LEGAL PACK FOR START-UP BUSINESSES

Russell-Cooke has always assisted start-up and growing businesses with their legal requirements. We are pleased to announce that we now offer a product designed for cost conscious start-up and growing businesses.

Russell-Cooke's Legal Pack for Start-Up Businesses provides you with a flexible package of specialist legal advice, documents and registrations, adapted for your business, at a competitive fixed price.

We will discuss business plans and advise on the legal requirements of your business on a free, no-obligation basis. If there is a limited budget we can help to prioritise your legal requirements. We will break down requirements into individual fixed-price product modules. Employment law modules are dealt with by our specialist employment department.

For further information please contact:

GUY WILMOT on 0208 394 6531, Guy.Wilmot@russell-cooke.co.uk
SIMON EWING on 0208 394 6449, Simon.Ewing@russell-cooke.co.uk

COOKIES

New UK regulations that came into force in May 2011 mean that businesses now need the consent of individual visitors to their website if they are to use “cookies”. Cookies are digital markers which are placed on the computer of an individual when they visit a website and allow the operator of that website to gather information about the user. In many cases they are essential to enable a website to run effectively but businesses will have to consider carefully how they use cookies and how they get the necessary authorisation of the individual.

The Information Commissioner gave a grace period of 12 months for businesses to address the new cookies regulations so it is now that you need to be tackling the legal, technical and practical implications of the legislation.

We can advise on practical steps to take to move towards compliance and provide tailored privacy policies that give your clients and customers the information they need about how your website functions.

As the reliance on digital media and the internet as a way to conduct business grows ever more rapidly so too will legislators appetite for regulating how information is collected and disseminated. Data protection and the safeguarding of personal details is a significant concern for governments, regulators and the public and, as Google are currently discovering, how a company addresses the issue of online privacy is likely to be heavily scrutinised.

For further information please contact:

GUY WILMOT on 0208 394 6531, Guy.Wilmot@russell-cooke.co.uk
SIMON EWING on 0208 394 6449, Simon.Ewing@russell-cooke.co.uk

PURSUING GUARANTORS

It is in the interests of any creditor to have a number of options for enforcing its debt, particularly given the current economic conditions. A common way to for creditors to improve the chances of having their debt discharged is for them to get security, whether over assets through fixed and/or floating charges, or through third parties acting as guarantor or surety. Two Court of Appeal decisions from 2011 demonstrated both the benefit of obtaining a guarantor or surety and the risk of being one.

Surety and security

White v Davenham Trust Limited [2011] EWCA Civ 747 concerned a case where a creditor had made loans to a property development company which were secured by charges on land, fixed and floating charges on the assets of the company and a personal guarantee from a director of the company. Following the company’s breach of the facility agreements, the creditor served a statutory demand on the director on the debt arising under his personal guarantee.

The director challenged the statutory demand. As the creditor’s debt was secured, it could not serve a statutory demand on the company. The director argued that it was unjust for the creditor to proceed with its statutory demand against the director as surety in circumstances where it could not do so against the company as principal.

The Court rejected this challenge. A creditor with several remedies can choose which to enforce, at what time, in which order and in what way. The only limit is that the creditor cannot recover more than it is due on the debt with interest and costs. The fact that a creditor’s debt is fully secured over the assets of one debtor does not by itself prevent that creditor from serving a statutory demand on another debtor in respect of the same debt.

Liquidated sum

McGuinness v Norwich and Peterborough Building Society [2011] EWCA Civ 1286 concerned a case where the creditor had made a mortgage loan to an individual debtor and later obtained a guarantee from the debtor’s brother. Following the debtor’s default, the creditor served a statutory demand on the debtor’s brother as guarantor for the mortgage debt and interest, which was not disputed.

No application was made to set the statutory demand aside, but at the hearing of the bankruptcy petition the guarantor asserted that the guarantor’s liability was for damages or an account, which was not a liquidated sum. The creditor could not therefore proceed with a bankruptcy petition against the guarantor unless and until it had obtained a judgment.

The Court rejected this challenge. A guarantee may impose up to four types of liability: (1) an undertaking by the guarantor that the debtor will perform his contract; (2) a promise by the guarantor to pay sums which fall due if the debtor fails to pay them; (3) an indemnity; and (4) a concurrent liability with the debtor for what is due under the loan. Under the Court’s interpretation of the terms of the guarantee, the guarantor had a liability within category (2), which created a debt which could itself form the basis of a bankruptcy petition. The Court also found that the guarantee imposed a liability in category (4), which meant that the creditor was able to proceed against the guarantor without first exhausting its remedies against the debtor.

Conclusion

The availability of an appropriate guarantor or surety will commonly determine whether, and the terms on which, a lender will provide credit to a borrower. Where the borrower is a company, lenders often insist on the individuals involved providing personal guarantees. The individual guarantors will then only be protected from liability for as long as the borrower company fulfils its obligations.

In the event of default, pursuing a guarantor in the first instance will often be the most effective way for a lender to recover their debt. Depending upon the terms of the guarantee and the security provided, the lender may even be able to immediately proceed with a statutory demand against the guarantor, even though this option is not available as against the borrower. An individual guaranteeing the liabilities of a company may therefore not only negate the benefit of their limited liability, but may leave themselves in a worse position than if they had taken the loan and provided security as principal. It is therefore vital to always obtain advice both before entering into a guarantee and once liability has arisen under one.

For further information please contact:

MARK FLETCHER on 020 8394 6466, Mark.Fletcher@russell-cooke.co.uk
FRANCESCA KAYE on 020 8394 6477, Francesca.Kaye@russell-cooke.co.uk

This material does not give a full statement of the law. It is intended for guidance only, and is not a substitute for professional advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be accepted by Russell-Cooke LLP.

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