Tolhurst Fisher’s Corporate Finance team advises on Thai food cafe chain acquisition 05/12/2014

Tolhurst Fisher’s Corporate Finance team has just acted on behalf of Minor Food Group PCL in its acquisition of the Grab Food Thai café chain through one of Minor Food Group’s subsidiary companies.

Grab Food currently operates from two outlets in London and has ambitious plans to expand the business.

Minor Food Group owns, operates or franchises more than 10 brands and a profitable network of more than 1,500 restaurants in 17 countries across Asia.  This was its first investment into the UK.  Minor Food Group is a wholly owned subsidiary of Minor International PCL which is a leading hospitality operator with more than 100 hotels worldwide and is listed on the Stock Exchange of Thailand.

The Tolhurst Fisher team led by Chris Bard and Graeme Provan advised Minor Food Group throuhout the deal process.

Chris Bard, Commercial Partner in Tolhurst Fisher’s Southend office, commented:

‘Minor Food Group is a sophisticated restaurant operator and investment entity with a great deal of experience across various jurisdictions.  Tolhurst Fisher’s role in this investment was to provide assistance with due diligence and advise on the joint venture structure and transaction documents in light of English corporate law.  Minor Food Group’s expertise in the restaurant sector will be invaluable in assisting Grab Food to achieve its ambitious growth plans for the future.’ 

Supasith Xanasongkram, Vice President - Legal of Minor Food Group said of Tolhurst Fisher:

“We greatly appreciate your professional and quality services which was a key part of making (the investment) happen.”

Holiday Pay and Overtime

The Employment Appeal Tribunal (EAT) has recently issued its decision in the case of Bear Scotland Ltd –v- Fulton & anor. This is a decision that employers and employees alike have been eagerly anticipating as the appeals concerned whether the calculation of holiday pay should include an amount in respect of “non-guaranteed” overtime.  This is overtime that the employer does not have to offer to the employee but under the terms of their contract the employee is obliged to accept it.

In the UK we have the Working Time Regulations 1998 (WTR), which implement the Working Time Directive.  The EAT held that under the Working Time Directive this “non-guaranteed” overtime should be taken into account, and also that the WTR should be interpreted to give effect to this. The ruling will apply to any overtime that is regularly worked, whether or not it is compulsory.

The reason for this decision is that under EU law workers are entitled to receive their “normal remuneration” when taking holiday leave, and so where overtime is regularly required by employers it makes sense this should be included as part of normal remuneration.  The EAT decision is in accordance with the recent European decision of Lock –v- British Gas Trading Ltd.

Employers should however note that whilst under the WTR workers are entitled to 5.6 weeks holiday per leave year, the requirement to include the overtime payments only applies to the 4 weeks entitlement that is conferred on workers by the Working Time Directive.  So whilst our domestic law provides a more generous holiday entitlement than EU law, the EAT ruling does not apply to the additional 1.6 weeks holiday entitlement that domestic law provides.

The key concern for employers has been whether this ruling will open the floodgates for historical claims for holiday pay that previously did not include the overtime.  To an extent the EAT have tried to restrict the scope for workers to recover underpayments.  Employees will not be able to claim more than 3 months after the last incorrect payment.

There are wide-reaching legal and practical implications arising from this decision.  The Business Secretary, Vince Cable, has announced a task force will be set up to assess the impact of the ruling on businesses. 

Over coming weeks the full ramifications of the decision will become clear so watch this space.

If you require assistance in reviewing your holiday pay procedures or would like advice on how best to manage this then please contact Marsha Robinson.

Small Claims - to issue or not to issue?

 

As a Trainee Solicitor in Tolhurst Fisher’s dispute resolution department, I often receive queries from individuals and companies regarding potential claims which, due to their monetary value, are considered by the Civil Procedure Rules and the Court to be small claims.

The small claims limit was doubled from £5,000 to £10,000 in 2013.

While the courts may consider claims of this size to be small, individuals and companies may not see them in quite the same light.  These are significant sums for most individuals and certainly for small or medium sized businesses.

