The Intellectual Property Office announced that the small-claims track will limit fixed costs and have an upper limit on damages of £5,000 per case. It hopes that the track will be operational by the end of 2012.

With effect from 1st August 2011, companies will be able to raise up to 5 million euros (up from 2,500,000 euros) before the requirement to produce a Prospectus is triggered.

In addition, they will be able to raise finance from 150 person, not including certain qualified investors (up from 100 persons), before the requirement to produce a Prospectus is triggered – regardless of the amount of money being raised.

Preparing a Prospectus is a time-consuming and costly process and these measures have been brought in to provide a much needed fillip to SMEs looking to raise finance. Many of those small companies see credit as the primary source of finance but equity finance can be attractive too.

Time will tell whether these measures actually have any effect. They will make it easier for the SME to seek to raise finance but will not necessarily make an investment opportunity any more attractive to the investor community.

The announcement follows a consultation on the future of the ‘right to request time off to train or study’ regulations.

This decision follows confusion earlier in the year over whether this right was going to be extended – click here and here for full details. The previous Labour Government had passed legislation to extend the right from April 2011, but this was put on hold – and now ruled out – when the coalition Government came to power.

The Government has also confirmed that the right will continue to be available to employees in large organisations with 250 or more employees.

What’s happening?

The Government will include a range of measures in the Growth Review, a joint HM Treasury and BIS-led process that aims to ensure that all government departments are doing everything they can to help businesses and the country grow economically. These measures include:

1. A public audit of almost 22,000 business regulations that are currently on the statute book. This will allow businesses to voice their opinions on these regulations (which will be listed on a dedicated website); and

2. A moratorium to exempt businesses and start-up companies with fewer than ten employees from new domestic regulation for three years.

Mr Prisk stressed that there would be a period of consultation regarding how the aforementioned moratorium would work, but he promised that the exemption “will kick in very shortly.”

As part of the Growth Review, the Government also plans to:

1. Continue to exempt companies with fewer than 250 staff from the right to request time to train. Click here for further details;

2. Revoke regulations giving parents of children up to the age 17 the right to flexible working hours. These had been due to come into force on 6 April 2011. Click here for more details;

3. Introduce more transparency into the Government’s ‘One-in, One-out’ regulation rule; and

4. Free small companies from unnecessary audit fees by matching the minimum requirements laid out in EU directives.

The FSB has welcomed the moratorium on the introduction of new employment regulations for micro-businesses, but has called on the Government to extend this to small and medium sized businesses (SMEs).

Also, in its new report, Think Small First, the Confederation of British Industry (CBI) has called on the Government to speed up the employment tribunals system; extend the unfair dismissal qualifying period to two years; provide clear guidance in the absence of a default retirement age; reform the ACAS code; introduce the right to an annual review of flexible working; and introduce a right to agree a return date with an employee going on maternity leave.

What happens next?

Reducing the legislative burden for micro-businesses and SMEs remains an important issue. Over the next few weeks, the Government will (1) consult with businesses on the moratorium, and (2) publish details of how it will introduce sunset clauses into new regulations. This will mean that regulations will have to be reviewed every five years to see if they are effective and still needed.

The Prime Minister has recently made some bold claims, insisting that his Government will create “the most pro-enterprise, business-friendly environment that Britain has ever had” and that the imminent Budget will be “the most pro-growth Budget this country has seen for a generation.”

We shall see what is announced in Wednesday’s Budget…

The right to request time off for training was introduced for employees of large employers (i.e. those who have 250 or more employees) in April 2010, with a view to it being extended to all employers from April 2011.

The reason for the postponement is that government ministers want more time to examine the potential impact of the regulation on small and medium sized businesses (SMEs).

It is not known when the extension will be implemented, if at all.

HMRC will target 50,000 SME’s a year looking at business records going back over the last 6 years.  There is a legal obligation to keep adequate records, and failure to do so can give rise to fines of up to £3,000.  This is a change of practice from HMRC who historically have rarely imposed these penalties.

