Buying a Nursery: Ofsted and Assignment of a commercial Lease

Like any commercial matter, the buying of a business and property can often be daunting task trying to understand and undertake. While your immediate attention will be on the numbers and in particular profitability of the business, there are two common problems that affect and severely delay first-time buyers of a children’s nursery. Ofsted and transfer of the premises.

 Ofsted

We all remember the name. The Office for Standards and Education (“Ofsted”) are the children’s day nursery regulatory body. Ofsted’s primary objective is to inspect all childcare services and facilities, they do this by undertaking a number of inspections of suitability. To standardise this process, all children’s nurseries must be registered on Ofsted’ Early Years Register.

This process, while sounding simple enough, can be tedious and costly if not done correctly. The average registration process can take up to 26 weeks to complete and until it does, no nursery will be allowed to operate. If caught unaware, this could result in continuous financial losses for your newly acquired business.

 26 weeks process

The process of registration requires the cooperation of your local authority as well as Ofsted. In the first instance, you and any other individual connected with the nursery must complete a Disclosure and Barring Service (“DBS”) check online. Ofsted will also contact your local authority to see if you are known in connection to a care order or for disclosure on any information that would affect your suitability to work with children.

Ofsted will then require your consent to perform further comprehensive checks on any individuals connected to the nursery including health checks as well as assessing the premises and equipment.

Remember, it is a criminal offence to provide childcare services without being on the Early Years Register. If the seller decides to terminate their Ofsted registration on completion you will be left with children signed up to your nursery with you being unable to provide any care.

Hope for the best, plan for the worst

The last thing you want to happen is being unable to run your new nursery upon completion. It is important to plan for any situations that could cause delay in this process.

One way to do this is by requesting that the seller does not terminate their Ofsted registration until you can have the opportunity to complete your own. Sellers can agree to do this if you indemnify them to cover any associated costs from Ofsted making any claims against the seller after completion of the transaction.

Assignment of a commercial lease

Where it is just the purchase of the business, a fundamental part of the procedure will be obtaining a deed of assignment from the seller to transfer the lease to the premises to you or your company. A crucial factor for you as a buyer is to ensure the Lease permits assignment, in most cases this will be with the Landlord’s consent.

Although the Lease typically states that consent is ‘not to be unreasonably withheld’, there are several considerations to take into account, such as the Landlord may not be willing to assign so easily where there are no issues with the current tenant; and negotiations involving solicitors can lengthen the process as well as landlord’s costs which are to be borne by either you as the buyer or the current tenant as the seller, are forgotten to be budgeted for.

Terms of the Lease

You must be able to understand the terms of the Lease as these will be binding on you once the assignment is complete.

Some of the most important terms of the lease include:

  • Duration of the lease – ensure the period is satisfactory for the future of your business;

  • Rent review – this is usually carried out every 5 years’, you would need to consider whether the possibility of the rent price being increased is something you can budget for and when rent review under the particular lease is carried out;

  • Repairing obligations – some obligations may be more onerous than you can take on, assess whether they are suitable for you; and

  • Protected business lease – where the lease is not protected, you may not be able to remain in the premises once the lease expires. This may affect the value of the business.

  Disclaimer

This content is not intended to be used as a substitute for specific legal advice or opinions. No recipients of content from this site should act or refrain from acting on the basis of content of the site without seeking appropriate legal advice.

Buying or Selling a Pharmacy and the importance of Asbestos Management, EPC and Fire Risk Assessment

There are several legal requirements that pharmacists must comply with, however the below relate to those that affect the use and occupation of the pharmacy property itself and are important to consider when buying or selling a pharmacy. Pharmacists are required to comply with all of the below. So, if you are looking to sell your pharmacy, please note that any purchaser will insist on evidence of compliance of the below before the sale completes and vice versa, if you are looking to buy a pharmacy, please ensure that you obtain evidence of compliance before you complete the purchase.

Asbestos Management

  • Is there a statutory requirement?

    • Yes, under s. 4 Control of Asbestos Regulations 2012.

    • Requirements to be managed by the “duty-holder”, i.e. the pharmacist.

  •  What is the requirement?

    • Take reasonable steps to ascertain presence of asbestos in the pharmacy; if there is, where and what condition it is in;

    • Presumption of presence of asbestos until the contrary is proven;

    •  Keep an up-to-date record of location and condition of asbestos and/or material containing it;

    • Risk assessment of anyone exposed to asbestos from contaminated materials;

    • Prepare a detailed plan of risk management of contaminated materials;

    • Take necessary steps to put risk management plan into action;

    • Keep the plan up-to-date through periodical review; and

    • Keep anybody involved with the materials informed about their location and condition.

