UK Immigration Law update - September 2009

Changes To Terms And Conditions Of Employment - Notification or New Work Authorisation?

During an employment there may be  changes its terms and conditions for a variety of reasons. Some changes to a migrant worker's terms and conditions of employment only require notifiying to the United Kingdom Border Agency (UKBA) – these are called technical changes - others require fresh work authorisation, eg the issue of a fresh Certificate of Sponsorship (CoS) which in turn may require a fresh resident labour market test (RLMT).


You need to be able to distinguish between technical changes and other changes requiring fresh work authorisation. If changes of the more substantial type take place without prior work authorisation, this may invalidate the employee's work permit or CoS with potentially serious consequences both to the employee and the employer if the UKBA has not approved them.


The action you need to take depends on whether the migrant worker is here under a work permit issued under the former work permit scheme, (WPS) or is a sponsored migrant under the Points Based System (PBS).

Work Permit Scheme(WPS)

Technical changes need to be reported using the specified form (Notification of Technical Change) together with payment of an official fee of £20.


To be considered a technical change of employment, the UKBA needs  satisfying that the individual will continue to work under the same terms and conditions as before and continues to meet the work permit criteria.

What Amounts To Technical Changes Under A Work Permit?

The UKBA does not need to be notified regarding:

• changes to an employee's home address, 
• gender changes not recorded on an employee's passport and
• salary increases as a result of annual increments or other annual pay awards paid to most staff.

In all other circumstances the employer will need to report the change to the UKBA. If the UKBA accepts the changes are technical, it will update the details on its systems and write confirming that the changes have been accepted and that the employment continues to be approved.


Any significant changes to location, salary, level of job or working hours are not considered to be technical changes. They will be regarded as a change of employment. 


While the work permit scheme existed, this would need an application for approval to a change of employment. 


Following the introduction of the PBS, this has to be by issuing a fresh CoS, which may require a fresh RLMT, and the filing by the migrant worker of a fresh application for leave.

Acceptable Changes:

The UKBA will accept the following changes to the employee's terms and conditions as a technical change:

• changes to the individual's personal details, such as change of name on marriage;

• changes to the company's business address and/or name because of re-branding or relocation;

• where both the employee, and the specific job they were approved for, move location;

• restructure of the company due to takeover:

If there is restructuring within the company as a result of the takeover, the new employer will need to provide details of the restructure, for example, evidence of any redundancies. The UKBA will then assess whether the change can be accepted as a technical change; and

• temporary reductions in working hours where employers are reducing workers' hours to avoid making redundancies during the current economic climate. These will be accepted as technical changes provided all of the following conditions are met:

• the work permit holder is continuing to work in the same job, with reduced working hours;
• the reduced working hours are part of a company-wide policy to avoid redundancies;
• you are not treating migrant workers more favourably than resident workers;
• the pay or working hours do not reduce by more than 30%;
• any reduction in wages is proportionate to the reduction in hours;
• the arrangements will be in place for no more than one year.

Unacceptable Changes

The UKBA will not accept the following changes to the employee's terms and conditions as a technical change, and it will be necessary for the employer to issue the appropriate PBS migrant worker authorisation which may require a fresh RLMT, and for the migrant worker to obtain the grant of fresh leave, before the changes take place:

• the permit holder's duties have changed due to promotion, demotion or restructuring;

• the permit holder's salary has risen significantly; that is above normal annual increments or pay awards applied to all, or most, staff;

• salary reductions, unless applying to all staff;

• salary reductions where the salary falls below the National Minimum Wage (or below the 'going rate' for the job);

• the working hours have been increased or reduced significantly (by at least 10%), unless as a temporary reduction in working hours, to that indicated in the work permit application; and

• the permit holder is required to move to a different location to do a similar job for you, but the job for which the permit was issued remains in the original location.

Tier 2 Of The Points Based System (PBS)

The UKBA has surprisingly not carried across into the PBS the detailed guidance under the work permit scheme relating to technical changes. However, where the PBS guidance is silent, it may be possible to place reliance on the work permit scheme guidance.

What Amounts To 'Technical' Changes Under The PBS?

Under the PBS, the requirement to notify 'technical' changes arises under the generic reporting duties of a licensed sponsor. Under these, the sponsor is only required to report significant changes in the sponsored migrant's circumstances, such as:

• a change of salary from the level stated on the migrant's CoS (other than changes due to annual increments, bonuses or natural progression within the same job provided this progression is at the same level and is not a promotion); and

• where the location the migrant is employed at changes.

