One of the major differences between operating a business as a sole proprietor and being the director of a limited company is the commercial law relating to liabilities. In particular, a person acting as a sole proprietor is seen legally as the same entity as the business, and as such is liable for any of the debts and liabilities incurred by that business.
Conversely, under commercial law, a company director is regarded as a different legal entity to the business and thus in normal circumstances would not be liable for any of the debts or liabilities the business had. This is one of the often-cited advantages of running a business as a limited company rather than a sole proprietor, however, there is a caveat.
The protection for directors concerning a company’s debts and liabilities is not absolute, and there are actions, behaviours and circumstances that could mean a director does find themselves responsible for the cost of liabilities and obligations which were taken out in the company’s name. There are 5 specific categories of liability that a director might find themselves responsible for and they are:
Whilst any sensible person will take care to check all aspects of any large purchase they make, this goes on to an even higher level when it comes to purchasing a business. Given that the sum of money that you are like to be paying will be substantial, this makes the financial risks significant. In addition, if you purchase a business without due diligence you could find yourself in a situation where you fall foul of commercial law, due to actions taken by the previous owners.
The key phrase in the first paragraph is ‘due diligence and within this article, we are going to outline the core principles of the due diligence you should take if considering buying a business. In addition, we also urge you to employ the services of a commercial lawyer who can ensure that every aspect of the transaction is legally sound and provide you legal protection too.
When you are carrying out your due diligence, almost all the checks that you make will fall within one of three distinct areas. These are financial, operations, and legal. Below we outline some of the specific checks you will want to make within each one of these.
For most business owners the prospect of ending up in court to defend a legal claim by a disgruntled client or supplier is ever-present. Thankfully, these occurrences are rare, but that does not mean that commercial law cannot impact a business and it can do so every day it is trading. Knowing the ins and outs and commercial is simply not feasible for someone running a busy business given their time commitments which is why commercial lawyers are in such demand.
If you have held off from hiring a commercial lawyer thus far, even if it was in having them available to call for advice, you are missing out on the opportunity to not only ensure your business is protected, but to also give yourself peace of mind knowing that should you encounter a legal issue, you have the exact person you need to help you resolved it. If you have not been convinced yet of the merits of a commercial lawyer, here are some other reasons which should.
Like most governments and the Commission itself, the UK government wants to make public procurement more transparent and open up contracts to more suppliers, including smaller firms (SMEs). But sometimes the “law of unintended consequences” kicks in. That means we see outcomes that are not the ones foreseen and intended by a usually well-meaning and purposeful action. Here is a great example.
In the Public Contracts Regulations 2015, one of the steps taken by the UK government, which was beyond the requirements of the new EU directives, was designed to open up procurement by mandating greater use of the government’s Contracts Finder website, which lists public contracting opportunities. Here is the guidance from the UK government, and this is one of the key elements.
“Contracting authorities are required to ensure that any new procurement opportunities, above thresholds, are published on Contracts Finder (in addition to, or instead of any other portal or publications route they may currently use).