Partner, Edward Evans, recently wrote an article for Business Plus on how right now is a good time to review all contracts underpinning your business. Read the original article here or below.
Legal Health Check For Family Firms
In line with our sponsorship of DCU’s National Centre for Family Business, Beauchamps continue to look at what legal support Ireland’s 160,000 family businesses, employing close to a million people, may require as we all adapt to the economic landscape this side of the Covid-19 pandemic. With 90% of Ireland’s family businesses classed as micro enterprises yet making such a significant contribution to the Irish economy, the continued success of all of our family businesses is important to Ireland’s post-Covid recovery.
Be clear on your financial obligations
All family businesses should fully understand their commitments to lenders and funders of their business, by reviewing and assessing the terms and conditions of any financial facilities.
Are those facilities ones which can be called in when the business shrinks? What, if any, are the financial covenants that the business must meet to ensure it is not in default? Also, the security for any such facilities is key – are there charges over the business or personal assets, and are there personal guarantees?
When this picture is fully understood through answering questions such as these, strategic decisions on the future finance of the business can be taken, lenders can then be negotiated with and debts can be re-structured, to ensure they are serviceable based on the anticipated new business levels.
Audit supplier/customer contractual obligations
If your business depends on certain key suppliers, how contractually certain is that supply? Are prices and continuity of supply locked in for an adequate period, or can force majeure provide an opportunity for the supplier to get out of the obligation to supply?
Similarly, if you have important and large customers, can you depend on them to continue to purchase from you at the agreed prices, and again it must be considered whether force majeure could apply?
In all these cases, the terms and conditions are key to establishing where you stand. If they are not perfect, then now is the right time to try to amend them to ones that are fully fit for purpose to protect the value of the business.
Ensure your business and your work force are protected
The two most important assets in any business are usually its people and its know-how, or intellectual property (IP). These are ‘the family silverware’ and they need to be carefully protected by clear and concise contracts.
In an employment sense, this also means making sure key business information is something employees do not own, for example by having IP assignments as standard in employment contracts, having reasonable restrictions on departing employees and having the right incentives in place to retain the best people. Similarly, any key IP in the business and brand/trade names need to be protected and registered.
Government initiatives and how to navigate red tape
It is more important now than ever before to know what supports, incentives, grants, loans etc are available from the state. A key supporter of expanding businesses, Enterprise Ireland has a range of possible supports as well as the ability to invest directly in many businesses through equity investments. The terms and conditions of these investments and supports must be understood and factored into any decisions on expanding or new funding.
Adapt and be flexible to survive and grow
If your business model is impacted by the pandemic, is there an alternative or complementary model you need to put in place for the business? Is on-line the way to go? If so, your terms and conditions (at the very least) will need to be adapted to the new model.
Your ways of working will also need to change and this will impact on a range of contracts, particularly employment contracts, that are key in the business. Similarly, new supply contracts, such as retaining new distributors, will be needed and all contracts that underpin the commercial model should be reviewed and adapted.
Conclusion
Now is the time to look at the contracts (including financial, asset protection, terms and conditions of sale, supply contracts and employment contracts) that tie the business model together. There has never been a more important (or better) time to do this, leveraging the best legal advice from experienced family business lawyers — like us in Beauchamps.