Ask the Experts - October 2011 | Davis Blank Furniss Solicitors

Q: I would like to gift my minor children some shares from my business. Is this possible?

Sonio Singh – a partner in our corporate department: ‘A person under 18 can hold shares in a company in his or her own name unless the constitution of the company specifically prevents this. However, this can cause problems particularly if the child is a baby (and so can’t sign required documents) or if the shares need to be sold before the child reaches 18 years old. Prior to reaching 18 (and for a reasonable time afterwards) the child can reverse any sale made when he or she was underage or even renounce the original gift.

A parent or guardian has no special powers to sell shares or sign documents on the child’s behalf. It would be far better to have the shares held for the child by a nominee. As with any gift, if the donor goes bankrupt later, there is a risk of the transfer being set aside by the courts. It also won’t work to reduce the family’s income tax liability, as any income over the first £100 received by a child on assets given by a parent will be taxed as the income of that parent. If the shares have (or in the future might have) significant value then proper tax advice, including on whether to set up a formal trust, should always be obtained first.’

 

Q. We are starting to expand our business so we need to take on new premises.  Having seen other business tenants run into difficulties in recent years we would like some tips on how best to protect ourselves when negotiating a new lease.

Caroline Williams, a Solicitor in our Commercial Property Department.

The first thing to remember is that the commercial property arena is largely still a tenant’s market.  Many landlords are finding themselves with empty properties as a result of previous tenants running into difficulties or prospective tenants choosing not to relocate due to uncertainty about the future.  With that in mind, it is worth being bold in your negotiations and seeking legal advice before you enter into a lease to ensure the terms you are signing up to suit your needs and you are protected for the future as far as possible.  Some pointers to consider are:

Length of lease term.  Historically, commercial tenants often took 15-20 year leases which gave the landlord certainty of income and allowed the tenant to build goodwill at the property over a long period.  Nowadays no business can be certain it will still be trading in 15 or 20 years time so short leases (3-5 years) are commonplace, particularly for newly expanding or small businesses.  Tenants can no longer assume that they will be able to assign the lease to a new tenant during the term so a shorter term can alleviate concerns about the future.
Statutory Protection – the Landlord and Tenant Act 1954 (‘the Act’)
Unless the lease specifically excludes it, you will have the automatic protection of the Act which gives you the right to a new tenancy on broadly the same terms at the end of the lease term.  The landlord can only object to a new lease on certain limited grounds.  It is in the tenant’s best interest in every lease negotiation to ensure that the Act is not excluded but it will be particularly important for tenants choosing to take short leases, and even more so if they are also intending to carry out alterations or fit out works at the property. Legal advice should be sought to ensure that the draft lease includes this important statutory protection.

Try to include a break clause
The most flexible type of break clause would be a rolling break allowing the tenant to terminate the lease at any time during the term.  However, many landlords will only agree to a break clause which can be exercised on a specified day or days (for example on the third and sixth anniversary of the date of the lease).  A break clause will be triggered by the tenant giving notice, the timing and format of which must be absolutely correct.  A mistake in the break notice can mean the tenant loses the right to exercise the break which can be costly so it is important to take legal advice before serving the notice.  Furthermore, an unscrupulous landlord may seek to make the exercise of a break clause conditional.  Such conditions may, on the face of it, seem reasonable but in reality can make it almost impossible for the tenant to actually exercise the break, making it worthless.  It is worth seeking the advice of a solicitor on the wording of a break clause to ensure that it gives you adequate protection.

Rent payment dates
Most leases require the rent to be paid quarterly.  To assist with cash flow try to agree with the landlord that the rent can be paid monthly.

Repair
A landlord will invariably insist on making the tenant fully responsible for all repairs and maintenance at the property, particularly if the lease is for the whole (as opposed to a part) of the property.  This creates an obligation to put and keep the property in a good or substantial state of repair and condition which can lead to a costly repair bill for the tenant at the end of the term of the lease.  A reasonable compromise would be to suggest that the tenant’s obligations are limited by reference to a schedule of condition or schedule of photographs which will be prepared at the start of the lease term and attached to the lease.  This, coupled with the correct wording in the body of the lease, ensures the tenant is not expected to put the property in any better condition than it is in at the start of the lease so it will only be responsible for the damage, wear and tear it causes.

Testimonials

Read what our clients have to say...

View All

Excellent experience start to finish – always very responsive to any queries and the turnaround on the property I was buying was very quick, even in the busy time leading up to stamp duty deadline. Jenny was always very helpful and went above and beyond to close on a short timescale.

Ben Armitage

“Very approachable, practical solutions to problems, but most of all very responsive which I personally think is very important because if you need help, you need it quickly, or at least to know someone is looking at it for you”.

Joanne Rowe, Finance Director, Greater Manchester Chamber

“Always able to contact, very approachable, friendly and professional”

Nives Feely, JAM Recruitment

“I believe I have been able to establish a professional working relationship with everyone I have come into contact. Importantly, I sense the relationships which have been established give me the confidence that I can make contact with Davis Blank Furniss at any time and on any matter. I would also like to express my thanks to the very impressive “gatekeepers” who work in reception, not only for making me very welcome, but also for their professionalism”

Bill Pryke, CEO, Chartered Institution of Civil Engineering Surveyors

“Thank you for your efficient and friendly help throughout this process. We have had it easy but your approach has been part of that”.

Robert Amsbury (Conveyancing Client)

“I would like to take this opportunity to thank you personally for the ongoing support and assistance the firm has offered to our parents over the years. I hope also that we may be able to call on you if necessary in the future.”

Valerie Fisher (Probate Client)

“Jo always provides great service, understands our needs and delivers on her promises. Our needs are relatively simple but the complexity arises out of the volume of work and short time frames, Jo always delivers.”

Peter Fernandez, Corporate Director at Royal Bank of Scotland

“A big thank you to all who dealt with my wife’s claim… We would not hesitate to recommend Davis Blank Furniss to anyone that may be in a situation like we have been…”

Anon (Personal Injury client)

“Before putting my case in Kirsty (Morbey)’s capable hands I’ve met a couple of other solicitors. None of them listen to me as intently as Kirsty and showed me as much empathy and understanding as she did. Simultaneously she was able to look at my case from legal perspective, explain all the options and follow each of our meetings with written summary of the discussed matters (in timely manner). Her advice was invaluable and led me to successfully ending the case matter (hopeful for good). I’m forever grateful for he work and would definitely recommend her to anyone looking for reliable, knowledgeable and committed solicitor”.

Anon (Family client)
5 star service

Our Manchester office is rated 5 stars on Google