Company Liquidation – Pros and Cons

On one hand, company liquidation definitely comes with some advantages, especially when it comes to your current situation.

Leases are cancelled

Terms on lease and hire purchase agreements are generally terminated at the date of liquidation, meaning that no further payments need to be made. If any arrears are owed, the company leasing the goods may be able to claim from the insolvency practitioners along with other creditors. It is worth noting here that personal guarantees are often given upon signing a property lease agreement; you should check your documentation carefully so you know whether you are likely to be made personally responsible for the remainder of the lease. 

Avoid court processes

By voluntarily choosing to liquidate the company, you can avoid being petitioned through the courts and be able to demonstrate to the public that liquidation was a company choice rather than a result of hostile creditor action.

Staff can claim redundancy pay

Members of staff will be made redundant by the liquidator, and if eligible, they can start their claim for redundancy pay and other statutory entitlements. If monies realized from the sale of company assets are not sufficient to cover redundancy payments, staff have an alternative route by which to claim what is owed. The National Insurance Trust Fund(NSITF) pays out for redundancy, unpaid wages and holiday pay should the company not be able to do so using its own funds.

Legal action is halted

Any legal action against the company is stopped when the company is in liquidation. Again, as long as you have no personal liability for a company debt, creditors will be unable to take action against you.

Having identified some of the advantages of this type of liquidation, let us now look at the main disadvantages of the process.

Personal liability for debts

Becoming personally liable for company debts can happen if a director has made a personal guarantee against debts of the business. A creditor can enforce the debt if they are unable to reach an agreement for repayment.

If it comes to light that the company has been liquidated quickly, with the sole purpose of avoiding debt repayment, directors may be held personally liable for company debts due to their improper actions.

All assets will be sold

All existing assets will be sold off in order to provide a dividend to creditors where possible, and for the insolvency practitioner to collect their fee.

Staff will be made redundant

As liquidation bring about the end of a company, any staff employed by the business will be made redundant and be forced to look for employment elsewhere. However, depending on their length of service with the business, they may be able to claim statutory redundancy pay following their dismissal.

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The Regulation Of Courier And Logistic Companies In Nigeria

Courier and Logistic services is big business. According to the US International Trade Administration, the value of Nigeria’s logistics sector as at 2018 was estimated to be N250 bn ($696 million US Dollars. This value has increased to N300bn.

Since the dawn of time, people have been moving objects from one place to another. Whether it was a stack of rocks for building a house, food or (more recently)items bought online. As time progressed, people devised more methods for transporting goods. These ranged from messengers running around delivering messages to homing pigeons or horses and carts. 

The Nigerian Courier and logistics sector has been impacted by a huge infrastructure deficit, anti-business government policies, poor road networks, unstable electricity, and multiple taxation. This has prevented the sector from achieving its full potential, with local stakeholders unable to meet financial obligations, transferring costs and charges to end-users thus making them uncompetitive, and making room for foreign owned operators with the financial capabilities to absorb higher levels of business risk to enter into the market, entrenched corruption, and others being additional factors.

Do you want to invest in the Courier or Logistics Sector? We can guide you on the best way to structure your investment.

Schedule a consultation today

A History of Insolvency Law

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Early insolvency law was dominated by punitive approaches and it was not until the early eighteenth century that notions of rehabilitation gained force. Insolvency was seen as an offence little less criminal than a felony and was punishable by detention in person at the creditor’s pleasure in debtors prisons. The prevalent view was that it was not justifiable for any person other than a trader to ‘encumber himself with debts of any considerable value’

Prior to this revolution, common law offered no collective procedure for administering an insolvent’s estate. A creditor could seize either the body of a debtor or his effects – but not both. Creditors, moreover, had to act individually, there being no machinery for sharing expenses.

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The idea that creditors might act collectively was recognised in 1542 with the enactment of the first English Bankruptcy Act which dealt with absconding debtors and empowered any aggrieved party to seize the debtor’s property, sell it and distribute the proceeds among other creditors ‘according to the quantity of their debts.

