Eastern Enterprise Hub – 4 April 2014Start-up structures and growing pains

Jon BloorPartner – Corporate Services

jbloor@prettys.co.uk01473 298219

Company limited by Shares

–Articles of Association–Companies Act 2006–Companies House–NOT suitable for charities–Limited liability–Dividends–Directors duties

Company limited by guarantee

–No shares–Members' guarantee–Limited liability–Suitable for charitable status–Can have "asset lock"

Company limited by guarantee

–Shares or guarantee–CIC regulation–Limited liability–Can't be a charity–Asset lock–Community interest test

Sole trader

–No constitution–Unlimited liability–No specific regulation– Income tax?

Partnership

–Partnership Agreement??–Partnership Act 1890–View to a profit–Joint & several liability–No registration–Tax transparent

Limited liability partnership

–Members Agreement??–LLP Act 2000–Limited liability–No charitable status–Companies House administer–Taxed like a partnership

And the rest…

–Charitable Trust–Charitable Incorporated Organisation (CIO)– Industrial & Provident Society (Comm. Ben. or Coop)–Unincorporated association–Limited Partnership–Hybrid structures (tax planning)

Legal Growing Pains

Employees

• Employment Rights Act statement

• Employment contracts?

• Policies?

• TUPE

• Help?!

Premises

• Freehold

• Leasehold

• Licence

• Pop-up?

• The garage

Supplier contracts

• Payment terms

• Distribution (exclusive, sole etc.)

• Likely to be stuck with standard terms

• But… don’t overlook smaller suppliers

Customer contracts

• Standard terms for sales of products and services

• Payment terms

• Passage of ownership and risk

• Limitations of liability

Shareholders Agreements

• Granting shares to promising new employee

• Transfer restrictions

• “Leaver” provisions

• Management and disputes?

Employee incentives and ownership

• Share Options

• Enterprise Management Incentive

• Employee Shareholder status

• Mutualisation

Moving into e-commerce

• New website

• Distance Selling Regulations

• Payment processing

• Fulfilment and delivery

• More contracts?!

Outsourcing

• Warehousing

• Fulfilment

• Contractual protection

• Service Level Agreements

• TUPE

Funding – banks

• Overdrafts

• Term loans

• Invoice financing

• Personal guarantees

• Debentures and security

Funding – private equity

• Equity stake

• IRR

• Exit focussed

• Value driven

• Sell your business the day you take on PE funding?

Funding – the crowd?

• Kickstarter

• Peer to peer lending

• Crowd sourced lending

• Equity crowd funding

• Is this the future?

Intellectual Property

• Trade marks?

• Website IPR

• Audit of IPR portfolio

• Registrations and maintenance

• Debentures and security

Data Protection

• Notification

• Fair processing

• Security

• ICO fines - £200k!

Growing by acquisition

• Horizontal (competitors)

• Vertical (supply chain)

• Diversification

• Due diligence and legal documents

Corporate governance

• Banks and investors

• Management team

• Non-exec directors

• Corporate governance code (listed companies)

Exit routes (1)

• Sale

• Winding up

• Management buyout

• Initial Public Offering

Exit routes (2)

• Due diligence (again)

• Sustainable without founders?

• Legal documentation

• Impact on value

• Succession planning (not just an “exit” issue)

Questions?