Another episode in the Q&A video series for SME’s and business leaders.
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Intro: I’m Stuart Ayling. Welcome to another episode of Vectis Q&A. In this episode I’m speaking with Helen Kay who is a commercial lawyer and Partner in Creevey Russell Lawyers, and we’re going to be looking at having the legal documents in place for your business.
And whilst it might sound like it’s pretty uninteresting, having the right legal documents is critical for your business growth whether you’re at the start-up phase or whether you’re in a mature business.
Stuart: I’m here with another episode of Vectis Q&A and I’m speaking with Helen Kay who is a commercial lawyer and also a Partner at Creevey Russell Lawyers, and she is passionate about helping business owners avoid unnecessary risks in commercial contracts.
So Helen’s always full of good tips about what business owners should be doing to make sure they’re keeping themselves safe as well as building their business and moving forward. So thanks for being here for this episode Helen.
Helen: Thanks for having me again Stuart.
Stuart: It’s great to have you here, I look forward to hearing what you have got to say on this particular topic, which is all about the key legal documents that a business should have place. Why don’t we just make a start by, maybe you could explain what are the key legal documents that a business should have in place?
Helen: There is a core pack of documents that I would recommend every business has in place. We package these together as what we call our Essential Startup Pack.
As well as that, inevitably if you’re in business especially if you started a company, you would have a constitution. And you may have entered into a trust deed, maybe a family trust deed to hold your shares or to be the trustee of the company. and then the all-important shareholders agreement or partnership agreement which again we discussed in a separate video.
Stuart: Yeah ok so that’s certainly sounds like some important documents there, but why does a business owner need to do that? I mean what’s the, why do they need to go about putting those together.
And business terms of trade as we discussed previously, this is your contract with your customer if you want to get paid you really do need to have a good well drafted and valid set of terms of trade.
Legal agreements with your clients and your suppliers. So that would be another one. Handshake deals are rarely enforceable, so if you’ve paid a substantial amount of money and you’re expecting delivery of certain products on a certain date you need to be able to point to a contract where you actually agreed to those terms. Because otherwise it’s he said, she said, which is no good.
Stuart: Would it be fair to say it’s a bit like having insurance, that like you really need to have these documents in place because when things are going well people don’t really ask too many questions but when something goes wrong, or if a project doesn’t go the way it should, or if a client doesn’t hold up their end of the deal on payment terms or whatever it might be, that’s really where these documents are going to come into place, to protect the business. Isn’t that the case?
Helen: Absolutely right. I do get people phoning me saying they know laws that can protect us here. Well often especially in a commercial arrangement between two consenting businesses, there may not be laws that actually step in.
What we then need to do is go away from the statutory regulation and create our own contractual obligations, so therefore we would look to contract law which would be enforcing those particular contracts. Contracts must be writing, must contain all the terms and must be signed by the party.
Stuart: What I think we might do because you’ve mentioned a number of different documents there. We might list all these documents out separately below this video on the page so a viewer can easily understand which documents are which.
What’s the best way for a business owner to actually go about getting these documents into place? Obviously they should be speaking to a commercial lawyer such as yourself, but is there something else they need to be doing, or is there a process that they need to go through?
The Essential Legal Documents
- Business Terms of Trade
- Shareholders Agreement
- Supplier Contracts
- Customer Contracts
- Trust Deed
Helen: Well they need to have a plan Stuart. You can’t move a mountain in a day. You need to have a plan as to when you have these documents, obviously cash flow, timing, there’s a time commitment because you need to have input into these documents. There won’t be a template that you can purchase online which suits your needs. There’s no one-size-fits-all as I said before.
So having a plan, and what we do is we do a legal health check for clients and say look, this is where we see your issues, these are the gaps, and this is the order in which we think you need to address them.
Business owners can do that themselves as well. And then have a plan to go and get them. Some of these could be purchased online. If you do purchase these online you need to carefully read them and consider them and consider whether they suit your circumstance. If not you can always ask a lawyer for some input into certain areas of those terms. It’s often more efficient to engage a lawyer to prepare the documents for you from the outset rather than trying to push a square peg through round hole, as they say.
Stuart: Yeah and maybe not at the end of the day still not really being sure if the changes you’ve made to some template that you have accessed online is really going to suit the purpose what you need.
Helen: Exactly. And often Stuart people only find this out when they seek to rely on it. And that’s unfortunate because that’s when you really needed it to work and it doesn’t work.
Stuart: OK Helen, well look just before we wrap up this particular episode I just want to ask a question picking up on something you said earlier, you mentioned like there’s a pack for startups so they all these documents can be created and put into place. What’s the situation though for an existing business, that’s maybe been around for a few years? Is that process any different for an existing business?
Helen: Stuart, no not if they don’t have the startup pack. So if they skipped that stage then they still need it. It’s the essential legal pack.
Or it might be that they did cobble some together themselves and they’re now in a position where they say right now we need to actually engage a lawyer to do this properly, and go and meet with the lawyer. Or in my case I would have a Skype or a Teams conversation with them. And actually get those documents updated and and tailored to them.
Bigger business really do, obviously they already know that they need employment contracts, but they really should sit and spend some time and actually look at the business and think, right where’s my risk factors and where are there no well drafted contracts that going to help me. This is something that commercial lawyers can do it with you when they conduct an audit of your legal risk.
Stuart: Yeah, because as a business grows I suppose all these factors become more and more important because the potential risk grows, and the decisions which made within that business maybe have more ramifications than they they did when the business was quite small. So I guess this whole area of having the right legal documents in place becomes more and more important as time goes on for a business.
Helen: Absolutely, and the problem is people find out that their documents either weren’t in place or weren’t as good as they thought they’d been, when there’s a problem. So it’s a reactivate issue. So they’re reacting to an issue that’s arisen. Maybe a third party has claimed for defects against a product.
It’s then that they realise they need to go and get it redrafted, which is a shame because that’s always more costly and more emotional and stressful than it would be to do it proactively.
Stuart: So true. OK well look Helen we’re out of time for this particular episode so thanks again for sharing your professional insights on this topic of which legal documents a business should have and why. So thanks again Helen Kay from Creevey Russell Lawyers, appreciate your time.
Helen: Excellent thanks Stuart.