Archive for September, 2012
The word on everybody’s lips following the conclusion of London’s glorious Olympic summer is ‘legacy’. The meaning of the term ‘legacy’ varies from one person or organisation to another. Amongst hardened City of London commuters, Marriott Harrison LLP lawyers hope that the Olympic legacy will amount to more than a plethora of fading pink stickers on tube station maps indicating the stops for Games venues.
This autumn promises a stimulus to the sluggishness of commercial activity that preceded the Games and then trailed in its wake. How much of those activities in which our clients are engaged will directly result from the beginnings of the legacy is currently difficult to predict. Nevertheless, while plans are made for new projects, there are plenty of changes in the law to address. In the current issue of MH Update, lawyers from around the firm’s departments examine a number of current legal developments and review matters that have recently been challenging our clients. These include pieces that consider: The interpretation of commercial contracts; changes to the UK security registration regime; proposed changes to the corporate residency test in the Takeover Code; the long awaited auto-enrolment pension scheme; saving rates on empty properties; issues arising on earn outs; the relevance of the Legal Aid Sentencing and Punishment of Offenders Act 2012 to business and a review of the pros and cons of social media in the work place.
The Olympics demonstrated that London is an international city. As the UK economy continues to eschew growth, Marriott Harrison LLP lawyers have been increasing their focus on opportunities to develop international business. With a round-up of some of the firm’s recent international initiatives and projects, one increasingly apparent legacy of the Olympic summer is the City-wide in recognition of the relevance of the global delivery of UK legal services.
Want to save money on empty commercial property?
Both a tenant with space they no longer occupy and a freeholder who can’t find a tenant have to pay business rates on empty commercial properties, no matter how hard they are trying to find a new occupier. Indeed, even the Government is affected as it will pay over £70m rates on empty buildings this year. Empty retail and office premises only have a three month rate-free period, industrial and warehouse units have six months and then full rates become payable. However, legislation provides that a new rate-free period is triggered when there has been a degree of occupation for a minimum period of six weeks.
The Courts have recently decided two cases where the owner of the property was able to successfully reduce/avoid its rates liability.
1. Landmark case gives six figure saving
In the case of Makro Properties Ltd v Nuneaton and Bedworth Borough Council, Makro owned a large empty warehouse which was liable for 100 per cent, rates. Makro subsequently used the property to store 16 pallets of documents that occupied only 0.2 per cent, of the floor space. It was argued by Makro that the occupation for the required 6 week period triggered a six-month unoccupied rates grace period once the files were removed, saving £117,000 for Makro.
The Court ruled that occupation of a very small percentage of a warehouse did constitute rateable occupation. This allowed Makro to claim empty rates when the occupation ceased and so a new period of empty rates relief applied.
There are hurdles that must be satisfied in order to qualify for this relief. However slight the occupation is, there must still be an intention to occupy the premises and the occupation must provide a practical benefit to the occupier.
This case demonstrates that the rate-free period can be re-set if a rate payer occupies even a very small part of its premises. However, anyone doing this must consider the insurance of the premises and exactly how they plan to “occupy” the premises.
This case may well be appealed and/or legislation introduced in order to close such a blatant loophole, but at present it could yield some very welcome savings.
Rating relief applies where the ratepayer is a charity and the property is wholly or mainly used for charitable purposes. The case of Preston City Council v Oyston Angel Charity (OAC) shows how granting a licence to a charity can trigger zero rating relief.
Facts of the case
OAC entered into a licence with the freehold owner of several commercial units. The licence provided that OAC had to pay all the rates due, if any, and only allowed the charity to occupy or sub-licence the units for charitable purposes.
Most of the units remained unoccupied but OAC did sub-licence one unit to another charity.
The local authority issued rates demands on OAC for the unoccupied units. OAC refused to pay. In Court, the local authority claimed that such units were not entitled to a zero rate relief as the property would not be occupied by OAC itself.
The Court ruled in favour of OAC and held that the units were exempt from unoccupied rates as the ratepayer was a charity and it appeared that, although OAC would not occupy them, the units would still be wholly or mainly used for charitable purposes.