The problem with small claims is that legal costs are generally not recoverable, other than certain fixed costs which are very minimal in value.  Where claims exceed £10,000, the general principle is that the losing party pays the costs of the winning party (or at least a substantial proportion of them).

The fact that legal costs are not recoverable on small claims provides an individual or company with a conundrum as to whether or not to issue proceedings to seek to recover an outstanding debt. The options available are either to take a commercial view that the time, effort and potential expense involved in pursuing the debtor is simply not worth it or to ‘bite the bullet’ and issue proceedings. Unfortunately, the more savvy and unscrupulous debtors are aware of the costs implications in issuing proceedings on small claims and often use this to their advantage in attempting to avoid repaying debts that are clearly due and payable.

For those that do proceed with a claim, there is yet another decision to consider - whether or not to instruct a solicitor to act and incur non-recoverable legal fees or to act as a litigant in person.  

At Tolhurst Fisher LLP we can assist you with small claims matters by fully discussing and exploring your options and being as flexible as possible taking into account your specific requirements.  We can agree a fixed fee with you to act on your behalf and deal with everything relating to the claim.  Alternatively, we can assist you by agreeing a bespoke approach to your claim such as drafting the necessary court documents and providing advice generally if you decide to deal with the claim yourself.

 If you do require advice or assistance on a small claim, do not hesitate to contact the experienced dispute resolution department at Tolhurst Fisher LLP.

Danny Turpin

dturpin@tolhurstfisher.com

A new lease of life for property values

Throughout the UK, short residential leases are a ticking time bomb for unsuspecting homeowners, potentially wiping tens of thousands of pounds from property values. Yet, this problem can easily be avoided by simply extending the lease before it falls under 80 years - a legal process that, if done correctly, can pay for itself many times over when it's time to sell up.

Robert Plant, Commercial Property Partner at leading law firm Tolhurst Fisher LLP advises that 'Under the 1993 Leasehold Reform Act, qualifying tenants have the statutory right to extend the lease on their property by 90 years, plus the present unexpired term. So, for a lease with 90 years left, this would be extended to 180 years, and all at a peppercorn rent - a small token payment used to fulfil the requirements of a legal contract.'

Why act before the lease reaches 80 years? For the extension of any lease below this length, legislation entitles the freeholder to 50% of the marriage value. This is the increase in the property's value on completion of the lease extension.

Naturally, the shorter the lease becomes, the bigger the rise in value, with the leaseholder facing a much larger bill to extend it. For any lease greater than 80 years, the marriage value is deemed to be nil.

In a turbulent economic climate, therefore, it is crucial for leaseholders to act now to protect their investment, rather than later. It is a point highlighted by the plight faced by many leaseholders in the process of moving home.

Sensing their desperation to sell, unscrupulous freeholders have been known to delay the process and even enter into costly private arrangements knowing they have the leaseholder over the proverbial barrel.

The lease extension process begins with a notice served to the landlord and normally takes around six months. In reality, the experience should be hassle-free for the leaseholder, providing everything is done correctly.

Lease extension is a specialised area of law and very time sensitive. Any delays or errors could cost anywhere between a few hundred to thousands of pounds, with the leaseholder forced to wait 12 months before the process can be restarted. Therefore, choosing the right solicitor is an absolute must.

Tolhurst Fisher is a leading law enfranchisement law practice and a member of the Association of Leasehold Enfranchisement Practitioners, with extensive specialist knowledge of all aspects of lease extension. This includes experience in representing clients throughout the leasehold valuation tribunal process.

Acas early conciliation

The Advisory Conciliation and Arbitration Service (Acas) is an independent organisation set up to impartially act as a liaison between employers and employees (whether current or former) in the event of some form of employment dispute. The aim is to achieve settlement of any such disputes.
Previously Acas became involved in employment disputes automatically after a claim had been issued in the Employment Tribunal. Parties could (and still can) contact an assigned Acas representative if they wished to discuss settlement.

