Certainty is good for a business. From a legal perspective, it helps to evaluate and manage risk, from a commercial perspective it helps plan for the future.
We are, however, living in uncertain times. Whilst businesses have become used to adapting to the commercial implications of uncertainty, they have often neglected its other implications.
Legal documents that were put in place at a particular moment in time need to be regularly reviewed to ensure that they are still doing the job for which they were designed.
Shareholder and partnership agreements that were entered into in a rosier economic climate need to be revisited to ensure they are still fit for purpose in these more testing times. Terms and conditions of business and commercial contracts that provide generous payment terms or fail to address potential insolvency issues do not pass muster in the more challenging world in which we live.
If these economic changes weren’t enough, we also have legislative changes adding to the burden. The Bribery Act 2010 and the Agency Workers Regulations 2010 have implications for businesses in terms of contractual documentation to be updated and systems and procedures put in place.
Quite how bringing in rafts of new legislation that add to the regulatory and compliance burden of business fits with the ideas of an entrepreneurial culture and the freeing-up of businesses to drive economic growth is a question you may want to ask the politicians. Regardless of the rights and wrongs of this new legislation, ignoring it is not an option.
As basic housekeeping, all businesses should keep a record of all the contractual documentation they have entered into, or that they use as standard, whether this is shareholders’ agreements, employment contracts or terms and conditions of business. They should keep a note of when they were last reviewed or updated. In an ideal world, your legal advisers should be reviewing these documents for you every couple of years or when circumstances change. In the absence of such an ideal, the following are sensible steps:
- If circumstances have changed since the last review (e.g. a shareholder is less involved in the business or the trading environment has changed) then the relevant documentation should be reviewed;
- You should be getting regular e-mail or postal updates from your lawyers and accountants, setting out recent changes. Don’t just treat these as an annoyance to be deleted or binned. Skim read them as a bare minimum to see if anything jumps out as having an impact on or being relevant to your business. If it is, contact your advisers to see if you need to be doing anything.
Keeping on top of changes shouldn’t take too long once you get into the habit and a little time and effort invested up-front can pay huge dividends down the line.
“Plus ça change, plus c'est la même chose” may be alright for the French but British business can’t afford to be quite so blasé.
Simon Morris is a partner and head of Raworths’ Corporate unit. To contact Raworths telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate, HG1 1HF. Alternatively, you can email Simon - simon.morris@raworths.co.uk
