Economic Area. The only exception is where that territory/country can ensure a sufficient height of security for the data.

How Can I Find Out What Information Organisations Hold about Me?

You have the right to find out what information organisations and the government holds on you. All you need to do in order to find out what this information is is submit your request in writing. Once the organisation receives this request, they are legally obliged to provide you with the information they hold.

Do be aware of the fact that some organisations may charge a fee for providing this information. They are not allowed to charge a fee higher than £10 for digital information, or a fee higher than £50 for paper medical records. If you would like to find out what information credit agencies hold on you, this can be done online (normally for a fee of £2).

Succession planning

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Succession planning is a process for identifying and developing people, within an organisation,  with the potential to fill in critical business positions in the company as they become vacant. Succession planning can be either short-term or long-term and usually involves internal and external training and development programmes. Succession planning ensures that the company can further progress by being efficiently managed and quickly adaptable to any organisational changes that may be prompted by changing market realities.  A carefully planned succession strategy minimises risks of business management failure and ensures that people with the right skills are always available to fill in the positions of responsibility and drive the business forwards.

Succession Planning vs Replacement Planning

Many people confuse succession planning with replacement planning. Both of the terms should not be used interchangeably as they have some fundamental differences.

Replacement planning relies on the assumption that internal organisation structures will remain unchanged in future. Based on that assumption, a strategy is put in place to identify potential replacement candidates for critical positions that may become available soon. It is standard for human resources departments to have three alternative candidates, with various levels of experience, for each position available.

By contrast, succession planning focuses on building a ‘talent pool’ from which selections can be made as the positions become available. Many leaders prefer this, as a more viable long-term sustainability commercial option, than simple replacement strategy. The main idea behind succession planning is to have a wide selection of candidates for each position available. This way a company can better adapt to dynamically changing markets by creating new positions as well as replacing old.

What to consider when developing a succession plan?

Research provided by Randolph M. Kessler proves that identification of clear goals is crucial to efficient succession strategy planning. In practice most of the following human capital investment objectives are core to modern businesses that have well-developed business processes:

  • Identification of individuals who are capable of greater responsibility assumption;
  • Provision of sufficient development opportunities and training programmes to ensure that the most promising candidates further develop their skills;
  • Ensuring that experienced managers and leaders provide support to the selected people and pass their knowledge onto younger talent;
  • Ensuring that proper human resources reports are kept and compiled to improve selection processes.

A good succession programme also ensures that improvements are made for existing employees. Commitment and retention can be achieved by meeting the existing personnel’s professional expectations and ambitions. A good management of existing human capital will ensure that in long-term the company not also has strong management but also devoted human capital.

Tailoring the succession plan

There is no universal succession plan and every strategy should be developed in view of particular business and market conditions. For instance, a family run business will require a totally different strategy from multinational corporation. To be successful, your succession plan must form a part of your overall business strategy and risk profile. To give you an example:

The head of administration, in an advertising agency business, is a good leader who meets tight deadlines and has clear potential to become a vice president of the company. His past professional background has always revolved around administrative and project management positions. Optimally, he should gain a little bit more of sales experience and networking skills, to be better prepared for leading the company and bringing in more high profile work. The company recognises that need and his career progression development plan is includes a future move to sales department. If the company is keen to take a bit of a risk and put a person with relatively low experience in charge of the whole department, the plan may work very well and create a future leader with very broad professional experience. However, many companies are reluctant to do so and therefore have to spend more on external recruitment.

Business partnerships

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Business Partnership

What is a partnership?

A partnership is one of the legal structures for forming a business and is an alternative to a sole trader or a limited company. There are different types of business partnerships: ordinary partnerships and limited liability partnerships. All partnerships have some similarities in that they will contain two or more partners (either as individuals or their businesses) who share the profits of the business as well as sharing duties and responsibilities. Businesses that are usually run as partnerships include: doctors, dentists and solicitors.

The partnership agreement

Most partnerships are governed by a “partnership agreement”, which is the contractual relationship between the partners of the business. In the absence of a partnership agreement, the business will be governed by the Partnership Act 1890. It is recommended that parties entering into a business partnership draw up a partnership agreement because the Partnership Act 1890 is a very old piece of legislation and does not protect against every possible outcome. For example, under the Partnership Act 1890, if one of the partners dies or retires the partnership is automatically dissolved.

