Jan. 2011 – The challenges for directors in 2011


Business Law Update
January 2011

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Gary CousinsHappy New Year and welcome to the January 2011 issue of the Cousins Business Law ezine. At the start of this year we look ahead to see the challenges and opportunities available to business owners.

There’s some invaluable advice for Directors in our feature article ‘What directors should look out for in 2011’ along with a few predictions for the property market in the year to come, in Blogs in Brief.

We hope you will find information relevant to your business in this month’s issue. Email your article suggestions or legal questions to marketing@business-lawfirm.co.uk.   

Gary Cousins
0121 778 3212

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The challenges for directors in 2011 

As we enter 2011, one thing is for sure: company directors have never before faced so many duties, responsibilities and potential personal liability for the companies they control. Based on recent trends, we predict there will be four main areas for directors of SMEs to watch out for in 2011. 

Directors’ Pay

The law on how and when a director can be paid is complex and there are strict procedures that must be followed. We have seen a large increase recently in the volume of claims made against directors for them to pay back remuneration and dividends, and this is set to continue.

Most problems are caused by the common practice of a director being paid drawings during the year and then declaring a dividend at the year-end to cover this. There are rules and procedures for overdrawing loan accounts and declaring dividends and, if these are not strictly followed, up to 6 years’ worth of dividends might have to be repaid to the company.

For advice on how to deal with this issue read the full article on the Cousins Business Law website.

Director or shareholder disputes

It is a fact of life that directors and shareholders will sometimes fall out with each other and, during these difficult times, this is happening more frequently. The problem is made far worse however where no one party has overall control of a company and there is no agreement in place setting out how disputes can be resolved or when a director can be removed for misconduct.

Generally speaking, directors can only make decisions regarding themselves if the majority agrees, and a director can only be removed by the majority of shareholders. Needless to say, setting up a company with, say, two directors each with 50% of the shares just sets up a stalemate situation if there is a conflict. This is a recipe for disaster unless you have a specific agreement in place.

For advice on how to deal with this issue read the full article on the Cousins Business Law website.

Liability for costs in litigation

If your company finds itself involved in a court case, you must be particularly careful where you are a small company. The general rule in litigation is that the losing party pays towards the winner’s costs and, if the loser is a company, this payment comes from the company’s coffers.

However, the courts are becoming keener to order company directors of small companies to pay the winning party’s costs personally in certain circumstances. If a director stands to gain from the litigation, controls and funds it (and this is often the case in small companies where the company is effectively the trading vehicle for a director), then the courts may well order them to pay personally.

For advice on how to deal with this issue read the full article on the Cousins Business Law website.


The new Bribery Act 2010 comes into force this April. This introduces the following criminal offences:

  • Making a bribe.
  • Accepting a bribe.
  • Bribing a foreign public official in order to win or retain business.
  • Failing to prevent bribery by employees, agents or subsidiaries. It is a defence here to show that the company has adequate procedures in place to prevent persons associated with the company from paying bribes.

For advice on how to deal with this issue read the full article on the Cousins Business Law website.

It’s not easy being a director but you can prepare yourself and by taking professional advice at an early stage protect yourself. For advice in relation to directors’ duties and responsibilities contact Gary Cousins at Cousins Business Law here.   

Blogs in brief
In his Property outlook for 2011 commercial property solicitor Paul Harrison predicts the top 5 talking points for the property market over the next 12 months

Is your landlord Code compliant? contains useful advice for commercial tenants.

Lying politicians and why the rest of us need confirmation in writing provides useful advice on why you need to get all your commercial agreements in writing.
Blog Watch

A growth plan for Britain – what’s your suggestion? – Real Business, The Champion of UK Enterprise

Useful Links

Get to grips with the Equality Act 

A Starter Kit to help businesses understand the Equality Act is available on the Equality and Human Rights Commission website. With videos, presentations and a modular breakdown of the Act it’s a very useful tool for HR managers and business owners alike. 

Free lease renewal pack for commercial tenants

Renewing your lease? There’s a great opportunity to renegotiate and save money, but only if you start the process at the right time and fully understand your duties and responsibilities and those of your landlord. The Commercial Property team at CBL has put together an invaluable information pack for all commercial tenants.

The pack includes:

» 12 tips for negotiating your lease;

» an explanation of your responsibilities regarding dilapidations and repairing responsibilities;

» a discount voucher for £50 off a full lease review or advice for renegotiating the terms of your lease.

Register on the Cousins Business Law website to receive a free copy of the lease renewal pack or email Steven.Petty@business-lawfirm.co.uk.

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Cousins Business Law is a member of the Law Society & regulated by the Solicitors Regulation Authority under number 485128. Head Office: Swan House PO Box 11543, Birmingham, B13 0ZL. Tel +44 (0)121 778 3212. Fax: +44(0)121 275 6155