SINCE the EU referendum in June 2016, the issue of Brexit has dominated and transformed the UK’s economic and legal landscape. From fluctuations in the pound, to the ongoing issue of when Article 50 will be triggered, Britain’s intention to leave the EU has influenced every business in different ways: some have seen their profits fall due to currency uncertainty, while others have thrived on increased exports and seen accelerated growth. Regardless of the bearing that Brexit has had on your industry in the short term, undertaking a review of your business now is fundamental to the long-term potential and success of your business.
The first step to ensuring potential for growth lies in getting the structure of the business and its foundations right. Whether you operate a company, partnership or are a sole trader, understanding your legal structure and the parameters that you operate within is fundamental. One of the key foundations of a business operating as a company, for example, is its Articles of Association. Although the Companies Act 2006 came into force a decade ago, many companies are still operating under outdated Articles of Association dating from the Companies Act 1985 which may not be compatible or suitable to the business and could hinder potential for growth.
Failing to get the business structure right can also have significant accounting, tax and legal implications, so it is important to have a thorough understanding of the mechanisms of any particular business structure. Investment schemes, for example, are a popular way to raise finance and there are a range of schemes that can help a business flourish if it meets the qualifying criteria. Whether it is an EMI Scheme to reward loyal employees or an EIS Scheme to raise initial capital, there can be significant rewards to help a business grow. However, if you have the wrong structure in the first instance, both you and your investors could stand to lose the benefits you originally set out to gain.
The second step to ensuring potential for growth lies in the agreements that govern how a business will be operated and managed. Shareholders agreements, investment agreements and partnership agreements are all key documents that any business should have in place where there are multiple business owners. Although agreements such as these are arguably still a foundation of a business, they can often be overlooked or not prioritised. Such agreements are particularly crucial in difficult or uncertain times, as they establish how an issue will be addressed and resolved (as well as how the business will be governed and managed more broadly). With the future uncertain, it is fundamental to ensure that businesses have these agreements in place and that they are up to date. If businesses have a clear understanding of how any issues or disputes will be resolved, there is no need for any such circumstances to affect continued growth.
The business structure and internal agreements are just two areas that need to be considered to ensure a strong foundation from which to grow a business, and taking the time to undertake a legal review of your business now could save many concerns further down the road and better enable you to plan for the growth of your business.
Franklins offers a legal review service for businesses. For more information contact Holly Threlfall on 01604 828282 or email
By Holly Threlfall
Solicitor
Corporate Services
Franklins Solicitors
