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.

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.

 

Why Lawyers Make Good Early-Stage Startup Hires

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By Daniel Doktori and Sarah Reed (culled From hbr.org)

It’s a startup shibboleth that entrepreneurship and formal education don’t mix. For icons such as Mark Zuckerberg and Bill Gates, so goes the lore, finishing a bachelor’s degree would have only stifled the creativity that fueled their companies to stratospheric success. PayPal founder Peter Thiel offers a $100,000 fellowship to “young people who want to build new things instead of sitting in a classroom.” Graduate degrees are thought to merely exacerbate the problem of too much thinking, too little doing. And while high-profile efforts by top business schools to teach and promote entrepreneurship have lessened the stigma around the MBA, the law degree continues to occupy a unique place of villainy among the startup set. After all, YouTube, Uber, and Airbnb, among many others, were founded on ideas that challenged, if not broke, laws and regulations. When it comes to a tech startup, lawyers are a bug, not a feature. Right?

Maybe not. Lawyers can add value in the obvious ways, helping to avoid early mistakes like issuing stock too late in the game, when the company has grown in value and the employees can no longer take advantage of favorable tax treatment. But more importantly, a lawyer on the early team can contribute to a thriving company culture by asking the right questions at the right times, providing perspective on crucial transactions, and getting smart fast on issues where the rest of the team lacks expertise.

Lawyers help startups deal with common transactions and avoid costly mistakes.

Issuing equity to the early team often triggers time-sensitive filings with the IRS. Successfully commercializing a product depends upon clean and clear lines of intellectual property ownership. Raising outside financing requires compliance with complex securities laws. A misstep on any of these items could mean an early exit for a startup company (and not the good kind). A corporate lawyer with a few years of relevant training can help navigate these and other common set-up requirements.

Moreover, lawyers, particularly corporate transactional lawyers, have repeated exposure to the types of deals — and the associated risks — that a startup will face. The dynamics between a CEO and the investors on her board are a function of the legal arrangements articulated in the financing agreements. The relationship between a company and its customers stems from a license agreement governing how users may interact with a product. Partnering with a larger company in a similar industry can, in the best case, open new markets or, in the worst, box a company into a corner, severely limiting options for growth and eventual acquisition. Lawyers understand these transactions and the perspectives of the negotiators involved.

And when the complexity of the particular deal exceeds the expertise of the lawyer on the team, she can play the savvy procurer of legal services, knowing how to target efforts and limit costs. Such experience comes in handy in managing other third-party service providers such as bankers, accountants, and consultants.

While these benefits are valuable, however, they don’t in and of themselves justify a startup hiring a full-time in-house lawyer. Early stage companies — at least those with founders sufficiently experienced or savvy to recognize that they walk a road pitted with legal potholes — tend to manage such standard risks by hiring outside counsel. And while the costs associated with that outside attorney often rank among the highest in a startup’s budget, they do not typically rise to the level of a full-time annual salary. To justify her presence among the first dozen employees, a lawyer must add something beyond legal knowledge to the equation.

Lawyers are trained to ask the right questions at the right times.

Counterintuitively, lawyers can add the strategic absence of knowledge. President Harry Truman famously longed for a “one-handed economist” when presented with the equivocating analysis of his advisers, but executives in politics and business need to understand opposing viewpoints in order to make informed decisions. Legal education and training includes a strong emphasis on questioning assumptions and probing for further information.

Rather than crippling the company through risk aversion and overanalysis, however, having a lawyer on the early team contributes to a data-driven, analytic culture of thoughtful decision making. Further, lawyers are trained as advisers and service providers. They can ask questions, explore options, and execute on answers, but they don’t expect to make the final call. This comfort with playing a supporting role helps avoid the egocentrism that can cripple any organization, particularly a nascent one.

The lawyer’s craft sometimes can be boiled down to a willingness to immerse herself within the “fine print,” offering to read what no one else will on account of complexity, length, or sheer dryness. Trained to ensure that even simple advice is backed by evidence, lawyers read closely to the point of comprehension as a matter of professional responsibility. Such a skill enables a lawyer to take responsibility for a wider variety of important matters. Fledgling startups inevitably have to rely on analysis over experience. Lawyers fit well in such situations.

Not every lawyer is well suited for the gig, however. A lawyer with the qualifications outlined above needs a tolerance for risk. For one thing, she must be willing to give up her plush office and lucrative salary for a computer station at a long table and compensation in the form of prayers, otherwise known as stock options. Her professional risk tolerance must follow suit. An essential attribute of a business attorney is providing “risk-adjusted” advice, and the level of tolerable risk for a startup generally far exceeds that for a Fortune 500 company. Lawyers at startups need to recognize that a workable answer today is often preferable to the perfect answer tomorrow; hand-wringers need not apply.

But risk tolerance must be accompanied by a stiff spine in situations where the company’s momentum (and the CEO’s vision) hurtles on a collision course with the law or the company’s outstanding commitments. In these cases, a willingness to speak up is one of the many things lawyers can bring to the table.

Daniel Doktori is the Chief of Staff and General Counsel at Credly, a digital credential service provider. He previously represented startup companies at WilmerHale, a law firm.

