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The Family Business - July 2017

Birketts LLP

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United Kingdom July 10 2017

Clear Legal Advice Cambridge Chelmsford Ipswich Norwich www.birketts.co.uk/familybiz The Family Business July 2017 The Family Business Welcome to the latest issue of The Family Business Adam Jones Partner 01245 211332 [email protected] Welcome to another family business newsletter. Firstly, if you haven’t yet requested a copy of our guide to GDPR, please do so. Compliance starts on 25 May 2018 and every business needs to be prepared. With that in mind, please take just a couple of minutes to update your subscription to our various newsletters and events by visiting www.birketts.co.uk/register. I was delighted to present the award for the East Anglian Family Business of the Year at the Mayfair Hotel on 8 June. ‘Warm’ congratulations to Steve Pearce and his family at Warmer Homes Heating & Renewables on their success. As well as my colleague Kitty Rosser highlighting your need to embrace data with the introduction of GDPR, Nellie Jackson has some wise words on protecting the name of the family business - which may well be your own name of course. In addition, Lottie Fletcher has put the spotlight on shareholdings and the need to ensure your governance documents are revisited regularly as the dynamics of your family change. We talk about this a lot and often it only strikes a chord when things are going wrong. On 12 September, our next family business event will take the issue and the challenges a step further and play out a case study covering as many ‘diffi cult’ scenarios as possible. Make a date in your diary or better still, contact [email protected] for more details. Finally, enjoy the summer break whatever you are doing. For some this is a time for huge activity and opportunity, for others a time to kick back and relax with the family. Our next newsletter will be in November, if your family business has a story to share, get in touch as we would love to hear from you. Adam Jones Head of Family Owned Business Team Birketts LLP In this issue GDPR: countdown to compliance for the family business Take stock: avoid the smoking barrels Brand protection: make your mark Ernest Doe & Sons: more than just a family business Family Business United: 2017 Awards LinkedIn Birketts LLP Twitter Clear Legal Advice Cambridge Chelmsford Ipswich Norwich www.birketts.co.uk/familybiz The Family Business July 2017 GDPR: countdown to compliance for the family business In May 2018 a new law will be imposed called the General Data Protection Regulation (GDPR). It brings about the biggest change to data protection laws in over 20 years. Family owned businesses, which form an enormous proportion of the UK’s economy, will have to take notice of this, and be prepared. There has been a lot of coverage – not least due to the headline-grabbing threat of up to €20m fi nes, but many remain unsure of what they should actually be doing to get ready. There are some key basic steps to go through to assist you to understand what will be required in practical terms. 1. Audit your data - you will need to know what data you hold, where it comes from, what you do with it, where you keep it, who you share it with and what happens to it when it is no longer needed. 2. Fair processing notices - whether you refer to them as FPNs, privacy policies, data protection statements or something else entirely, the information that you give to individuals when you collect their data will need to be updated to meet the new information standards in the GDPR. 3. Consent mechanisms - under the GDPR you must meet a higher standard of consent and record how and when consent was obtained, all of which will require some updating to your current systems. 4. Streamline your SAR process - the GDPR reduces the time for providing a response to a Subject Access Request from 40 days to one month (and abolishes the £10 fee). Individuals have new rights under the GDPR, specifi cally the right to be forgotten and the right to data portability. You will need to ensure you understand what these rights involve and how you will comply with them. 5. Record your processing - from May 2018 you will no longer have to register with the Information Commissioner’s Offi ce (ICO) but you must keep a written record of your processing activities, security measures and data retention practices instead. 6. Appoint a Data Protection Offi cer - for many organisations this will be a mandatory requirement under the GDPR. 7. Update your breach procedures - from May 2018 mandatory breach reporting will begin – most breaches must be notifi ed to the ICO within 72 hours and you must keep a full internal breach register. 8. Train your staff - staff awareness is absolutely crucial to compliance. Different staff members will require different training depending upon their role and responsibilities but all staff will require some basic awareness training around the GDPR at the very least. We can provide full details of the changes introduced by the GDPR. We also offer a range of training courses to help your business comply with data protection laws and to raise awareness amongst your staff. “GDPR brings about the biggest change to data protection laws in over 20 years. Family owned business must be prepared.” Kitty Rosser Associate 01603 756559 [email protected] Clear Legal Advice Cambridge Chelmsford Ipswich Norwich www.birketts.co.uk/familybiz The Family Business July 2017 Take stock: avoid the smoking barrels This article intends to highlight a few common issues that often arise in family-owned businesses, provoke thought and debate on those issues and offer some guidance. A follow up seminar will be held on 12 September at our Norwich offi ce in which we explore these issues further, using the below scenario as a case study to provide context and facilitate discussion. Scenario Company X, a family business owned by a father and two sons (all directors) encounters diffi culties when the father, the majority shareholder, falls ill