Running a business can be exciting and rewarding, but it’s important that you get it right. Challenges can range from getting the right premises to ensuring you have watertight contracts to protect you from suppliers, customers and even your fellow businesses partners. It's important that you get some initial advice - this can help prevent unnecessarily bad decisions being made, which will ultimately cost you more in the long-run.
Brendan Donohue, Employment Partner at Burroughs Day Solicitors in Bristol & Portishead, talks to Business West to give his take on the top legal issues every business needs to know.
1. Having the right Terms and Conditions of Business
Terms and conditions of business are an essential document which every business should (but often don’t) have in place. You want to ensure you have a binding, legally enforceable contract with your suppliers and customers. It can protect you against non-payment; help limit your liability to your customers; and set out a clear and legally compliant policy for delivery, returns and defective items. It will also help you avoid disputes arising at a later date.
One size doesn’t fit all and if you ‘crib’ from other people’s terms, you can’t be sure they are legally compliant, enforceable or drafted in the best interests of your business: every business has different (and changing) needs.
Here are some things to be aware of:
- Whose terms apply? Only careful drafting can ensure your terms form part of the contract with your customer and take precedence over any additional terms introduced by them. It’s therefore worth investing in some legal help at the outset.
- The laws for contracting with consumers and businesses are different and so your terms should be modified accordingly. In particular, your contract with consumers needs to be clear, fair and balanced, as required by the Consumer Rights Act 2015; if it’s not, certain terms may be deemed unfair and therefore unenforceable, i.e. useless.
- There are specific laws governing how you contract with customers over the internet. If this applies to you, several of your terms and conditions, including those regarding methods and charges for payment, delivery, and returns; and cancellation rights (which are different to when someone buys something in person), need careful consideration and drafting.
- ‘Standard’ terms and conditions don’t usually include a ‘retention of title’ clause. Having one enables you to retain ownership of the goods you’ve supplied until you receive payment. When properly drafted this is an extremely useful provision in the event a buyer fails to pay or runs into financial difficulty.
2. Protecting your intellectual property
‘Intellectual property’ is something you or your business creates that’s different to anything else available on the market. It includes copyright, patents and trade marks and can be the product that you invent or your business’ logo. ‘IP rights’ (as they are commonly called) can become an extremely valuable asset for a business – something that’s not always thought about when a business is just starting out. However, taking a little time to think about your IP rights, and they can be protected in the long run, is well worth considering at the outset.
- The U.K. Intellectual Property Office describes a trade mark as ‘a sign which can distinguish your goods and services from those of your competitors.’ If your trademark meets the necessary criteria, and is not already in use by an existing trade mark owner, you can register it.
Registering it gives you immediate protection from the unauthorised use of it by someone else, including counterfeits. It also promotes brand awareness and reduces the chance of confusing your trademark with another trader. It also enables you to sell and license your brand. The ® mark shows that the brand is registered and warns others against using your brand.
- Certain categories of ‘works’ are protected by copyright, e.g. written, dramatic, musical, artistic work, sound and music recording and films. Copyright protection arises automatically on creation of the work and does not require any formal application or registration. The author of the works is generally the copyright owner, although there are exceptions to this including works created by an employee in the course of their employment, or commissioned work. It is therefore important to make sure your contracts with your staff, contractors and customers are clear as to who is retaining or purchasing the copyright in any works being produced.
3. Your staff
Any business is really only ever as good as the people it employs. Ensuring staff are clear about what is expected of them will reduce the risk of disputes and help you to defend any potential Employment Tribunal claims. Having a comprehensive recruitment process and the right employment documentation is a major step towards protecting your business and your staff. Here’s why:
- A properly drafted application form and thorough recruitment process are crucial for selecting the best people to work for your business. Training and then performance managing unsuitable recruits can be time consuming and costly; so can finding their replacement. You also have a duty not to discriminate against job applicants. If you do you will more than likely find yourself at the Employment Tribunal.
- I may be starting to sound like a bit of a broken record, but make sure your staff contracts are tailored to your business. An ‘off the shelf’ contract’ won’t necessarily be suitable for your industry, or cover specific things unique to your business. There are also financial penalties if they don’t contain certain legally required information.
- The right contracts can help prevent staff from stealing your business idea or valuable clients. Where appropriate, you can also prevent someone from leaving to work for a competitor.
- As a minimum, you need to have grievance and disciplinary policies in place. They will set out your obligations to make sure you deal with staff complaints in an appropriate manner, and help you to follow a fair procedure if you need to dismiss someone. Getting it wrong could result in you not only facing an Employment Tribunal claim, but also further financial penalties for failing to follow a legally compliant procedure.
- But employment law is so much more than grievances and disciplinaries. For example, do you know how do you deal with: sickness absence (long and short-term); when someone ‘blows the whistle’ (would you even know they had?); if someone asks to see their personnel file; someone going on maternity and/or shared parental leave? These are just some of the issues that can arise… the list goes on. Having the right policies/procedures will help keep you the right side of the law.
4. Shareholder Agreements
Shareholder agreements are confidential private agreements between the shareholders of a company (or members if you are a limited liability partnership). They set out an agreed framework for dealing with matters that are not covered in your constitution i.e. management and decision-making, dispute resolution, exit strategies and remuneration.
It can also protect the other shareholders if someone dies or becomes critically ill. It can be challenging, very time-consuming and expensive to resolve such issues where there are no pre-agreed terms. It’s therefore advisable to have a shareholder agreement from the outset. Treat it as a living document: review it regularly to ensure it reflects the evolving needs of your business and the shareholders.