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Month: March 2023

Restrictive covenants: Distinction between ‘dealing’ and ‘solicitation’

Posted on by fluroltd

Restrictive covenants in employment contracts are included for business protection.  An employer holds certain legitimate business interests, and the confidentiality clauses of the contract may not provide adequate protection for those interests.

Such terms will only be enforceable if they provide no more than reasonable protection for the specified legitimate business interest.

Today it is more typical to include a form of non-dealing requirement, in the hope or expectation of preventing the departing employing from any form of business dealings with specified customers, colleagues or suppliers.   Although, such a requirement may sometimes be hard to enforce due to those reasonableness principles.

A non-solicitation requirement is typically included, seeking to prevent the former employee from encouraging those people and businesses to follow them in their new pursuit.

There is sometimes confusion about whether a non-solicitation obligation may bite if the customer, colleague or supplier first contacts the former employee.   In this regard, the case authority of Croesus Financial Services Ltd v Bradshaw and another [2013] EWHC (QB) provides helpful clarity (at paragraph 102):

102.  It is often assumed that there is no solicitation where it is the customer who first contacts the ex-employee. From his evidence, this seems to have been the basis on which Matthew Bradshaw proceeded. However, this is not necessarily the case and although the question who made the first contact is relevant, all the circumstances surrounding that contact must be considered, each case depending on its own facts. There is no general rule that wherever a customer initiates contact, an individual can respond and even go so far as making a presentation without breaching a prohibition on solicitation as Ms Stone submitted. Rather, these are questions of fact and degree. There is obviously a distinction to be drawn between solicitation and dealing with; accordingly, a critical element that distinguishes the two is that solicitation requires persuasion or encouragement of clients to transfer their business.

Our employment law specialists regularly advise on restrictive covenants, in the context of their drafting and enforcement.

Break clauses in commercial property leases

Posted on by fluroltd

What is it?

In simple terms, it is a “get-out” card for the party exercising it. A means of exiting the lease prior to the official end of the term. If exercised correctly, the lease is broken and both parties walk away, free of their obligations under the lease.

Who does it benefit?

It benefits the party exercising it as they no longer need to continue to fulfill their obligations under the lease for the duration of the term. Particularly useful, for example, where a tenant is no longer able to pay the rent due to poor business. In such a scenario, they may exit early by terminating the lease on the break date (discussed further below) as opposed to being continually obliged to pay rent for the duration of the term of the lease.

Conversely, it could benefit a landlord in an instance where they have been offered a much higher rent by a new and financially more viable tenant, who wishes to take the premises sooner than the end date of the existing tenancy. The landlord may then exercise its right to break the lease on the break date thereby taking back possession of its property sooner than the end date, so that it can let it out at a higher rate, to a more financially viable tenant.

How does it come into play?

Best practice is to negotiate such a clause when negotiating other terms of the lease. It can be applicable to only the landlord, only the tenant or both parties. It can come into play at any stage of the lease term as agreed between the parties and there can be more than one break.

Often, conditions are attached to a break clause where this is exercisable by the tenant, such as, all rents must be up-to-date and the tenant must provide vacant possession upon breaking. Care must be taken when reviewing such conditions whether acting for the landlord or tenant.

These conditions should not be taken lightly and should always be reviewed by an expert as some conditions may be drafted deliberately widely, leaving the complying party in a vulnerable position where compliance can be subjective. For example, a condition may be that the tenant must have complied with “all its obligations under the lease”. A landlord not wanting the tenant to break may rely on this condition and refuse to allow the tenant to break due to it not having complied with the clause that states “the windows to be cleaned as often as necessary”. Whether or not a window is clean is subjective but this shows how something as simple as cleaning a window, can become the deciding factor as to whether or not a tenant may effectively exercise their right to break.

Types of Break Clauses

A break clause may sometimes be exercised at any time after a certain date.  This is often referred to as “rolling break”.

Quite often, a break may only be exercised on a fixed date or dates.  This is often referred to as a “fixed break”. 

Implications of getting it wrong

Careful consideration should be given when drafting and/or reviewing such clauses as an error can lead to a break clause being invalid resulting in the party being unable to exit at the desired sooner date.

It is also imperative, that a notice to exercise a break clause is drafted correctly and served in the correct time and manner, in order for it to be validly served.

The case of Siemens Hearing Instruments Ltd v Friends Life Ltd [2014] 2 P&CR 5 illustrates just how important it is to word the break notice in the required explicit form.  In this case, the Court held that the break notice served, was invalid as it failed to express the exact wording of the break clause and should have explicitly stated that it was served under section 4(2) of the Landlord and Tenant Act 1954.