Overtly raising taxes at the moment is political death.  So HM Treasury have to look elsewhere for money.  This seems to be a case of rummaging down the back of the sofa for those extra bits of revenue.  However, for most SMEs – £3,000 is not small change.  Businesses need to ensure that they keep all relevant documentation in addition to their accounts, such as till rolls, cheque stubs, paying-in-slips, cash receipts, etc.

If you want to speak to a solicitor or accountant about your obligations please contact us.

We also offer a business healthcheck  service, which includes a review of your business documentation and compliance.  If you are interested in this please contact our corporate team.

As reported in Upload-IT in September 2010, from 1 March 2011 marketing communications on any space within a business’s control, including its own websites and space on Facebook and Twitter, will have to comply to the non-broadcast advertising rules as set out in the CAP Code, the full text of which can be found here. Our article, which includes full details of the changes, can be found here.

Businesses must comply with the CAP Code by 1 March or risk an ASA investigation taking place, which can damage a business’s reputation and make it difficult for that business to find advertising space. For practical and cost-effective help and advice on how to comply with these changes, please contact us at Matthew Arnold & Baldwin before it’s too late.

In a written ministerial statement, Mr Prisk has now said the following:

“I regret that my written parliamentary question response of 11 November… which referenced the future direction of the right to request time to train, gave an answer which was premature. The policy is still under active consideration until final decisions can be made.”

Consequently, unless the Government makes any further announcements, all employers should now assume that the right for employees to request time off to train and study procedure will apply to them from 6 April 2011. It already applies to companies with 250 employees or more.

UPDATE (16 Feb 2011): The right to request time off to train will NOT be extended to all employees in April 2011. Click here for full details.

The right, which was introduced by the Apprenticeships, Skills, Children and Learning Act 2009, has applied to employers with 250 or more employees since April 2010; it was due to be extended to all employees from April 2011. Although no explicit confirmation was given, it would appear that the right will still be extended to employers with between 50 and 249 employees from April 2011.

The Government’s decision will be a welcome relief for smaller employers, who were concerned about the bureaucratic and cost implications the right to request time off would have on their businesses. In its recently-published Business Plan for 2011-15, the Department for Business, Innovation and Skills has already made it clear that it intends to reduce the number of costly and bureaucratic regulations imposed on employers, with a new ‘one-in, one-out’ system set to be launched next year. This decision has got the ball rolling…

UPDATE: Mark Prisk has said that his announcement that smaller companies would be exempt from the right to request time off to train or study procedure was “premature.” Therefore, no exemption for smaller companies has been approved. Click here for full details.

UPDATE (16 Feb 2011): The right to request time off to train will NOT be extended to all employees in April 2011. Click here for full details.

The first is aimed specifically at SMEs (small and medium sized enterprises) setting out step-by-step guides to stay in line with competition law. The second is aimed at directors of all companies, outlining the level of knowledge and understanding directors need to have of competition law.

With businesses liable to be fined up to 10% of their turnover and with directors at risk of disqualification should their companies breach competition law, the guidance is likely to be welcomed.

A link to the two sets of guidance can be found here:  http://www.oft.gov.uk/OFTwork/consultations/current/achieving-compliance/  and   http://www.oft.gov.uk/OFTwork/consultations/current/company-directors/.

The report can be found here: http://www.oft.gov.uk/shared_oft/market-studies/onlinemarketsdiscussionpaper.

Wenta is the Enterprise Agency for Hertfordshire and Bedfordshire, and plays a significant role in supporting the local economy. It recently created two business incubation centres at Stevenage and Luton, which are designed to assist entrepreneurs, help create successful businesses and act as a source of support to new start-up companies across the two counties. Following the creation of these two centres, Wenta has been looking to strengthen its Board of Directors with accomplished professionals from the local business community.

Wenta’s Chief Executive, Chris Pichon, commented on Wenta’s website that the Agency is “constantly sourcing new ways to support, train and advise those involved in running start-ups and small businesses. Richard, [Steve and Julie] will be instrumental in steering the organisation forward as well as being our ambassadors in the community. We believe their experience, knowledge and skill set will help Wenta build on its successes and create new ones in the future.”

