News

New Pro Formas

In line with our unique policy of providing certain aspects of our legal services to our clients and colleagues entirely free of charge, we have placed on to this website two additional pro forma documents which should be of considerable assistance to you.

The first of these, in our Employment section, is a pro forma statement of terms of employment. Every employer must issue such a statement to its employees if their employment lasts a month or more.

The second, in our Private Client Services Section, is a pro forma basic will.

Each pro forma comes with pointers for their completion.

We find it a very helpful exercise for clients to read through these pro formas, make sure they understand the various clauses in them, complete any admin details such as names/addresses etc and try to think through how these pro formas might be adapted for their own circumstances. We will then review the clients first draft, thus maximising the clients understanding of their own legal documents, and minimising our own input time, with consequent cost savings for our clients.

If you have any queries on these pro formas please refer to the appropriate department.

Of course, unless we have reviewed a draft for an existing client, we accept no responsibility for their use or content.

Intellectual Property

Whether you trade in traditional markets or in cyber space, your trade marks, copyright, confidential information, designs and patents are fundamental to the success of your organisation.

We advise on all aspects of Intellectual Property Law and how it might impact on your business. We advise software companies, University spin out companies and manufacturers in every sector. We have good relationships with and contacts in the recognised patent and trademark agencies.

In order to assist companies which might not be entirely sure if they need protection in this area, we have recently devised a questionnaire, designed to identify areas of concern so that we can advise on what protections might be available, and at what cost.

We are happy to issue the questionnaire by e-mail, on application to Morinne Macdonald, David Beveridge or Philip Hannay. They can also assist with any questions you might have relating to Intellectual Property issues.

Making your business grow

Often the answer to securing initial capital is from your own bank account. But there are other options.

Finding additional financing is an important matter. There are many reasons for further funding and “we’ll go bust otherwise” is, of course, among them. But that won’t get you very far with a funding body.

Obvious considerations are that the company seeking funds must appear to have a future.

Potential funders will spend time with the client so they can understand why they’ve succeeded so far they need to be convinced that a growth opportunity is there.

The business plan has to make sense and the proprietors have to be satisfied they’re still earning enough, but they’re interested in whether they can make the payments rather than looking for an exit point or return on investment.

A business plan remains one of your fundamental assets. This can be tricky since most people are experts in their business rather than in writing plans, but its essential.

Another matter to consider when mapping out who to approach is the amount of money you are looking to secure. Business Angels are good for tens and hundreds of thousands, but not for more.

As lawyers we have extensive experience in working with clients and advising on available financing options, and lenders recognise the important role we play alongside businesses. We also have a range of other advisors and sources of finance that all play an essential role in the raising of finance.

Please contact Morinne Macdonald, David Beveridge or Philip Hannay if you have any queries.

Also see the article on “Finding the money to develop your business” in the useful articles section of our website.

New Money Laundering Regulations - Do they affect you?

New Money Laundering Regulations have recently come into force. Whilst the legal and accountancy professions are the most obvious groups affected by these changes, your own business may now be subject to the new regulations.

The effect of the new regulations is to make certain categories of professions regulated under stricter money laundering legislation. These categories are:
auditors, external accountants and tax advisors; real estate agents;
notaries and other legal professionals acting on behalf of their client in any financial or real estate transaction; dealers in high-value goods, such as precious stones or metals, or works of art;auctioneers, whenever payment is made in cash, and in an amount of EUR 15,000 (about £10,000) or more; and casinos.

If your business comes under one of the above categories, you must have all the necessary money laundering procedures in place. These are:
(a) Having a Money Laundering Reporting Officer (“MLRO”) appointed.
(b) Ensuring everyone in the firm know who this person is.
(c) Having written procedures concerning:
i. client identification;
ii. record keeping;
iii. recognition of suspicious transactions;
iv. reporting to the MLRO.
(d) Be able to demonstrate that all partners and staff are aware of these procedures.
(e) Be able to demonstrate that all partners and staff have been informed of their obligations under the Proceeds of Crime Act and money laundering regulations.
If any of the above are not done, the directors or partners will be committing a criminal offence. And the penalties are severe - the maximum prison sentence which can be imposed for failure to comply with the regulations is 14 years.

Changes to Stamp Duty

From 1 December 2003 stamp duty on UK land and buildings is largely (but not entirely) replaced by a new tax called Stamp Duty Land Tax (SDLT). SDLT is a self-assessed tax on UK land transactions. In this way it is fundamentally different from stamp duty, which is a tax on the legal effect of specific documents.

SDLT is charged on the creation, surrender, release or variation of any estate, interest, right or power in or over UK land, or of the benefit of an obligation or condition affecting the value of UK land. In this respect it is wider ranging than stamp duty. Examples of transactions which are outside the scope of stamp duty but which are subject to SDLT if they are entered into for valuable consideration include the removal of a break option from a lease or some other variation of a lease, the lifting of a restriction covenant affecting land, and the release of an option over land.

Certain transactions are exempt from SDLT, most notably licences and security transactions. In addition, no SDLT is payable on reverse premiums (i.e. payments by landlord to tenant at the grant of a lease, or by assignor to assignee on the assignment of a lease, or by tenant to landlord upon surrender of a lease).

Because SDLT is a tax on transactions not documents, it is irrelevant whether or not a sale is completed by a transfer of legal title. Resting on contract (also referred to as a “split title scheme”), where the price is paid and beneficial ownership transfers to the purchaser but with the vendor retaining legal title as trustee for the purchaser, has been a recognised means of mitigating stamp duty - as no stampable document is created no stamp duty charge is triggered. However, under SDLT the payment of a substantial amount of the consideration and/or the transfer of beneficial ownership triggers a charge to tax - the transaction has occurred even though no transfer has been completed.

The part of the new SDLT that will affect most people is the new tax now on leases. The SDLT is a compulsory tax and is calculated differently, a ready reckoner detailing the approximate changes in level of tax is attached.

For more advice on the new legislation contact Morinne Macdonald.

Share Option Schemes

More and more companies are offering share option schemes to their staff. Not only do such schemes help attract staff but they also assist in incentivising and retaining existing staff.

In general, directors and employees are chargeable to income tax when they receive shares free or cheaply by reason of their employment. The major exceptions to this are where such shares are obtained under one of the Inland Revenue approved share options schemes. The main approved schemes are:

- company share option plans
- SAYE share option schemes
- share incentive plans
- enterprise management initiatives (EMI)

Approved schemes have favourable tax treatment but tend to be less flexible. The EMI schemes are perhaps the most generous from a tax point of view as any gains on shares are liable to capital gains tax (rather than income tax) which can be as little as 10%.

Even where the grant of options is done under an approved scheme, it is still possible that the actual exercise of the options may be outwith the allowable rules and therefore taxable under the unapproved Inland Revenue provisions. In such circumstances, the employer's national insurance contributions can be significant.

Under a share option scheme, a company grants to an individual (often an employee) a share option entitling them to subscribe for a specified number of shares during a specified period and at a specified price. The subscription price is usually the share value at the time of the granting of the option. As a result the shares are often subscribed for at less than the current market value as the market value of the company at the date of subscription is normally greater than the market value at the date of the granting of the option.

Employees are usually not chargeable to income tax when they are granted share options by virtue of their employment. In the main, charges tend to arise on the exercise of the option. However, if an option is capable of being exercised more than ten years after the date of the original grant, this may lead to a taxation charge on the grant itself if the grant was made at under value.

Contact us for more information on the subject of share option schemes.