By granting a licence to a charity which imposes the liability to pay rates (if any) an owner can potentially avoid paying unoccupied business rates subject to certain provisions
Both cases are good news for the rate payer, but not for the local authority. If you are paying empty rates on a commercial property and are interested in following one of these schemes our Real Estate Team would be happy to discuss them further with you.
Social Media in the Workplace – Advantages and Disadvantages
Social media has fundamentally changed the way we live our personal lives and in the workplace. Twitter, Facebook, Linked In and now Google Plus provide platforms with millions of members who can be reached in an instant. This article looks not just at the advantages and opportunities that social media offers employers and employees but also the disadvantages and risks that arise from having such powerful and instantaneous tools. Lastly, it looks at steps that employers can take to minimise the disadvantages and risks arising from the use of social media.
Social media provides a low cost method of reaching a vast global audience and it would be an oversight not to take advantage of it in relation to marketing and communicating with customers, business partners and other stakeholders. It is not the case that social media is only a social tool for children, Linked In is a social media tool directed at professionals and companies. Twitter is also frequently used to provide marketing updates and general communications. Blogs, which can be accessed via RSS feeds, are a more traditional (in social media terms) method of communicating updates and are widely used by professionals.
Internal Collaborative Working
There are many collaborative working tools available (accessible via company intra-nets) which use the same platform and have the same functionality as social media websites. Due to the widespread use of social media, most people are familiar with how such tools operate (e.g. work colleagues) if you upload a document. These collaborative working tools are usually web-based and are a user-friendly method for storing and sharing information.
Social media allows customers to quickly interact and easily provide feedback, compared to traditional methods. Previously, it was a time-consuming exercise for customers to provide feedback. Many businesses have embraced social media to assist with sales queries, after care assistance and support with the end result being an improved customer experience.
Below are a sample of some of the disadvantages and risks arising from using of social media.
Loss of Sensitive Information
Social media creates a risk of confidential data being leaked by employees. Product prototypes, price lists and other commercially sensitive information are at risk from inadvertent and malicious disclosure on social media sites or sites such as YouTube. It only takes seconds for photos and video clips to be uploaded on the YouTube with serious repercussions caused by the disclosure.
Negative Customer Feedback
No company has a 100 per cent customer satisfaction rate and often dissatisfied customers are quicker to share their views than satisfied customers. Social media presents dissatisfied customers with a huge audience and platform to air their views. If companies do not monitor this arena then they will not be able to deal with negative and potentially inaccurate or unfair reviews.
Bullying in the Workplace
Whilst social media can be of great benefit in terms of collaborative working, it can also be used to bully and harass other members of staff. It should be made clear to employees (e.g. in a social media policy) that conduct which harasses, bullies or threatens other colleagues is unacceptable via social media in the same way that it is unacceptable in an office environment.
Reputational Damage and Liability for Employee Actions
There have been a number of cases regarding the use of Twitter for malicious/menacing tweets. One recent example was the racist tweet about Mo Farah by a Northampton Saints rugby player. Unless the employer can show that the employee is off on a “frolic of his own” then there is the potential for a claim for defamation against the employer. In turn, if a post adversely impacts upon the employer, for example by bringing them into disrepute, an employer should consider if it warrants disciplinary action, including dismissal, against the employee.
Social Media – Best Practice
There are a number of steps that employers can take to best manage social media in the workplace
Build Social Media in to your Marketing
Social media should now be an integral part of a varied marketing/advertising campaign. Having a presence in social media not only shows that the company is progressive but provides low cost and immediate access to a large audience and helps increase the profile of the business.
Monitor and Managing Negative Feedback
Being proactive in responding to customers and also negative customer feedback on social media goes a long way in minimising any damaging impact. Whilst many companies may not be keen on airing their dirty linen in public, having a social media presence and allowing customers to provide feedback via social media shows transparency and that you listen to your customers. Companies should also pro-actively review other relevant review websites (e.g. TripAdvisor in the leisure and tourism industry). Sites, such as TripAdvisor, allow companies to respond to negative feedback or contact the reviewer directly.
