Pub Tenant landlords and Reform of the Pub Code

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.

It is well publicised that following derestriction of the pub sector in the 1990s a new corporate phenomenon occurred, the Pub chain. This comprised large companies acquiring pubs and then entering into onerous leases with incoming tenants, with the effect that rents sky rocketed and tenant landlords often faced difficulty in making the business work.

The reforms to this sector have now been drafted in the form of Sections 35-63 of the Bill.

These reforms are not yet specified, but the Bill requires that the Secretary of State conduct a review of the Pub Code and introduce regulations about terms of a tenancy or other agreement between a pub-owning business and a tied pub tenant.

The Bill also introduces an arbitration process to settle disputes between the pub tenant and the pub-owning business, where conventionally the balance of power lies with the pub-owning business (and therefore, currently, the pub tenant rarely has – or can afford – legal assistance or protection). The Bill provides for the appointment of an Adjudicator, as part of the arbitration process, to investigate the dispute and report on his/her findings and recommendations.

Such a report may be published (subject to certain criteria) and may lead to financial penalties should either party fail to comply with any of his/her findings or recommendations.

Guidance through this process, especially at the initial stage when the Bill is introduced in April 2015, is essential for all pub tenants or pub-owning businesses and at Francis Wilks & Jones we can assist in this respect.

Company transparency – disclosure of VAT information by HMRC

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.  The Bill is currently undergoing readings before the House of Lords following the 1st reading on 19 November 2014 and the 2nd reading on 2 December 2014.

Our last blog referred to the power provided to the Treasury to make regulations authorising the disclosure by banks of credit information on small to medium-sized companies. Section 6 of the Bill provides that, from commencement, HMRC will be able to disclose any information on its VAT file to any person seeking such information to assess creditworthiness, regulatory compliance or risk of fraud.

The category of “person” who may seek such information is very wide and can range from the police and regulatory bodies, to banks, suppliers or customers.  Companies which have entered or are undergoing Time-to-Pay Agreements or which have any issue or late payment of VAT are therefore under an immediate threat that this could lead to higher finance costs as a result of the denial of credit by suppliers (thus threatening the ability of some companies to trade).

This again supports the need pervasive throughout the Bill to ensure company transparency and assist third parties dealing with companies to properly understand their financial position before committing to any agreements. In line with this, the Bill also provides that HMRC may disclose prescribed information (subject to the introduction of necessary regulations to define the information disclosed) relating to the type of goods exported from the UK and the identity of the exporting individual.  This is designed to combat the proliferation of fraud, as well as supporting the theme of transparency.

Accordingly, as this applies to all companies, it is essential that tax affairs are addressed immediately and well before the Bill becomes legislation. Ongoing Time-to-Pay Agreements and arrears of tax could suddenly be determinative as to whether your company can continue to trade with inquisitive suppliers.  

At Francis Wilks & Jones we can assist with HMRC negotiations and restructuring issues with a view to mitigating the impact of this legislation.

INTRODUCTION - The Small Business, Enterprise & Employment Bill Blogs

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015. The Bill is currently undergoing readings before the House of Lords following the 1st reading on 19 November 2014 and the 2nd reading on 2 December 2014.

This series of blogs is intended to discuss the topics proposed in this Bill and the consequences it may have to all, mainly in respect of the corporate aspects. The Bill is intended to make various provisions for businesses and individuals, including the regulation of companies, director disqualification matters and insolvency matters.

Please note that this Bill is not yet written into legislation and may suffer a number of changes during its readings and passage through Parliament. This series of Blogs is intended to address the changes proposed in the published Bill and is not intended to comment on the eventual legislation introduced by Parliament.

These changes will be extremely important to the above parties and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these Blogs.

Small and Medium-sized businesses – publicity of credit history

Section 4 of the the Bill provides the Treasury with the power to introduce regulations on credit record information, with banks and credit reference agencies being required to publicise information on companies.

This is obviously part of the Secretary of State’s overall objective to restrict fraud and improve transparency within most companies and in theory is welcomed. These provisions are intended to enable the Financial Conduct Authority to obtain further supplementary powers to assist it in policing compliance and conducting investigations into small and medium-sized company’s affairs.

However, the risk with such regulations is that the widening of credit reference information could lead to funding difficulties for companies which are start-ups or are undergoing restructuring and it may also lead to finance becoming more expensive for some companies.  

There are of course provisions in the Bill for such regulations to provide a power for companies to seek injunctions against any such disclosure or even restrict or delete any such credit information held but it is questionable whether a company always has resources to take such potentially costly legal action.

However, as of writing, the Bill is intended only to provide the power to the Secretary of State to make such regulations and it is essential that all companies ensure they are ready should such regulations be subsequently introduced.