Richard commented: “I’m delighted to be involved, given the support Wenta offers to the local business community. As a stakeholder in local business (being a significant employer and given the wealth of businesses and owners of business that Matthew Arnold & Baldwin advises), the firm has always considered the support given to growing businesses at their early stage by Wenta and other like bodies as absolutely crucial. Matthew Arnold & Baldwin has been involved with Wenta since its inception and I am enthused to be able to play my part and help it continue to develop across the region.”

1. Tackle ‘red tape’

Before the election, both the Conservatives and Liberal Democrats promised to tackle red tape, including imposing a “one-in-one-out rule” for new regulations. This rule will now be implemented. They have also agreed to scrap the culture of “tick-box regulation” enforcement and will introduce “sunset clauses” (a Liberal Democrat policy), so that rules will expire if they are not reviewed. Finally, the Government will scrap the “gold-plating” of European legislation (i.e the transposition of EU legislation, which goes beyond what is required by that legislation.)

2. Businesses

The Government aims to encourage new start-ups by reducing the number of forms needed to register a new business, so that Britain becomes the fastest place in the world to start a business (Conservative policy). It will also end the ban on social tenants starting businesses in their own homes (Conservative policy.)

3. Takeovers

The Government “will review the range of factors that can be considered by regulators when takeovers are proposed.” There are currently no further details. The Conservatives’ manifesto did not explicitly deal with takeovers, but the Liberal Democrats promised to ensure that the takeover rules restored a public interest test, so that a broader range of factors, other than competition, would be considered by regulators when takeovers are proposed.

4. Operating and Financial Reviews

The Government will reinstate Operating and Financial Reviews “to ensure that directors’ social and environmental duties have to be covered in company reporting, and investigate further ways of improving corporate accountability and transparency.” (Liberal Democrat policy). These Reviews were originally proposed, but then dropped, by the Labour Party in 2006.

It is currently early days for the Government, and their recently-published ‘Coalition Agreement’ will be implemented over the next five years. Many of the proposals lack sufficient detail at the moment, but this will surely become clearer over time. The emergency budget, which will be heard on 22 June, will be a starting point. From a small business perspective, look out for the capital gains tax changes.

1. Corporate governance

The main political parties’ proposals were made in the aftermath of the Walker Review, an independent review of corporate governance in the UK banking industry, in November 2009.

Labour

The Labour Government welcomed the Walker Review, with Lord Myners, the Financial Secretary to the Treasury, commenting that the Government had to address “the weaknesses in board practice, risk management, control of remuneration and exercise of ownership rights identified by the Review…” In its manifesto, the Labour Party states that it will:

• Strengthen the Companies Act 2006 “where necessary” in order to create strong businesses comprising of skilled managers, accountable boards, and committed shareholders with long-term commitment;
• Strengthen the UK’s Stewardship Code for Institutional Shareholders, requiring institutional shareholders to declare how they vote, and for bank remuneration policies to be approved by shareholders.

Conservatives

The Conservative Party also welcomed the Walker Review, but criticised it for not going far enough. The Party’s manifesto says that it will: 

• Abolish the current tripartite system of regulation – abolish the FSA and put the Bank of England in charge of prudential supervision.

Liberal Democrats

The Liberal Democrats also supported the Walker Review, but, like the Conservative Party, did not believe it went far enough. Vince Cable, the Party’s Treasury spokesman, commented at the time that the recommendations should be compulsory, not voluntary.  

2. Takeovers

The recent controversial Kraft/Cadbury takeover has brought the subject of takeovers back into the political sphere.

Labour

Although at the time, the Business Secretary, Lord Mandelson, said the takeover was something that had to be decided by Cadbury’s shareholders, he has now changed his position and in the last couple of months has called for a wide-ranging review of UK takeover law. The Party’s manifesto includes some proposed reforms which would have a huge impact on takeovers: 

• Raise the threshold of shareholder support for company takeovers to a two-thirds majority, rather than the existing 50 per cent plus one share majority;
• Examine the possibility of “limiting votes” to those on the voting register before the bid is announced;
• Ensure that bidding companies are “more transparent” about their long-term plans for the business they want to takeover and their advisers’ fees;
• Require bidding companies to set out how they will finance their bids;
• More disclosure of who owns shares in the companies;
• Extend the “public interest” test in UK merger control so that it is applied to potential takeovers of infrastructure and utility companies.

