Legal Newsletter (Fifth Edition)

Story 1 – What’s In A Name?

Days after the circulation of the last edition of this newsletter, Prince George of Cambridge was born to the Duke and Duchess of Cambridge.

There was much speculation as to the name to be given to the new born prince (and third in line to the throne). While his name was announced two days after his birth, he was from birth a British prince entitled to the style of Royal Highness under letters patent issued by King George V in 1917 and Queen Elizabeth II in 2012.

It might not come as a surprise to many that immediately from birth he is entitled to the title of Royal Highness. It occurred to me how important it is that people should be informed with whom they are dealing.

I have had the pleasure recently of attending a number of local charitable organisations that believe now is the time to become a limited company, thereby providing the trustees with an element of protection should things go wrong.

There are many reasons why an organisation might decide to incorporate, and I am pleased to report that the feedback on my advice notes has been extremely positive. A potentially expensive situation arises, however, when an organisation that is registered as a limited company does not disclose to the rest of the world that they enjoy the benefits of limited liability.

So what are the requirements surrounding, for example, stationery when an organisation decides to incorporate?

A smart letterhead not only helps organisations portray a professional image, but it must also contain specific pieces of information as stipulated by Companies House. Failure to adhere to this requirement could lead to each director of the company being hit with a £1000.00 fine and potentially a £100.00 per day fine where the issue is not promptly dealt with.

Regulations require company letterheads to show four things:

• the registered name of the company. This is not the trading name used, if indeed a trading name is used, but the name of the company as it appears on the certificate of incorporation, including either the word ‘Ltd’ or ‘Limited’. Where a trading name is used this can be shown more prominently than the registered name as long as the registered name is still clear and eligible;
• the registered address of the company. This must be displayed in full and identified as the company’s registered address. Where a company trades from an address other than its registered address, this address should also be shown on the letterhead;
• the company registration number;
• the part of the country in which the limited company is registered.

As well as appearing on letterheads, the above information must also appear in e-mails. It is therefore advised a standard e-mail footer containing all of this information is set up for all staff e-mail accounts.

Company letterheads are not required to include the names of company directors. However, where a company chooses to include this information, the names of all the directors must be included rather than a select few.

In relation to other formal documents and communication, such as invoices and order forms, it is necessary to include all of the information listed in the bullet points above, whether distributed in physical or electronic format. This information must also appear on the company’s website.

There are further requirements for stationery and other documents in certain cases and for particular forms of company:
where a limited company is exempt from the requirement to use the word limited as part of its registered name (under section 60 of the Companies Act 2006), it must state the fact that it is a limited company;

• a community interest company which is not a public company must state the fact that it is a limited company;
• an investment company within the meaning of section 833 of the Companies Act 2006 must state the fact that it is such a company;
• a charitable company whose name does not include either of the words ‘charity’ or ‘charitable’ must state that it is a charity;
• where the name of a director of the company is included, other than in the text or as a signatory, the letter must disclose the name of every other director. There’s no requirement to show director names at all, so effectively the company must show either all of names of the directors or none of them; and
• if the company chooses to display its share capital, it must show the amount of paid up share capital.

For advice on whether your limited company is complying with The Companies (Trading Disclosures) Regulations 2008 (as amended) then contact Nick Dent at RCVDA on 01642 440571 or by e-mail: [email protected]

Story 2 – To The Manor Born

The Charity Commission, the independent regulator of charities in England and Wales, has opened a statutory inquiry into Manor Residents Association (registered charity number 1121121).

The Hartlepool based charity provides and promotes activities to benefit the residents of the Owton Manor area of Hartlepool, and works in partnership with local agencies and councils to advance education and to improve the conditions of life for the residents in the area.

The purpose of the inquiry, which opened on Friday 18 October, is to examine various regulatory concerns including: the apparent significant risk to, and potential loss of, the charity’s funds or other property; whether, and to what extent, there was mismanagement or misconduct on the part of the trustees, in particular, financial mismanagement and/or serious governance failures; and whether, and to what extent, the trustees have discharged their legal duties as charity trustees.

The regulator first contacted the trustees in May 2013, after the result of an employment tribunal ruling against the charity raised regulatory issues. The regulator has been engaging with the charity since then and says the trustees have been unable to allay its concerns.

In October, Cleveland Police arrested two of the charity’s employees for offences including theft. As part of the inquiry, the Commission has acted to restrict the charity’s bank accounts and the transactions it may enter, so the trustees cannot make payments from the accounts or dispose of property without the consent of the Commission.

As concerning as such an enquiry might be, it does emphasise the need to comply with all charity and (if applicable) company law regulations.

Charities that have failed to file annual reports, accounts and returns (‘the annual documents’) for two or more years are now being formally investigated, the chief executive of the Charity Commission has announced.

