Article nav
Download PDF Get a free consultation

Introduction

Running a successful food or beverage product is a dream most foodies have considered. And why not? The world needs innovation in food and drink and it’s a deliciously rewarding business venture. Nevertheless, according to the latest market research, over three quarters of all new product launches across the Fast-Moving Consumer Goods (FMCG) sector fail in their first year. Whilst we didn’t want to begin on such a sour note (!) it’s important to emphasise this fact so you can embark on your endeavour with your eyes wide open. A lack of success can often be down to not having the right product at the right time, marketing it wrong, running out of money or poor management (amongst many other things). However, a lot of these common problems can be alleviated, and you can protect yourself through knowing your rights with regards to the law and having the right contracts in place. At the end of 2016, YouGov interviewed over 1000 UK SMEs and we had the stats analysed by the Centre of Business and Economics Research (CEBR). According to this research, the Food and Beverage Sector loses over £1.5 billion through not taking care of their legal business. Ignoring the law means legal problems will eventually bite, and we cannot express how important it is to protect your ideas and the foundations of your product from the outset. We hope you enjoy this plain-English LawBite (we realise our name is quite apt here!) guide to successfully running your FMCG brand with the business’s legals in mind. Please note, some of these stages will of course over-lap and some things may not necessarily apply to you...

Hiring Staff

At the beginning of your venture you’re going to be the director, sales exec, marketer, accountant, administrator, client handler and everything in between but at some point there’s a rather large chance you’re going to need other people occupying these roles. There are different ways in which people could be hired. The most obvious of these is as an ‘employee’ either full-time or part-time. You can also hire ‘casual or zero hours workers’ or agency staff. There is also the option of hiring consultants or contractors, who can help you with specific projects or strategic decisions. In general, if you’re hiring staff, there are several practical matters you should be aware of:

  • If you have ‘employees’ then you must have employers liability insurance.
  • You will need to set up payroll and ensure that people are paid on time and taxes are deducted (though this doesn’t apply to agency staff as they will be paid by the agency, who you will pay).
  • It is recommended that they have clear contracts in place.
  • You have to provide certain information to an ‘employee’ about their employment within two months of the beginning of their employment. It is recommended that all employees sign contracts of employment containing this information and other terms that protect your business.
  • You should also ensure you comply with health and safety legislation.
  • A commitment to equal opportunities when hiring staff means that you will attract the widest pool of talent; there is credible evidence that this will benefit your business in the long-run.
  • It is recommended to have a range of well-drafted policies to provide sensible and appropriate guidance as to how people should behave within the organisation.

As many businesses worry about the effects of Brexit, the latest government statistics suggest businesses are holding off employing permanent employees, engaging contractors instead to provide additional resources

One of the advantages of engaging contractors is that they provide a business with flexibility, without the administration that is often involved with employees, even those engaged on a short-term basis. Normally you have no PAYE or National Insurance contributions to administer – payments are made without deductions as you would pay any other supplier. Many contractors are available on short notice, no waiting around before they can start, and they don’t have the same legal protection as employees, like unfair dismissal, at the end of their contract.

Contractors are generally engaged for short-term projects or to provide particular expertise that a business doesn’t have. This allows you and your employees to focus on the company’s core products and talents. However, this may not allow your employees to learn new skills so you should balance a short-term need, with long term aims and staff development.

Contractors are usually paid more than equivalent employees, which may cause resentment amongst staff, but they may be cheaper overall than an employee. Contractors don’t get employee benefits like holiday and sick pay, and many work from home so don’t need office space and equipment. In addition, the business doesn’t have to pay employer national insurance contributions.

However, one area where you shouldn’t cut costs is the consultancy agreement with any contractor that you engage.

You have less control over a contractor than an employee, who you can tell how to do their job, when to do it and discipline them if they don’t. With contractors, you are relying on their expertise to ensure that they achieve the task that they are engaged to perform. The consultancy agreement should set out clearly what services the contractor is providing and the standard you expect of them.