and no longer has capacity to make his own decisions. The fi rst son is heavily involved in the day to day running of the business with little or no input from the second son. Company X has only one type of share in issue and no formal legal documentation exists to govern the relationship between the parties. Challenges The above scenario presents many common problems faced by family businesses including succession, control of the company and how to deal with inactive directors and troublesome minority shareholders. The recommendation of our family business team when starting a family business is to think beyond family relationships and blood ties and formalise the relationship between members in the form of a written agreement, such as a shareholders agreement or employment contracts for different members. This process promotes discussion on key, often tricky, areas and helps create certainty and stability. Although there are solutions available without the formal paper work in place, these can often be time-consuming, risky, expensive and increase tension between the parties. Some possible solutions are set out below. Solutions There are provisions to allow shareholders to remove a troublesome director under the Companies Act 2006 (Companies Act). However, such a move requires an ordinary resolution (i.e. over 50% of the vote). In this situation: not straight-forward. If the father has granted a power of attorney then the attorney may be able to exercise their vote to remove the errant director. However, among other factors, the attorney would need to be satisfi ed that they were meeting their fi duciary duties to the father. An alternative may be to issue more shares to the fi rst son to give him a majority of the shares. However, this depends on the provisions in the articles as, under the Companies Act, there are pre-emption rights which are intended to prevent one shareholder swamping the others. In addition, the majority shareholders could open themselves up to a minority prejudice claim. Removing a minority shareholder is often harder to resolve, takes more time and as such can prove costly. Our team of family business specialists recently negotiated a hostile sale of shares from an inactive member. It was an expensive deal where the team had to persuade the minority shareholder to part with his shares in the company, something that family members are often reluctant to do due to their emotional attachment to the company. Conclusion Corporate governance and succession is not always straight-forward and so a formal agreement along with a well-drafted set of articles specifying the roles of individual members and the rights attached to their shares would help avoid the above issues. Our team of family owned business specialists are well placed to provide bespoke solutions to help your company overcome problems and continue to grow and fl ourish. We look forward to seeing you at our seminar where we will explore these issues further. “Think beyond family relationships and blood ties and formalise the relationship in a written agreement.” Lottie Fletcher Associate 01603 756545 lottie-fl [email protected] Clear Legal Advice Cambridge Chelmsford Ipswich Norwich www.birketts.co.uk/familybiz The Family Business July 2017 Brand protection: make your mark Every family owned business, whether it’s Fortnum & Mason or RJ Balson Butchers, relies on a name to identify its business and distinguish it from others. Despite the family brand forming an integral part of any family business, formal brand protection is an area often overlooked. Regardless of business type, your brand name is always worth protecting to ensure that the values and characteristics associated with your family brand, built on by each generation, are attributed solely to your family’s business. Is registering your company name enough? It’s not a legal requirement to register your ‘brand name’ as a trade mark and it’s a common mistake to assume that a company name and/or domain name registration is all that’s needed to protect a business or brand name, without appreciating there is a separate trade mark registration system. How will a trade mark registration help? Without a trade mark registration, you have to rely on common law rights and reputation built up through long term use of the family brand, whether it be by way of company name, domain name or otherwise, to prevent others from using an identical (or similar) name. Such passing off actions are notoriously time consuming and expensive. In addition, whilst many family owned businesses have traded under the family name for generations, to prove the requisite reputation can still be diffi cult if the commercial use is localised, which is often the case for family owned restaurants or retailers, for example. Another key issue for family owned businesses arises out of the natural tendency to use the family name as the primary trade mark, being a name that all family members feel entitled to use. With an unregistered arrangement, however, there is no control over the continued use of that family brand when the commercial relationship between succeeding generations breaks down, or the interests of individual family members diversifi es. To ensure the longevity of the business and the brand across generations, best practice is to take affi rmative steps to convert the intangible reputation and goodwill to a tangible commercially exploitable asset by way of a trade mark registration. Is the registration process complicated? A trade mark registration is relatively easy to obtain and enforce, and provides certainty to your position. It gives the owner a clear statutory right to the exclusive use of the mark in the territory (such as, the UK) in connection with the goods or services for which it is registered. There is no time limit on protection as long as renewals are carried out and as long as the trade mark remains in use, and it allows you to apply the ® to your products and services to indicate the proprietary rights to the name. Even if your family owned business is not aspiring to be the next Fortnum & Mason, your family brand can be a signifi cant source of value and should be nurtured and protected to reach its full potential. “To ensure the longevity of your business and brand, convert your intangible reputation and goodwill to a tangible commercially exploitable asset by way of a trade mark registration.” Nellie Jackson Senior Associate 01473 299154 [email protected] Clear Legal Advice Cambridge Chelmsford Ipswich Norwich www.birketts.co.uk/familybiz The Family Business July 2017 Ernest Doe & Sons: more than a family business Ernest Doe & Sons are a large family owned business. By that I mean, not only are they large by turnover, but a large number of the family and extended family have a direct interest in the business. That business will be 120 years old next year, and with Colin Doe currently at the helm the business is in rude health. As, indeed, is Colin himself, a very keen cyclist who is undertaking a charity cycling challenge that I will come on to. This is a business that clearly values its people, and its community, and even those (like me) who offer external assistance. So much so, in fact, that recently I had the pleasure of being invited, along with other advisers, to attend an open day at the premises of the business in Ulting, Essex, where I had the super privilege of being allowed to drive some very large and exciting vehicles, including a combine harvester and a 20 tonne digger. There is a very simple pleasure in digging a massive hole! There is a wider point here, which is that Colin has ensured that Ernest Doe & Sons habitually embraces the various different factions that infl uence it – the night before, for example, it was the local Young Farmers group who had been given the same opportunity. The extremely helpful staff had given up their time outside of normal hours to promote the vision and brand of the business, and their willingness to do that is refl ective of just how important each member of staff is made to feel by the Doe family. Back to Colin and that cycle challenge. He is raising money for Parkinson’s UK, by aiming to conquer the Italian Alps on 9 and 10 September this year. If you search his name on the Just Giving website you will fi nd the details, and once again this is just another example of how family owned businesses, no matter how busy they are looking after the family’s assets and future, will always make time for great philanthropic efforts, and this is a prime example of that. Ernest Doe & Sons is a fi ne example of an East Anglian family owned business, which we are proud to advise, but which we are equally proud to support in its non-business efforts, just as one sees throughout family businesses in general as a rule. And whilst we are happy to see the business look to climb to greater heights – through its expansion, and its addition of new lines – we equally expect to see the same of Colin in his personal endeavour. “A business almost 120 years old that clearly values its people, and community ...” Adam Jones Partner 01245 211332 [email protected] Colin Doe (centre), with his team and guests Clear Legal Advice Cambridge Chelmsford Ipswich Norwich www.birketts.co.uk/familybiz The Family Business July 2017 Warmer Homes Heating & Renewables wins East & East Anglia Family Business of the Year Award 2017 We were delighted to pull together such a vibrant bunch of family businesses for the 2017 awards, some that have succeeded for numerous generations and continue to thrive, and others that are relatively young but have great values at the heart of what they do. Warmer Homes www.warmerhomesuk.com are a family fi rm through and through and although one of the newer family fi rms in the awards this year they are focused on customer service with family values at their core. They are keen to make their mark and challenge perceptions of their industry and pride themselves on exceeding the expectations of their clients. Their goal is simple - to provide unparalleled levels of customer care and advice, while delivering products at the highest quality but affordable prices. This isn’t just a business owned by a family but a real family run business with members of the Pearce family involved at every stage. Steve Pearce, Managing Director of Warmer Homes Heating & Renewables added, “We are absolutely thrilled to be the winners of the East and East Anglia Family Business of the Year title. These awards recognise the role families play in business across the UK, and family really is key to the successful running of our business. Members of our family are involved in every aspect of what we do, from the initial meeting of customers right through to handing over of the boiler equipment following installation.” “We really do appreciate the time and effort that has gone into making this award happen and want to acknowledge the hard work that every member of our family puts into the day to day running of the business.” The Family Business of the Year Awards are organised by Family Business United, the award-winning magazine and resource centre that champions and celebrates the family business sector. Now in their fi fth year, these awards recognise the diversity, strength and depth of family fi rms across the UK and seek to highlight the contribution that family fi rms make to the UK economy. Open to family fi rms of all generations, sizes and sectors, these awards recognise some outstanding family fi rms and help to put family businesses on the map. Judged by a panel of experts from the world of family business advising together with a group of family business representatives, the awards are well respected and sought after accolades. Paul Andrews Founder and Managing Director Family Business United [email protected] @FamilyBizPaul “Warmer Homes isn’t just a business owned by a family but a real family run business with members of the Pearce family involved at every stage.” Left to right: Adam Jones, Andy Pearce, Steve Pearce, Katie Pearce, Paul Andrews

Birketts LLP - Adam Jones, Kitty Rosser, Lottie Fletcher and Nellie Jackson

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