Note: care should be taken not to “fake blog”, i.e. representing on blogs or review sites that you are a happy customer is an offence under the Consumer Protection from Unfair Trading Regulations 2008.
Put in place a Social Media Policy
A key concern for employers is the amount of working time wasted by employees using social media, such as Facebook and Twitter, during working hours. Therefore, employers should have a clear policy in place around the use of social media in the workplace. It should set out which social media sites are acceptable and when they may be used. It should also clarify that using social media to discriminate against or harass other colleagues is strictly prohibited. It is not reasonable to dismiss an employee for misconduct if they did not understand (and could not reasonably be expected to understand) that what they were doing amounted to misconduct. Therefore, the social media policy should be clear about what is and is not acceptable behaviour. Given the potential for an employee’s private post to negatively impact on their employer’s reputation it is a good idea to draft a social media policy widely so as to cover any posts made by employees away from the workplace.
Finally, if it becomes apparent that an employee has posted an offensive comment online, take prompt action to deal with the situation, e.g. getting the post taken down. Similarly, if a company uses message boards and allows user generated content then the company should react quickly (particularly if requested to do so) and remove any offensive or defamatory statements (a website/acceptable use policy should permit the employer to have complete control to take down any content on its website).
Marriott Harrison LLP
For more guidance on defamation, social media in the workplace including social media policies, IT, communications or website/acceptable use policies, please contact Aonghus Martin on 020 7209 2017 or by email at
Marriott Harrison LLP continues to increase its international offering, focusing on key jurisdictions across all of its departments. Below are some recent examples of Marriott Harrison LLP’s international work.
The Corporate Department continues to advise on a large number of international transactions. This includes acting for:
- a Cyprus based company entering into a joint venture agreement with a US private equity fund to develop real estate opportunities in South East England;
- the London subsidiary of a Brazilian designer label, on various corporate and intellectual property issues;
- a domicillary care provider on the acquisition of a Northern Ireland based business;
- two private equity institutions on their co-financing of an investment in a Jersey entity formed to invest in US mining assets;
- a private equity institution on its proposed investment in natural resource assets located off the coast of North Africa;
- a UK restaurant group on its new financing arrangements with a UK clearing bank and deep discounted debt from the BVI;
- a New York based founder of a new concept restaurant based in Soho, London with shareholder arrangements structured through a Luxembourg joint venture company;
- an English IT/telecoms company on its equity and debt fundraising with investment from the US and Israel; and
- ongoing refinancing arrangements of Jersey-based property holding companies.
MH Dispute Resolution has acted on the following matters:
- an injunction for a BVI company to restrain a transfer of funds advising a South American government entity on liability by a third party in respect of loss of and damage to property;
- a claim by a Spanish company to compel the delivery up of film materials held to the order of an Irish company;
- a claim against a Dutch resident with interests in a UK entity and its rights to develop assets in Central and Eastern Europe; and
- advising a US celebrity in respect of a false product endorsement.
MH Media & Technology
The Media and Technology Department has advised:
- Girl Hub, a joint initiative of Nike Foundation and the Department for International Development (DFID). Girl Hub is rolling out a number of social awareness programmes in Africa, the first of which is centered in Ethiopia. Empowering young women through music and drama is the theme. Tony Morris has been advising on the legal structure of various production arrangements and contracts in conjunction with local Ethiopian lawyers;
- on a number of international recording licences with the US, Canada and Europe;
- Executive Interviews, the global recording, repackaging and rights distribution company, on a series of distribution contracts with the US; and
- overseas creditors on their position with regards to the decision by controversial ticketing company, Viagogo, to move its operation overseas and liquidate the UK operating company.
The MH Real Estate Department has acted for:
- the Federative Republic of Brazil on the purchase of a new Embassy in Trafalgar Square and the disposal of their old Embassy.
Conferences and Events
Tony Morris and Jonathan Leigh-Hunt attended the Cannes Film Festival in May where they were invited to the screening of client Carnaby Films’ “The Wee Man” for which they had provided legal services.