There can also be tax implications if you call an individual a contractor when they are an employee. You need to make sure you’re compliant with IR35, if you’re not you may face claims from HMRC for underpaid tax, penalties and interest. The consultancy agreement should set out the nature of the relationship and include the key clauses that show that the contractor is not your employee. The agreement should also include a clause requiring the contractor to pay you back for any money that you have to pay if the contractor, is in fact, an employee.

The contract should set out who owns any intellectual property created by the contractor. Unlike an employee where most of the intellectual property that they create at work is owned automatically by their employer, this is not the case for contractors. They own the intellectual property rights in their services unless they transfer them to the business engaging them. This should be done in the consultancy agreement. It should also protect the confidential information and key business connections of the business through confidentiality provisions and restrictions both during and after the engagement, and a notice period allowing you to end the contract before the project is completed.

Marketing And Advertising: Promoting Your Brand

Even if you have a fabulous product which looks and tastes great with a wonderful team raring to go, you’re likely going to need to actively be promoting it from the start. Whilst carrying out these activities, there are certain legal considerations you should think about. Most are common sense but certainly worth mentioning. The government website quite plainly states what you can and cannot do:

All marketing and advertising collateral (e.g. flyers, online ads, business cards etc) must be:

  • An accurate description of the product or service. To elaborate further, to provide an ‘accurate’ description’ means that you are easily able to prove what you say. This also includes the price of the product, so if you’re charging VAT but fail to mention that in the pricing, that’s not accurate.
  • Legal
  • Decent
  • Truthful
  • Honest
  • Socially responsible (not encouraging illegal, unsafe or anti-social behaviour)

Data Protection Legislation

The law on Data Protection is becoming increasingly strict, with the introduction of new General Data Protection Regulations (subject now to Brexit) which introduces the new ‘right to be forgotten’. Anyone who processes personal information must comply with eight principles of the Data Protection Act which make sure that the information is.

  • fairly and lawfully processed;
  • processed for limited purposes;
  • adequate, relevant and not excessive;
  • accurate and up to date;
  • not kept for longer than is necessary;
  • processed in line with your rights;
  • secure; and
  • not transferred to other countries without adequate protection.

The Privacy and Electronic Communications Regulations (PECR) sit alongside the Data Protection Act. They give people specific privacy rights in relation to electronic communications.

  • There are specific rules on:
  • marketing calls, emails, texts and faxes;
  • cookies (and similar technologies);
  • keeping communications services secure; and
  • customer privacy as regards traffic and location data, itemised billing, line identification, and directory listings.

With regards to ‘direct marketing’, there are rules you must comply with if you will be contacting your database via phone or by email (if you are collecting this information from your website):

  • Cookies: As mentioned before, if you have a website, you must have a cookies policy which is easily understandable and states what you intend on using them for.
  • As a general rule, you must check to see if the person you are trying to contact is happy to be contacted by phone/fax/post/email and also give them the chance to object.
  • When you do collect their details and would like to send them other offers and promotions e.g. ‘10% off all order over £50 until 31 Jan 2017!’, you must get permission.
  • If another organisation e.g. an affiliate partner would also like to promote offers, in an email perhaps, you must make sure they are happy for you to share their information to a third party.
  • They should also be able to ‘opt-out’ if you are sending too many emails or texts, for example. It should be easy and obvious to do so.
  • A point to note is that if you are buying or renting databases, you have to have a system in place to demonstrate that you checked that the person who obtained the list of names gave his or her consent to being contacted. The person or business must have specifically opted-in to use it, otherwise it’s not legal.

Remember: If a person is unhappy about receiving unsolicited correspondence from your business, they could submit a formal complaint and you’re likely to get fined. Don’t get caught out!

Another effective way in which you could market and advertise your business is through an affiliate network or ‘partnerships’. These are people or businesses who don’t directly work for your business but would be happy to recommend the service if they feel their friends or customers could benefit. Sometimes there is a referral fee for the recommendation. If you intend on marketing in this way it is sensible to draw up an affiliate agreement which will clearly set out the parameters of the relationship and how the partnership will operate in practise. It doesn’t have to be complicated, just so everyone is clear about how it will operate.