  • Time Frames

    •  Update asbestos register whenever work on asbestos materials is carried out; and

    • Check these materials at least once a year to make sure they have not changed condition/deteriorated.

    • Failure to comply constitutes a criminal offence with penalties ranging from a fine up to £20,000 and up to six months imprisonment.

EPC – Energy Performance Certificate

  • Is there a statutory requirement?

    • Yes, under The Energy Performance of Buildings (England and Wales) Regulations 2012.

  • What is the requirement?

    • Duty to put the EPC rating in any adverts of the sale or letting of the property;

    • Make valid EPC available to prospective buyer/tenant. This includes where a pharmacist sublets part of their property;

    • EPC must be displayed in a property which:

      o   is not a dwelling and is not an exempt property;

      o   has a total useful floor are of more than 500 sqm; and

      o   is visited frequently by the public.

    • EPC must be displayed in a prominent place, where it is clearly visible to members of the public who visit the property.

       

Time Frames.

  • Valid for 10 years;

  • No obligation to obtain a first EPC for existing property which is neither being sold, rented out, or significantly altered;

  • No obligation to obtain EPC just because the existing one is more than 10 years old;

  • No obligation for landlord to replace expired EPC if there is no change of tenant;

  • When property is marketed:

    o   Obtain EPC within 7 days of property first being put on the market;

    o   If impossible, EPC must be issued within a maximum of 21 extra days, with no further extensions allowed.

  • ·Failure to comply with the regulations when selling or renting a pharmacy is generally set at 12.5 per cent of the rateable value of the pharmacy, with the minimum penalty being £500 and the maximum, £5,000.

Fire Risk Assessment

  • Is there a statutory requirement?

    • Yes, fire safety duties are set out in the Regulatory Reform (Fire Safety) Order 2005.

  •  What is the requirement?

    • Pharmacists are responsible for fire safety in relation to both the internal and external areas of the pharmacy.

    • Under Part 2 Regulatory Reform (Fire Safety) Order 2005:

o Take out general fire precautions;

o Produce a fire risk assessment of the property and keep it up-to-date;

o  Make and give effect to fire safety arrangements;

o  Take measure for fire-fighting and fire detection;

o  Ensure that property, fire safety equipment, emergency routes, and exits are maintained and in order;

o  Appoint competent persons to help discharge duties;

o  Provide information and safety training to employees;

o  Assess risks coming from any dangerous substances at the property and reduce them.

Time Frames.

  • There is no grace period for the responsible person in relation to general fire safety duties;

o   Responsible person is defined as:

  • The employer in workplaces, if workplace is under his control, or

  • Person in control of the property and in control of own trade, business, or other undertaking, or

  • The owner, if person in control of property has no control over trade, business, or other undertaking.

  • Obligations start as soon as the responsible person takes ownership, occupation, or control of the property.

Disclaimer

This content is not intended to be used as a substitute for specific legal advice or opinions. No recipients of content from this site should act or refrain from acting on the basis of content of the site without seeking appropriate legal advice.

The Million Dollar Question- How to Choose the Right Solicitor to Represent You!

Finding a solicitor to deal with your legal problem means finding the right solicitor that you can rely on to successfully resolve your problem. So how do you do this? We have listed the below tips to help you deal with this:

  • Seek personal recommendations from friends and family of individual solicitors or law firms they have used. This is a great way of finding a solicitor or law firm as you will know people who have had first-hand experience with them.

  • Check the law firm’s online reviews and their website to see if the law firm has the expertise to deal with your legal problem. It is essential to find a solicitor with the experience and expertise that relates to your legal problem. The search facility on the Law Society’s website is a useful tool to use as it allows you to search not only by post code but also by specialist areas of law.

  • Arrange a call or meet up with a solicitor of the law firm. Make sure you bring all necessary documentation to the meeting or have all documents to hand for your call, as well as having a few questions to ask.

  • See how responsive they are, were they confident, helpful, courteous and professional? Did they answer your concerns in your initial meeting? If you experience a poor level of service, or the solicitor is unable to answer your questions it is likely that you will experience the same once you become a client.

