LAW & FINANCE
Business & Company Law
We offer a wide range of services for you and your business here in the UK, including:
- Advice and assistance with matters relating to shareholding, issue of new shares, resolution of shareholders’ disputes, directors’ duties, shareholders’ agreements and other business agreements as well as advice and assistance with small to medium business purchase;
- Advice of an English qualified solicitor on all matters relating to your business and/or company registered here in the UK;
- Advice and assistance with opening and operating a company registered in the UK;
- Preparation of Business Plans;
- Opening of a business bank accounts in £ Sterling, US dollars and Euros;
- Annual and management accounts- preparation and filing (as required);
- Tax returns (personal and corporate)- preparation and filing (as required);
- VAT registration (if required) or as a matter of course if the company turnover exceeds £82,000 in any year;
- Employment law advice and pay roll services.
Below you can find some important information in relation to the following:
- Business assistance for Tier 1 Entrepreneur Migrants;
- Business Plans – key points;
- Small & Medium Business Purchase in the UK.
Business Assistance For Tier 1 Entrepreneur Migrants
Migrants who have obtained visa Tier 1 Entrepreneur have to set up, join or take over one or more businesses in the UK. They have to register as self-employed persons or directors in the UK and be actively involved in the running of the set up or purchased businesses. Red Square London offers a full range of business services and assists its clients with preparation of Business Plans, organisation of new businesses or their purchase.
Below you will find information about the most common issues arising in the process of conducting a business and the importance of competent business assistance.
If you are a director of a company, it is your responsibility to try to make the company a success using your skills, experience and judgement. It is important to follow the rules set out in the company’s Articles of Association, make decisions for the benefit of the company rather than your own. Failure to follow these rules as well as incorrect filings, late reporting of changes and incompetent accounting might lead to fines, prosecutions or your disqualification as a company director. If your intention is to extend your Tier 1 Entrepreneur visa in the future and to apply for naturalisation later, you simply cannot afford for things to go wrong.
Your company has to be registered with HMRC as an employer. When paying salaries, the company must take Income Tax and National Insurance contributions from the salary payments and pay these to HMRC together with the employer’s National Insurance contributions. It is important to know, that the immigration rules related to the visa Tier 1 Entrepreneur do not allow you to receive salary from the required investments made by you into the company. Incorrect organisation of salary payments and incorrect use of the required investment funds might become a reason of unsuccessful attempt at visa extension.
When applying for naturalisation (British citizenship) you have to satisfy certain requirements. To be of “good character” – is one of such requirements. This notion does not only include law-obedience and absence of serious or recent criminal record but also observance of immigration rules. Your financial soundness and order in your financial and tax affairs are also important aspects. Declaration of bankruptcy and liquidation of your insolvent company might result in a refusal of your application for naturalisation. However, there are mitigating circumstances which we will explain to you based on your individual circumstances. For example, the decision maker will not normally refuse an application where the person was made bankrupt or his or her company went into liquidation through little or no fault of their own. In general, for visa extension applications as well as applications for naturalisation, it is important to show that your business has continuously been developing in the UK. These are the reasons why the engagement of competent business consultants is very important.
Below are a few examples of business aspects which might require the engagement of Red Square London qualified consultants:
A dividend is a payment a company can make to shareholders if it has made enough profit. Your company must not pay out more in dividends than its available profits from current and previous financial years. It is also important to remember that you cannot count dividends as business costs when you work out your Corporation Tax.
HM Revenue & Customs may check your company and accounting records to make sure you are paying the right amount of tax. We will assist you with the preparation and submission to Companies House your company’s statutory accounts. We will also assist you with the preparation and submission to HMRC your Corporation Tax Return and personal tax return.
Company Annual Return
You must send Companies House a company annual return every year, within 28 days of the anniversary of the company’s incorporation. If you miss the deadline, Companies House can close down your company or prosecute you. You could also be disqualified from being a company director.
Company changes you must report to Companies House:
- Change of your company’s registered office address
- Issue of additional shares
- Appointment of a new company secretary or ending of an existing one’s appointment
- Change in directors’ personal details
- Change in the Articles of Association
- Removal or an appointment of a director
It is important to know that some changes and decisions require shareholders’ approval.