The employer will need to report the change to the terms and conditions of employment using the Sponsor Management System within 10 working days.


There is no fee payable.


No further guidance is given on what amounts to a significant change in the sponsored migrant's circumstances. Where the employer is uncertain whether the proposed changes to an employee's terms and conditions of employment will be accepted by the UKBA as technical, then it is advisable to notify the UKBA of the proposed changes and only once they are accepted as technical to implement them. 


This will avoid a situation where the changes are deemed by the UKBA as substantial, thereby invalidating the employee's current work authorisation and rendering the employment illegal.

What Amounts To A Change Of Employment Requiring Fresh Authorisation?

The sponsor guidance states that where the migrant is continuing to work for the same sponsor, but their core duties and/or responsibilities change, or where their position in the hierarchy of the sponsoring organisation changes, for example due to a promotion, this is treated as a change of employment.


The employer will need to carry out a resident labour market test (where appropriate) to show that no suitable settled worker is available to fill the position, issue the employee with a new CoS and the migrant must then make a new application for leave under tier 2.


The migrant's application for leave must be approved by UKBA before they can start work in their new job. This applies regardless of whether the new job is with the same sponsor or with a new sponsor. In the meantime, the migrant can continue working in their original job, for their original sponsor (provided their previous leave has not expired) until the start date of the new job, which should be the start date given on the new CoS.

Consequences Of Failure To Report Changes Of Employment

• If a technical change of employment is not reported, or prior approval to a change of employment is not obtained, there can be severe consequences:  
• the individual's employment can be categorised as unauthorised, 
• the work permit/CoS revoked, 
• their leave to enter or remain curtailed and
• they can be removed for breach of conditions, which will lead to a mandatory re-entry ban of at least 12 months. 

The employer 

• might have a civil penalty of up to £10,000 assessed against it,
• have its ability to bring in other migrant workers restricted and in serious cases 
• may have a criminal prosecution brought against it and its directors and other officers.

It is therefore essential that employers (and migrant workers) have systems in place to monitor any proposed changes to the conditions of employment of migrant workers. A decision can then be made as to whether it is necessary to notify the UKBA of the change or whether it is necessary to issue a fresh CoS, which may require carrying out a fresh RLMT, and for the migrant to obtain a fresh leave based on the new CoS.

Employment Law Update - September 2009

This update keeps you informed of new developments in employment law and focuses particularly on a recent Employment Appeal Tribunal decision concerning Amnesty International

Motive irrelevant in establishing race discrimination

In the recent case of Amnesty International v Ahmed (UKEAT/0447/08/ZT), the Employment Appeal Tribunal (EAT) held an employee was subjected to direct discrimination when her employer, Amnesty International, did not offer her a promotion because her ethnicity meant  it would be dangerous for her to perform the role. Further, Amnesty International was concerned that offering the promotion could compromise its impartiality and, therefore, effectiveness.


Facts


The employee is of northern Sudanese origin and applied for the role of 'researcher' for Sudan. She was, at the time, performing the role of 'campaigner' in respect of Sudan. Amnesty International was of the view that her ethnic origin would not only compromise its impartiality, but would also expose her and those travelling with her, to increased safety risks when visiting Sudan or the camps in Eastern Chad. On this basis, her application was refused and, as a result, the claimant resigned and claimed race discrimination and constructive unfair dismissal.


Amnesty International has always been concerned about the problems that may arise if staff of a particular nationality or national or ethnic origin undertake work in, or related to, the country of which they are a national. This is because the impartiality, or perceived impartiality, of the staff in question may be prejudiced by their connections with the country. This would not only reduce effectiveness but could also have implications for Amnesty's own reputation for neutrality. Further, staff who have to visit a country of which they are nationals, are considered to be at significantly greater risk of ill treatment or violence than others.


Finding


The EAT held that the employer's motive is irrelevant in establishing whether an individual has been discriminated against on the grounds of race. The employee's non-appointment to the new role constituted direct discrimination contrary to the Race Relations Act 1976, notwithstanding any potentially justifiable reasons for the decision. Amnesty International was unable to successfully defend its actions on the grounds that sending the employee to Sudan would have meant it breached its duty as her employer under the Health and Safety at Work etc. Act 1974.


However, the EAT concluded that Amnesty International's conduct was not sufficient to breach the mutual term of trust and confidence, entitling the employee to claim constructive dismissal. In this regard, the employer's motive was relevant in that Amnesty International had reached its decision following a thorough and reasoned process, which was not influenced by racial prejudice.