  • Shop around, don’t just go to one law firm. It is advisable to do this, so you can compare the levels of service and costs of each.

  • Evaluate each law firm and then finally, go with your gut!

Disclaimer

This content is not intended to be used as a substitute for specific legal advice or opinions. No recipients of content from this site should act or refrain from acting on the basis of content of the site without seeking appropriate legal advice.

A Summary of how to Remove a Director

Removing a director from a company is much more complicated than removing an employee and is usually a sticky subject and if not done correctly, could invalidate the entire process.

 Below is a summary on the process.

A director’s appointment may be terminated:

  • by resignation;

  • under the company's articles;

  • by operation of law;

  • by ordinary resolution under section 168(1) of the Companies Act 2006 (“Act”);

  • under contract, such as a provision in a service agreement requiring the director to resign;

  • by court order; or by the death of the director.

This article focuses on the removal of directors from their office by ordinary resolution under the Act. Where shareholders feel that a director has not acted in accordance with their statutory and/or fiduciary duties, and the relevant director does not intend to leave voluntarily, the shareholders may wish to consider removing them. The starting point, however, should always be the company’s constitutional documents including any shareholder or investment agreements. If there is nothing contained with them, then the Act provides a mechanism.

Steps

Under section 168(1) of the Act, the shareholders of the company can remove a director before the expiration of their period of office by passing an ordinary resolution at a meeting of the company. The right applies notwithstanding anything in any agreement between the director and the company, it will therefore override anything to the contrary in the director's service contract. If the below steps (which is somewhat a complicated process) are not followed, the resolution is likely to be invalid. 

  • The resolution must be passed at a meeting, a written resolution will not suffice.

  • The shareholders must serve special notice on the company of any resolution to remove a director under the provisions of the Act.  The notice must be given to the company at least 28 clear days before the meeting.

  • On receipt of the shareholders’ notice the company must without delay send a copy to the director. The director is entitled to be heard to make their case on the resolution to remove them at the meeting. 

  • Where the director concerned wishes to make representations in writing to the company and requests their notification to the shareholders of the company, the company shall, unless the representations are received by it too late, inform all shareholders of the representations having been made and send a copy of the representations to all the shareholders.

  • If a copy of the representations is not sent as required because they were received too late or because of the company's default, the director may require that the representations be read out at the meeting. However, copies of the representations need not be sent and the representations need not be read out if the court is satisfied that the rights conferred by section 168 are being abused.

  • At the meeting, for the resolution to pass, it must be supported by more than 50% of the shareholders who are eligible to vote.

No two situations are the same and it can be dangerous to remove a director without considering your legal position and tactics to employ.

Removing a director from their office can be a complicated process and in order to mitigate the risk of a claim, it is important to seek legal advice to ensure that any removal of a director is carried out lawfully.

There are many legal issues to consider, but it is important to note that whilst a director may be removed from their office in compliance with the Act or the company’s constitutional documents, the director may also be an employee and could therefore still have rights and a potential claim against the company in their capacity as an employee. Therefore, before you invoke any procedures under a director’ service agreement, the company’s constitutional documents or the Act, we recommend that you take legal advice.

Why your Company should have a Shareholders' Agreement?

When entering into a legal relationship, whether that is buying a house or having a kitchen installed, you want to know exactly what you are getting and that it is worth the money you are spending. When you are investing your time and money into building a business you need to ensure you know who has what powers and rights in the Company and what will happen if something goes wrong. Here at Carter Bond we are here to help.

What is a Shareholders’ Agreement

A shareholders’ agreement is a private contract entered into between the shareholders of a company. It regulates the relationship between the shareholders and the management of the company, setting out how the shareholders should act in relation to their shares. It also governs the way in which the company is run aiming to promote the running of the company in good faith. Shareholders’ agreements are often used as a safeguard and to give protection to shareholders.

Absence of a Shareholders’ Agreement

If a shareholders’ agreement does not exist, then the disputes will have to be governed by the articles of the company. However, most companies have standard articles, which are not always suitable, may not offer enough protection and are limited in their scope. The absence of a shareholders’ agreement increases the potential for disagreements. Shareholders’ agreements contain provisions that pre-empt disagreements and set out ways for disputes to be dealt with.