Using an agency

Many food and drinks ventures decide to take on an agency, such as Hurricane Design who have particular expertise in the field and know exactly what it takes to grow and make a brand successful. Nevertheless, you need to know exactly what you’re getting into when you take on an agency, all the terms of which should be clearly defined in a ‘supply of services’ agreement. As with any agency you should request for them to sign an NDA too. You should have contracts to ensure agencies have adequate insurance cover for accuracy of their communications.

UK Government & European Commission Compliance

The Advertising Standards Authority (ASA) is the UK’s independent regulator and is responsible for ensuring that the UK Government and European Commission’s legislation around advertising are complied with.

As with the labelling on your product, any promotional material you employ to spread the word of your brand must comply with the European Commission’s ‘Health Claims’ directive. This is to protect consumers against misleading statements that encourage them to buy your products. Whether this is on a flyer, on a billboard or even on social media, make sure you are authorised to say what you are saying!

A crucial part of the Advertising Standards Authority’s work is concerned with the protection of children from potential harm, who are of course highly susceptible to influence from advertisers. As legitimate consumers, this doesn’t mean you can’t advertise to them, it simply means you have to follow certain rules. The Committee of Advertising Practice is the board which sets these rules (it’s ‘Code’) to be complied with and defines children as those under 16. Broadly speaking, marketers should ensure that communications don’t contain anything that is likely to result in the physical, mental or moral harm of a child or encourage bad behaviour. ‘Hard pressure’ and ‘hard-sell’ techniques should be avoided and you shouldn’t take advantage of negative emotions such as fear or a lack of self-confidence. You can use licensed characters and celebrities (except if you directly target primary and pre-school children) to promote products but this must be done with a due sense of responsibility e.g. you cannot suggest that buying the product will help the child emulate the figure!

Part of the government’s ongoing childhood obesity inquiry, in 2007 media and communications regulator Ofcom introduced broadcasting restrictions to significantly reduce the exposure of children to TV advertising of foods high in fat, salt and sugar or ‘HFSS’ foods. This means that if you ever wanted to go down the broadcasting route, you need to be aware of the restrictions which are still in effect today. For example, you can’t advertise food considered to be HFSS during in and around programmes with a ‘disproportionately high child audience’ (specifically appealing to children between 4 and 15).

You can see more detailed guidance on how to lawfully market and advertise directly to children with the CAP’s PDF guide. The rules are constantly changing, however, and if you are unsure you should always seek professional advice.

Promotions are a great way to drive sales and to increase awareness of your brand- but don’t get caught out by the laws that surround them. Promotions are defined as any ‘money off’ offers e.g. ‘two for the price of one’/’10% off’ or any prize draws, instant wins or competitions. You are also subject to the Consumer Protection from Unfair Trading Regulations 2008, Gambling Act 2005, Data Protection Act 1998 and the Betting, Gaming Lotteries and Amusements (Northern Ireland) Order 1985, so make sure the promotion is not unlawful from the outset. Here is a good example list of rules set by the Committee of Advertising Practice Code that you should be aware of, though this is not exhaustive so do check out their website PDF for the latest updates:

  • Your promotions must be safe and cause no harm to consumers or their property.
  • No promotions of alcohol to under 18s.
  • Must not be socially undesirable e.g. encourage irresponsible use.
  • Make sure you have sufficient resources to handle the delivery of the promotion effectively.
  • With the advertisement of the promotion, you must include all applicable conditions if omission of the conditions is likely to mislead. These include:
    • How to participate
    • Free-entry route explanation
    • Start date and closing date
    • Proof of purchase (if any requirements)
    • Description of the prizes and gifts
    • Any restrictions
    • Availability
    • Promoter’s name and address
  • Within the CAP’s Code, there are rules surrounding the specific targeting of children and also incorporating charity-linked promotions too so be sure to check out it out.