However since 6 April 2014 there is a mandatory Acas early conciliation process which must be followed by most Claimants who wish to present a Tribunal claim. This means before a claim is issued in the Tribunal the Claimant must contact Acas first.

The aim of the government is to reduce the number of claims that proceed to Tribunal by imposing an obligation on parties to attempt early settlement.

There is a fairly specific procedure to be followed by a Claimant in contacting Acas by using the Early Conciliation form or telephoning them. There are also various rules relating to time limits as usually a Claimant will only have 3 months from the date of dismissal in which to bring a claim.  A Claimant will always have one month in which to present their claim after the early conciliation period has ended.

Once the Claimant has contacted Acas then the conciliation officer will try to promote settlement for a period of one calendar month (this may be extended by up to 14 days).

There are benefits to having Acas involved. They are of course a neutral third party and there is no charge made for their conciliation services. However employers are not obliged to engage in the early conciliation process and can refuse to participate.

If you require more information on early conciliation please contact Marsha Robinson here.

Danny Turpin now a solicitor in training!

We are pleased to announce that as of today Danny Turpin, previously one of our paralegals, is now officially a trainee solicitor.

Danny studied a law degree at Anglia Ruskin University in Chelmsford and after graduating completed his LPC. He joined Tolhurst Fisher in 2013 and has since been a great asset to the firm, working with our Dispute Resolution and Family and Divorce departments.

I am sure you will join us in wishing Danny the best of luck with his further training.

If you would like to contact Danny you can do so here.

Acas early conciliation

The Advisory Conciliation and Arbitration Service (Acas) is an independent organisation set up to impartially act as a liaison between employers and employees (whether current or former) in the event of some form of employment dispute. The aim is to achieve settlement of any such disputes.

Previously Acas became involved in employment disputes automatically after a claim had been issued in the Employment Tribunal. Parties could (and still can) contact an assigned Acas representative if they wished to discuss settlement.

However since 6 April 2014 there is a mandatory Acas early conciliation process which must be followed by most Claimants who wish to present a Tribunal claim. This means before a claim is issued in the Tribunal the Claimant must contact Acas first.

The aim of the government is to reduce the number of claims that proceed to Tribunal by imposing an obligation on parties to attempt early settlement.

There is a fairly specific procedure to be followed by a Claimant in contacting Acas by using the Early Conciliation form or telephoning them. There are also various rules relating to time limits as usually a Claimant will only have 3 months from the date of dismissal in which to bring a claim.  A Claimant will always have one month in which to present their claim after the early conciliation period has ended.

Once the Claimant has contacted Acas then the conciliation officer will try to promote settlement for a period of one calendar month (this may be extended by up to 14 days).

There are benefits to having Acas involved. They are of course a neutral third party and there is no charge made for their conciliation services. However employers are not obliged to engage in the early conciliation process and can refuse to participate.

If you require more information on early conciliation please contact Marsha Robinson here for further information.

Financial Penalties in the Employment Tribunals

On 6th April 2014 Section 16 of the Enterprise and Regulatory Reform Act 2013 (“the Act”) was brought into force. This amends the Employment Rights Act 1996 and gives Employment Tribunals the power to order employers to pay a penalty if the employer has breached any of the worker’s rights to which the claim relates and has one or more aggravating features.

The amount of the penalty is 50% of the amount awarded to the employee subject to a minimum of £100 and a maximum of £5,000.

The Tribunal must have regard to an employer’s ability to pay in deciding whether to order the employer to pay a penalty.

There is nothing in the Act which says what would amount to an aggravating feature, but the guidance notes published by the government suggest that relevant factors might include:

• the size of the employer;
• the duration of the breach of the employment right and the  behaviour of the employer and of the employee;
• whether the action was deliberate or committed with malice rather than a genuine mistake; whether the employer had a dedicated human resources team; or
• where the employer had repeatedly breached the employment right concerned.

