Know Your Limited
This article is a more detailed version of the article taht appeared in the October Issue of Fine Magazine.
Know Your Limited!
There are, at least unless some proposed changes to the tax regime are pushed through for the financial year starting in April, significant tax and other financial advantages for relatively high earning single person businesses to run as a limited company. The benefits of protecting your personal property if the business fails and tax advantages may, however, be at risk if the directors of the company don’t fulfil their duties.
What is a Company?
It seems like a silly question but lawyers are often surprised by the failure of directors of even large-medium firms to understand the difference between them as individuals and the company. A company is not the director, it is a completely different Legal Person, imagine it as a separate actual person that the director controls the movements and actions of. The Directors are in charge, but have to act in the company’s best interests like the parent of a child, they are not the company which is why if the company goes bust the directors are protected if they have done their duties.
Directors have to follow the rules in the articles of association and act in the company’s best interests, using their skills experience and judgment making decision for the benefit of the company not themselves and need to tell other shareholders if they are going to benefit personally from a transaction the company is involved in. Directors also need to ensure that the company keeps proper records and compiles with legal requirements and files true and fair accounts. Most of these duties are fairly clear if the Directors understand that they are not actually the company but the duty of acting in the company’s best interests can sometimes present difficulties:
Acting in the company’s best interests is a not the same as simply having permission to act. A director may, for example, have the permission of the board to offer a guarantee from the company for a loan to another company (which the director is also director of) or individual (the director or another person associated with them or the company) but may not be acting in the company’s interest if the director gives the guarantee. If the action isn’t in the company’s best interest in the opinion of that director then, even if the director has permission to take that action they shouldn’t.
In Practical terms it would be a good idea for directors, even of same shareholder/ director companies to keep a record of the commercial benefit they see in every transaction the company undertakes and note that they have authority to take that action, in larger companies a meeting should take place where that benefit is discussed or recorded. If a company is getting the benefit of a guarantee provided by another related company it should probably check that the authority of the other company’s board has been properly given.
The general rule with contracts is that the contract is between the people who have signed it. A Limited company needs, however, somebody to sign for it as its agent, which is usually the company director. For the Director to be signing for the company, rather than themselves and risking liability for the contract, either:
1. The Contract needs to make clear that the person signing is a director of the company and clearly identify the company or
2. There should be clear evidence that both parties knew the signature was for the company.
It is self-evidently safer to have contract make the matter clear than have to argue what each party knew on the evidence.
In practice what this means is that:
A contract which has beneath the signature “A.N Other, Director of A.N Others Ltd” will be signed by the director on behalf of A.N.Others Ltd.
2) An error doesn’t necessarily invalidate this, so long as it remains clear who the contract is with, for example if the wording was “A N Other, Director of A.N Otherwise Ltd” and A.N. Otherwise Ltd does not exist but A N Other does and the signature is from a director of the company that exists that would be a contract with the company that exists. [Dr Muneer Hamid (t/a Hamid Properties) v Francis Bradshaw Partnership  EWCA Civ 470.]
3) In the example in 2 if A.N. Otherwise Ltd also existed then the contract would be with them (unless both parties knew it was a mistake). Where the companies operate as part of a group any court might need substantial evidence of the interactions between the parties in the time leading up to the contract to establish who the contract is between. [Estor Ltd v Multifit (UK) Ltd  EWHC 2565 (TCC)]
4) Where the contract is entered into on the basis of an exchange of letters or emails then so long as the correspondence states the company registered office and company number and place of registration the contract will be with the company.
5) It is also possible for the contract itself to make clear, perhaps by reference to the trading name of the company in the body of the contract, that the contract is with the company but there would need to be some evidence of the fact that both parties knew the contract would be with a limited company.
Trading online and running a company website:
A company’s website needs to contain the following information:
It’s registered name (not just the trading style)
An email address
The Registered office address
Any VAT number
Distance and Online selling are both regulated and have specific requirements for traders and companies but a good basic overview is available at: https://www.gov.uk/online-and-distance-selling-for-businesses/overview
How Your Website Can Get You Into Trouble
This Article is a more detialed version of the article produced for the July 2015 issue of Fine Magazine
How your Website can get you into trouble……
A web presence is now essential to the marketing of any business, whether professional of trade, retail or wholesale. Whether you have an expensively designed highly interactive site or a single page placeholder site it’s important to understand the legal implications of your businesses web presence. A Highlight of some of the more dangerous pitfalls is set out below.
The very first consideration:
The regulation of cookies has been with us for some time (The first EU regulation was in 1995) but the requirements have changed following a further EU Regulation in 2011. There is some very good comprehensive guidance on the Information Commissioners Office website at
There are some exceptions but generally:
• You must clearly explain what the cookies do and why.
• You must also get their permission (either directly or because they continue to use the site).
The good news is that for most sites a banner requiring a click to close that informs the visitor about cookies and gives a link to sites policy is normally sufficient. Writing a clear policy requires a good understanding of both your website’s operation and the law on cookies.
Comments, Blogs and Forums
If your site has a section for comments or reviews, if you run a blog or a forum, then you need to be aware of your legal responsibilities. Even if your site isn’t intended to be a blog or to have comment if it was built in wordpress- as many sites are now- the facility will be there and will need to be managed.
The main concerns with allowing others to post on a site you run relate to the content of their posts: users of a forum or blog and people who comment may either;
• Make defamatory remarks about people or companies
• Make racist or other offensive comments
• Incite or encourage people to commit offences
• Incite or encourage hatred or discrimination against protected group.
• Threaten or conspire in terrorist activities
• Harass other users
• Entice children into inappropriate acts
The extent to which this is a concern and what you should do about it depends on the type of site you run. If you have a simple brochure website that has a comments section simply because it was made in workdpress then you may just want to disable all comments, giving you complete control over the site content. If you run a form or allow reviews then you will want some protection against committing any offence. The exceptions introduced for website owners and other providers under the Defamation Act 2013 are a good starting point.
A website should have:
• A requirements for comment makers/ reviewers/ Forum users and Blogger to log in, ideally using a third party user account like facebook or google+. This should allow you to identify any offender and hand their details to the police of the complainant’s lawyers if required.
• A “report and remove” system: allowing and encouraging users to report offensive or inappropriate content with the promise that it will be removed.
• A policy and the power to exclude offenders and provide their details to the police if they are believed to have committed an offence or to another parties lawyers if they are threatened with a defamation action.
As well as providing businesses with problems the law also provides solutions. There are now a huge array of GTLD’s and many businesses find that their established registered or unregistered trademark has been taken by a “cybersquatter” someone simply buying the domain speculatively in the hope of selling it on. The UK has nothing comparable to the US federal laws protecting businesses but ICANN the domain name body has the Uniform Domain Name Dispute Resolution Policy. Filing a complaint under this policy can result in successful transfer of a domain where you can show:
• A trademark (either registered or unregistered) that is the same or confusingly similar to the domain
• that the party that registered the domain name has no legitimate right or interest in the domain name; and
• that the domain name was registered and used in bad faith.