One final note on promotions is that you should also ensure any promotional partners have adequate insurance cover for prize winners. This should be stated in any contracts you draw up with them. If you have promotional items such as toys, you should make sure they are sourced in an ethical manner and conform to any necessary quality standards, recognisable by symbols such as .

Social Media

Social media is undoubtedly a great way to reach a huge audience, keep them informed about products, communicate with consumers and create a lasting brand voice. However, because it’s such an open and public platform, it naturally it opens up the door to potential risk.. trolls, angry consumers and silly staff mistakes are rife in this space and how you deal with them is very important. As social media is such a new phenomenon, the legislation that surrounds it is continuously up for debate, particularly with regards to freedom of speech and privacy. Nevertheless, here are a few words of guidance for navigating the deep ocean of social media communications..

  • If you have members of staff posting on the company’s behalf, mitigate risky engagement from the outset by facilitating training in this area and creating a staff policy as to what is acceptable and what isn’t, including the brand tone.
  • It should state somewhere in your staff contracts and within your employee handbook that posting from personal accounts a negative image about the company and/or its consumers will not be tolerated. This will strengthen your case should you end up in an employment tribunal. However, you should also establish a balance between monitoring employee social media accounts and respecting their rights, particularly to privacy.
  • Your business could be liable for damages caused by employees sending out inappropriate posts from personal accounts as well e.g. revealing customer data, so again you need to set out guidelines in your staff contracts and employee handbook.
  • Your business could be liable for damages caused by employees sending out inappropriate posts from personal accounts as well e.g. revealing customer data, so again you need to set out guidelines in your staff contracts and employee handbook.
  • If one of your members of staff does post something which could be construed as offensive (even if it was simply poor-judgement), the usual process is to delete the material and issue an apology.
  • If one of your members of staff does post something which could be construed as offensive (even if it was simply poor-judgement), the usual process is to delete the material and issue an apology.
  • And finally, remember your business has rights too. If you believe that someone is essentially lying about your product or an experience with your business in an attempt to sabotage it (e.g. a competitor or customer), seek professional advice as to what you can do.

Dealing With Problems

Consumer complaints

And finally, remember your business has rights too. If you believe that someone is essentially lying about your product or an experience with your business in an attempt to sabotage it (e.g. a competitor or customer), seek professional advice as to what you can do.

Consumers are mainly covered under the Consumer Protection Act 1987 and if a serious problem is ambiguous) you may well have a Trading Standards investigation on your hands, specifically from the Food Standards Agency, which is where things start to get a little more serious. If you are contacted by the FSA, action could range from educating your business so that it does not replicate the mistake or in the worst case scenario they can take legal action to close you down completely. We would advise you speak to a professional at this stage.

Advertising Standards Authority Complaints

Around 80% of complaints to the ASA do not reach those advertising and they are resolved beforehand. However, if despite your best efforts you are subject to an ASA complaint because you haven’t abided by the rules of the Code, this doesn’t mean an immediate draconian punishment, as they do try to work in a fair and conciliatory manner from the outset. You can find on their website a resource which details of how they handle the complaints procedure with the company and agencies in question

Remember, prevention is always better than a cure so do familiarise yourself with the Code and seek professional advice if you’re not sure whether what you’re going to publish will cause offence! If you want to broadcast an ad, Clearcast is best known for getting ads cleared to go on air, paying special attention to the rules of the Code.

Avoiding and dealing with litigation

Avoiding and dealing with litigation It is the unfortunate truth that at some point you may end up in a dispute with a company or person with regards to your business. Be it with a customer, supplier, manufacturer, employee, consultant, agency or anyone else, these disputes needs to be managed properly and maturely and you should try to avoid litigation at all costs.

If you are in the first ‘stage’ of your dispute and no legal action has been threatened yet, our first piece of advice would be never to ignore the matter. Simply ignoring calls and emails is certainly not a sure-fire way to make the matter go away. Ideally, you should meet in person to discuss as it will foster a far more conciliatory environment than hot-headed emails and will evoke empathy from both sides. Before you meet, make sure to do preparatory work by thinking of the other side’s needs as well as your own and establish what you want to get out of it. If you cannot meet up because of distance, free online video conferencing software such as Skype is an option.