Workplace parking levy schemes

The Workplace Parking Levy (England) Regulations 2009 will come into force on 1 October 2009. Under these regulations, local authorities in England (excluding Greater London) will be able to introduce a workplace parking levy scheme. Details of how each scheme will operate will be the responsibility of each local authority. It is hoped that by imposing a levy on the amount of workplace car parking provided by employers, car-commuting will reduce in favour of alternative means of transport.


The Regulations do not specify charging levels, exemptions and discounts which will be decided by the Local Authority in light of local circumstances. Guidance will be issued to Local Authorities by the Department of Transport as to which issues should be taken into account in workplace parking levy schemes. No workplace parking levy scheme will come into operation until 2011, and no levy is expected to commence before April 2012. 


Employers may have to consider the parking offered to their staff following the introduction of any workplace parking levy schemes and will have to have regard to any implied contractual right to parking.

Review of the default retirement age

Under the Employment Equality (Age) Regulations 2006, the statutory default retirement age is 65. It was originally intended that this would be reviewed in 2011. However, due to the change in economic circumstances, the government has announced in its strategy 'Building a Society for All Ages' that this review will be brought forward to 2010.


Currently, the government is gathering evidence to inform the review. If, as a result of the review, it is found that the default retirement age is no longer necessary, any changes would not be implemented until 2011. This will give employees and employers sufficient time to prepare for any changes, and allow employees additional time to consider their retirement plans. Employers will be encouraged to give employees more choice over their retirement as part of the Age Positive initiative. This government initiative will also work with employers to promote the recruitment and retention of older workers.

Employment claims in decline?

In July, Acas published its annual report for the year ending March 2009. Interestingly, the report revealed that the total number of employment claims actually declined by 8 per cent despite the widely reported issues faced in the job market. In addition, Acas noted a 13 per cent fall in the number of equal pay claims.


Despite the overall decline in the number of claims reaching employment tribunals in 2008/09, closer analysis of the figures revealed an increase in Acas' conciliation and mediation services and a significant shift in the nature of claims pursued. Acas' report highlighted a 29 per cent rise in unfair dismissal claims and a 36 per cent rise in redundancy claims. The shift in the type of claims has been largely attributed to the current recession which has required many employers either to reduce headcount or restructure their workforce.


In addition to recording the annual number of claims, the report revealed that Acas received 78,670 cases for conciliation from the employment tribunals representing a rise of 18 per cent from last year. Unsurprisingly, Acas confirmed that the economic downturn led to a rapid and sustained increase in the number of cases passed to them for conciliation in the second half of 2008/09. In addition, Acas' mediation service saw a 24 per cent increase in demand over the preceding year with resolution rates remaining very high at just over 90 per cent.


Therefore, despite the fact that fewer claims are reaching employment tribunals, there is little doubt that the economic downturn has prompted a sharp rise in workplace disputes. 


The Acas helpline, which has long acted as a barometer for the state of the workplace, predictably showed a dramatic increase in calls for advice on redundancy and lay-offs, from employers and workers alike. With commentators predicting that unemployment is likely to continue to rise in the coming months and into 2010, employers are well advised to seek specialist advice to minimise their exposure to employment claims.

HMRC threatens to get tough with dodgy recruitment agents

The Revenue has recently published a brief announcing that it is going to get tough with recruitment agencies and umbrella organisations which breach tax and national insurance legislation when offering temporary workers. HMRC will be working with the Department for Business Innovation & Skills, and the Gangmasters Licensing Authority to identify businesses acting in contravention of legislation and will penalise breaches of the law as they are identified. Businesses which use temporary workers need to make sure that the supplier is operating within the law to avoid the risk of putting their own reputations and businesses at risk

Setting up a limited company

Why is it called a limited company?


The term 'limited' stems from the fact that the company's finances and assets are entirely distinct from the personal finances and assets of its owners.Shareholders in limited liability companies are not responsible for company debts, although if required, directors may be required to guarantee loans or credit granted to the company.


If you are a sole trader you are personally responsible for all the debts you incur.