Sarah Reed is the Chief Operating Officer and General Counsel of MPM Capital, a venture capital firm that invests in early-stage life sciences companies. Previously, she was the general counsel of Charles River Ventures, an early-stage technology venture capital firm.

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.

 

 

 

 

ARE SALARY DEDUCTIONS LAWFUL?

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Donald owns a golf course business run through a company called Great Ltd. The business is performing poorly and there are significantly fewer customers than last year. Donald takes the view that this is the fault of his employees. He decides he will ‘make the business great again’ by firing staff or deducting their salaries.

Donald has never liked one particular employee called Bernard. As Bernard is doing his usual maintenance work on the golf course, Donald walks up and asks him aggressively why he is not working faster. Before he can answer, Donald states that he is going to deduct 20% of Bernard’s salary!!!

Fast forward to the end of the month, Bernard receives his pay check and notices that indeed 20% had been deducted from his salary, after taxes! he was so infuriated and reported the matter to this line manager, who after giving him the runaround, informed him that the order to deduct his salary came directly from Donald. Understanding that he can achieve no objective by working with the company hierarchy, Bernard seeks legal advice on his options.

As a general rule, Under the Labour Act LFN 2004,  all amounts payable to an employee in relation to the performance of work must be paid in legal tender and periodically. It should be noted that the Act does not not govern the amount or periodicity of wages, but merely stipulates that the terms should be reduced into writing by the employer.

There are very specific provisions in the Act regarding the circumstances when an employer can make deductions from an employee’s wage or salary and it is important for employers to understand their obligations.

S.5 (1) of the Labour Act provides that except where expressly permitted by law or where loss or injury has been caused to the employer by the wilful misconduct or neglect of the worker, no employer shall make any deduction or make any agreement or contract with a worker for any deduction from the wages or any other moneys to be paid by the employer to the worker, for or in respect of any fines. This suggests that the use of wage deductions as a punitive or disciplinary measure is to a large extent unlawful.

Allowable deductions include;

  • Pension
  • Personal Income Tax
  • Union contributions, where the worker has accepted in writing to make voluntary contributions to the trade Union
  • Over payment of wages, but only in respect of any such over payment made during the three months immediately preceding the month in which the over payment was discovered.
  • Deductions which have been expressly approved by the worker, e.g Cooperative contributions, judgment debts which have been duly garnished by the judgement creditor or loan payments due to a 3rd party. The written authorisation from the employee must specify the amount of the deduction and may be withdrawn or varied, in writing, by the employee at any time.
  • Deductions for goods or services provided by an employer, or a related party to the employer, to an employee in the ordinary course of the employer’s business, and which are provided on terms and conditions that are the same as, or not more favourable than, to the general public.
  • A deduction which is to recover costs directly incurred by the employer as a result of the employee’s voluntary private use of particular property of the employer, whether the use is authorised or not. e.g cost of items purchased on a corporate credit card for personal use by the employee, cost of personal calls on a company mobile phone

However, it is possible that a situation may arise where the salary of the worker is tied to their work product, in which case, the suspension of an employee’s employment may not be viewed as a salary deduction.

Employers need to be very cautious in effecting payroll deductions,understanding that there is a distinction between a “belief” that there is a right to recover money from an employee, a legal right to recover money from an employee, and the method that the employer can ultimately use to recover any money.

The Law does not simply permit an employer to take the easy option of making a deduction from the employee’s future wages or salary to recovery money which the employee owes the employer.

Further, employers should be cautious in simply seeking to rely on any general deduction wording in their employment contracts.  Despite such contractual wording, an employee’s express written authorisation of a specific amount will still be required, unless the deduction is properly authorised by an industrial instrument, legislation or court order.

In addition, employers are prohibited from requiring employees to spend any part of their payment in relation to the performance of work where the requirement is unreasonable.  Where employees are required to wear a particular brand or type of clothing and are required to purchase that clothing, then that requirement has to be reasonable to be enforceable and not be in breach of the Act.

Employers should seek professional advice if unsure about the lawfulness of a payroll deduction for the employer’s benefit, BEFORE proceeding, as an unlawful deduction may attract a civil penalty under the Act.

 

 

The Biggest Mistakes Entrepreneurs Make when Hiring Business Lawyers.

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I do not pay my lawyers to tell me what I cannot do, but to tell me how to do what I want to do.

J.P.Morgan

Ikenna is a brilliant programmer and all round tech whiz. in 2015, he designed a classified listings website called TRUGG, which drew public attention and commercial success due to its  user centered design  and simplicity of use, as well as its global reach.

However, As his company grew rapidly, so did the rate of lawsuits filed against the company. Aggrieved users, competitors and random individuals would file cases against the company, costing the company millions of Naira in time, legal costs and settlements. After a few years of fielding these cases, Ikenna decided to seek advice from Joe, a fellow successful tech entrepreneur,  on the desirability or otherwise of retaining a commercial lawyer for his business.