In the situation where a Tribunal finds against the employer, but makes no award (e.g. where they allow the parties to agree compensation between themselves following a judgment that the Employer is liable) the Tribunal can still use its discretion to set the amount of the penalty (subject to the £100 minimum and £5,000 maximum).

This represents just the latest in a series of changes which mean an employer who loses at an Employment Tribunal hearing could end up paying out far more than an employee who loses.  For example, it was already the case that if an employer has not complied with section 1 of the Employment Rights Act (provision of written particulars of employment), the Tribunal can award up to 4 weeks gross pay to the employee.  In addition if the employee was dismissed in breach of the Acas Code of Practice, the Tribunal can order a 25% uplift on any award made.  Finally the Tribunal can also order the employer to pay the fee incurred by the employee in bringing the claim, which could be as much as £1,200.

So employers do need to be aware that there are additional amounts that they could have to pay out over and above the award for loss of earnings and the basic award.  For that reason it is important to make sure any dismissal is done properly and fairly in accordance with the law and the Acas Code of Practice. This means that even if a claim is brought the employer can defend it confidently.

Please contact Marsha Robinson here for further information.

Essex Young Farmers' Country Show 2014

Last weekend Tolhurst Fisher moved out from behind our desks and in to a field, at the annual Essex Young Farmers' Country Show.

Based at Boyton Hall, Roxwell the event attracts an average of 13,000 visitors each year. With a range of attractions and events the day is popular with families.

Our stand this year was near the Game Fair ring where we had the pleasure of watching the Dog and Duck Show and the Super Young Farmer Competition - which involved members spinning, jumping and ending with their face covered in flour!

We felt the event went really well and it was great to see some familiar faces stop by our stand. We are already looking forward to next year.

Westcliff RFC Under 10 Tour

Tolhurst Fisher were proud to sponsor the Westcliff RFC Under 10's team on their rugby tour in Holt.

Our logo took pride of place on the front of the boys shirts and we are pleased to hear that the boys not only looked the part but felt it too.

We would like to extend our congratulations on their hard work throughout the tour!

WRFC Annual Mini Festival 2014

Tolhurst Fisher has long been sponsors of local rugby club Westcliff RFC and last weekend saw them host their annual mini’s festival, of which Tolhurst Fisher was the principal sponsor.

This year we looked to do something a little different and alongside sponsoring and producing the programmes we arranged for an award to be presented. The Tolhurst Fisher Fair Play Award was to be awarded to the club that played with the biggest smile and showed the greatest sportsmanship throughout the day.

Despite the hailstones and rain our Chris Bard, alongside the referees for the day, set about to find the club that deserved to win the award the most.

We are pleased to announce that Ongar were the overalls winners of the Fair Play Award. We congratulate them and all of the other teams on their efforts at the festival.

UPDATE - LLP Tax Changes

This post is an update to our previous blog post which you can find here.

HMRC has now published its revised guidance on the new tax rules for salaried members of LLP’s. HMRC has refused calls to postpone or scrap these changes, but has made some small concessions. 

LLP members will have to satisfy at least one of the three following conditions to prove that they are a true partner in the business.  The revised guidance provides some clarity in the interpretation of each condition as follows:-

Condition A – Disguised Salary

A member must receive a variable profit share based on the overall performance of the firm.

HMRC will be looking for a reasonable expectation that at least 20% of a member’s reward for services will be a share of the overall profits of the firm. 

Condition B – Significant Influence

A member must have significance influence over the affairs of the firm.

HMRC provide examples of those who do have a significant influence including those involved with the management of the business as a whole or senior members who may have not have day to day management, but their role means that they can still exert significant influence.  There is no line in the sand as to the number of members which can exist consistent with all of them having significant influence, this will vary from firm to firm.

Condition C – Capital Contribution

A member must contribute at least 25% of their salary to the capital of the firm.