As your consultants, we will assist you with any business related issues.
*Please read about immigration requirements in relation to Tier 1 Entrepreneur visa in section “Immigration” of our website or contact us for information.
Business Plans – key points
Preparation of business plans is one of the most popular services among our clients provided by our team at Red Square London. This is due to the fact, that business plan is a requirement whether you are applying for Tier 1 Entrepreneur visa, seeking to attract investors, obtain commercial mortgage or simply trying to get a loan for business development. This is the most important document which influences decisions of the Immigration Services, banks and also investors. This is the reason why it is important to have a professionally prepared business plan.
Typical business plan
Main point of a business plan is to explain your business idea, spot potential problems, set out your goals and also measure your progress, if your business has existed for some time. Typical business plan contains the following information which might vary on case by case basis:
- Business Strategy – general information about the business and its potential development
- Economic Case – risk management, how the activities of the company will be funded, information about business operations, premises, marketing, staff etc.
- Financial Section – you have to provide financial projection for at least 3 years.
- Project Plan – you have to show how you are planning on implementing your business strategy.
Business plan for Tier 1 Entrepreneur visa
Business plan required by the Immigration Services for Tier 1 Entrepreneur applicants differs from a typical business plan. It is usually a 20-30 pages document which has to contain the following information and financials:
- Description of your business idea.
- Previous experience, qualifications and CVs of the owners of the business.
- Summary of market research, information on who your customers will be, information about the available competition on the market, details of your product or services and why they will be good for your customers and better than those of competitors.
- Why you have decided to develop your business in the UK.
According to specific requirements of the Immigration Services, your business plan has to contain also the following information:
- How the required investment of £200,000 will be made, what exactly it is going to be spent on.
- Who will be running the company – the immigration rules require the applicant to be a director of the company or to be registered as a self-employed person within 6 months from the grant of leave or entry to the UK.
- As a Tier 1 Entrepreneur visa holder, you are also required to created 2 full time jobs for people “settled in the UK” which have to exist for a continuous period of at least 12 months. How you are going to create the required jobs must be explained in your business plan.
- Your business plan has to contain cash flow forecast for 3 years – the whole period of your initial grant of leave to remain.
Please note that the provided above information is only a brief summary of what this document has to contain. It is important to remember, that any business plan has to contain financials, especially profit and loss forecast for 3 years ahead.
Small & Medium Business Purchase in the UK
We assist our clients who wish to purchase small or medium businesses in the UK including cafés and restaurants. Below we share with you our expertise and experience in this area and provide an example of a business purchase process.
To begin with, you will need to decide which business you would like to purchase and where it should be situated. When looking to buy, for example, a restaurant, its type is as important as its location. You need to understand the market well. Business media and business consultants can be of assistance in this matter. The condition of a restaurant, its client base and competitors are the factors worth considering. Other questions to ponder: how you will add value and perhaps unique feature to the existing business. Business purchase can be structured either as a purchase of the share capital of the company which owns the business or as a purchase of the business as a going concern. In the first case your lawyers will prepare “Share sale and purchase agreement” and other documents, which will transfer the title to shares from the seller to the purchaser. In the second case, your lawyers will prepare “Business sale and purchase agreement” and “Assignment of lease agreement” or transfer of freehold. In both cases, your lawyers will have to conduct legal and financial investigation in relation to the company being purchased – the so-called due diligence. It is also important to remember about tax issues regardless of whether it is a business or a share capital purchase.
When buying the business as a going concern, the buyer simply selects business assets he wishes to purchase. Assets can include: land, equipment, cars. As regards to taxation, most important taxes which have to be taken into account are:
- Stamp Duty Land Tax (SDLT): the purchaser of the property (whether it is a freehold or a leasehold) has to pay SDLT. The amount of the sum payable depends on the purchase price of the property.
- Value added tax (VAT): such tax is usually paid in relation to goods and services received and also on transfer of the major part of the property when business is sold. When you buy a business as a going concern, you will not have to pay VAT.