Today’s market

Given the uncertainty in today’s property market, it may be more essential that ever before to ensure you’ve got this clause right.  Exiting at precisely the right time may determine whether or not your business will survive!

What is a Declaration of Trust and do I need one?

Posted on by fluroltd

With house prices and interest rates at an ultimate high, individuals and couples are looking for alternative arrangements when it comes to purchasing a property. For many, this will include buying with partners or friends, whilst others may seek financial support from parents and relatives.

What is a Declaration of Trust?
A declaration of trust is a legally binding document that records the financial arrangements between joint property owners and anyone else with financial interest in the property.

A declaration of trust is usually made at the time of buying the property. Once this document is in place, all parties will know exactly where they stand if the property is sold, or if one person wants to be bought out in the future.

If there is no declaration of trust in place, it becomes difficult to tell who is entitled to what and can often cause stressful situations, damage to relationships and potentially costly litigation.

When is a Declaration of Trust required?
A declaration of trust can be required in various circumstances, for example:
• If you’ve bought a property with someone else: For couples that buy a property together, a declaration of trust can clearly set out everyone’s financial contribution. In the event of the property being sold, a relationship breaking down, or the death of one of the parties, the entitlement and share of equity is clearly defined.
• If you’ve received financial help: If the ‘Bank of Mum and Dad’ or any other individual has supported the purchase of the property, they may eventually want their investment back. This can be clearly recorded.

What should be included?
As every situation is different, a qualified solicitor will help to tailor the declaration of trust to your requirements.

The document should include the following details:

• How much each party has financially contributed to the deposit.
• If there is a mortgage, how much each party will be contributing to the monthly payments and other outgoings.
• If the property is rented out, how the rent should be divided.
• If the property is sold, how the net proceeds should be divided.
• An agreed way of valuing the property.

Can I change the Declaration of Trust once it’s in place?
As your situation changes you may need to update your declaration of trust. This could be done via a deed of variation which refers to the existing declaration and adds the new clauses you need.

Note: Consent will be required from all parties involved.

What happens if you get married?
Many cohabiting couples will get married. Whilst your declaration of trust will usually still stand, in the event of a divorce the provisions of the Matrimonial Causes Act 1973 will apply. We would recommend considering a pre-nuptial or post-nuptial agreement to capture the details of what should happen if you were to separate or divorce. You should also review your Will.

How Blaser Mills Law can help
Declarations of trust can seem complicated, but it is an extremely useful way of protecting funds and providing certainty in the future. At Blaser Mills Law we have extensive experience with all types of trusts and will help you decide on the most efficient and secure planning for your estate.

For further information or advice, please contact the Wills, Trusts, and Probate team at Blaser Mills Law on: 01494 781362 or by email at privateclient@blasermills.co.uk.

No more week: Coercive control and the law

Posted on by fluroltd

The 5-12th March 2023 marks ‘No More Week’. The campaign seeks to unite and strengthen a diverse community of members of the public and organisations nationwide to actively take a stand against domestic abuse and sexual violence. Domestic abuse isn’t always physical and can often come in the form of coercive control.

What is coercive control?
Coercive control is when a person you are connected with, continues to behave in a way which makes you feel controlled, isolated or frightened. Coercive control can be difficult to recognise and sadly can often lead to physical violence. It’s also a criminal offence under the Section 76 Serious Crime Act 2015.

The following types of behaviours are common examples of coercive control (not exhaustive):

  • Isolating you from your support system
  • Monitoring your activity throughout the day
  • Controlling financial spend and assets
  • Denying you freedom and autonomy
  • Gaslighting
  • Any form of assault or threatening behaviour
  • Controlling aspects of your health
  • Humiliation and intimidation
  • Threatening your children
  • Sexual coercion

How our Family & Divorce team can help

If allegations of coercive control arise as part of the proceedings, the victim and abuser may find they have to deal with family and criminal courts. These types of cases often involve both family and criminal lawyers as some behaviour can be classed as a criminal offence.

Our family lawyers can help you to break free from the coercive control and regain your independence and can assist you in securing legal protection against an abusive partner. They have experience of litigating with people who exhibit tendencies of coercive control or narcissistic personality disorder (NPD) and can support you through this process effectively because of this.

Our team will approach your case in confidence and help to minimise any further distress in what is already a difficult situation. To speak to a member of the team in confidence please call Lucinda Holliday on 01494 478603 or email ljmh@blasermills.co.uk. 

Free confidential support in the UK

Safe Spaces are open in Boots, TSB Banks, Superdrug pharmacies, Morrisons & Well pharmacies & many independent pharmacies across the UK. If you’re experiencing domestic abuse, you can use Safe Spaces to call a helpline, support service or loved one.