During the 19th century, attitudes towards trade credit and risk of default changed. This was due to the rise of joint stock companies and the resulting de-personalisation of business and credit.

The key statute was the Joint Stock Companies Act 1844 which established the company as a distinct legal entity, although it retained unlimited liability for the shareholders. the modern limited liability company emerged in 1855, to be followed seven years later by the first modern company law statute containing detailed winding-up provisions.

The House of Lords in Salomon’s case confirmed that a duly formed company was a separate legal person from its members and that consequently even a one-man company’s debts were self contained and distinct. However, every insolvent business went into liquidation or receivership automatically. It was the kiss of death for them and the creator of unemployment.

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An insolvency system was later created to administer the range of new procedures be introduced as alternatives to outright bankruptcy or winding up, which would deal with individual cases on their merits. These involved recommendations that private insolvency practitioners should be professionally regulated to ensure adequate standards of competence and integrity; that creditors be given a greater voice in the choice of the liquidator; and that new penalties and constraints be placed on errant directors. This represented a movement towards stricter control of errant directors but also in favour of an increasing emphasis on rehabilitation of the company.

The rationale behind the culture of business rescues was expressed by Sir Kenneth Cork as follows: “When a business becomes insolvent it provides an occasion for a change of ownership from incompetent hands to people who not only have the wherewithal but also hopefully the competence, the imagination and the energy to save the business”.

The current attitude towards insolvency is to carry out much more work on corporate problems before any insolvency procedure is entered into. This places a new emphasis on managing insolvency risks proactively rather than after troubles have become crises.

In this series, we will explore the life cycle of insolvency from financial distress and default, to corporate failure and business rescue. We will also investigate different approaches to managing insolvency, along with their strengths and weaknesses.

WHEN IS A COMPANY INSOLVENT?

Corporate insolvency law is not merely concerned with the death and burial of companies. Important issues are whether corporate difficulties should be treated as terminal and whether it is feasible to mount rescue operations.

WHAT DOES INSOLVENCY MEAN?

Insolvency refers to the regulated legal process that ensues upon the bankruptcy of a company. Insolvency procedure registers and prioritizes claims, freezes other legal actions, limits company to business as usual, and tries to establish value from assets.

In a society that facilitates the use of credit by companies, there is a degree of risk that company creditors will suffer because the firm has become unable to pay its debts on the due date.

If a number of creditors were owed money and all pursued the rights and remedies available to them (for example, contractual rights; rights to enforce security interests; rights to set off the debt against other obligations; proceedings for delivery, foreclosure or sale), a chaotic race to protect interests would take place and this might produce inefficiencies and unfairness. This is what insolvency laws seek to prevent.

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The end target of any restructuring or insolvency process is to return a company to financial health. Predominantly by lowering and decreasing its obligations. If the situation can’t be rectified, insolvency law will work to ensure a fair allocation of liquidated assets.

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WHEN IS A COMPANY INSOLVENT?

There are two definitions of Insolvency, depending on the test applied by the court. Briggs J in Re Cheyne Finance Plc contrasted “a momentary inability to pay as a result of temporary liquidity soon to be remedied” with “an endemic shortage of working capital” which renders “a company insolvent, even though it may be able to pay its debts for the next few days, weeks or months before an inevitable failure.”

  • A company is balance sheet insolvent where the company’s liabilities exceed its assets.

  • A company is cash flow insolvent when the company is unable to pay its mature liabilities as they fall due. In this situation, the company may be balance sheet solvent and is experiencing temporary cash flow/liquidity problems.

Where a company is cashflow insolvent it may undergo restructuring through schemes of arrangement, administration, or receivership and be managed until it returns to profitability.

If the company cannot be returned to profitability, it may be wound up and its assets sold to satisfy creditors claims, after which the company is then liquidated.

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Many companies would find themselves without access to funding or credit and may enter unnecessarily into insolvency proceedings if an arbitrary approach was taken to the balance sheet test. For this reason the cash flow test is used to identify companies that merely require a cash injection and those that need to be totally restructured.

In BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL Plc, The court held that the “balance sheet” test of insolvency may only apply where a company has reached a point of no return (where it is clear that the business will not be able to meet its future or contingent liabilities).  However, if the cash flow test were the only relevant test for insolvency, then current and short-term creditors would in effect be paid at the expense of creditors to whom liabilities were incurred after the company had reached the point of no return because of an incurable deficiency in its assets.

An insolvency usually begins with an event of default (“EoD”) or inability to meet an agreed business obligation. This obligation may be a contractual debt, a bill payment or a business loan.

A period is sometimes allowed to repair the default (Cure Period); usually between 1 week to 3 months. If the Cure Period lapses or there isn’t one to begin with, the creditor has a right to declare EoD and pursue legal action against the company for the immediate payment of all outstanding obligations.

Final liquidations are a last resort, sometimes the best of both worlds can be achieved by a court approved private work out as creditors generally prefer private negotiation to judicial intervention.

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Judicial proceedings are a fall back remedy, used when it is necessary to stay hold out creditors, bind dissentients, improve title, enhance foreign recognition, monitor gross unfairness and punish fraud.

When a corporate failure occurs, this may have a dramatic impact on the lives, interests and employment prospects of a number of parties. It is important to understand the nature of these potential effects. This would help us better manage the negative effects of corporate failure.

 

Sexual harassment 101: what everyone needs to know

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The aftermath of the Harvey Weinstein revelations has unearthed a  depth of ignorance around the whole issue of sexual harassment. There has been the routine conflation with assault and then panicky addition of “alleged” to the end of every sentence, along with wild assumptions about its rarity and triviality. For the avoidance of doubt, this is the harassment 101.

What is sexual harassment?

The UK Equality Act of 2010  defines it as:

“unwanted conduct of a sexual nature which has the purpose or effect of violating someone’s dignity, or creating an intimidating, hostile, degrading, humiliating or offensive environment for them.”

It covers indecent or suggestive remarks, unwanted touching, requests or demands for sex and the dissemination of pornography. This legislation is often portrayed as murky or ambiguous, on the grounds that it’s hard to tell the difference between a bit of banter and a humiliating remark.

 The humiliation or intimidation of sexual harassment lies in making someone feel that their physical attributes are their main value to the workplace, which undermines any skills or talent or insights or hard work they may also have brought. So saying “you’ll do well in the organisation because you have big boobs” is harassment, even if

a) you think it’s true,

b) you personally are not a boob man,

c) you didn’t mean it as an overture and

d) everyone laughed.

The test “how would I feel if it were said to me?” isn’t necessarily helpful, since there is context you may have missed, such as what it’s like to be routinely ignored in meetings until your point has been corroborated by three other men, and then congratulated on your big boobs. Sex-based harassment relates to the sex of the target but isn’t necessarily sexual in nature.

How common is it?

A report conducted jointly by the TUC and Everyday Sexism found that 52% of women had experienced some form of sexual harassment at work, nearly a quarter had been touched without invitation, a fifth had experienced a sexual advance. An earlier study by the law firm Slater and Gordon found that 60% of women had experienced inappropriate behaviour and nearly half of respondents had been warned to expect problematic behaviour from a particular person when they arrived.

Why don’t women report it?

About one in five women do report it. Their outcomes are poor: 80%, according to the TUC report, found that nothing changed; 16% said that the situation worsened afterwards.

Many women never report harassment because of the cultural context they are stepping into, one in which, says the writer and feminist activist Beatrix Campbell, “there’s a knowledge of and tolerance of sexual harassment, that makes women’s journeys through public space always a little bit hazardous. I think the people who talk about this stuff as if it’s nothing forget how heartbreakingly sorrowful we feel about that and how ashamed. The other structural conversation to have about this, apart from power, is shame. I am overwhelmed by hearing these women’s stories. The politics of humiliation has been erased from the discourse. It can’t be underestimated, because you were in that room, he did put his hands on your body. Even if you escaped, the point is that you were there.”

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Why would a woman end up alone in Harvey Weinstein’s hotel room?