If on the other hand, the other side has already sent a legal letter, usually the form of a ‘Letter Before Action’, that does not automatically mean that you will end up going through litigation via the courts- so don’t panic. There are other alternatives to resolving disputes, which fall under the ‘alternative dispute resolution’ (ADR) banner. Methods such as mediation, negotiation and arbitration have been proven to be successful over 70% of the time and the courts will look upon it favourably. If you do not feel comfortable responding to the letter, we would always recommend you speak to a professional. Remember, ADR is less stressful, cheaper and far more conciliatory than going through litigation and we would always advise you consider it before going to court. Furthermore, you have an obligation to the courts to attempt to resolve the dispute prior to a claim being filed.

Unfortunately, some matters do escalate to the litigation stage, the legal claims of which are allocated to one of three tracks. If the claim is less than £10,000, you will enter the small claims track, fast track for up to £25,000 and Multitrack for more complicated cases involving larger sums of money. Get your case into the small claims track or the fast track if you can, where the process tends to be streamlined and cheaper (£90 - £900). If you can, you should always have the help of a professional to assist you with your case.

A few words of advice here as well:

  1. Make sure you follow the deadlines to serve documents to the other side, otherwise you run the risk of your case being struck out
  2. State specifically whether you’re denying any claims made against you. Unless the issue is dealt with elsewhere in the defence, you’re assumed to have admitted the allegation.
  3. Watch out for costs- court action can be very expensive, with costs generally correlating to the superiority of the court. You could win your case and still be out of pocket for costs.

Product recalls

Article 19 of the General Food Law Regulation (EC) 178/2002 states that if food is not safe under the conditions of Article 14 within those regulations then you must start the food recall process. The first step would be to notify the relevant authorities i.e. your local Authority and the Food Standards Agency. In short, as the business’s operator (the person who is legally in control of making decisions within the business), you have an obligation to alert the authorities straight away if you think there could be risk to human health no matter what stage of the process if you are no longer in immediate control of the product. If the product has reached the final consumer you need to inform the consumer quickly, effectively and accurately, providing details as to why it is unsafe. Business operators need to co-operate with the authorities on all the action you have taken or propose to take to avoid or reduce the risk to the public on the product you have supplied.

The Food Standards Agency has issued some very digestible guidance around what this EC regulation means for you and your business, which you can access here.

Crisis Management

When we think of a ‘crisis’ with regards to food or drinks products, we tend to this of large head-line grabbing events like the supermarket horsemeat scandal back in 2014 or the 2016 Mars bar recall over a suspected plastic contamination. However, problems such as these are not unique to larger businesses. In the beginning stages of your business venture, you can’t afford to be careless so here are some tips on how to manage those sticky situations you might find yourself in...

  1. Preparation is key! Have a crisis management strategy in place.
  2. Make sure you address the issue head-on and immediately notify all those it could affect such as employees, any stakeholders and of course the public. Do not bury your head in the sand by ignoring emails, social media platforms etc!
  3. When you are making all members of the public and stakeholders aware, make sure you demonstrate you are in control of the situation and show a true commitment to resolve the issue.

Remember, if you manage to successfully deal with a problem, this could actually reflect well for your brand so try not to see any crisis as a huge blow to your business!

Thinking Of The Future

Exporting

The opportunity to export is an exciting prospect for any business venture. If your product has become popular in the UK, why not in other destinations? Before steaming ahead with prospective buyers, you need to think about which laws and regulations are applicable to you. Below is some general guidance if expanding abroad is on your radar.

Exporting to EU countries>

  • It should actually be relatively seamless to export to countries within the EU. This is because there is a ‘free movement of goods’, which includes food and drinks products, so if it’s safe to consume in the UK it’s happy to be consumed in the rest of the EU.
  • Nevertheless, you should check with the authorities of the destined country, by contacting their UK embassy for example, to check in case there are any unique restrictions.
  • Naturally this ease of process is all subject to the terms negotiated during Brexit. For the time being though, nothing will change so we'd recommend you seek advice only when the future is clearer!