There are currently 65 charities in the Cleveland area that have not submitted these details for one or more of their last financial years.

Failure to submit annual documents to the Commission is a criminal offence. The Commission says that it also amounts to mismanagement and/or misconduct in the administration of a charity and is often associated with wider mismanagement and poor governance, including the misapplication or abuse of charitable funds.

Speaking at the Commission’s Annual Public Meeting (APM) in London, Sam Younger announced that the regulator has opened a class inquiry into charities that are in default of their statutory obligations to meet reporting requirements by failing to file their annual documents for two or more years in the last five years. The Commission started by looking at charities with a last known income over £500000.00 but is now extending the inquiry into charities with a last known income between £250000.00 and £500000.00. They include charities that have submitted an annual return but failed to submit a Trustees’ Annual report and accounts – and vice versa.

As part of the enforcement action, the Commission has, over recent weeks, been contacting the charities, by telephone and in writing, warning them that they are in default and requiring full compliance by a specified date, making clear that failure to do so would lead to them being moved into the inquiry.

The regulator identified 86 charities with a last known income of over £500000.00 that were in double default with their reporting requirements for at least the last two financial years. Of these:

• 16 had dissolved with Companies House;
• a further 32 were identified as being in liquidation or in administration and the missing and final accounts will be prepared as part of the liquidation process;
• 2 have ceased to exist.

As at 23 September 2013, 12 out of the 86 charities were still in default and are now part of the inquiry. The names of the first 12 charities that went into the inquiry have now been announced and the names of the next 12 charities were announced yesterday.

The Commission’s first step as part of the inquiry has been to issue a formal legal direction to trustees, ordering them to meet their reporting requirements within a set period of time. The regulator has put the trustees on notice that, should they fail to comply, it will make a referral to the police for criminal prosecution unless it is evident that the relevant trustees took all reasonable steps for securing compliance. In addition, the Commission says it may exercise its legal powers to appoint an Interim Manager to secure compliance, and may seek to recover the cost of that from the trustees personally.

Sam Younger, the chief executive of the Charity Commission says:

“This move should come as no surprise to the charities under investigation or to the wider charitable sector. The Commission sends numerous reminders and regulatory advice warnings to charities in default. We have also been signalling our tougher approach to defaulters for over a year and have more recently issued clear public warnings to all repeat offenders to submit their annual documents. This latest enforcement step sends an unequivocal message that we will not tolerate charities that demonstrate contempt for the public they are accountable to by failing to meet reporting requirements. We know that failures in this area are often linked to wider financial mismanagement. In some cases the excuses given by the charities are frankly poor.”

The Commission says it has begun by targeting double defaulters with incomes of over £500000.00 and will move on to investigate any other outstanding double defaulters. This is in addition to the existing and on-going programme of enforcement the Commission carries out on charities that default on their reporting requirements.

RCVDA sincerely hopes that the double default does not apply to your organisation, but if it does then now is the time to act. You can seek professional help and guidance by contacting Nick Dent at RCVDA on 016420 440571 or by e-mail: [email protected]

Story 3 – (Not Such) A Purple Patch

Within my last newsletter during September 2013, I reported that confectionery giant Cadbury owns the colour purple ~ in chocolate packaging terms at least.

Since the circulation of my newsletter, however, the matter has come before the Court of Appeal on Friday 4 October 2013 and Nestle won its court battle with confectionery rival Cadbury, over Cadbury’s attempt to trademark the purple colour of its Dairy Milk bars.

Last year Cadbury won a legal case to stop other chocolate firms using the colour – known as Pantone 2865c.

But Swiss firm Nestle, the world’s biggest food company, has now won an appeal against that earlier ruling.

“Cadbury’s formulation does not comply with the requirements for [trademark] registration,” said the UK court.

The Court of Appeal also said the trademark application lacked “the required clarity, precision, self-containment, durability and objectivity to qualify for registration”.

The legal battle has been running since 2008, when Nestle first opposed Cadbury’s initial trademark application.

Cadbury – bought by US food giant Kraft in 2010 – has been using a purple colour on its chocolate wrappers since the early 20th century.

“We are disappointed by this latest decision but it’s important to point out that it does not affect our long held right to protect our distinctive colour purple from others seeking to pass off their products as Cadbury chocolate,” said a Cadbury spokesman.

“Our colour purple has been linked with Cadbury for a century and the British public has grown up understanding its link with our chocolate. We are studying this particular ruling and will consider our next steps which includes the possibility of an appeal”.

Nestle said it welcomed the court decision, which it believed “was the right outcome from a legal perspective”.

The legal battle is obviously promising to last a lot longer than the bar of dairy milk chocolate sat in my cupboard, wrapped in Pantone 2865c..!

Story 4 – Get Social!…

(and now on Flickr ~ search for RCVDA).