A partnership agreement will allow you to depart from any of the terms of the Partnership Act 1890 and will help to avoid potential disputes. The partnership agreement should state things like how much each partner is contributing, how they will share profits, what their roles are going to be, what to do when a partner wants to leave, how to dissolve the partnership, how to admit new partners and how decisions will be made. If a partnership agreement is entered into then each partner should obtain separate legal advice.

Partnership rules for an ordinary partnership

There are no formalities for creating an ordinary partnership ie not a limited liability partnership; it simply requires two or more people “carrying on a business in common with a view of profit”. However there are some formalities regarding how the business conducts itself, for example, the names of the partners should be displayed to the public, such as on their website and letterheads.

Advantages and disadvantages of ordinary partnership

An advantage of a business partnership is the accounting and tax structure. Business accounts are not public records and partners complete their own annual tax returns like any other self employed person.

 A major potential disadvantage of a business partnership is that partners are joint and severally liable for the business debts. This means that in the event of a partnership insolvency situation, creditors can come after each partner’s individual assets to pay off any outstanding debt, even if the debts have been caused by one of the other partners. Essentially, according to J E Baring, specialist insolvency lawyers,  there is no protection for the partners should the business fail. Even a partner who has left the business can still be held accountable for the business if there is an issue surrounding something that occurred during their tenure.

 

Limited Liability Partnership (LLP)

A s seen above an ordinary partnership does not have many rules and is largely governed by the partnership agreement. However, limited liability partnerships have additional legal requirements.

A limited liability partnership (LLP) is more like a limited company in comparison to an ordinary partnership. LLP’s require at least two designated members who carry extra responsibility. If at any time there are less than two designated members then every member is deemed to be a designated member. LLP’s must also register with Companies House and they must file their accounts, which other partnership types do not have to do.

A key advantage of an LLP is that the partners’ liability is limited to the amount of money they have invested in the business along with any personal guarantees they have given, therefore they have more protection than ordinary partnerships.  The LLP is an entirely separate legal entity from the partners as individuals.

Some businesses have “sleeping partners” who make financial contributions to the business but have no involvement with its day to day running.

Additional resource for partnership law.

Company law

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Company Law

Company law, primarily the Companies Act 2006 provides the statutory framework within which a company or other business organisation must function. Other law also involved in the regulation of companies includes the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and common law.

Company law, also known as corporate law is vast and in practice has a considerable effect on commerce, politics, economics and social contexts. It is therefore important not only to think about the legal aspects of the subject but also practically, for example the implications it has on the company structure, shareholders, directors and fundamentally the impact it has on the way the business is operated.

There are two main strands to company law, corporate governance and corporate finance.

Corporate Governance

A company comprises of four components

  •  shareholders
  •  directors
  •  employees
  • creditors

Each of the above have their own rights and duties. Corporate governance moderates the rights and duties to avoid and prevent conflict by balancing the power each have. It recommends structure, administration, accountability and remuneration along with rights and duties. However, the company constitution (Articles of Association and Memorandum of Association both lay down the framework in which the company is to run and function) can freely assign the above as it wishes.

English law tends to favour the position of the shareholder giving them equality and the freedom to trade their shares in the market. The shareholders get to exercise their right to vote in company affairs in a General Meeting. The rights are minimum but it permits them to alter the company constitution and remove members of the Board (directors) by issuing resolutions (written decisions).

Where shareholders own a company, the directors manage it and make decisions on the day-to-day running of the business. Although the company constitution has to be adhered to, directors often have to exercise their own judgement and autonomy. It is therefore not surprising that company law seeks to place mechanisms in place to ensure the directors are accountable for their acts and omissions. Directors owe duties to the company and are required to perform their responsibilities with competence, loyally and in good faith. If this is not done, they can be vindicated in court.

Corporate Finance

Corporate finance, as the name suggests deals with matter of finance i.e. money and capital primarily concerning the shareholders and directors. There are two methods through which a company can function, equity finance (shares) or debt finance (loans).