Exporting to non-EU countries

  • Exporting to non-EU countries is more complicated as each country will have its own regulations as to what can and can’t be imported. You need to check with UKTI (UK Trade and Investment) on what you need to know before approaching that country and they can assist you with the process.

Of course, the Food Standards Agency provides more detailed information and useful links to the rules and regulations about exporting, which you can find here. You should also visit UKTI’s website, particularly if you’re exporting to non-EU countries.

  1. Undergoing due diligence: completing the due diligence questionnaire, which includes:
    • Company details and structure: everything from registered address to details of the company staff.
    • Share capital: all information relating to your business’s current share-holding structure.
    • Financial accounts: Copies of annual accounts and reports going back at least three years, as well as any other financial info e.g. auditors’ reports.
    • Current contracts: Details of all current agreements in place with third parties (supplier and customers).
    • Assets: Information around all the assets your company owns, which includes the paperwork which proves the ownership. This includes both physical and intellectual property.
    • Employment: Lists of all employees, their salaries, any pension arrangements etc. This also includes consultants, agents and anyone who works on or with your business. You will also have to includes any staff policies and employee handbook (if you have one).
    • Litigation and disputes: All details around any current or threatened litigation or disputes of any kind. This includes employee grievances.
  2. Data room: As the seller, you set up a ‘virtual data room’ where you add all the requested documentation in. A key tip here is make sure it is well-arranged with the files easy to locate. This will speak wonders of your company as a whole.

From the above, we can certainly ascertain that having your legal and financial house in order will be absolutely key to any prospective buyer and will greatly impact the agreed price.

From the above, we can certainly ascertain that having your legal and financial house in order will be absolutely key to any prospective buyer and will greatly impact the agreed price.

  1. Discounted cash flow (DCF) method: This works by applying a formula to estimate future cash flows and discounting them to come up with a value in today’s terms (because the value of money changes over time).
  2. Market multiple approach: This takes an estimated value for future earnings of the company over a specified period of time and multiplies it by a certain number. This number is chosen by looking at other publicly listed companies in the same sector and could be the ‘price- earnings ratio’ (PE) or the ‘enterprise value’ of your company based on your EBIT (profit Earnings Before Interest and Tax).
  3. Net asset value: In order to determine the ‘net asset value’, you value all your company’s assets and deduct the value of its liabilities. Really this is more relevant when a company goes into liquidation, for example, but is still a useful way of coming up with a value.

Receiving the money

You’ve agreed a price for the sale of your business- hoorah! But agreeing how it is to be paid is a whole new matter. It is highly unlikely a buyer will simply hand you all the cash and be done with it. They will likely give you a portion up-front then keep back as much as they can for an earn-out. An earn-out is a deferral of some part of the purchase price with the amount that’s paid subsequently becoming dependent upon the performance of the company. Here is some general guidance for this process and the disadvantages you should be thinking about:

  • As they are dependent on future performance, you can’t simply walk away from your business once you have sold the shares- you will have to continue to work hard for your money
  • At the same time, you do not have as much control over the performance of your company as it is no longer technically yours. Your buyer may not listen to your views and have his or her own strategy in mind.
  • The two above points could lead to a fractured relationship between yourself and the buyer. Often this friction will lead to a negotiated settlement, where you leave the business early but with a reduced pay-out which may not represent the full value of the business.
  • Your buyer will likely also try to limit their risk by making you agree to warranties. These are promises that you make in the purchase agreement about the state of the business e.g. the company’s accounts give a true view of the state of the business or that the company owns all its assets.
  • The purchase contract may also contain indemnities. This is a promise to reimburse the buyer for costs associated with claims in relation to warranties. This will also apply in relation to tax payments and will be dealt with using a tax indemnity or ‘tax covenant’.