Refuge’s National Domestic Abuse Helpline : 0808 2000 247

The Men’s Advice Line run by Respect is a confidential helpline specifically for male victims: 0808 801 0327

UKSAYSNOMORE | Together we can end DV & SA

EMI options and board discretion: HMRC guidance

Posted on by fluroltd

HM Revenue and Customs (‘HMRC’) published guidance on the inclusion and use of board discretion in Enterprise Management Incentive (‘EMI’) share option plans. If board discretion provisions are not carefully drafted, these may affect tax treatment of EMI options. Our Corporate & Commercial team summarises the key points which are of particular importance to our growth clients.

In the context of a share plan, the exercise of discretion usually involves the board of directors using their judgement to come to a decision. For instance, this may include deciding to treat a departing employee as a ‘good leaver’ or deciding to increase the number of vested shares on an exit (known as an ‘acceleration’).

To avoid adverse tax consequences, board discretion must be clearly set out when the option is granted. HMRC treats any amendment to an EMI option agreement or use of discretion to create a new right of exercise, introduce a new board discretion, or change the exercise date, as the grant of a new option – depending on the circumstances, this may lead to the loss of some or all EMI tax benefits unless any improvements to the employee’s rights are limited.

A decision by a company’s board to exercise discretion may result in the share option being treated as released and regranted. This may impact tax benefits that the EMI Scheme is designed to deliver.

EMI regulations set out three ‘fundamental’ terms which are set out in a written EMI option agreement (‘Terms’):

  • the number of shares under option;
  • the exercise price per share; and
  • when the option may be exercised.

An exercise of a board discretion that results in an amendment to any of the Terms is likely to result in the option being treated as released and regranted and the tax benefits lost – unless the amendment has ‘minimal’ effect.

The following provides a brief overview of HMRC’s guidance.

  • for ‘exit-only plans’ (such as an IPO, sale or other change of control), there may be a loss in tax benefits where there is a general board discretion i.e., the discretion is not tied to any particular event and there is a general ability for the directors to determine an option is exercisable at any time and under any circumstances that the board chooses;
  • for ‘non-exit only’ plans, provided that the board’s discretion is not to bring forward the option exercise date determined at the outset and there are adequate provisions in place, if the board chooses to accelerate the extent to which an option may be exercised (i.e. its vesting) this should not affect the option’s tax treatment; or
  • for ‘non-exit only plus performance condition’ plans, to vary or waive a performance condition should not affect the option’s tax treatment, provided there are adequate good leaver provisions set out from the outset and this is done in appropriate circumstances only.

HMRC will treat any amendment to an EMI option agreement or use of discretion to create a new right of exercise, introduce a new board discretion, or change the exercise date, as the grant of a new option (which, depending on the circumstances, could lead to the loss of some or all EMI tax advantages) unless any improvements to the employee’s rights are limited.

If there is uncertainty, professional advice should be sought when directors exercise a discretion in an EMI share option plan.

Divorce and financial settlement tax considerations

Posted on by fluroltd

When a relationship breaks down there is an enormous impact on the individuals involved. For many people, the priority is the children or how they are going to be able to afford to put a roof over their heads after the separation.

When caught up in such significant change, it is easy to overlook some of the less obvious effects of the relationship breakdown which could have a substantial financial impact. Although most of us are aware that “the only two certainties in life are death and taxes” often tax issues relating to the breakdown of the relationship are overlooked.

When considering options for settlement it is vital that you understand the tax implications of the options available to you. Money drawn from a business is likely to incur tax liabilities as will the encashment of shares and some investments. In many cases couples who own second homes together or individually need to decide whether these should be sold or transferred from one or another to allow them to rehouse. As with any disposal, there are likely to be capital gains tax implications for selling a property or transferring it. These need to be considered when looking at a divorce settlement or when leaving a cohabiting relationship.

Even the sale or transfer of the family home can have tax implications, particularly if one of the owners has left the family home for some time and regardless of whether they have bought another home. Although tax might be due on the transfer of assets, there is relief that might be available in some cases and
you need to be aware of this. The timing of the transfer or sale of the property can also be critical.

The current rules regarding taxation are due to change as a result of the proposed new revisions which will be introduced in the Finance Bill 2022/2023. These changes are due to take effect in April 2023 which could benefit individuals but again, timing is essential.

Although solicitors are not tax experts, it is important that your solicitor highlights any tax issues and refers you to specialist tax advisers, if they feel it is necessary, so that you are not adversely affected by tax and that any tax liabilities are considered in a financial settlement.

How Blaser Mills Law can help

The Family & Divorce team at Blaser Mills Law can highlight these issues and can signpost you to experts who can provide additional support if needed. For further information or advice please get please do not hesitate to contact Lucinda Holliday on 01494 478603 or email ljmh@blasermills.co.uk.