HMRC recognises that many firms will struggle to obtain loan finance by 6th April 2014.  In order to avoid a position where a member may be treated as an employee for a short period whilst they obtain finance in order to invest capital, HMRC is giving a three month grace period.  Provided that there is an unconditional commitment to make such a contribution by 6th April, and that contribution is then made within 3 months, this condition will be satisfied.

What to do next?

It is important to review your existing partnership structure with a view to making any necessary changes in order to keep your structure in line with these changes and therefore, mitigate any unnecessary additional tax liabilities taking effect from 6th April 2014.

Tolhurst Fisher acts for a number of professional partnerships and can assist you in reviewing and your existing agreements and amending as necessary.  Please contact our commercial team by emailing commercial@tolhurstfisher.com for further information.

Employer Protect – now including Pursuit Cover

We recently launched our Employer Protect Scheme, which is designed to help employers manage all of their Employment Law and HR requirements in an affordable and effective way. We can provide advice on the basis of fixed monthly fees to allow you to set your budget, or if you prefer we can continue to provide ad hoc advice as and when required. The most important element of the scheme is flexibility.

A particular benefit of our scheme is that we offer insurance protection against legal fees and awards/settlements in the event of a Tribunal claim against you.  This is an optional extra.  We are pleased to announce that we can also now offer Pursuit Cover as part of any policy.

Many of our clients have employees working for them who are subject to post-termination restrictions. The aim of these restrictions is to protect the business when an employee leaves, for example to prevent the solicitation of clients.  However, they are notoriously expensive to enforce, and this often deters clients from enforcing what is necessary to protect their business.  The benefit of the Pursuit Cover is that it covers High Court costs in respect of enforcement of restrictions.

The Pursuit Cover is of course not compulsory within the insurance policy, but we feel it may be of great benefit to some of our clients.

For more information take a look at our Employer Protect leaflet here

Growing bitcoin use fails to mask payment risks

Rarely out of the financial pages, virtual currency “bitcoin” is beginning to gain limited acceptance amongst traditional retailers, with some specialist food and drink outlets now able to accept digital money.

But the attractiveness of an untraceable payment method that is free from regulation or supervision, and knows no international or political borders remains, for many, exactly the reason to steer clear. 

Allegations of connections with criminal gangs have done little to boost bitcoin’s image, whilst storing a virtual wallet on a computer hard drive magnifies the risks from a failed or lost laptop for even the most law abiding consumer. Such are the growing pains for a new payment method.

Risks aside, few can doubt the rise in bitcoin’s popularity, and any retailer that fancies dipping a digital toe in the world of peer to peer payments needs to consider whether it is a good fit for its business.

Currency volatility is well known to those that trade internationally, but the frequency of wild gyrations in bitcoin values are rarely seen in the mature foreign exchange markets.  With hedging virtually non-existent, holding bitcoins without offsetting liabilities exposes you to a huge risk.

Although the US is making some progress, there is currently little in the way of a distinct regulatory framework in the UK.  The traditional payments system relies on confidence, underlined by law, to function effectively and huge problems could result without these.

For the time being Tolhurst Fisher will not be accepting bitcoin payments, but if your business requires advice on collecting or making payments please contact our commercial department by emailing commercial@tolhurstfisher.com for further information.

Growing Your Business

The UK economy grew by 1.9% in 2013 according to the Office for National Statistics.  Chancellor George Osborne recently commented that “the economic recovery is broadly based with manufacturing growing more than other sectors”.

Looking specifically at the manufacturing industry, there are many exciting way to grow and expand your business.  Some of these ideas may include:-

Distribution Agreements

This is a fairly low risk means of expanding a business into new markets or territories.   Generally, the manufacturer sells products to the distributor, who then sells the products on to customers, adding a margin to cover costs and profit.  In purchasing and reselling the products, the distributor contracts both with the supplier and with the customer, and title to the products in question will pass to and from him.

Agency Agreements

An agent would be an intermediary involved in making a contract between the manufacturer and the manufacturer’s customer.  Therefore, the contract for sale of the products is made between the manufacturer and the customer. The agent generally has no contractual liability to the customer. 

