Does Your Company Have Any ‘Persons with Significant Control’?

If so, you need to include their details in a new Register.

If you run a limited company, under new regulations, it is necessary to keep a register of people with significant control of the company. This register will be in addition to the register of directors and register of members.

The Regulations came into effect on 6th April 2016 and details have to be included in your annual statement at Companies House from 30th June 2016.

Persons With Significant Control

puppet master photo

You now have to record who pulls the strings in your company Photo by Greg Walters

A person with significant control (a PSC) is someone who:

• directly or indirectly holds more than 25% of the shares or voting rights of a company,
• directly or indirectly has the right to appoint or remove the majority of the directors, or
• has “significant influence or control” over the company itself, or over the activities of a trust or a firm which meets any of the other specified conditions in relation to the company (e.g. by holding more than 25% of the shares).

A person would exercise “significant influence or control” if for example he/she is not a member of the board of directors, but regularly or consistently directs or influences a significant section of the board, or is regularly consulted on board decisions and whose views influence decisions made by the board.

This would include a person who falls within the definition of “shadow director”. It can apply even if the individual is not aiming to gain economic benefits from the policies or activities of the company, trust or firm.

The PSC Register

The register has to contain the name, nationality, date of birth, usual country of residence and usual residential address of each individual who is a PSC plus the nature of their control and the date on which that person became registrable. A service address is also needed. The residential address will not appear on the public record.

Your company’s PSC register must not be left empty and you must take reasonable steps to determine whether any individual or any legal entity meets the conditions for being a PSC. Failure to do so is a criminal offence.

If there is nobody with significant influence, your register (and the information to Companies House) should say:
The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.

Or, if you are still checking, it might say “The company has not yet completed taking reasonable steps to find out if there is anyone who is a registrable person or a registrable relevant legal entity in relation to the company.

LLPs and Exemptions

Similar regulations apply to LLPs (limited liability partnerships).

There are exemptions for those who have influence in a purely professional capacity, such as a lawyer or accountant.

Why Is This Being Introduced?

The new regulations are part of the Government’s attempts to deal with tax evasion and money laundering and are part of a Europe-wide initiative.

£2.3 million Fine Under Bribery Act. Protect Your Business!

Avoid Bribery Act headaches with a simple download

Bribery Act headaches can be avoided with a simple download
Photo by threephin Creative Commons

 

 

Consultant Sweett Group have been fined £2.25 million plus £95,000 costs at Southwark Crown Court in the first prosecution under Section 7(1) of the Bribery Act.

This is an offence of strict liability – if a business does not have “adequate procedures” designed to prevent persons associated with it from bribing a third party, then it will automatically be guilty of an offence.  And this offence can occur even if the person who offered the bribe was not an employee or not even in the UK – so it could be an overseas agent over whom you have no direct control.  Indeed, in Sweett’s case the offence occurred in the Middle East on some contracts related to the firm.

It is very easy to protect yourself from this risk – you can start by having a proper Code of Conduct or Anti-Corruption Policy in place – and that will cost you a mere £39 (excl. VAT) at ContractStore.

Thousands of small businesses do not have adequate protection – don’t be one of them – set up your Code of Conduct today!

New EU Regulations for e-commerce: Deadline 15th February 2016

fighting photo

Don’t get in a fight! You can now sort out disputes online. 
Photo by MGEARTWORKS Creative Commons License

If you sell goods or services online, under new EU Regulations from 15th February, your website must provide a link to the European Commission’s Online Dispute Resolution (ODR) Platform.

Online traders who use Alternative Dispute Resolution (ADR) should also provide information about the ODR Platform in their contractual terms.

How To Comply with the New ECommerce Regulations

In order to comply with the regulations, you must provide the following information on your website:

1. a link to the ODR platform http://ec.europa.eu/odr
2. the email address of the online trader

The following wording may be suitable:

If you are a client/customer and we have made a contract with you by electronic means you may be entitled to use an EU online dispute resolution service to assist with any contractual dispute you may have with us. This service can be found at http://ec.europa.eu/odr. Our email address is xxxxxx

What is the EU Online Dispute Resolution?