However, you can reduce the effect of warranties and indemnities by:

  • Admitting all through a Disclosure Letter in relation to the warranties. This may sound as though you are admitting weakness but it means that you can’t be held liable and sued for a breach of warranty.
  • Admitting all through a Disclosure Letter in relation to the warranties. This may sound as though you are admitting weakness but it means that you can’t be held liable and sued for a breach of warranty.
  • Expressing time limits for warranty claims.
  • Using financial limits e.g. you can cap your liability to an amount not exceeding the purchase price or more.
  • Remember to divide up liability with your other shareholders and use a contribution agreement
  • Finally, remember consult an accountant to understand the tax implications on the different types of way you could be paid and work out which would be the most beneficial to you.

Selling your business’s assets/divesting

As well as outright acquiring a business, buyers can purchase assets (as well as shares) in a company. Here are some issues to bear in mind if this is something you choose to do:

  1. Valuing assets: To start with, you can take the ‘book value’, which is the amount stated in the most up-to-date accounts. This would be the value when purchased taking into account its depreciation. Naturally, this doesn’t apply to intangible assets that you own and goodwill (the reputation) of the business.
  2. Undergoing asset due diligence: This will fulfil a similar purpose to if they were purchasing shares and will raise similar issues.
  3. Receiving an asset price: Unlike a share sale, you have less of a chance of being given a deferred price but they may still want further security from you if any of the warranties turn out to be untrue and they lose money. One way of achieving that is for them to put a considerable amount into a retention account, which will then be used to settle any claims. This shouldn’t be more than 5 - 15% of the total consideration, however, and they should only be allowed to hold it for a limited time period e.g. 6 months to one year.
  4. Handling debtors and creditors: Unlike when a purchaser is buying shares, you need to negotiate what happens to exiting debtors and creditors i.e. who is responsible.
  5. Making warranties on asset sales: The buyer will want your company to warrant that it owns all the assets being transferred and that there are no other competing interests on them. However, if you do not, the buyer will want to know whether they can use them after it purchases that part of the business. Be careful when you are selling part of the business in relation to what you might want to do later- could selling this part of the business impact your ability to sell the rest of the business at a later date?
  6. Transferring employees: You might have heard of the relatively new TUPE- the Transfer of Undertakings (Protection of Employment)- Regulations, which protects employees who are part of the sale of assets. This essentially requires for the buyer to ‘step into the shoes’ of the seller so you can’t just dismiss any employees upon selling as it could result in an unfair dismissal claim. Also, be careful that the employees you are transferring do not support the other parts of your business you are not selling or you could have a skills shortage.
  7. Reducing your tax bill on sold assets: In an asset sale, it is actually the company that is being taxed and not the individuals selling it so company tax liabilities will apply. You should seek professional advice so that this is done with the correct reliefs and fair considerations for the sale.

We hope you enjoyed Part 3 of our plain-English guide to developing a food or beverage product. Parts 1 and 2 go into detail about starting and developing your business so do have a look at them too. Of course none of this information is a complete substitute for professional legal advice so if you’re confused about any of the above or would simply like the reassurance of a solicitor, LawBite offers a free 15-minute consultation, which you can access by submitting an enquiry here. Good luck!

Credit Control & Cash Flow

It’s important to have an in depth view of the credit profile of any business you work with or rely on, so that you can protect your business from financial risk.  Understanding the financial status of your potential customers or business partners is absolutely key when it comes to credit control and consequently, cash flow. Services such as Experian Business Express allow you to credit check both UK and international companies to assess if they will meet their financial commitments and lending requirements.  You can also gain insight into the individuals who run the business.

The sort of information and data can you access includes:

  • Check and monitor any UK companies & directors
  • Reduce exposure to potential bad debt
  • Qualify prospects and suppliers and set realistic credit limits
  • Take action when faced with payment delays
  • Check to see if your customers and suppliers have CCJs
  • View detailed financial payment trends
  • In-depth credit history
  • In-depth credit history

Contributors:

Lizzie Knight, Head of Marketing
Jeremy Barnett, Regulatory and Food Safety Barrister
Hannah Newell, Corporate and Commercial LawBrief (LawBite lawyer)