The minimum requirements of a limited liability company are:

• The company must be registered at Companies House (CH).
• Annual accounts must be filed at Companies House.
• An annual Return must be completed each year to update Companies House with basic details relating to the company. It must be completed within 28 days of your company 'made up date' each year. You can file this on paper or online for a smaller fee.
• HMRC must be informed if the company has any profits or taxable income in a company year.
• The company must send HMRC a corporation tax return each year and pay any tax due within nine months and one day of the company year end.
• The company must register for PAYE and deduct income tax and national insurance from what it pays its employees and directors.
• It must inform HMRC of any benefits-in-kind provided to its directors or certain employees.

Following changes made in the Companies Act 2006, a limited liability company formed under it no longer has to have a company secretary.


Who are Companies House?


Companies House is responsible for company registrations in Great Britain. It also has a key role in providing information about British companies.


Who can form a company?


One or more persons can form a company for any lawful purpose by subscribing their name(s) to the memorandum of association and complying with the legal requirements for incorporation. In law, 'person' includes individuals, companies and other corporations. Those persons who subscribe their names to the memorandum of association are known as "subscribers".


How is a company formed?


This overview is a brief guide to the simplest incorporation i.e. private company limited by shares with straightforward articles and a non contentious name.


You or an agent acting for you must complete and return the following documents to Companies House to register a company:


Application to register a company (Form IN01).


- an eighteen page document setting out the company's name, registered office, first directors and officers, shareholding etc.


Memorandum of Association


- Includes company name, location, and business type.


Articles of Association


- outlines directors' powers, shareholder rights, etc. (unless you decide that the model articles downloadable from CH website are relevant to your company and should apply in their entirety).




Additional information 


-if your application includes a prescribed or sensitive word or expression.


The CH fee for registering the company.


- currently £20 except for “same day registrations”.




These documents are often prepared by a company formation agent, or your accountant. There is no legal requirement to use an agent, but it's typically a hassle-free process compared to doing it yourself.


You can file the application electronically or you can send a paper application.


The Companies House website provides detailed guidance and FAQ's which describe all aspects and requirements of the registration process, including what you can call your limited company, and the documentation required to complete the registration process.




What is included in a Form IN01?


The company's name


Before you incorporate your company you will need to choose a name.


The name you choose must not be identical or the ‘same as’ another name appearing on the CH register company names, even if you are already using the name as a sole trader or partnership.


You can check if your preferred name is available by searching the index of company names on the CH website.


You should also check the Trade Marks Register of the UK Intellectual Property Office to ensure your proposed name does not infringe an existing trade mark.


The characters and punctuation you can use in a company’s name are specified by law. While accents may not be included in a company’s registered name, this does not prevent their being included in the company’s stationery.


You will normally only have to seek prior approval for a company’s name if it includes a specified word or expression or implies a connection with Her Majesty’s Government, a devolved administration, a local authority or a specified official body.


The company’s registered office


All companies must have a registered office, which must be a physical location in the United Kingdom (not a PO box). You must choose whether the registered office will be in England & Wales, Wales, Scotland or Northern Ireland and state the address of the company’s registered office on incorporation.


It can be your business address, the address of your accountant or any other address you choose. However, it must be an address at which you will be able to deal with all official letters and notices you receive.


The type of company


There are four main types of company:


Private company limited by shares:


This type of company has a share capital and the liability of each member is limited to the amount, if any, unpaid on their shares. A private company cannot offer its shares for sale to the general public.


Private company limited by guarantee:


This type of company does not have a share capital and its members are guarantors rather than shareholders A company is limited by guarantee if the members liability is limited to such amount as the members undertake to contribute to the assets of the company in the event of its being wound up.


Private unlimited company:


This type of company may or may not have a share capital but there is no limit to the members' liability. Because the members’ liability is unlimited, the company has to disclose less information than other types of company.


Public limited company:


This type of company has a minimum share capital of £50,000 and limits the liability of each member to the amount unpaid on their shares. A public limited company may offer its shares for sale to the general public and may also be quoted on the stock exchange.


Community Interest companies (CICs) can be incorporated as private or public companies. Private companies also include Right to Manage Companies and Commonhold Associations.


The company’s officers


The company’s officers are the directors and the company secretary, if you decide to appoint one or are required to do so.


Private companies must appoint at least one director but do not need to appoint a secretary.


A company may be an officer of another company but at least one director must be an individual.


Public companies must appoint a minimum of two directors and a secretary. One of the directors must be an individual.


Can anyone be a company director?


The only legal restrictions preventing anyone becoming a director are:
they must not have been disqualified from acting as a company director (unless the court has given them permission to act for a particular company);
they must not be an undischarged bankrupt (unless they have been given permission by the court to act for a particular company);
they must not be under the age of 16.