Tony Morris, Jonathan Pearce and Duncan Innes went to Boston and New York on a business trip in June where they were engaged in a series of meetings with clients and contacts.
Automatic Enrolment Pension Scheme: The Essentials
The long-awaited auto-enrolment pension scheme comes into effect from 1 October 2012. The scheme affects every UK employer and aims to ensure that all eligible “jobholders” (broadly, employees and other workers earning over a minimum amount) automatically become members of a qualifying pension scheme. Importantly, the scheme requires employers to pay a mandatory minimum contribution into the eligible jobholders’ pensions. This article gives a brief overview of what is a complicated scheme.
When will it affect you?
The auto-enrolment requirements are being phased in, with employers becoming subject to “enrolment duties” from their particular “staging date”. These staging dates are being rolled out over a five-year implementation period starting on 1 October 2012 and depend on the number of workers in an employer’s PAYE scheme. Again, the detail is complex, but broadly the staging dates are:
- more than 250 employees: staging dates between 1 October 2012 and 1 February 2014;
- between 50 and 249 employees: staging dates between 1 April 2014 and 1 April 2015;
- fewer than 50 employees: staging dates between 1 June 2015 and 1 April 2017;
- new employers set up between 1 April 2012 and 30 September 2017: staging dates between 1 May 2017 and 1 February 2018.
Employers with fewer than 50 workers on 1 April 2012 who had (or were part of) a PAYE scheme with 50 or more persons on that date can choose to defer their staging dates so they run from 1 August 2015 to 1 April 2017.
The Pensions Regulator intends to notify every employer of their exact staging date 6-12 months before they are required to begin auto-enrolment.
What does this mean for you?
Every employer in the UK will need to consider the steps it must take to comply with the new duties, including whether any changes will be needed to existing scheme rules and procedures.
All employers operating in the UK will have automatically to enrol into a qualifying pension scheme jobholders who:
- are aged 22 to state pension age;
- earn more than the minimum earnings threshold – set in line with the level at which the individual starts paying income tax (currently £8,105); and
- are not currently in a qualifying pension scheme.
There are detailed rules governing whether a pension scheme is qualifying.
Some other types of worker (including some agency workers and contractors) will be entitled to opt in, despite not being subject to auto-enrolment.
Contributions are not calculated on normal pensionable salary, but on bands (currently ranging from £5,564 to £42,475) of total earnings (including e.g. overtime and bonus). Eventually, employers will be required to contribute at least 3 per cent of the relevant band, with the employee making up another 5 per cent. The contribution levels are themselves being phased in, starting at 1 per cent employer and 1 per cent employee contributions.
There are detailed provisions relating to the information that employers are required to provide to jobholders about the scheme at least one month before their auto-enrolment date.
Usually enrolment should take place within one month of the jobholder becoming eligible, but employers may postpone this for three months in certain circumstances. This should mean that short-term workers will not need to be auto-enrolled.
Whilst the scheme is mandatory for employers, jobholders can opt out and will be able to opt back in at a later date. Employers must also re-enrol eligible jobholders (even if they have opted out, unless they have done so in the past 12 months) every three years after the date they first became subject to the employer duties.
There are significant anti-avoidance provisions, so employers will for instance not be able to offer financial inducements to opt out of membership or offer jobs on the basis that favours those indicating an intention to opt out.
Thankfully for employers, jobholders will not be able to bring individual Employment Tribunal claims for breach of the scheme itself, although the Pensions Regulator may bring enforcement action. The regulator has wide-reaching enforcement powers including to impose fines of up £10,000 a day depending on the size of the employer. In extreme cases, certain acts or omissions by an employer can amount to criminal offences.
Employees will however be able to bring Tribunal claims for detriment or dismissal as a result of seeking to enforce their rights under the scheme.
As can be seen from this brief review of the new scheme, auto-enrolment will have major implications for all employers and it is vital to understand how it will affect your own business.
For more information on the impact of auto-enrolment, please follow the link to the Pensions Regulator’s auto-enrolment webpage:
http://www.thepensionsregulator.gov.uk/automatic-enrolment.aspx or contact one of the MH Employment Team.