Posted on 19/01/12, filed under Business Law | No Comments
Banks aren’t the only ones facing the dangers of commercial borrowing. Stephen Netherwood explains.
Our commercial clients tell us that it’s very difficult to obtain business capital from banks, and has been since 2008.
Maybe it’s a coincidence, but there’s something else that business lenders have been doing for the last few years that can make business borrowing more risky than it ever used to be.
For decades, business lenders have followed a policy of demanding personal guarantees from company directors as a condition of providing loans to the company. Lenders don’t much care about the corporate veil – they just don’t want directors liquidating the business then smiling sheepishly and explaining that they just wish they’d been able to pay back the loan beforehand.
The recent development has been to strengthen these guarantees into what has been called by the Court of Appeal a demand bond. In the words of a judge:
…it is a particularly stringent contract of indemnity….Sometimes the wording of the contract has the result that the liability of the guarantor arises on mere demand by the lender, although it might be that the borrower has not done anything wrong or even that the lender itself is in default under the loan agreement. ¹
If that doesn’t leave you as shaken as James Bond’s martini, then your business must be as strong as Fort Knox!
Business loans, overdraft facilities, invoice factoring – all these arrangements are usually packaged with guarantees. If you have one of these – or you’re thinking of entering such an arrangement – contact our commercial team who can advise you exactly how dangerous the guarantee might be.
And if you’re already in trouble because such an arrangement has collapsed, contact our litigation team to find out whether you can live to fight another day…
¹ In the case of Vossloh Aktiengesellschaft v Alpha Trains (UK) Limited [2010] EWHC 2443 (Ch), at paragraph 28. (Adapted to make sense to a non-legal audience.)
Posted on 12/01/12, filed under Family Law | No Comments
Typically, the beginning of January is known as D-Day for divorce lawyers. January has always been the month for a high number of new divorces, but will this trend continue?
You may have come to us for outline advice during the year but have chosen to reflect upon that advice before initiating proceedings. There is no doubt that the present economic climate is placing a further pressure on families by compounding the financial worries. This in itself may lead to discord. It may even cause a decision to separate or divorce to be deferred.
Couples may decide, for any number of reasons, to postpone legal action until the New Year. The festive season offers an opportunity to spend time together and reflect upon the future of their relationship. It is perhaps natural to want the family together for the sake of the children, the extended family, or the prospect of presents under the tree. However, too much time together over the festive period can prove to be too much for those already under stress and for others the festivities accentuate rather than repair the cracks in the relationship.
We understand that these times can be difficult for many, as all the usual stresses can seem even worse. We also understand that many want to resolve to make a fresh start. Whatever your situation, we are ready to assist with our legal expertise when you feel the time is right. Make 2012 the year Bennett Griffin helps you create a happier future.
Posted on 05/01/12, filed under Business Law | No Comments
Someone contacted me recently for preliminary advice, but I was unable to help this potential client, so this post is by way of a warning!
If two or more people embark on a business venture without creating a company, then they have created a partnership. Now the law regarding partnerships is found in the Partnership Act of 1890, and there’s a big problem. If there isn’t a written partnership agreement, then one of two partners can bring the whole thing to a grinding halt by saying “It’s been nice, but I’m off.” And one of three or more partners can cause real problems for the others by saying the same: “I want to withdraw from the partnership.”
When such an informal partnership comes to an end, the problem is this: the partner leaving usually thinks he’s entitled to something like half of everything - but the partner left behind thinks he should get more than half because he’s still trying to run a viable business; and so the arguments start. This is good news for litigators, but not so great for the partners, and probably not for the business either.
For the recent enquiry, the circumstances were such that the other partner terminated the agreement but had managed to keep control of most of the business’ critical assets. So that was more like “It’s been nice, and I’ve got the lion’s share, and I’m off”. It just wasn’t practical to go the expense of court proceedings.
If there’d been a written agreement, that could never have happened.
So - if you’re in a partnership and there’s no written agreement, or you’re thinking of starting a partnership - come and see someone in our commercial team. That’s the right time to agree exactly what happens if someone wants to bale out, and how it might be different from a mutually-agreed dissolution.
And if your partnership-without-a-written-agreement is encountering some relationship issues – you should speak to a litigator.