A good business attorney, when fully embraced  and informed, guides the company and its management on all touch points- products, services, communications, investor relations and customer service. Your lawyer will provide vital assistance in almost every aspect of your business, from formal business incorporation to basic compliance, copyright and trademark advice, and civil, contractual, or criminal liability arising from the activities of the company.

Most small businesses put off hiring a lawyer until the sheriff is standing at the door serving them with a summons. Bad mistake. The time to hook up with a good business lawyer is before you are sued. It’s easy to get into court, but very difficult and expensive to get out once you’ve been “trapped”. Once you have been served with a summons, it’s too late–the problem has already occurred, and it’s just a question of how much you will have to pay (in court costs, lawyers’ fees, settlements and other expenses) to get the problem resolved.

A good commercial law firm should be ideally able to handle your lawsuits, negotiate your lease of office or retail space, file a patent or trademark, draft a software license agreement, advise you on terminating a disruptive employee, and oversee your corporate annual meeting.

For many entrepreneurs, the idea of consulting a lawyer conjures up frightening visions of skyrocketing legal bills. The fee a lawyer will charge to keep you out of trouble is only a small fraction of the fee a lawyer will charge to get you out of trouble once it’s happened. When you hire an attorney, ensure you draw up an agreement (called an “engagement letter”) detailing the billing method to be applied and also specifying what expenses you’re expected to reimburse. This saves from conflicts arising from billings and requests for reimbursements.

Your lawyer should tell you what the law says and explain how it affects the way you do business so that you can spot problems well in advance. However, you should note that no lawyer can possibly know everything about every area of law. If your business has specialized legal needs (a graphic designer, for example, may need someone who is familiar with copyright laws), your attorney should either be familiar with that special area or have a working relationship with someone who is.

You should be able to communicate openly and freely with your attorney at all times. Good looks and a dynamic personality are not as important in a lawyer as accuracy, thoroughness, intelligence, the willingness to work hard for you and attention to detail. Look out for a lawyer who believes in your business and who is willing to go above and beyond the call of duty in managing the risks of your business and resolving any issues that may arise before they start.

How to Increase your Customer Base

 

We were privileged to have Mrs. Ijeoma Olujekun, Brand Manager at Evron Food Store, as a facilitator at our recently concluded MSME Roundtable. Ijeoma shared her experiences with building a customer base from scratch and gave us some serious tips with us on how to create and develop rich, fruitful and mutually beneficial long term relationships with individuals; helping us to convert these individuals into a customer base.

Here are some key points of her presentation:

  • Every business starts with zero customers
  • There is always a customer for your product, irrespective of the product.
  • Define your target customer (your #1 Customer) and tailor your marketing efforts to meet the needs of that customer
  • Meet your customers at the point of their need and through their preferred mode of communication
  • Do your customer research diligently
  • Create an enhanced user experience for your clients
  • Sell a lifestyle, not a product
  • Identify your value proposition early
  • Sometimes in the business journey, your value proposition may have to change in order to reach your client
  • Create Win-Win relationships with your customers
  • Nobody cares about your brand except you; make it your mission to transfer the vision of your business to the minds of your customers
  • Understand the customer Lifecycle
  • Sometimes you need to do something iconic to get noticed!
  • Value your customer data like you value your life
  • You need to be on every platform that enables you communicate and engage with your customer!
  • Do not be limited in the use of communication media, engage in multi-channel interactions and encourage your clients to do so as well
  • Always look out for ways in which you can increase your channels of interaction, look for every platform your customers are comfortable with
  • Twitter is a very powerful medium because it allows you to aggregate information using the simple hashtag
  • Customer service is the best form of marketing
  • Make use of free advertisements, endorsements and opportunities for building business connection.
  • Personalise each and every customer interaction
  • The more a brand is seen, the more a brand is bought

 
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Mergers: Dating Before Marriage

Before a merger of companies actually takes place, while negotiations are ongoing, the companies need to review their operational systems and corporate culture. This is because each corporate body has their peculiar system of operations, values, trade culture and work ethics. The concept of dating before marriage consists of further steps taken after due diligence investigation in order to determine cultural compatibility. It is the stage where the companies enter into a compromise using the information gathered during the due diligence investigation in order to facilitate a successful merger.

Numerous studies have explored the key drivers for merger successes and failures. The overwhelming evidence is that over 70% of the time, mergers do not create synergies and shareholders of both companies involved do not see gains in shareholder value due to cultural incompatibility. The difficulty in blending two organisations lies in the fact that each group tends to see the world through its own biased cultural filters, popularly referred to as “familiarity blindness” or “cultural trance”. Several authors emphasize the value of “soft” due diligence audits, which focus on human resources and identification of cultural difference and its impact on the success of the merger. Some authors have also suggested that certain individuals are critical to the success of the merger and as such, should be identified and included in the merger process.
To avoid merger failures a diagnostic process has to be developed that allows a company to test the impact of a proposed business initiative or venture on those people most affected by it, to identify why it may fail and to establish precisely what has got to be done to make it a success. This tool can be applied to a proposed merger as part of the HR due diligence process, to identify and assess the cultural issues that will be encountered. The tool should be sufficiently flexible and scalable to be adapted, modified or enhanced to meet specific requirements.