Obtaining good quality legal advice is vital at every stage of the lifecycle of a business to reduce the risks to both you and your organisation. Taking legal advice at the outset will help increase the health of your business and your chances of a successful exit in the future (in the event that you plan on selling your organisation further down the line). We have set out below a number of key areas where speaking to a corporate and commercial lawyer would be beneficial:
If you are borrowing cash from a bank, the terms of the loan may be complex. The relevant bank may also ask you to provide a personal guarantee where you can be held responsible for the debts of your company. This can have serious financial consequences. A corporate lawyer can review the loan terms for you and provide you with practical advice to ensure you fully understand the agreement you are entering into.
Even if you are being funded by investment from friends and family, it is important that the terms of any financial arrangements are documented. Circumstances can change and plans can alter. If all parties can then refer to a formal agreement setting out the major terms, this will reduce the risk of any misunderstanding or dispute further down the line.
Choosing the right structure for your business depends on its size, complexity and goals. A corporate lawyer can advise you on the different legal aspects of the various corporate structures (including a private limited company, a limited liability partnership or other business structure) and which one would be best suited for your business.
If you are going into business with other people, a shareholders’ agreement (or a partnership agreement) is a good idea. This document regulates the relationship between shareholders, the management of the company, the ownership of shares and the protection of shareholders. The shareholders agreement can provide for a dividend policy, procedure in the event of a deadlock, valuation of shares and the procedure to be followed in relation to a proposed transfer of shares in the company.
The lack of a shareholders’ agreement means an increased risk of disputes and conflict in the future, which could otherwise have been resolved by the agreed procedures set out in a formal shareholders’ agreement.
Terms and conditions
A company’s terms and conditions are its first line of defence against disputes. Terms and conditions should be drafted according to the precise needs of the particular business at that time. They are too important for a business to rely on freely available templates. A commercial lawyer can help to draft a company’s terms and conditions according to the business’ requirements, with a view to correctly documenting each party’s rights and obligations, allocating risk, and limiting liability in the event of a dispute. From small, independent online retailers to biotech software manufacturers, every business needs tailored terms and conditions which are up-to-date with current legislation and case law.
The Data Protection Act 2018 (DPA) (incorporating the General Data Protection Regulation (GDPR)) obligates businesses to not only comply with the seven key principles of the GDPR, but also to evidence how they comply through documented policies and procedures. As a business, you will in all likelihood be processing some form of personal data, for example from your customers or employees.
Other areas of data protection that need to be thought about include: registration and payment of fees to the Information Commissioner’s Office; applicable exemptions; mapping the life-cycle and risks of the personal data; and the lawful basis on which you send personal data to third parties, for example a supplier located outside of the UK. Businesses should also consider how they carry out e-marketing. A commercial lawyer can advise you on the different legal requirements of the DPA and draft documents to reflect the data protection needs of your business.