It is essential to use clear terms when defining whether the relationship between manufacturer and intermediary is one of agency or distributorship. Lack of clarity may lead to unnecessary litigation. Tolhurst Fisher can assist you in drawing up agreements that would be appropriate for your planned business expansion and would also be happy to review any existing agreements.

Please contact our commercial department by emailing commercial@tolhurstfisher.com for further information.

Leading the way in alternative funding

Although historically low interest rates would ordinarily encourage leveraged business expansion, the message we most frequently hear from the corporate community is that access to traditional lending remains, at best, restricted.  In some cases the amount of funding on offer falls so far short of business requirements that expansion plans have to remain on hold and opportunities are missed.

This environment has seen a surge of alternative funding vehicles.  Grabbing the financial headlines is “crowdfunding”, a collective term where a project is funded by numerous investors offering a relatively small amount.  Still in its infancy, this type of finance is believed to be worth over £350mn already, and is now being watched by the Financial Conduct Authority.

Fuelling the rise of alternative funding schemes is widespread investor frustration with historically low interest rates.  With few signs that any monetary tightening is imminent, the prospect of accessing corporate debt markets is clearly attractive to the right investor with the right risk profile.

Tolhurst Fisher LLP has been involved with a number of recent transactions where private individuals have funded corporate projects, either entirely, or to bridge a gap in existing funding lines.  Whether we are acting for the borrower or lender, we can advise on the most appropriate security structure and lending documentation, often smoothing over complexities and in short timeframes.

If you are in the process of investing in a business, or if you are receiving external investment, call Tolhurst Fisher’s corporate finance specialist Edward Garston on 01245 216100 to discuss turning your proposal into reality.

LLP Tax Changes - Review Your Partnership Agreement Now

The tax assessment of LLP’s and mixed member partnerships will almost certainly change on 6th April 2014.  Technical consultation on the Finance Bill 2014 has now closed and HMRC should publish its revised guidance imminently.  However the draft legislation is expected to go ahead in substantially its current form. 

The cumulative effect of these changes will mean that some partners could face a large increase in their tax bill.  As a result many firms will look to mitigate the impact of these changes by reviewing their partnership structure.  

Two strands of change to partnership taxation

The main objective of the reforms is the removal of perceived structural inconsistencies in the tax system.  This will be achieved by making changes to two distinct aspects of current partnership tax rules:- 

• Removing the presumption of self-employment for salaried members of an LLP in order totackle what HMRC views as “disguised employment”; and
• Introducing new rules to apply to mixed membership partnerships (not just LLP’s).

Disguised Employment

Currently, individual members of an LLP are always taxed on a self-employed basis irrespective of the terms.  

Under the proposed changes, LLP members will have to satisfy at least one of the three following conditions to prove they are true partners in the business:-

• A variable profit share based on the overall profits of the firm;
•   Significant influence over the affairs of the firm; or
•  A contribution of at least 25% of their fixed pay is made to the firm’s capital.

There remains some uncertainty about how exactly these conditions will be applied but the basic principles will probably remain.  There is also some doubt about the timing of the implementation of the changes, particularly given that so many LLPs still follow the traditional partnership year end of 30^th April. 

Mixed membership partnerships and asset disposals

There are a number of structures used by partnerships that involve using corporate partners for various reasons.  

The Government now aims to prevent partnerships from using corporate partners to reduce the tax liabilities of individual members.  Partnerships may however still continue to use a corporate member for non-tax purposes. 

It is not intended for there to be any exemptions for particular partnerships, for example, family partnerships.

What to do next?

It is important to review your existing partnership structure with a view to making any necessary changes in order to keep your structure in line with these changes and therefore, mitigate any unnecessary additional tax liabilities taking effect from 6^th April 2014.

Tolhurst Fisher acts for a number of professional partnerships and can assist you in reviewing and your existing agreements and amending as necessary.  Please contact our commercial department by emailing commercial@tolhurstfisher.com for further information.