A few practical reasons: for instance, she had been lied to, told there was a party there or started off in a group that had then evaporated; meetings are routinely held in hotel rooms in the entertainment industry; the junior party in any given business meeting rarely has a decisive say over where it’s held. But really, the slide from civilised interaction into threatening behaviour is all in the hands of the aggressor. There are no formal waypoints, where consent is understood before moving to the next waypoint. Harassment isn’t like a date with a communication failure. However, the fact that this question is asked contributes to the shame and builds the wall of silence.

Is there a typical target, or a typical harasser?

Often the target of the harassment has low power in the workplace, whether by dint of a temporary or precarious contract or being young. The Equal Opportunities Commission (as was) found in 2002 that the majority of harassment cases taken to tribunal were by people who had been in the workplace for less than a year. Research suggests a clear association between harassment and women who are on zero-hours contracts who will just not get offered work again if they kick up a fuss. That is crude power operating in the workplace.”.

Powerlessness has no single source – Terry Crews has recounted his harassment by a senior Hollywood executive, as has James van der Beek; the operative vulnerability was race and age, respectively. The harassers are overwhelmingly male, and in a position of authority over the target.

 

How easy is it to bring a case of sexual harassment to an employment tribunal?

Juliette Franklin, a senior associate at Slater and Gordon, says that “unfortunately, it tends to be one person’s word against another, because if you’re setting out to intimidate, you do that when there’s no one else around”. Then it will be a case of looking at corroborating evidence. “Has any of this found its way into email correspondence? Can you keep a diary or some kind of record, perhaps send yourself an email so you’ve got something contemporaneous. Have you contacted HR and raised a grievance?”

Companies may have lots of procedures in place that nobody ever follows: they may have a big push on equality training, but nobody has been trained for 10 years.

“An awful lot of cases settle before they get to court, a level of compensation might be paid, other measurements might be put in place,” says Franklin. “That can be biggest benefit of it, making sure someone is taken to task for their behaviour.” The civil system is adjudicated on the balance of probabilities: is it more likely than not that this has happened, and for this reason? It is not a notoriously difficult area in which to secure a victory, but “there’s a great deal to be gained from resolving it as soon as possible”.

Michael Newman, from the solicitors Leigh Day, says “it’s easy enough [to bring a case] as in, the law is there. It’s quite hard for people to decide to do it while they’re still employed by the company. What I typically see is someone bringing an unfair dismissal case, and they’ll reel off a series of harassment incidents which, on their own, they never would have gone to a lawyer about, they’ll just have put up with it. They’d have found it pretty awful, but they couldn’t see a way of reasonably bringing a claim. It’s a very nuclear option.” Sometimes the HR department is inadequate, but often “the individual is so senior that they can operate in relative isolation”. A small employer may not have an HR department. “A garage in Scunthorpe with three people in it … I wouldn’t say it’s particular to any sector, or any large or small employer. Sadly, it’s pretty universal. And often I’ll get a bundle of cases: ‘Not only did you make me redundant while I was pregnant, you also did this a year ago.” The problem with that is the event has to be within the past three months.

Who should solve this?

We’ve got lots of policies on sexual harassment, we’ve been churning out guidance, giving training, we have a couple of hundred thousand elected workplace reps who are trained on how to tackle discrimination and harassment at work. But it really does come down to employers, unions and government. It is now the job of the institutions to take responsibility for this. It’s about women saying: ‘I didn’t do this, you allowed him to do it.’ It’s our problem and their fault.

Training Bonds: How do they work

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Captain Dan is a pilot who was formerly in the employment of Highland Airways Ltd. A year before his resignation, the company expended substantial amounts of money in sponsoring 2 specialised trainings for Captain Dan in order to improve his skills and increase the number of planes he could fly.

The terms and conditions for sponsoring the trainings were contained in two training bonds which required Captain Dan to remain in the employment of the Company for 36 months and 12 months respectively. Captain Dan thereafter attended the trainings and acquired licences and qualifications as a result, which made him a desirable candidate for several .