The EU website has the following explanation:

If consumers have a complaint about a good or service they have bought, instead of going to court, they can choose Alternative Dispute Resolution (ADR). The term ADR includes all the ways of resolving a complaint which do not involve going to court.

Typically consumers ask a neutral third party to act as an intermediary between them and the trader; this neutral third party is called an ADR entity. The ADR entity can then suggest or impose a solution, or simply bring the two together to discuss how to find a solution. This is also known as “mediation”, “conciliation”, “arbitration”, “ombudsman” or “complaints’ board”. Compared with going to court, ADR is usually quicker, simpler and costs less.

Online Dispute Resolution (ODR) is an ADR procedure conducted entirely online.

The platform is user-friendly, multilingual and accessible to all.

Everything is done in four, simple steps:
• The consumer fills in an online complaint form and submits it.
• The complaint is sent to the relevant trader, who proposes an ADR entity to the consumer.
• Once consumer and trader agree on an ADR entity to handle their dispute, the EU ODR platform transfers automatically the complaint to that entity.
• The ADR entity handles the case entirely online and reaches an outcome in 90 days

Read the information in full:

http://ec.europa.eu/consumers/solving_consumer_disputes/docs/adr-odr.factsheet_web.pdf

Regulations for Traders Who Use ADR for Resolving Disputes

Under The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015, if a trader is required by his Trade Association or Professional Institution to use ADR in resolving disputes, the trader must provide the name and website address of the ADR entity:

  • on the trader’s website, if the trader has a website; and
  • in the general terms and conditions of sales or service contracts between the trader and a consumer.

The ADR entity has to be one authorised by one of the organisations referred to in the Regulations, which include the Financial Conduct Authority and the Legal Services Board.

More Resources

ContractStore has a free download on ADR at this link: http://www.contractstore.com/Z140-alternative-dispute-resolution

Also our document A221, Website & Email Legal Notices, provides templates and explanations on the increasing number of notices that a business needs to include on its website.

Let us know in the comments if you have any questions or experiences to share.

Technology Update – What Every Business Needs to Know

New technology laws for business and more in the Moore Blatch updateOver the next couple of years, important new legislation about data privacy will be coming through from the EU: any business that stores customer information, needs to be aware and can start preparing now. Read more here

Other news in the latest update from Moore Blatch:

 

 

Think Twice Before You Copy From Another Website (it could prove to be expensive!)

In a recent case, a home improvement company in Bradford lifted 21 images from the website of a loft conversion company in the London area when it decided to move into loft conversion work and wanted some illustrations.

Absolute Lofts South West London Ltd. sued the Bradford company, Artisan, and its owner, Mr Lubbock, and won substantial damages. Artisan admitted liability and the judge awarded a total of £6300 in damages – £300 for ‘compensatory damages’ and a further £6000 – 20 times the basic compensation– because of the flagrant nature of the breach.

imitate photo

Making duplicates of other people’s images could leave you exposed
Photo by iloveart106 Creative Commons

In a case like this, compensatory damages are calculated on a theoretical basis of what might have been agreed for the use of the images between two willing parties. Experts instructed by each of the parties came up with different figures – the expert for Absolute Lofts argued that Artisan would have paid £9000 for a professional photographer to take those pictures. Artisan reckoned the figure was less than £1000. The judge did not think much of either expert opinion and decided £300 was the right amount as this was what it would have cost to source similar images from a photographic library.

However, the judge then decided that additional damages were due. Section 97 (2) of the Copyright Designs & Patent Act 1988 allows additional damages when there is a flagrant infringement of copyright.  And Article 13(2) of the EU Directive on The Enforcement of Intellectual Property Rights allows for damages appropriate to the prejudice suffered by the injured party.

