A 50 point check-list for business legal security

  1. Make sure that legal ownership assets used in the business are actually owned by the business.
  2. Get written copyright assignments from designers, authors, software and web developers and appropriate warranties of originality.
  3. Check the terms and conditions of third party suppliers of services to ensure you legally own any deliverables they create.
  4. Do not rely on a terminable licence for key business assets; take an assignment or a perpetual royalty-free licence.
  5. Always negotiate when taking or granting a licence (term, option to renew, notice period, warranties, conditions etc).
  6. Make sure new shareholders assign the assets that they are bringing to the party to the business as a condition of the issue of their shares.
  7. Check every name, trademark, slogan and design you use to ensure it does not infringe any third-party rights.
  8. Do not use a name, slogan or logo without filing a registered trademark application.
  9. Check the patentability of your inventions before disclosure or marketing.
  10. Patent your novel inventions if patentable.
  11. Register your designs as UK or EU Registered Designs.
  12. Insist on non-disclosure agreements as prelude to deal negotiations.
  13. When buying, consider milestone payments and a retention.
  14. When buying, obtain contractual warranties and indemnities from sellers.
  15. When buying, carry out as much due diligence as is possible.
  16. When selling, get deferred payments guaranteed or secured.
  17. Agree terms of ’soft’ loan capital up-front to avoid sudden repayment demands by investors.
  18. Consider weighted voting rights for business founders who go below 50%.
  19. Ensure shareholders, employees and consultants agree non-compete obligations.
  20. Ensure post-termination non-competes are reasonable and enforceable.
  21. Protect customer-base and goodwill by including non-solicitation obligations in employee contracts.
  22. Protect investment in staff by including non-poaching obligations in employee contracts.
  23. Impose strict confidentiality obligations on people involved in the business.
  24. Ensure confidentiality obligations continue after termination of involvement.
  25. Draw up an appropriate Shareholders Agreement for multiple shareholders.
  26. Consider list of ‘reserved issues’ requiring unanimous shareholder consent to implement.
  27. Do business under your own clearly-drafted standard terms and conditions of business.
  28. Bring your terms and conditions to the attention of customers before they commit to buy.
  29. Make share ownership by partners and staff subject to performance criteria.
  30. Provide that employee shares vest over a reasonable period of time.
  31. Make employee shares subject to sell-back obligation if they leave for any reason.
  32. Provide a procedure for the fair valuation of shares of leaving employee.
  33. Encourage employee loyalty by providing for nil value on share buy-back in first 2-3 years.
  34. Consider discounted (or nil) value for shareholder employees dismissed for breach or wrongdoing.
  35. Control the ability to sell the business by imposing ‘drag-along’ terms on minority shareholders.
  36. Consider share purchase assurance to buy back shares of deceased shareholder from the estate.
  37. Consider a contractual dispute resolution procedure to avoid dead-lock or formal proceedings.
  38. Build business value by obtaining written contracts with customers and clients.
  39. Consider minimum term commitments from customers and clients and long notice period.
  40. Register under the Data Protection Act if applicable.
  41. Negotiate favourable written agreements with all suppliers.
  42. In supplier contracts, seek exclusivity, initial minimum term, renewal rights and long notice period.
  43. When granting exclusivity ensure minimum performance criteria as a condition of such exclusivity.
  44. Consider legal expenses insurance and After the Event Insurance when engaging in legal proceedings.
  45. Ensure your business operates within its industry standards and applicable statutory framework.
  46. Agree an appropriate Grievance and Disciplinary Procedure and stick to it.
  47. Do not terminate any contract of employment without taking legal advice.
  48. Never rely on a calculation or valuation carried out by accountants that are being instructed or paid by someone else.
  49. Always seek a personal guarantee of payment or performance from principals of an SME business.
  50. When dealing with a group of companies, seek guarantee of payment or performance by holding company.
              …..and never give anyone a signed, blank cheque.
 For more information go to: www.silvermansherliker.co.uk or email Chris directly at : cjs@silvermansherliker.co.uk
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