Without a shareholders’ agreement there is a lot of uncertainty as to what can and cannot be done with shares in a company, and any issues can become very difficult and expensive to resolve. Below is a list of 5 things that can go wrong without a shareholder’s agreement:

1.       Decision making

There are many decisions which directors of a company can take without reference to the shareholders. The shareholders’ agreement put restrictions onto the directors that prevents certain decisions being taken without the shareholders’ consent. For instance, directors have a general power to take day to day decisions such as entering into contracts and transactions, dealing with insurance policies, dealing with employees and can also appoint other directors. The shareholders’ agreement gives the shareholders more comfort that their investment will be managed well.

2.       Dispute

When starting out in a new business venture or joining an existing company it is easy to think that there will not be any problems, and there may well not be. However, in the situation that something goes wrong, a shareholders’ agreement will set out a process of how to resolve the dispute without the need to resort to legal advice. The Agreement gives a clear process on how to handle a dispute and resolve a dispute, without matters becoming unnecessarily expensive.

3.       Death or Incapacity

In the unfortunate event that a business partner passes away or is considered mentally unsuitable to be a shareholder, if there is no shareholders’ agreement in place a number of issues can arise, for example:  the surviving shareholders may wish to purchase the shares of the deceased shareholder but the executors of the deceased shareholder may not wish to sell them.  Leaving open the possibility of the widow/personal representatives being involved in the running of the business, or the right to appoint themselves as director.  The executors of the deceased shareholder’s estate may want to sell the shares to the remaining shareholders, but they may not be able to afford it, and then the shares could be sold elsewhere. So having a shareholders’ agreement will contain a mechanism for the automatic transfer of the shares. This allows the remaining shareholder(s) to buy the shares, preventing a person who was not envisaged and/or unsuitable coming into possession of those shares. The shareholder or their estate will get market value for the shares, making the transfer fair whilst protecting the business venture and the investment.

4.       Wanting to sell

If a shareholder decides they do not want to be a part of the business anymore and wants to leave, the shareholders’ agreement sets out the mechanism to transfer their shares. Without such clause, a shareholder who leaves the company may be able to sell their shares to anyone, leaving the remaining shareholders running a company with someone they don’t know, or the other shareholders could refuse to allow the shareholder to sell his shares. Firstly, the remaining shareholders will have the right to buy the shares, and if they decide not to, they may be sold to a third party at the same value. This protects the remaining shareholders in the event that they do not want an unknown third party joining the company, however, does not restrict the outgoing shareholder in the event that the remaining shareholders do not want to buy the shares.

5.       Wanting to accept an offer (Drag & Tag)

If your business becomes very successful, or is attractive to another business, an offer to buy the company may be made. Often in this situation the buyer will want to buy all the shares. The shareholders’ agreement will provide a mechanism in that if over 50% of the shareholders want to sell they can require the remaining shareholders to sell their shares. Alternatively, if not all of the shares are being bought, and the remaining shareholders do not want to enter into a business relationship with an unknown party, they can require the majority seller to also sell their shares.

A few other advantages of having a Shareholders’ Agreement

As highlighted above, there are a host of advantages for having a shareholders’ agreement in place, below are some of the main advantages:

·         gives a contractual remedy; and

·         helps address issues before they arise by setting out a structure for the sale or transfer of shares. For example, the shareholders’ agreement can provide for what happens if there is a ‘deadlock’.

Our solicitors are able to help and advise you on shareholders agreements when entering into a business or entering into a shareholders’ agreements after your business has been incorporated. For further information or if you require our assistance please call us on 0203 475 6751.

Disclaimer

The material/information contained herein is believed to be correct at the time of circulation. These notes are prepared for general interest only, therefore it is important to obtain professional advice on specific issues. No responsibility is taken for loss occasioned by any person acting or refraining from acting as a result of the material/information contained herein and no responsibility can be accepted by Carter Bond or the author.

Corporate Insolvency for Businesses: Who said you don’t need a corporate secretary?

In challenging economic times, it is not uncommon for businesses of all sizes to find themselves in dire financial straits, which can lead to a company becoming insolvent. While insolvency is not a desirable scenario, some insolvency procedures can be the life raft a drowning company needs to get back on its feet. With this in mind, here are six key things every business owner should know when it comes to corporate insolvency in the UK.

Revealed: The M&A strategy for success

For most business owners, their long-term goal is to expand the business they’ve built, and many turn to mergers and acquisitions (M&A) as a route for fuelling business growth. However, M&A typically entails an intensive upheaval process; the only way to ensure that this upheaval will be worthwhile is by carefully managing the merger or acquisition from the outset, and adopting the right strategy.