However, contrary to the terms of the training bonds, Captain Dan resigned from the employment of the Company and repudiated the training bonds. He argued that the training bonds were void and unenforceable because they constituted a restraint of trade and an unfair labour practice. The company on the other hand, is of the opinion that the training bonds were freely entered into by the parties and were necessary for the protection of the Company’s business interests. It was further argued that training bonds are not contracts in restraint of trade and are enforceable in Nigeria and other jurisdictions.

This compelled the company to seek legal advice on their right against Captain Dan. Having recourse to international best practice in other jurisdictions, the position of the law is that training bonds are contracts in restraint of trade, but are enforceable if they are considered to be reasonable. The test of reasonableness is whether the restraint is necessary for the protection of the parties’ interest and is not contrary to public policy.

Where the bond is deemed reasonable, the parties can adopt the practice in other jurisdictions where the amount an employer is allowed to recover following a breach of a training bond is limited to the pro-rated cost of the training for the remaining period of the bonding period before the employee breached it. This position of the law provides comfort to employers who incur considerable expenses in providing training for its employees that such investment will be protected by the courts. Arguably, it will also reduce the tendency of employees to flagrantly breach their contractual obligations due to the lure of better offers of employment from their employer’s competitors.

Employers are therefore advised to seek legal advice before drafting their training bonds to be certain that they would pass the test of reasonableness.If a training bond is deemed unreasonably lengthy or restrictive, such as to place the employee in a state of indentured servitude to the employee, the courts may void the legal effect of such an agreement, even though it was freely entered into by the parties.

 

Should an Employee who was not issued with an Employment letter give a written Notice to Resign?

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Amaka started working as an analyst in a commodities brokerage located in Victoria Island. Shortly before her employment, the Human Resources manager had resigned due to a dispute with the senior management. Due to this state of affairs, Amaka was not issued with an employment letter by the company and this state of affairs continued unremedied for the next year as the company searched for another Human Resources manager.

Amaka being a hard worker, was not bothered by the non-issuance of an employment letter, believing that she would prove her worth to the company over time. Moreover, she had been jobless for 2 years after the completion of her national youth service, and she was not going to let a simple matter as the non issuance of an employment letter prevent her from enjoying the fruits of such a juicy job.

Fast forward, and Amaka had worked punishing hours  for 3 years under a continuously tense environment worsened by her nasty boss who had been pursuing a vendetta against her for not accepting his lascivious overtures. He had promised to ruin her career and make life difficult for her whilst she remained under his employment. Despite consistently delivering stellar work, she was repeatedly given low grades during performance appraisals and consequently denied promotions. Amaka felt like a slave and was treated almost like one.

A few months later, Amaka received an offer from another investment bank, with considerably better terms of service and benefits. She promptly turned in her 2 weeks notice of resignation and patiently waited for  her salary at the end of the month. On the 30th day of the month, she received a letter from the Managing Director informing her that her resignation had been rejected on the grounds that it was company policy that employees were to give 1 (One) clear month’s notice or forfeit their monthly salary in lieu of notice. The letter was delivered by her boss with a malicious smirk on his toad-like face.

Amaka was incensed!!! This was a travesty, and she was not going to allow it. She promptly sought out legal advice on her options against the company.

The position of the law is that an employee has the right to resign with immediate effect, and the rejection of his resignation is tantamount to forced labour, and also against the time-honoured labour law principle that an employer cannot force himself on an unwilling employee. Employees are considered to have given notice of their intention to resign if they unambiguously inform their employers that they will terminate the contract on a certain date.

Furthermore, the Labour Act states that an employer must give an employee a written contract within 3 months of the commencement of the employment. The Labour Act also makes it unlawful for an employer to deduct the salary of employee by way of penalty, except in situations where the employer suffers a loss as a result of the misconduct of the employee.

From the facts  there was a failure of Amaka’s employers to provide her with an employment agreement stipulating the terms of her employment, including the process for terminating the employment relationship. The necessary conclusion is that the attempt by the company to withhold her salary on the grounds of non-adherence to company policy falls flat on the failure of the company to comply with the provisions of the Labour Act. The absence of an express requirement for 1 month notice implies that the employment relationship could be terminated at will. Consequently Amaka’s resignation is valid at law, and she can enforce her right to the withheld salary against the company by a suit at the National industrial Court.