When you buy shares belonging to a company which is the owner of the business, the business itself remains the property of the company. In other words, there is no transfer of business assets. Instead, the change of ownership takes place. When shares of the company are being bought, you will need to pay tax on share transfer amounting to 0.5% from the purchase price which will have to be paid by the purchaser.
Another common form of ownership is a franchise. Franchises are cheaper as regards to purchase and business operation but provide less opportunities for self-expression.
Analysis of the restaurant’s accounts can be used to create your own financial plan. The most important factor is cash flow. It is more important to prepare expense projection than sales and demand projections. In order to prepare expense projection you will need the existing data in respect of salaries, utility bills, rent payments and other expenses.
It is advisable to prepare three different projections: low level sales revenue and high level expenses; middle level sales revenue and middle level expenses and high level sales revenue and low level expenses.
You need to remember that at the beginning the income flow might be much slower than the inflow of bills to pay.
It is important to request building survey and official valuation of the business. Such information will allow you to find out about some issues which might not be obvious and give you grounds for negotiation. It is also a good idea to ask the owner why he is selling the business.
The main rules applicable to any business purchase are also relevant for a purchase of a restaurant. Preparation of a business plan is a must. It is advisable to think about the financial side: how much money you can invest into the business and how much money you can expect to make with it. Thorough and careful planning will allow you to clarify your goal and help to choose the most profitable option. To start a restaurant business from scratch is more difficult than to purchase the existing restaurant. For example, it is easier to attract investments when the business is already established. Yet, if you have decided to purchase an Italian restaurant and turn it into an Indian restaurant, you might lose the existing client base. Nevertheless, this approach is typical – purchase of a restaurant of one type with the view of turning it into a restaurant of another type.
Process: Purchase of 100% of the Share Capital
There are four main stages in any purchase of share capital:
- pre-contract due diligence;
- negotiation and execution of contracts and other transaction documents;
- completion (payment of the purchase price and transfer of ownership);
- post-completion registrations and other administrative matters.
Below we will talk about one of the most important stages of acquisition – legal and financial investigation in relation to the company being purchased, the so-called due diligence.
During the due diligence process, your lawyers might discover a number of issues requiring further clarifications and action. For example, the target company’s accounts might reveal that the target company has a large director’s loan or considerable amount of other trading creditors, as well as debtors.
Documents related to taxes, contracts with third parties, insurance policies and many other documents and information are thoroughly investigated during the due diligence process. Such process might also reveal a number of ongoing disputes, for example, with the business suppliers. Also at this stage your lawyers will look into lease agreements in order to ensure that there are no clauses which might have negative consequences or require an assignee of the lease (the purchaser) to perform certain actions. For example, to pay a deposit, insurance contributions or service charge.
Despite the revelation of sometimes large amount of issues, they can be dealt with prior to completion of the business purchase in order to protect the purchaser. Some of such issues can be dealt with by separate agreements or repayment waivers. The other – by inserting into the Share sale and purchase agreement certain warranties and indemnities.
Warranties are contractual promises that certain facts and information about the target company provided in the Share sale and purchase agreement and other documents, are true. Such warranties reveal all necessary information about the company being purchased. Warranties are especially important in respect of financial information, compliance with the contracts concluded with the suppliers and with the terms of existing licences, any pending disputes or investigations involving either the target company or any of its directors. If a warranty proves to be untrue at some point after the purchase has been completed and the purchaser will incur damages, he will be entitled to claim compensation from the seller.
Indemnities are the seller’s undertakings to meet a specific potential legal liability of the purchaser. If an indemnity event occurs, for example a claim against the purchased company or a purchaser, the purchaser would be able to recover the full amount of the indemnified sum. Such indemnities can be included in the Share sale and purchase agreement and ensure, that the seller will reimburse the purchaser in respect of losses arising from the bad debts as set out in the accounts. In other words, by including indemnities, the seller will undertake to repay the purchaser’s a specific sum relating to bad debts if the same were not paid within a certain agreed time.
If you have any questions in relation to the above, we will be happy to discuss them with you. If you plan on becoming an entrepreneur in the UK or simply wish to expand your business by purchasing an additional business, our legal and business team at Red Square London will assist you with this.