Artisan’s owner knew that the images were being used without consent. But the judge also found that Artisan had directly profited from the photographs on their website – it seems that they not only implied the company had expertise in loft conversions, but its profits increased as a result.   Even though the distance between the two companies did not mean that Absolute Lofts suffered from direct loss of business as a result of Artisan’s action, the judge nonetheless thought there was prejudice and so awarded the £6000 additional damages.

The internet is often seen as a free resource where you can pick up and copy other people’s pictures or text and use them on another website. This case underlines the fact that you do so at your peril, and do remember that it is relatively easy for a copyright owner to search for and find duplication on the web.

There are plenty of free images available online, and Google search now allows you to search by license. There is a system of Creative Commons licensing that allows image publishers to declare the details of how they want their images shared.  Because of this, the courts are likely to get increasingly firm on blatant infringements.

So, if you are engaging a designer, be sure to check that their contract makes it clear that nothing they supply will infringe any third party’s copyright. Our designers’ contract template covers this along with all the other things you need to consider when working with designers.

For the full case report see: http://www.bailii.org/ew/cases/EWHC/IPEC/2015/2608.html

 

Data Protection: Safe Harbor Not Safe Any More

 

servers photo

Who in the world is handling your data? Maybe Joshua Crass in Oregon has it on this Facebook Data Center Server Board. Photo by IntelFreePress on Flickr

You may not think that much about where all the personal information you share on Facebook is physically stored, but because each country has different rules about the data stored within their territory, this global data sharing is presenting a complex challenge for anyone involved in personal data collection and storage.

The rules in the EU are different from those in the US, yet millions of Europeans are sharing their data with companies whose computers are located in America, and thus who are subject to different rules on who can access that data.

Safe Harbor

The EU places strict limitations on transferring data overseas and up till now, an arrangement called Safe Harbor has been used to allow US companies to store a European citizen’s data without having to have individual case-by-case agreements with all parties. The Safe Harbor scheme is a set of principles and rules for processing personal data.

US organisations wishing to transfer personal data from the EU to the US may subscribe to the scheme voluntarily with the US Department of Commerce. An agreement was reached between the US and the European Commission in 2000 that US companies that subscribed to Safe Harbor would be considered to be operating within the requirements of the European legislation requirements.

However, following Edward Snowden’s revelations of the levels of interference with personal data by American security agencies, it has become apparent that data protection in the States is incompatible with EU data protection laws.

A certain Mr Max Schrems of Austria brought a challenge to Facebook in Ireland through the European courts. Does Facebook, which stores a lot of data in the States, ensure that a European’s data is looked after correctly according to EU regulations?

As a result of this case, the European Court of Justice has declared that this Safe Harbor agreement is invalid for failure to comply with Article 25(6) of the Data Protection Directive. Safe Harbor no longer provides sufficient protection to European citizens when their personal data is transferred to the USA.

So the 4500+ companies that are relying upon it to cover the transfer of information from Europe to the US will have to put in place alternative mechanisms.

Facebook must also be investigated further by the Irish Data Protection Commissioner (DPC). If the DPC decides that Facebook’s activities have not provided adequate protection for European Facebook users, then it may suspend transfers of personal data to American servers with immediate effect.

Are many businesses affected?

The ruling is far wider than just Facebook and other tech giants. There is as yet no allegation that Facebook has done anything wrong but as Safe Harbor has been ruled invalid then thousands of businesses have significant work to do!

As stated, some 4,500 US companies are currently signed up to Safe Harbor. They will now have to put in place alternative means of ensuring that they comply with the European data protection legislation.

But many other companies also send data about their employees and their customers to the US. Companies with a US parent often use IT systems located at the US headquarters to administer personal data such as HR and CRM.

Likewise, significant numbers of companies outsourcing their IT systems to cloud service providers which frequently use US-based servers to store the data. Even companies that, for example, send payroll data to the US for administrative purposes will be caught by the collapse of Safe Harbour.

What will we do instead?

For businesses operating in Europe and the USA, the significance of this decision should not be under-estimated. Transfers of personal data from Europe to the USA made solely on the basis of the protection afforded by the Safe Harbor Agreement are no longer compliant with data protection law, so clearly any organisations that have been relying on Safe Harbor will now have to find another way to comply with their data protection obligations.

