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Ashfords' Business Bulletin - October 2021

This quarter’s newsletter focusses on a wide range of articles from Employment, Corporate, Commercial, Restructuring & Insolvency and Data Protection.

Restructuring & Insolvency

Pandemic rent debt - ongoing support for commercial tenants

The Government announced recently that it intends to create legislation to ringfence debt accrued by businesses who were affected by the pandemic and forced to close to prevent otherwise viable businesses collapsing under the pressure of rent arrears recovery action by out of pocket landlords.

The British Property Federation estimates that £7.5 billion of commercial rent was in arrears as at 30 June 2021. Clearly one of the Government’s overriding concerns and objectives is to protect jobs which are threatened by the build-up of arrears during the pandemic.

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When a CEO or "director" in name only is not considered a director - the fall- out from the Kids Company case

Can companies name an individual a ‘director’ when they are not in fact legally appointed? The short is answer: yes, but there may be consequences…

The court considered what makes a director in the director disqualification case following the high profile liquidation of the charity, Kids Company. Like many charities, Kids Company had a board of unpaid non-executive trustees (who were its registered directors), and a CEO who was not a registered director but ran the charity on a day-to-day basis and received a salary. The Insolvency Service alleged that the charity’s CEO, Camila Batmanghelidjh, was unfit to be involved in the management of a company, applied for her disqualification.

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Employment

Homeworking considerations for employers post-Coronavirus restrictions

'Business as usual’ had never been more unusual during the pandemic. Indeed, it is no secret that the pandemic caused much uncertainty for businesses, yet perhaps a silver lining is that it has shown us just how much we can actually do from home. For many people, a harmonious work-life balance was achieved. Now with restrictions easing, it seems homeworking may be here to stay! But just how should employers be preparing for these more permanent shifts in homeworking practices?

The key areas for successful long-term homeworking arrangements that employers should consider are: supervision, compliance, security, performance, flexible-working and wellbeing. Paying close attention to these areas will enable employers to effectively monitor those working from home whilst ensuring business efficiency.

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Commercial

The EU proposes to regulate AI systems – how will that affect UK businesses?

Despite the UK’s withdrawal from the EU, if UK businesses are trading in the EU they should stay updated on EU proposals and be aware of the potential impact. Earlier this year, the EU Commission published a proposal for a new AI Regulation. The Regulation aims to strengthen Europe’s position in the development of AI, all whilst protecting the fundamental rights of individuals and businesses.

Described as ‘the first legal framework on AI’, the new proposal is predicted to become the de-facto standard for AI practices in Europe and potentially for much of the world’s largest companies. Only time will tell as to whether the UK Government will implement similar legislation in order to facilitate trade with the EU. One thing is certain though, and that is UK providers must comply with the new Regulation if they wish to continue selling their products or services to the EU. Businesses are advised to monitor the development of the EU’s proposals going forward and consider their impact.

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Corporate

Protecting the value of your business purchase when the sellers set up in competition

Just imagine: You buy a business only for the previous owners or directors to go on and create a carbon copy company. They know the ins and outs of the company and have specialist knowledge about the clients, staff and suppliers... What do you do if they try to set up in competition? How do you protect your investment?

The good news is that the courts will find certain contractual restrictions to be necessary in order to protect the value of the company. As part of the business sale, service contracts with the sellers usually set out certain restrictions which prevent threat to the business by limiting competition if the previous owners decide to leave the business. In addition, the Share Purchase Agreement (SPA) would typically provide contractual protection to the purchaser by placing similar limitations on the former owner, such as, for example, restricting them from approaching clients or headhunting employees.

If there is evidence that the sellers have breached those restrictions, the purchaser must act fast, gather evidence and obtain legal advice as it may be necessary to go before the court.

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Data Protection

Data protection - navigating international data transfers

What are international data transfers?

Advancing technology has enabled many businesses to operate internationally either by expanding their global footprint to buy and sell products or services overseas, or by utilising suppliers in other jurisdictions in order to remain competitive within their industry. Whenever a UK based organisation sends personal data outside of the UK it will be engaging in an "international data transfer" by "exporting" personal data to another jurisdiction. If you’re buying or selling abroad, monitoring the behaviour of individuals in other territories or engaging suppliers internationally, you are likely to be processing, and transferring personal data outside of the UK. Organisations should be particularly mindful of Software-as-a-Service (SaaS) providers whose 'cloud based' products often store personal data on servers outside the UK. Without consideration, utilising such providers may result in businesses falling foul of data protection law by inadvertently exporting personal data and not having the appropriate safeguards in place.

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