When running any business is it important to keep up to date with the latest developments that may affect the good commercial management of your company. Here is a summary of some of the latest changes in to keep in mind.
Director guilty of wrongful trading
Even in the good times companies go bust, but with questions over the recovery and what shape it will be, this is a worthwhile reminder of the importance of making the right decisions to prevent being prosecuted for wrongful trading, and becoming personally liable for the company's debts.
In a recent case the sole director of a film production company was found guilty of wrongful trading after engaging a facilities house to produce a film when there were no funds available and no reasonable prospect that the company would avoid going into insolvent liquidation.
It is important when trying to save a company not to make commitments that it can't reasonably be expected to perform. Once a director is aware, or should reasonably be expected to be aware, that a company is insolvent their responsibility changes from representing the interests of the members (shareholders) of the company to protecting the interests of the creditors. If found guilty of wrongful trading, the court can order the director to use their personal assets to help settle the company's debts.
And don't forget you don't have to be called a director to be regarded as a director by the courts. A shadow director can be anyone, other than a professional advisor, that gives instructions to directors of a company or who exercises real influence in the corporate affairs of a company.
Employment Appeal Tribunal confirms employers right to vary contracts of employment
In a recent case against Asda Stores, the Employment Appeal Tribunal (EAT) upheld Asda's right to vary the contracts of employment based on it including a variation clause in the staff handbook. Several factors were taken into account and therefore this should not be seen as freedom to vary employment contracts at will.
The EAT recognised that pay is fundamental to the employment relationship and therefore without a valid variation clause an employer is required to obtain consent to the changes. However, it was found that Asda's variation clause (which stated "the company reserves the right to review, revise, amend or replace the content of this handbook, and introduce new policies from time to time") formed part of the employment contract and that Asda had a contractual right to vary its terms without requiring the employee's consent.
It is important in these situations not to breach of the implied term of trust and confidence between the employer and employee. In this case the tribunal noted that there had been an extensive consultation period and therefore Asda had not acted unreasonably.
New companies required to file VAT Returns online
HM Revenue & Customs (HMRC) is phasing out paper VAT returns and as of April 2010 all new VAT registered organisations will be required to file their returns online and pay any VAT due electronically. This also applies to all companies with a net turnover of £100,000 or more (including nil and repayment returns) even if your turnover drops below £100,000 in the future.
Existing companies above the turnover threshold should have received a letter and guide explaining how to register for the online service.
There are no exemptions based on ability or capability, e.g. access to a computer, internet connection and any lack of computer skills are not considered valid reasons not to file online.
The online filing process, without being drawn into government IT project discussions, is surprisingly easy to use and is claimed to work even on a dial up connection. Figures are entered in exactly the same way as would be completed on the paper version, and then you can download a PDF file of the submitted return for your records - and can print that out if required to fit in with existing procedures. You can also sign up to receive email alerts to remind you when your return is due.
And don't forget, you get an extra seven calendar days to submit your online return and pay any VAT due electronically - though note, it seems that HMRC are unable to receive fast bank payments so do allow the full 3 days for bank transfers to be received by the due date.
Data breaches to incur up to £500,000 penalty
New powers designed to deter personal data security breaches came into force on 6 April 2010.The Information Commissioner's Office (ICO) will be able to order organisations to pay up to £500,000 as a penalty for serious breaches of the Data Protection Act.
When serving monetary penalties, the Information Commissioner will carefully consider the circumstances, including the seriousness of the data breach; the likelihood of substantial damage and distress to individuals; whether the breach was deliberate or negligent and what reasonable steps the organisation has taken to prevent breaches.
The Information Commissioner will take a pragmatic and proportionate approach to issuing an organisation with a monetary penalty. Factors will be taken into account including an organisation's financial resources, sector, size and the severity of the data breach, to ensure that undue financial hardship is not imposed on an organisation.
The power to impose a monetary penalty notice is designed to deal with serious breaches of the Data Protection Act and is part of the ICO's overall regulatory toolkit which includes the power to serve an enforcement notice and the power to prosecute those involved in the unlawful trade in confidential personal data.
Directors' Tips - Mobile broadband v Hotel charges
Ever been stung by a hotel's wi-fi charges? £10 for 24 hours is affordable if not justifiable, but £6 for 1 hour at a time can really start to add up. All the major networks offer pay as you go (PAYG) mobile broadband modems now, and they're the size of memory stick so no extra weight to keep in your bag.
Typical price (as one of the networks always has an offer on) is £20 for the modem then £15 a month, or £2 a day if really for emergency use only. Note that there is usually a fair use policy limiting you to 3GB a month but that is quite a lot of data unless you're watching videos or downloading large files.
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Adrian Cull is one of a small team at Flexicom offering a part time commercial director service, helping SMEs to exploiting opportunities, reduce liabilities and improve the bottom line.
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