Statement of capital and initial shareholdings


This sets out:

• what classes of shares comprise the company's initial share capital;
• the rights attaching to them;
• the ccurrency in which they are to be issued;
• the maximum amount which can be issued for each class;
• the number of shares actually issued and to whom.

What is the memorandum of association?


The memorandum of association is a short, authenticated or signed statement of the intention of those forming the company (the subscribers), to be incorporated.


The document will include the subscribers’ names and that they agree to become members of the company.


Once the company has been incorporated, the memorandum will no longer affect the ongoing operation of the company. There is no way of amending the memorandum once registered.


What are articles of association?


The articles of association are the company's internal rule book setting how it is to be governed. They typically cover the issuing of shares (also called stock), the different voting and dividend rights attached to different classes of share, restrictions on the transfer of shares, the rules of board meetings and shareholder meetings, and other similar issues.


A company can adopt its own tailor-made articles or it can adopt model articles prescribed by the Secretary of State.


Model articles are available for private companies limited by shares, private companies limited by guarantee and public companies.


When you complete the ‘Application to register a company (Form IN01) you will need to indicate if the proposed company is adopting:

• model articles in their entirety (copy of the articles not required);
• model articles with amendments (copy of the amended articles as amended must be sent with the IN01but need not include the text of provisions of model articles that are adopted without amendment); or
• bespoke articles (copy of the articles must be sent with the IN01).

If you do not indicate which articles you are adopting, CH will automatically apply the model articles appropriate to your company type.




What do I do with the incorporation documents?


You may file them with CH either electronically or on paper.


Electronic filing


You may do this via CH's website. Incorporation usually takes 3-4 hours.


Paper Filing


If you file paper documents you should send them to Companies House in:

• Cardiff, if the registered office is to be situated in England and Wales or Wales;
• Edinburgh, if the registered office is to be situated in Scotland;
• Belfast, if the registered office is to be situated in Northern Ireland.

For an increased fee, CH also offer a ‘Same Day’ incorporation service for paper filing in Cardiff, Edinburgh and Belfast, allowing you to register the company on the day they receive the documents, provided they reach them before 3pm (Monday-Friday).


When filing ‘Same Day’ applications by post, courier or by hand ensure you clearly mark the envelope “Same-Day Incorporation”. Paper filings, which must be sent to the appropriate office, take longer to process than those filed electronically.

Landlords and Debt Relief Orders

Debt Relief Orders (DROs) are a new form of insolvency about which tenants are being advised by local CABs and authorised debt advisers. At first glance, social landlords may mistakenly believe that DROs may hinder their ability to recover rent arrears, however, the impact of DROs in this way, is somewhat limited.

What Is A Debt Relief Order?

A Debt Relief Order (DRO) is a form of insolvency which is an alternative to bankruptcy. They came into force in April 2009.

Who may apply for a DRO?

DROs are available to people who have very little surplus income (no more than £50 per month) and very few assets. Any assets owned by the debtor must be valued at no more than £300.

If the debtor owns a car, its value must be less than £1,000.

The level of debt owed must also be relatively low (no more than £15,000 in total).

The Insolvency Service website at www.insolvency.gov.uk/alternativestobankruptcy.htmprovides details about who may apply for a DRO.

What is the effect of a DRO?

Once a DRO has been made, there will be a moratorium period  usually lasting for a period of 12 months during which creditors cannot take enforcement action against the debtor without leave of the Court.

In addition, the debtor is prohibited from making payments towards any debts covered by the DRO.

Once the moratorium period has ended, any debts included in the DRO will be discharged.

Which debts can be included in a DRO?

Most debts can be included in a DRO including money judgments contained in an outright possession order or suspended possession order. Creditors, including landlords owed rent arrears, can raise objections to a debt being included in a DRO. The very limited grounds on which objections can be made are on the Insolvency Service website and can be accessed through the link above.

What is the effect of DRO's On Possession Orders?

The Insolvency Service does not seem to consider that DRO's have any effect on the validity or enforcement of possession orders.
Correspondence received from the Insolvency Service states that the principle in Harlow District Council –v- Norman John Hall [2006] EWCA Civ 156 applies to DROs.

Norman Hall was the secure tenant of a property owned by Harlow District Council.

By February 2004 Mr Hall fell into arrears with his rent and this led to a suspended possession order being made against him in February 2005.

A day after the suspended possession order was made a bankruptcy order was made against him.