The most common response will be to sign up to model contract clauses. However, this will cause an administrative burden. Particularly as the collapse of Safe Harbour has the following effects:

  • Individual European countries can set their own regulation for US companies’ handling of their nationals’ data. This means that US companies may have to comply with different regulations for each European country. This will mean numerous different contractual requirements;
  • Countries can choose to suspend the transfer of data to the US — forcing companies to host user data exclusively within the country. Russia has recently introduced this requirement and others may follow suit.
So, if affected, your buisiness needs to consider:
  • Can the transfer of data be suspended? Can you move all your data storage to the country in which you operate?
  • Where transfers of data to the USA are still necessary, consider putting in place model data protection contractual clauses in respect of those transfers
  • or set up corporate rules in respect of intra-group transfers of data.

 

Employment Law Update October 2015

Latest update from Moore Blatch on employment law in the UK

Latest update from Moore Blatch on employment law in the UK

The latest missive from Moore Blatch covers:

Read the employment update in full here

Consumer Rights Act – Unfair Contract Terms

The Consumer Rights Act 2015 introduces new rights for consumers and our previous articles have dealt with how the Act affects sale of goods, services and digital products.

Kawarau Bridge - Bungee dipping photo

You can’t escape your responsibilities by writing them away in a contract

The Act also re-states and expands the existing law concerning unfair terms in consumer contracts.

The basic requirements are that contract terms must be fair.

The law says that a term is unfair if “contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

This fairness test applies not only to terms in the contract but also to consumer notices – e.g. notices in car parks, as well as notices appearing online on a website.

All written terms in a consumer contract or in a consumer notice must be transparent – i.e. expressed in plain and intelligible language.

Any term in a consumer contract or a consumer notice attempting to limit or exclude the trader’s liability for death or personal injury resulting from negligence is unlawful and not enforceable. (So a bungee jumping company can’t get you to sign away your rights – if the bungee fails, that will still be their fault.)

Similarly any term attempting to limit or exclude the various terms implied by the Act (satisfactory quality etc.) are unfair and unenforceable.

What Is ‘Unfair’?

Schedule 2 of the Act contains 20 examples of terms that may be regarded as unfair. These include:

  • Disproportionately high charges when a consumer decides not to carry on with a contract or with services which have not been supplied
  • Terms that allow the trader to decide the subject matter after the consumer is bound by the contract
  • A term allowing the trader to fix the price after the consumer is already bound by the contract
  • A term designed to limit the trader’s liability in the event of death or personal injury of the consumer that results from some act or omission of the trader
  • A term designed to exclude or limit the consumer’s rights if the trader does not perform his obligations adequately
  • A term that allows the trader to bring the contract to an end without reasonable notice unless there are serious grounds for doing so
  • A term which has the effect of binding the consumer to terms which he has had no real opportunity of becoming acquainted with before the conclusion of the contract.

Fairness Exemption

the fairness test in consumer rights

Notices to the public such as clamping warnings are also subject to the ‘fairness test’

The test of fairness will not apply to a term in a contract that specifies the subject matter of the contract, nor will the price be subjected to a fairness test. But for the exemption to apply, the subject matter and the price must be prominent and transparent – i.e. in plain English and intelligible.

What You Need To Do

All businesses need to review their contract terms at this stage to see that they do not fall foul of the Consumer Rights Act and the updated Unfair Terms requirements incorporated in it. Although much of the existing legislation is retained, there are new provisions as well.

Resources

Employment Law Update August 2015

Newsletter from Moore Blatch employment lawyers

PDF newsletter from Moore Blatch employment lawyers

The latest from Moore Blatch includes:

  • The government’s Trade Union Bill, set to make it harder to start strike action
  • Justice Committee inquiry into legal fees and access to justice
  • Consultation open on the Gender Pay Gap
  • Key announcements from the last Budget
  • New Acas guides for employers

Read the briefing in full at Moore Blatch