life Archives - Milton and Cross

A History of Insolvency Law

Posted on March 5, 2018 by admin in Capital, corporate finance, Development, insolvency, International Investment, investment advisory, mergers and acquisitions, Uncategorized

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.

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.

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?

Posted on February 26, 2018 by admin in Capital, Compliance, Corporate Governance, insolvency, International Investment, Small Businesses

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.

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.

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.

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.

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

Posted on November 21, 2017 by admin in Capital, Corporate Governance, Development, entrepreneurship, Police and Security, rule of law, Small Businesses, Uncategorized, Whistle blowing

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.”

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.

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

Posted on November 15, 2017 by admin in Capital, entrepreneurship, investment advisory, Personal Finance, rule of law, Small Businesses, strategy, succession, transaction advisory, Uncategorized, wealth

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

Posted on October 18, 2017 by admin in Capital, corporate finance, Development, estate planning, International Investment, investment advisory, Personal Finance, real estate, Small Businesses, strategy, succession, transaction advisory, Uncategorized, upscale, wealth

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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.

small_1376440841-og_living_after — After

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.
before

After
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;

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 .

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.

Why Lawyers Make Good Early-Stage Startup Hires

Posted on September 12, 2017 by admin in Compliance, Corporate Governance, entrepreneurship, International Investment, investment advisory, mergers and acquisitions, real estate, rule of law, Small Businesses, strategy, transaction advisory, Uncategorized, upscale, wealth

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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.

Managing Creditor Risk through Inter-Creditor Agreements

Posted on August 18, 2017 by admin in Capital, Development, entrepreneurship, International Investment, investment advisory, real estate, Small Businesses, strategy, transaction advisory, Uncategorized, upscale, wealth

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 intercreditor agreement 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.

How can you transfer your music copyrights?

Posted on August 1, 2017 by admin in corporate finance, entertainment, entrepreneurship, International Investment, investment advisory, Personal Finance, real estate, rule of law, Uncategorized

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Wale is a music producer. Recently he composed music for a hit track which enjoyed substantial airplay for over 6 months. Consequent upon the success of his track, he was approached by an international music corporation, who requested him to transfer his copyright in the music to the company in return for a one off payment of $200,000 and royalties capped at 5% of global sales for the next 2 years. They assured him that he would enjoy more concert appearances with the allied revenue streams. Wale is confused and requires advice on his legal rights.

Of all the forms of copyright protected works, music is perhaps the most restricted and licensed. Since music was first broadcast on radio, a vast mechanism for licensing music has emerged from the opposing forces of the recording industry and the radio and TV broadcasting industries.

Copyright ownership can be transferred like any other form of property. Copyright is transmissible by assignment, by testamentary disposition, operation of law, as personal or moveable property. however, to give legal effect to that transmission there must be a written agreement signed by the assignor. Any grant by the copyright owner binds every successor in title except a bona-fide purchaser for value without notice (actual or constructive).

This doesn’t however mean that a copyright cannot be transferred verbally, as it is trite law that a verbal agreement to which both parties have agreed all the terms (i.e. has reached completion) is legally binding. It follows then that a verbal agreement to assign, provided there is no dispute as to the terms of the assignment between the assignor and assignee, is valid and copyright is transmissible by operation of basic contract. It is however advisable that the parties sign a confirmatory assignment agreement which refers retrospectively to the earlier assignment.

The transfer could be partial or total, where the rights owner can transfer all of the exclusive rights his or her grants. In partial assignment, a music author may transfer his reproduction, translation and adaptation rights to a publisher. He may also decide to split his rights between different persons.

Copyright assignment agreements can be limited in terms of duration or territory. The author of a literary work could, for example, assign their right to reproduce it in the UK, Nigeria, Ghana and the Gambia for 4 years.

Copyright assignment agreements can be reversionary, in other words, the rights can revert back to the assignor on the occurrence of an uncertain event, such as an unremedied breach of contract. This protects the assignor from the loss of their rights in the event of the occurrence of certain events which may be vitiate the transfer contract.

The transfer of copyrights contains some knotty issues, which could become highly problematic if not properly managed. When faced with a decision on copyrights, it is best that you seek advice from a qualified legal practitioner, so as to ensure that you take the best steps in the circumstances.

Milton & Cross Solicitors provides advice to entertainers, rights owners, rights administrators and merchandisers. We help them make informed decisions that facilitate high value transactions. Contact us for a free consultation.

10 Reasons to Have an Employee Handbook

Posted on July 19, 2017 by admin in Capital, Corporate Governance, entrepreneurship, leadership, Small Businesses, strategy, transaction advisory, Uncategorized, upscale

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?

Posted on July 6, 2017 by admin in Capital, Compliance, Corporate Governance, entrepreneurship, investment advisory, Personal Finance, rule of law, Uncategorized, upscale, wealth

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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.