After being made bankrupt, Mr Hall made an application to the Court seeking a discharge of the suspended possession order.

His application was dismissed.

Mr Hall then appealed to the Court of Appeal, who dismissed his appeal.

The Court of Appeal stated that a possession order was not a remedy for enforcing an outstanding debt for rent arrears, but was something that the landlord must obtain in order to recover possession of the tenant's property. A bankruptcy order did not therefore stop a landlord enforcing a possession order.

When DROs first came into force, it was not known if they would be treated in the same way as a bankruptcy order.

Recent indications from the Insolvency Service suggesting that they would be, are therefore helpful.

Landlords should note however, that any other methods of enforcement e.g. by way of an attachment of earnings order or a warrant of execution would not be permitted against a debtor who was the subject of a DRO, without leave of the Court. This is because these types of enforcement are used to enforce payment of the debt itself. The enforcement of a possession order essentially seeks to recover possession of the property.

Running a business in tough times

In the present economic environment all businesses are looking long and hard at market and business operations and considering how they are going to maintain, let alone increase, turnover and profitability. While even in a recession there are positive stories, businesses are increasingly making pragmatic and conservative decisions in order to protect their existing position. Some of the things we are seeing include:

Reviewing HR policies and incentives

While the reality is that there will almost certainly be increased numbers of redundancies, some clients are being much more proactive in their management of their workforce. That includes hiring freezes, reallocation of employees, increased training programmes to improve efficiency and client service, and the re-examination of incentive schemes. Many employee share option plans are now 'underwater' and we are increasingly working with clients to either replace existing option schemes or (given that the prospect of an exit has for many greatly reduced) implementing alternative incentive or bonus arrangements, often more heavily weighted to personal performance. Keeping staff motivated and delivering high quality customer service is becoming ever more important, as is retaining the key staff which the business relies upon.

Debt collection

All businesses are noticing increases in debtor days. As cash gets tighter it is unsurprising that debtors seek to hold on to their cash for as long as possible. Clients are having to get much more aggressive with cash collection. That often requires amendment to existing terms and conditions (eg. reducing payment dates from, say, 28 to 14 days, incorporating benefits for prompt payment, tightening up default procedures) and being tougher in chasing non-paying customers. While clients might have been more forgiving with non-payers in a buoyant economy, we are increasingly being instructed to chase bad debts on behalf of clients at the earliest opportunity. While that can be an unpleasant task, establishing a reputation amongst customers and clients for requiring prompt payment can bring long-term benefits. The reality is that many businesses make decisions as to who to pay first based on who is shouting the loudest.

Prudent cost-cutting

Just about every business is currently looking at ways in which it can cut costs without affecting turnover and service quality. One area where we are helping clients who are looking at reducing costs is in relation to lease obligations. There are increases in clients looking to sub-let or assign burdensome leases, buy their way out of lease obligations (which while involving a greater upfront cost, can greatly reduce medium to long term exposure), or in the extreme, looking at voluntarily going into administration (with a pre-packaged buyout vehicle in place) to rid themselves of crippling fixed costs.

Financial controls

In growing businesses, particularly at an early stage, it is not uncommon for financial controls to sometimes be somewhat lax. While business is booming, problems might not be so apparent, however the buck stops with management. They need to be fully aware of what is going on within the business, especially if there is any suggestion of the business potentially trading beyond its means. We are increasingly advising clients about issues relating to wrongful trading and directors' liabilities. That in turn is reflected in management becoming much more aware of the importance of financial controls including CEOs wanting to approve each and every expense, sign every cheque, and generally seeking to ensure that each expense generates a positive return on the investment made.

Communicating with investors and funders

The key is to keep talking to them, whether business is good or bad. Everyone recognises we are entering difficult economic times. That includes the banks, VCs and business angels themselves. In such difficult times keeping the lines of communication open, particularly when the news is bad, is vital. No investors or funders like unwelcome surprises. With time, and with full and frank discussion, funding solutions may often be able to be found, or alternative business strategies adopted. That can involve additional capital injections, the seeking of alternative funders, a trade sale (albeit sooner than perhaps expected or hoped), the hiving off of parts of the business, or at worst an orderly winding-up process. On the other hand, bad news delivered just before the money runs out almost certainly guarantees disaster.

Lame Excuses for Not Starting Your Own Business

If you haven’t started a business before, you can probably think of a million reasons not to do it. Feeling apprehensive about taking the plunge is justified. Creating a successful business isn’t easy.