Equity Finance

Equity finance is the more conventional method and involves issuing shares to build the capital of a company. The shares carry rights to dividends (share of the profit or surplus from the capital) and voting rights. The ownership of the company therefore lies with the shareholder.

Company law dictates that any potential shareholder is given full disclosure of all material facts in the prospectus. Existing shareholders can purchase newly issued shares before outsiders (pre-emption tights) in order to avoid dilution of their stake and therefore control of the company. The company constitution will necessitate that the capital is maintained to benefit the creditors.

A company, specifically public limited companies are forbidden from financially assisting a person for the purchase of its shares unless the company taken of the listings (list of public companies) or is private.

As already mentioned above, UK law focuses on the protection of the shareholder. To provide further protection, insider trading (trading on private information) is prohibited as it could affect the value of a company’s shares.

Debt Finance

Where in equity finance ownership of the company is lost, with debt finance ownership and profits remain with the directors. Debt finance involves a company getting a loan with a fixed interest and repaying that. It is customary for lenders, in particular banks, to secure their interest by means of a charge over company assets (also known as collateral) so that in the event of insolvency (inability of the company to pay its debt repayments as they fall due), company assets can be taken to recover the value of the loan.

The other way for a company to raise capital is sell to bonds or debentures, both a form of contract to repay a loan with interest. Debentures can be converted into stock. Any person holding a debenture or bond should ensure the company has this duly noted so that they are treated as a creditor should the company become insolvent. Debentures allow a company to generate capital without having to give up ownership to their assets.

Codicils

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Codicil

What is a codicil?

A codicil is a formal document used to change an original will (legal declaration managing one’s estate after their death). It supplements and ‘republishes’ the will to which it refers, which means that the will is treated as if it were executed on the day the codicil’s execution.

What can a codicil amend?

The amendments implemented by a codicil can be smaller matters such as changing the executors (the administrators of the estate) or more significant ones such as changing the gifts under the will. For major changes to the will it is advisable to revoke the will and execute a new one.

What is the form of a codicil?

A codicil needs to comply with the same legal requirements as the will. These are as follows:

  • It must be in writing;
  • It must be signed by the person making the will (the testator); and
  • It must be witnessed and signed by at least two witnesses present at the same time.

It should ideally be executed at a solicitor’s office where the compliance with the rules can be ensured.

If you need a will or a codicil, there are several good options available at modest cost. You may choose to use a specialist wills solicitor or choose one of the available online will services.

Bare trusts – what are they ?

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BARE TRUSTS: THE RIGHT TO BOTH INCOME AND CAPITAL

Bare trusts are similar to other trusts in that the settlor still appoints trustees who take legal ownership of the trust property. However, the beneficiary of a bare trust has a right to the income and capital of a trust, and can, if he so wishes, receive control of the property/actual ownership. The trustees must therefore act according to the beneficiary’s wishes.

Additionally, establishing a bare trust could provide the settlor with various tax advantages. A bare trust could be a viable way of leaving property to your children/grand-children, but also prevent them from receiving any benefits until they reach a certain age. This allows the settlor to retain a degree of control over the trust property.

The Role of a Trustee in a Bare Trust

Although trustees normally have discretion over what income they could pay a beneficiary from trust property, in a bare trust the person creating the trust has a greater role in directing the trustees. The trustees therefore have little/no discretion over what income to pay the beneficiaries. He/she is therefore more like a nominee – their control is in title only.

The Named Beneficiary in a Bare Trust

The named beneficiary holds an “absolute entitlement” to the assets in the trust, but the trustee(s) hold the assets until that person reaches a certain age (specified by the settlor). Once the beneficiary reaches that age, they are immediately able to receive the assets.

The Tax Advantages of a Bare Trust

One of the main advantages of a bare trust is the tax advantage it can give to the settlor. This is because the beneficiary holds an absolute entitlement in the trust property. The settlor therefore does not have to pay any tax on the assets, as they are relieved from the legal title once they transfer the assets. Therefore, if the beneficiary is a child it is unlikely they will be earning, and so will benefit from tax exemptions. Creating a bare trust to benefit from these exemptions is a tax-efficient method of securing assets for the future.