 

 

 

 

 

 

 

Investing in Renovating and Selling homes

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Balogun is  a banker approaching his 55th birthday. After a 30 year career as a banker, and seeing several people make their fortunes in real estate, he has decided to become a real estate investor.

His plan is to invest in underpriced property, with the objective of renovating the buildings and selling the individual units at a higher value than the amount at which he purchased the property.  Balogun is interested in understanding the risks and opportunities of this business and he comes to us for advice.

Some things to note:

  • Using this strategy, you purchase a building that needs fixing up for N2,750,000 and then you invest N500,000 in improvements (paint, landscaping, appliances, decorator items, and so on) and you also invest the amount of sweat equity that suits your skills and wallet. You now have one of the nicer homes in the neighborhood, and 2 years later you can sell this home for a net price of N4,000,000 after your transaction costs.

 

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  • Be sure to buy a home in need of that special TLC in a great neighborhood. With most properties, the long-term appreciation is what drives your returns. Consider keeping homes you buy and improve as long-term investment properties.
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  • This strategy is clearly not for everyone interested in making money from real estate investments. It is not advisable if you’re unwilling or reluctant to live through redecorating, minor remodeling, or major construction;

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  • You may not be experienced or comfortable enough with identifying undervalued property and improving it; so always make sure you get a professional opinion on each property .

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  • You should either have the budget to hire a professional contractor to do the work, or you should have the free time or the home improvement skills needed to enhance the value of a home.
  • You also need a financial cushion to withstand a significant downturn in your local real estate market, as this investment can be very cost intensive.
  • Mange your risks as much as possible!!! Make sure you do deep due diligence on the property in order to ensure that you have good title to transfer to a third party, especially since it may not make financial sense to perfect your title if you are not going to hold the property for a long period.

 

 

Managing Creditor Risk through Inter-Creditor Agreements

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James is the CEO of  HOC Global Logistics, a company which provides shipping solutions to large organisations. Having become tired of leasing cargo ships from large vessel owners, the company desires to purchase its own ships which they can use and also lease to 3rd parties. James approaches Lakeside Bank for a Term Loan to finance the $50 million transaction.

The Bank after reviewing the loan proposal filed by HOC Logistics, informed James that the transaction was larger than Lakeside bank could comfortable handle. However they are able to loan him $20 million on the security of the purchased ship. James accepts the terms and applies for loans from Cityscape Capital Ltd , HSCB, Shanghai Bank  and Union Finance Ltd. The individual loans have different terms, interest rates and security interests. The complexity of the transaction is so mind boggling that James sets up an appointment with his Lawyers to advise him on how to manage the relationships between the multiple creditors in such a manner as to enable the company satisfy all its loan liabilities. He is advised to structure and negotiate an intercreditor agreement among the several creditors, thereby ensuring he has a more convenient financing process.

An intercreditoragreement seeks to govern the relationship between a range of creditors providing finance to the same borrower. An intercreditor agreement entered into by senior and junior creditors can be expected to rank the senior and junior security, subordinate the debt of the junior creditors to that of the senior creditors, restrict the junior creditors’ rights of enforcement for a specified standstill period and impose payment freezes on the junior debt in prescribed default situations.

In highly leveraged transactions such as leveraged buyouts and certain acquisition finance transactions, funding may be structured into a number of different tranches of lenders who stipulate slightly different lending terms and interest rates for the funds they advance. Senior lenders and mezzanine lenders usually take security over the assets of the borrower, over shares acquired and over the target group’s assets. In addition, guarantees will be given by the borrower and may also be given by the target group.

The senior creditors tend to have a stronger negotiating position than do the junior creditors, so it is usual practice for the senior bank lenders and mezzanine lenders to appoint a single security agent (or security trustee) to hold the security package on trust for the benefit of all the secured creditors. The intercreditor agreement contains provisions dealing with enforcement of the security, usually requiring the junior creditors (the mezzanine lenders) to desist from enforcement for the standstill period so as to leave the way clear for the senior creditors (the senior lenders and any hedge counterparties) to instruct the security agent as to when and how to enforce their right to the secured assets.