The problem is that not running your own business may be keeping you from living your ideal lifestyle. Luckily, starting a business isn’t really that difficult. It is a lot of hard work.


So what are you waiting for? Are you afraid of failure? Everyone fails at some point. It’s part of the journey of success.


Here are some common excuses that shouldn’t stop you from your first business venture.




I don’t have enough money


Money doesn’t guarantee success in business..


You’ve heard that most businesses fail because they run out of money, right? The saying should actually be “all businesses fail when they run out of money.” It’s not about how much money you have, but how long you make what you do have last.


The fact is that most businesses don’t start with much. Instead of waiting for venture capital or an inheritance from your grandparents, use proven techniques of bootstrapping to give your business better odds and get started sooner.


I don’t have the time


Saying you don’t have enough time is really a way of saying that something isn’t a high priority for you. We all have the same number of hours in a day, and you decide how to spend those hours.


If you want to be successful in your new business, you’d better assign it a very high priority. Practically speaking, if you can’t afford to quit your job but want to free up some time to work on your new business, why not scale back your hours at your job? That could be a great compromise between income and time for the business.


My business plan isn’t perfect


Your business plan? If this is your first time, there’s so much about running a business you don’t know that your business plan can never be perfect. Planning is important, but use the Pareto principle (80/20 rule) to plan what you know and ignore details early on.


The timing just isn’t right


When will the timing be right? Are you waiting for the stars to align? Starting a business is a deliberate action, not something haphazard.


When you’re running a business, disruptions and moments of bad timing will be common. You might as well gain an advantage by learning to deal with those competing priorities now.


There’s too much competition


There’s probably two types of competition you’re worried about: the big guys (established companies) and the little guys (other startups).


As far as the big guys are concerned, they’re actually afraid of you as much as you are of them, and for good reason. Our increasingly volatile and hyper-innovative economy has decidedly given advantages to startups.


And for the little guys? To some degree, the same fear you have about competition limits the number of startups you might be competing against. On top of that, most markets have room for many winners. You and your competition can both be successful.


Also, don’t forget that during an economic downturn there is probably less competition. That may make a bad economy a great time to start a business.


I don’t have all the skills I need


There are a lot of ways to get around this one. Learning the skills you’re missing may not be as difficult as you think. If you don’t want to learn or don’t have the time, you could partner with someone to trade services (for instance, you provide marketing skills, and your partner helps you write software).


If neither of those options are appealing, consider outsourcing. 


So there, you shouldn’t have any more valid excuses. Get out there and change the world. 


Just make sure to consider your own lifestyle in your business plans from the start.

Companies Act 2006 - 1 October 2009 implementations

Annual Return

There is a new Annual Return form as well as additional information required to complete the form. The required information regarding the issued share capital is changing; a statement of capital (voting rights) has been added and, if your company has any corporate directors or secretaries, additional information will be required.

Accounts

You have one month less in which to file accounts. The filing period is reduced to nine months for a private company. In addition, the financial penalty for late filing of statutory accounts has doubled and now ranges from £150 to £1,500 depending on how late they are filed.

Place for keeping company records

There will be changes to the arrangements for inspecting your company's records. Records may be held at the registered office address or at a single alternative inspection location (SAIL).

This site will have to be in the same part of the UK as your registered office. You must notify Companies House to set up a SAIL address or if the SAIL address is moved.

You may only have one SAIL address for a company at a time. Once the SAIL address is set up, you can move some or all registers to the SAIL address by notifying Companies House. Forms for this will be available fromtheir website from 1 October.

Company Constitution – articles

The Companies Act 2006 introduces a new model form of articles of association for private companies limited by shares (with different forms for public limited companies and companies limited by guarantee). Whilst your company may continue to operate under its existing constitution after 1 October, this may be an opportune time to review the constitution.

Updating the articles of association could not only give the company all the advantages of the new model articles but also cover those areas where additional powers or clarification of rights and obligations is desirable to make the administration of the company easier to understand and manage.

Directors' address protected from disclosure



Directors residential addresses must be notified to the Registrar of Companies and are held on public record at Companies House, as well on the Register of Directors of every company. The register at Companies House is publicly available information and directors must make this information available unless they obtain a confidentiality order, for example where there is a threat of violence or intimidation as may be the case if the company is involved in politically sensitive activities.


From 1 October 2009 changes made under the Companies Act 2006, will allow individual directors to provide a service address which will be available on the public record, rather than their residential address. A directors residential address will still be required but this will be held on a separate register of residential addresses to which access will be restricted.


