LEGAL UPDATE Felicity Banks May 2011
Topics • Anti money laundering • Business structures • Companies Act 2006 • Charities • Employment • Pensions • Powers of attorney • Bribery • Privilege • Legal reform
Example of supporting information • Enlightened shareholder value – what does it mean? • Codifying the common law requirement to act in the company’s best interest. Directors must act in a way that promotes company success for the benefit of shareholders as a whole, and in doing so must have regard where appropriate to: • long-term factors • interest of other stakeholders (eg, employees, suppliers and customers) • community and environment • company reputation. • Government guidance is available at www.berr.gov.uk/files/file40139.pdf • Other useful links are http://www.berr.gov.uk/whatwedo/businesslaw/co%2Dact%2D2006/ and • http://www.companieshouse.gov.uk/companiesAct/companiesAct.shtml • And some ICAEW links are: www.icaew.com/companylaw • CA06 and major accounting changes: www.icaew.com/index.cfm/route/156108/ • FFM CA06 Summary: www.icaew.com/index.cfm/route/148125/ • There is a useful and short leaflet summarising the changes for private companies available at www.berr.gov.uk/files/file42262.pdf • There is also a more detailed one at www.berr.gov.uk/files/file42261.pdf and • www.companieshouse.gov.uk/companiesAct/pdf/berrUpdatingYourClients.pdf • And finally • BERR is now BIS - Department for Business Innovation and Skills – as of June 2009
AML - Two Sources • Tech Release 04/08 – AML Guidance for the Accountancy Sector • Tech Release 04/08 – Appendix A -Supplementary Guidance for the Tax Practitioner
The Offences • General Offences • Proceeds of Crime Act 2002 • Terrorism Act 2000 • Procedures and controls • Money Laundering Regulations 2007
Procedural Offences • Failure to apply CDD or EDD • apply on going monitoring • keep required records • provide required training • appoint an MLRO or have reporting system • Continuing with business where unable to apply CDD/EDD
CDD/EDD • Do you know what it is? • Remember three principles…..
First Principle • Normally complete CDD/EDD before entering into a business transaction, even if it is an occasional transaction
Second Principle • Can only carry out CDD/EDD during establishment of a business relationship in certain circumstances …….
Third Principle • Firms should not ‘complete’ an assignment or transfer funds, until CDD/EDD is completed
What are the procedures? • Appoint an MLRO or have a reporting system • Conduct CDD/EDD in accordance with a risk assessment policy • Identify beneficial owner • Monitor on ongoing basis
Other guidance • Remember that other regulated sectors, financial services, estate agency, high value dealers, casinos, have own guidance
So • Will you be responsible personally for picking this up? • If not, who is?
What am I? • Principal/Sole trader • Company • Partnership • LLP • LP • CIC • CIO
Limited Liability Partnership • Established in 2001 • Limited liability partnership • To the world it’s a company, amongst its members it’s a partnership • Exists independently of members
Limited Partnerships.. (..as opposed to LLPs!) • Established in 1907 • Not a legal entity • Frequently transaction specific (eg funds) • ‘Registration’ conclusive since 1 October 09 • Get the forms right ! • Watch this space…
Community Interest Company • Established in 2005 and cannot be a charity • Separate regulator who oversees an asset lock • Has flexibility of corporate structure with community interest features
Charitable Incorporated Organisation • Register with Charity Commission only • Annual report only, no directors report • Remember to distinguish from CIC which is not charitable
Companies Act 2006 • Final changes now in force • All companies must have at least one director who is a “natural person” from 1 October 2010
Operational flexibility • AGM and Company secretary are optional (not PLCs) • Simplified internal procedures • Share capital can be reduced without the need for court approval (not PLCs) • Financial assistance is permitted (not PLCs)
Charities Act 2006 • Changes to audit requirements and eased internal administration • Introduction of CIOs – Charitable Incorporated Organisations
Changes in more detail • Most charities with annual income below £500k need not be audited (unless constitution stipulates) • Enhanced whistleblower protection for accountants • Simplified administration, for activities such as changes of purpose or transferring assets
Employment • Research carefully and take advice • Availability of good resources
Status • Employee • Worker • Self employed
Types of work • Part time • Fixed term • Flexible working
Pinch points • Give a statement of employment within 2 months • Plan early on business sales and restructuring and assess position
More changes • Equality Act 2010 • Consolidation • Protected characteristics • Default retirement age • New consultation to phase it out • April 2011 • Clarkson case
Pensions • Felicity’s test……. • Pensions Protection Fund • Moral hazards regime • Notifiable events • Contribution notices and FSDs • Clearance • ‘Material detriment’ test
The Basics • October 2012 – largest employers first, steep scale and affecting those with less than 50 employees - August 2014 to February 2016 • Automatic staging dates dependent on PAYE reference • Auto-enrolment with compulsory employer contributions • Includes permanent, temporary and agency workers
Specifics • Age 22 upwards ( but younger can elect ) • Administration hurdles • Investment in systems • Review of existing schemes • Prepare for self certification • Guidance for trustees
Arrangements • Choose Qualifying Scheme(s) • Is existing scheme compliant ? • Two tier arrangements needed ? • Feeder schemes ? • NEST scheme
Powers of Attorney Gone: enduring powers of attorney Now: lasting powers of attorney • Ordinary powers of attorney • Personal Welfare LPA • Property and Affairs LPA
Practicalities • LPA introduced in 2007 • New ‘Office of Public Guardian’ • Registration is key, else LPA is invalid • Complex and time delays
Bribery Act 2010 • Four main offences • Paying bribes • Receiving bribes • Bribery of foreign officials • Corporate offence - failure of commercial organisations to prevent bribery • Onus on corporates to ensure anti corruption procedures are robust
Bribery continued • Formal guidance • Problematic for • Overseas business activities • Facilitation payments • Hospitality • Don’t wait – start thinking now
Legal Professional Privilege (LPP) • Two elements • Litigation privilege • Protects a confidential communication between a client or its legal advisor and a third party, where the dominant purpose is in connection with actual or contemplated litigation • Advice privilege • Protects confidential and qualifying communications between a client and a legal advisor, which are made for the purpose of seeking or giving legal advice or legal assistance.
The Prudential case • Why did the ICAEW intervene ? • What do we hope for ?
Akzo Nobel case • Ruling in September 2010 • Does NOT affect the scope of privilege under English law • In EU competition law investigations, communications with in house lawyers are still not privileged
Legal services reform • Why? • Legal Services Act 2007 • Legal Services Board - LSB • External ownership and investment • Alternative business structures - ABS • First true MDPs involving lawyers and other professionals • The key is a reserved legal service somewhere in the mix
Institute concerns • The process ……. • Divergent views on nature of firms and “legal advice” • Timing - first ABS operational in October 2011
Considerations • You could be a • Participant • Manager • Investor • Appetite depends on business model, size, niche • Consider MDPs to save costs • Tax services • Forensic and insolvency specialists • Novel structures and relationships for service delivery
The future • Legal competitors will be looking at you and your business offering • Innovate – you may want to add specialised services or enter into collaborative arrangements • Remember its professional services reform
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