 

10 Reasons to Have an Employee Handbook

Jacob runs a travel agency which caters primarily to individuals seeking overseas admission. After running the company  alone for a few months, Jacob hired Lucia to work in an administrative support role. A few months down the line, Jacob feels frustrated because Lucia has not been performing to his expectations. He periodically tries to tell her where she is going wrong, but she usually perceives his attempts as being overly critical and reacts defensively.

Jacob is confused. he is unwilling to fire Lucia, but he feels she is either incompetent or unable to understand his expectations of her. Lucia in turn feels stressed because Jacob has neither expressed his expectations of her, nor is there any handbook or documentation that could give her insight into his expectations. Jacob seeks legal advice on the way forward.

An Employee handbook provides the organisation with the following benefits.

Introduces employees to your culture, mission and values

Perhaps the most important aspect of your employee handbook is the introduction of new employees to your corporate culture. This helps to foster a sense of pride and belonging, which studies show will help employees become more productive in a shorter period of time.

Communicates to employees what is expected of them

A well-written handbook provides employees with a clear understanding of their responsibilities. The handbook also serves as a compass for the organization’s policies and procedures. For example, it advises employees what the procedures are for requesting time off or a vacation. It advises employees whom they should contact when they have an unscheduled absence (and what the timing should be). It tells employees whom to go to if they have questions about any of the specific policies in the handbook.

The handbook also communicates an employee’s general responsibilities regarding safety, timekeeping and reporting. By providing clear, accessible information, handbooks ensure companies continue moving in the right direction.

Educates employees about what they can expect from management and leadership

An employee handbook provides objectives and leadership styles, as well as management best practices, to foster healthy management-employee relationships. It also outlines logistics, such as timekeeping requirements, hours of work and pay periods.These clearly communicated policies help to eliminate confusion and inconsistencies that result when handbooks are silent on these topics.

Helps ensure key company policies are clearly and consistently communicated

No policy is effective if it is practiced inconsistently. A handbook will accurately communicate your organization’s policies regarding employment, conduct and behavior, compensation and other policies and procedures you follow. Most importantly, managers can refer to the handbook when answering questions or making decisions regarding your policies and ensure their answers and actions are consistent with your policies and best practices.

Showcases the benefits you offer

Does your organization offer vacations, investment plan, health insurance, paid parental leave or other benefits to employees? Make sure they know about these policies and the eligibility requirements by communicating them in the handbook. A robust benefits package can help you retain your best and brightest employees, so be sure they know about your full suite of offerings by communicating these in the handbook.

Ensures compliance with federal and state laws

No matter what state or country you do business in, or how many employees you have, you will be subject to state and federal employment laws. Your handbook not only communicates these various entitlements and obligations to employees, but is useful in demonstrating that your organization strives to be compliant with these regulations. you  will want to be sure they understand their rights and obligations .

Helps defend against employee claims

Employers should consider it a matter of when, and not if, they will face a lawsuit or similar challenge from a current or former employee. When this happens, one of the most useful documents you can provide your attorney will be a copy of your handbook.

A thorough and compliant employee handbook will help to show that the organization exercised “reasonable care” towards its employees. The employee’s signed acknowledgement page will show that the employee had an opportunity to familiarize themselves with the organization’s policies, a chance to ask related questions, knew whom they could turn to for help within the organization, and agreed to follow the terms and conditions of employment set forth by the organization.

Lets employees know where to turn for help

Ultimately, you want employees to feel comfortable turning to a trusted member of management for help when they want to report workplace violations, obtain workplace-related assistance and get answers to any other questions they may have.When a handbook not only outlines one or two management individuals for an employee to turn to in these situations, but also designates another individual to turn to in the event the employee disagrees with the first decision, they are more likely to keep their complaints in-house, and this is a good thing for employers.