It is important to note that if a settlor attempts to create a trust in order to avoid potential inheritance tax, they may still be subjected to this if they should pass away within 7 years of the transfer. This only applies to transfers that are £3000 or more.

How Can You Create a Bare Trust?

If you are unsure about creating a bare trust yourself, then it is probably better to seek legal advice before taking this step. However, certain organisations, like banks and building societies, provide forms and information that will allow you to create a bare trust yourself. It should be noted that an invalidly created trust may cause serious repercussions for the people you attempted to make beneficiaries, and so you should try to gather as much information as you can before attempting to do this.

If you have located the correct forms and information, and are confident that you know what you are doing, the next step is to forward your completed forms to your local Tax Office.

Discretionary Trusts: An Alternative

The main difference between a bare trust and a discretionary trust is that with the latter, the trustees generally have discretion as to how to utilize the income the trust generates. They therefore have greater responsibilities regarding the distribution of trust income, and can provide beneficiaries who have not yet reached the age required to access their trust property with income. Powers may include being able to determine how much income is paid, and to which beneficiaries, how often payments will be made, and whether the trustees will place conditions on beneficiaries in receipt of this income.

Small claims court threshold to double

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Small claims threshold to double

The Government is expected to announce today that the threshold for a civil (money) claim in the County Court for a case to be classified as a small claim will rise from £5,000.00 to £10,000.00.

The small claims court is not a separate court as such, the system works by a claimant issuing a  claim in any county court of their choice. The court then sends a response pack to the defendant. If a defence is filed the court then decides, with representations from the parties in a questionnaire known as a an allocation questionnaire, whether the claim should be a small claim or otherwise. the vast majority of claims within the financial limits detailed above will be allocated as small claims, but if a counterclaim is filed by the defendant which may exceed the value of the claim or if the case is very technical, it is possible the court will decide that the case is not suitable for the small claims court.

As with all things, there are advantages and disadvantages of the small claims system. On the one hand, the system fundamentally helps access to justice in that there is a  general no costs rule in the small claims court for legal fees, regardless of which side wins or loses the case. This enables more claimants or defendants to fight a case without fear of being financially bullied by the risk of paying a rich opponent’s expensive legal fees. On the other hand, this doesn’t mean a big company defendant won’t use a lawyer in the small claims court. The potential drawback is that the court must still apply the law and many personal or business users of the county courts still need legal advice on the law or court procedures. So, a claimant with a very strong claim which feels he, she or it needs a lawyer will end up having to pay legal fees out of any monies recovered from using the court.

Do you have a view on the small claims court, the doubling of the financial threshold or perhaps you have experiences, good or bad, of using the small claims court. If so, please provide your comments.

What is it about Manchester and law ?

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Manchester at the vanguard of progressive law firms

Many outside the legal profession and in fact many within it have failed to recognise that Manchester is at the forefront , and has been for some years, of the legal scene outside of the Magic Circle firms. This fact was also recently made in an interesting recent article in the FT.

It’s not clear why Manchester in particular seems to have more of the progressive firms, or who starrtd the trend, but it may have something to do with :-

  1. Pannone is based in Manchester and has for many years been one of the more dynamic and creative law firms
  2. Many of the most successful personal injury practices are in Manchester and the North West

As regards personal injury, it is interesting that the public and many lawyers seem to think either that those in this field are nor proper lawyers in the sense of what they do (a little like conveyancers are seen as paper shufflers only, which again is incorrect) or simply generally cock a snoop at them. In fact, personal injury lawyers tend to be far more commercial than most other lawyers in other areas of practice in small or medium sized firms. They have recognised, long before many other solicitors (many of whom still don’t get it) that law has become more of a business and a competitive one at that. They invest in marketing and understand the nature of the dialogue with their customers and that customer service is important.

Perhaps pure coincidence (or perhaps not)  but also interesting that the Co-Op, based in Manchester, are one of the non-lawyer providers who have shown most interest in entering the legal service market now that it is opening up.

Whatever it is about Manchester, it’s proving to be premier league for legal services as well as for football and we salute the Manchester law firms.

Any views on the above ?