Directors may give any address for service including the company's registered office. If they continue to use their residential address as their address for service the register will not make clear that that is their home address.

On 1 October 2009, a director's current residential address will automatically become the service address. If you would like to use a different service address (e.g. the company's registered office), you will be able to change these details from 1 October on the Companies House website.

Thus companies will need to keep three registers:

•  - a register of directors residential addresses,
• - a register of directors and
• - a register of secretaries (if they have a secretary). 

Directors who wish to take advantage of the ability to keep their residential addresses confidential should notify the company of a service address to be included in the Register of Directors. This change must be notified to the Registrar of Companies using form CH01.

A new register of directors residential addresses must be established.


Inspection of company records

If a person wishes to inspect your private company's records, they will have to give advance notice of the date and time they wish to carry out the inspection. You will not be able to prevent the person from copying all or part of a record they are entitled to inspect.

You will also have to provide copies of records in the format that a person requests. So, for example, if a person requests a hard copy, you must provide one even if the record is held electronically.

Notification of particulars of share capital 

In an application for a new company, the particular of share capital will be included in a new 'statement of capital', rather than being included in the memorandum.

Any changes in capital will be notified to Companies House through a new statement of capital.

Overseas companies with a business in the UK

There will be a single regime for the registration by overseas companies of the particulars of their UK establishments. There will also be a new regime for the registration of charges over property in the UK created by such companies.

Record-keeping requirements for limited liability partnerships (LLPs)

New record-keeping requirements will be introduced for LLPs. For example, an LLP will have to keep a register of its members that contains prescribed information.

The LLP must also tell Companies House where the register is kept available for inspection.

Articles for new companies

New companies will need to include the company's objects and liabilities – which were previously in the memorandum.  Copies of model articles are available to download from the Companies House website.

Notifying Companies House of articles changes

You must send any amendments to the company's articles to Companies House within 15 days. Otherwise you could be liable to a criminal offence and a civil penalty of £200.

Protecting your company from fraud

From 1 October 2009, the Registrar's Protected Online Filing (PROOF) scheme will operate under the framework of the Act (section 1070).

Corporate identity fraud is an increasing problem, with small businesses just as vulnerable as larger ones. PROOF is a new scheme from Companies House, which reduces the likelihood of your company falling victim to fraud by protecting you from changes to their company details. You agree with the Registrar that they will only file certain documents electronically. If a fraudster tries to ‘hijack' their company by filing a piece of paper, this will be rejected.

This can be done via the WebFiling service using the company's authentication code (you no longer need the written consent of each director). 

Forms

All Companies House forms will change from 1 October 2009. The new forms include:

• Companies Act 2006 information requirements
  
• new numbers updated to be relevant to the 2006 Act
  
• additional guidance notes
  
• details of any fee (if applicable)
  
  
  
  
  
  
  The new forms must be used for all company events that take place on or after 1 October 2009. If you use an old form it will be rejected.
  

Company events which take place before 1 October must be submitted on 1985 Act forms.

Northern Ireland companies

The Companies Act 2006 will create a single company law regime applying to the whole of the UK, and this order allows for a single UK-wide Register of Companies.

The Companies Registry in Northern Ireland, currently part of the Department of Enterprise, Trade and Investment in Northern Ireland, will become the responsibility of the Secretary of State for Business Innovation & Skills with effect from 1 October 2009.

Changes made to CIC regulations

Changes have been made to the regulations that govern the operation of community interest companies (CICs) from 1 October. The amendments are all contained in the Community Interest Companies (Amendment) Regulations 2009.

Casting Vote

The chairman of a CIC will no longer have a second or casting vote in matters where the board vote is tied. Similarly, alternate directors will no longer have the right to cast a vote on behalf of the absent director in addition to their own vote.

Community Interest Test

The second change involves the form of the community interest test that all CIC's must satisfy in order to retain CIC status. The current test requires the CIC to show that its activities benefit the community or a section of the community - 'section' being defined as 'a group of people who have an easily identifiable common characteristic which sets them apart from other members of the community'. Under the new legislation, a 'reasonable person's test' is being introduced, under which a group of people are considered to be a section of the community not only if they meet the current test, but if a 'reasonable person' might consider that they constitute a section of the community.

Conversion

Finally, under the amendments a CIC will be able to convert to the asset-locked form of a community benefit society (a form of industrial and provident society), and a Scottish charity may now be able to convert to a CIC