Huntley Legal's Blog

Normally, the buyer of a company will want to see full accounts for the latest year end, with monthly management accounts since then.

John Smith (not his real name) was buying a company from Ann Jones (not her real name either).

It's only a small business and Ann didn't manage it in a sophisticated way. She wasn't really up to speed. Her last business year ended 11 months ago, and it was nearly time for another set of year-end accounts. She didn't have up-to-date management accounts.

As a result, John didn't know how much her business might owe, including whether or not she owed money to HMRC.

Ann wanted to take all the money out of the business before completion of the sale. But debts follow the company, not the seller, so – before he purchased it  – John needed to check that the company would be able to pay the bills which had already built up.

What would you do?

If your business is registered in the UK, you must display your Caller Line Identification when making or instigating direct marketing telephone calls.

This requirement has been in effect since 16 May 2016, and applies whether your telemarketing calls are automated or live, solicited or unsolicited, and even if your business is based in the UK and your call centre is based abroad.

Did you know the data protection régime is changing under a European directive that's already in force?

In accordance with current data protection law, most businesses have already registered as a data controller. Sometimes they just manage a client list or a newsletter mailing list. Others use data in a more complex way.

Increasingly, there are businesses that farm data, collect a large amount of personal data, or analyse data at a sophisticated level.

It is important to know that the rules are changing on 25 May 2018, to the General Data Protection Regulation (GDPR).

It may be two years away, but that time will go in a flash, and you need to put your building blocks into place now.

When you sell your company, the buyer will want to inspect ALL your books, not just your accounts and other records.

But what do we mean by 'books'?

When you are a limited company or LLP, you are supposed to keep a register of members – that means shareholders – including the dates they each take and sell their shares.

You may know you are also supposed to keep a register of directors, including the dates when they are appointed and when they leave.

And you may know you are supposed to keep a register of when any mortgages and charges are taken against your company.

You may not know that all these registers remain mandatory.

When you are selling a company, it makes a technical difference whether you have been running it as a sole trader business, or as a limited company. Generally, you will either sell shares in the company, or you or your company will sell the business assets as a going concern.

Either way, you need to realise the buyer will leave no stone unturned when they do their due diligence.

That’s because they are not only paying the agreed figure, but are usually planning to invest even more money, time and energy in future. They are taking a lot of legal and financial risk.

Here are some of the things you need to prepare, so you can answer the buyer’s questions.

I am constantly amazed when I meet someone who has not protected their Intellectual Property (IP). It never matters if a project fails, but always matters when it succeeds, and often involves outsourced software development or design and marketing.

Here are some real examples (with names changed for anonymity):

Highway robbery 1

John had a brilliant idea for a software tool for a particular sector. He briefed two different suppliers to produce the software. Rather than pay for their work, he hoped to offer them equity. Development was quite far along, and he was about to look for investment.

However, at this crucial point, the suppliers hijacked him.

I had a heartbreaking conversation recently with someone who was so deeply in trouble that I had to send him to an insolvency practitioner. If he had come to me earlier, I might have been able to help.

Let’s call him Peter.

Peter had always dreamed of running his own restaurant. He was delighted when he found what seemed like the perfect property. The vendor told him the restaurant was a success, the landlord was nice, and the business was generating income.

Unfortunately, the vendor was lying.

If you are preparing to leave a company in which you have shares and also act as director there are a number of things that you will need to, or would be very smart to consider before you actually "do the deed" and tell all and sundry that you have resigned or which you need to make sure are in place and clearly resolved before you exit "Stage Left!":

Tip 1: Be clear on your reason(s) for leaving and what you want to achieve: 

So imagine the situation: Your fellow shareholder, let's call her Ann, had a large stake in the company, and was an active director bringing in most of the new business in the last couple of years. She has just died. Once the immediate shock has worn off and the funeral taken place, your mind and the minds of your colleagues turn to getting back to business. But whose business?

I’m delighted to announce that we have moved to new offices in Hammersmith. Huntley Legal is now nearly five years old and business is expanding, so I’ve taken the opportunity to move into exciting new premises, complete with plenty of meeting rooms and supported by excellent technical facilities.