Conservatives

The Conservative Party’s manifesto does not explicitly deal with takeovers. However, Shadow Business Secretary, Kenneth Clarke, commented that the Cadbury takeover was a matter for its shareholders.

Liberal Democrats

At the time of the Cadbury takeover, the Liberal Democrats were critical of the Government’s willingness to allow a state-controlled bank, Royal Bank of Scotland, to finance Kraft’s bid. Its manifesto proposes to: 

• Ensure that “takeover rules serve the UK economy” by restoring a public interest test, so that a broader range of factors, other than competition, can be considered by regulators when takeovers are proposed;
• Ensure that the outcome of takeover bids are determined by the long-term shareholder base.

3. Small and medium-sized businesses

Labour 

• New UK Finance for Growth, which will use £4bn billion of public and private funds to help businesses looking to develop and grow, in exchange for an equity stake in the company;
• Growth Capital Fund, announced in the last Budget, will inject money into, small and medium-sized companies in businesses with turnovers of between £1m and £25m.

Conservatives

Although there are no direct manifesto commitments, the Conservative Party recently commissioned a report by the American entrepreneur Doug Richard (an ex-‘dragon’ on the BBC’s Dragon’s Den television programme). His report, Small Business and Government: the Richard Report, proposed, amongst other things, the extension of the Enterprise Investment Scheme, which helps smaller trading companies to raise money by offering tax reliefs to investors who purchase shares in the companies.

Liberal Democrats

Establish Local Enterprise Funds and Regional Stock Exchanges. Local Enterprise Funds will help local investors put money into growing businesses in their own locality. Regional Stock Exchanges will allow businesses to access equity without the heavy regulatory requirements of a London listing;

• Reintroduce the Operating and Financial Review to ensure that directors’ social and environmental duties will be covered in company reporting.

3. Regulatory burden

Labour 

• Seek to reduce the costs of regulation by more than £6bn by 2015.

Conservatives

The Conservative Party policy document Regulation in the Post-Bureaucratic Age, published in October 2009, criticises the rise in regulation since Labour came to power in 1997, and proposes to: 

• Reduce the burden of red tape on business with a ‘one in one out’ rule for new regulation;
• Force each government department to reduce the regulatory burden by 5 per cent each year by eradicating costly and inefficient regulation.

The Conservative manifesto reiterates the need to cut the regulatory burden, and also to: 

• Reduce the number of forms that need to be completed to register a new business. It aims to create a ‘one-click’ registration model, so that Britain becomes the fastest place in the world to start a business;
• End restrictions on tenants in social housing starting a business from their homes.

Liberal Democrats 

• Cut regulation by assessing the cost and effectiveness of regulations before and after they are introduced;
• Operate a ‘one in one out’ system so that for every regulation introduced, another one is scrapped;
• Change the ‘culture’ of regulators to help, not hinder, business.

Comment

The election manifestos and policy statements of the three main parties have revealed some common ground and one big difference between them.

All the parties have welcomed the recommendations of the Walker Review (even if they don’t all think it has gone far enough), put forward plans to financially help small and medium-sized businesses, and made commitments to cut regulatory burden.

However, differences emerge on the issue of takeovers – a sensitive subject in the wake of the Cadbury takeover by Kraft. Labour has promised to bring in a ‘Cadbury law’ to protect British companies from foreign takeovers, whilst the Liberal Democrats want to create a ‘public interest’ test to ensure that issues other than just competition are taken into account when deciding whether a takeover should be allowed. The Conservatives, on the other hand, have rejected calls to change the UK takeover rules at all.

The proposed changes by Labour and the Liberal Democrats, if brought in, would have a big impact on how takeovers are conducted and potentially make it more difficult for bidders to succeed. Consequently, business leaders, as well as lawyers, are awaiting the outcome of the election with even greater interest than usual.