BQ West Midlands Special Report Autumn 2015

LEGAL AND FINANCE QUARTER Family Law Edition IN PARTNERSHIP WITH:

SPECIAL FEATURE

Helping to drive excellence in family Law Claire Darley, Chair of the Birmingham Law Society’s family law committee explains how

INSIDE F OCUS: FAMILY AND OWNER MAN AGED BUSINESSES

Boardroom table or kitchen table?

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WELCOME

Legal and finance quarter - family law edition

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We are family Welcome to the second edition of BQ’s ‘Legal and finance’ section, which is becoming a regular and valuable part of our quarterly magazine.

We have a ‘family’ theme running through our pages this quarter, starting with a profile of Claire Darley, a partner in the family team at Shakespeare Martineau, and chair of the Birmingham Law Society’s family law committee.

Claire explains how this committee meets six times a year, focusing on partnership work between lawyers, the judiciary and the courts service to make all elements of family law work more smoothly for clients.

Those clients can be anyone from the parents and children involved in divorce, custodial

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and finance battles to the directors and beneficiaries of family-owned businesses.

The legal challenges can often be long, drawn-out and sometimes messy, and Claire explains how she and the Birmingham Law Society are determined to help improve services in this area. The profile on Claire is followed by informed commentary from a series of specialist family law firms who draw upon their considerable experience to offer opinions and observations on this complex and highly sensitive area of the law This family theme then continues with a focus on family and owner managed businesses published in partnership with Dani Saveker and her Families in Business support group. Dani talks through some of

O’NEILL

LLB (Hons)

Specialist Family Law Solicitor

Established in October 2005, Majella O’Neill Family Law practices out of the beautiful village of Knowle. I specialise in all aspects of family law nationally and internationally being dual qualified in England & Wales and Northern Ireland .

My practice reflects my objectives to provide a bespoke service with individual attention, transparency of fees and timescales, to enable your case to be managed effectively. A practical and pragmatic lawyer ,endorsed by a colleague as one ‘who stands up and fights for her clients “ Priest House, 1624 High Street Knowle Solihull West Midlands B93 0JU 01564 739298 / 07789 910645 majella@majellasol.co.uk

A bespoke service with individual attention

the many benefits and challenges of running a family firm, and explains the way that her organisation tries to help the sector.

All this is aimed at helping family-owned SMEs to tackle those difficult subject areas – having the right kind of legal structures, making the books balance, and keeping all their staffing, operations and financial decisions completely within the latest laws.

We’ve also have ‘The Big Issues’ This includes the latest opinions of late-paying big corporations, which can so often cause cashflow problems for SMEs. We hope you find these detailed insights on legal and finance matters a useful read.

Steve Dyson, Editor, BQ

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PROFILE Birmingham Law Society

It’s a family affair Claire Darley is Chair of Birmingham Law Society’s Family Law Committee, helping to drive excellence in that specialised area of the legal profession It is a fact of life that relationships break down and individuals can find themselves in circumstances which they could not have envisaged. In these circumstances, people need to call on the services of professionals, who work with families, for assistance.

A “family” can take many forms, with persons within that family having different legal responsibilities to one another. Families are unique and diverse.

In a commercial context, family members may be co-directors and shareholders of a business. Family businesses can involve complex legal structures. The issues they face can involve tackling the challenges of how to preserve resources during their lifetime and passing on wealth to future generations.

These issues and many more, are where family law experts can help, by working out the best solutions in a practical, commercial and effective way.

“Our role is to work together to seek to ensure efficient practices and procedures to make Birmingham a centre of excellence for the legal profession when it comes to helping families and family businesses,” says Claire Darley, the Chair of the Family Law Committee.

The Committee meets six times a year, and has a wide membership made up of many different professionals working in the Family Law Justice System. This includes Solicitors, Barristers, Judges, representatives from HM Courts and Tribunals Service, the Children

“The experts and guest speakers we’ve had at the Committee have brought a real wealth of knowledge, both for us and our wider membership” and Family Court Advisory and Support Service (known as Cafcass), National Family Mediation and the Local Authority.

Claire says: “By bringing together all of these professionals working in family law, we are able to concentrate on important issues,

changes and new initiatives relating to child law and financial proceedings.

The practices and procedures in these areas of law are constantly changing, and the Committee is able to collate and communicate the latest information to

PROFILE Birmingham Law Society

members of Birmingham Law Society and other groups such as the Birmingham Family Group and the West Midlands Branch of Resolution, (formerly known as the Solicitors’ Family law Association).

Members of the Family Law Committee are specialists in financial and child law matters.

We provide case law updates and participate in specific initiatives; for example, the Specialist Scheme for financial cases arising out of Divorce. This Scheme ensures the appropriate allocation of the court’s resources to cases. We consider reforms to the law in all of these areas and regularly respond to consultation papers on behalf of Birmingham Law Society.

We have looked at the procedure for court proceedings and the streamlining of processes. For example, at a recent workshop organised by the Court Service, we were involved in looking at urgent family law applications with the aim of reducing the time taken to obtain a court order. As a result, a new procedure has been brought into place, to protect people who are victims of domestic violence. The average court waiting time to obtain an order, from when a court user makes an application, has been reduced to 2.5 hours.

Cafcass have been working with Birmingham Family Court to fast-track the preparation of reports, relating to family disputes. They are now able to report in four weeks, from a previous time estimate for the preparation of reports of 12 weeks”.

The Committee’s ethos, Claire says, is all about recognising and then sharing the very latest information across Birmingham Law Society, to promote excellence within the family law profession throughout the West Midlands.

She says: “Birmingham Law Society covers a significant area, from Birmingham and Solihull to Shropshire, and from Staffordshire in the north to Worcestershire in the south.

It is important to promote the expertise and talent we have in the field of family law and how we are best placed to offer these services.”

She said: “The experts and guest speakers we’ve had at the Committee have brought a real wealth of knowledge, both for us and our wider membership.

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“Our role is to work together to seek to ensure efficient practices and procedures to make Birmingham a centre of excellence for the legal profession when it comes to helping families and family businesses” For example, we have had guest speakers providing case updates relating to financial claims arising out of Divorce and looking at nuptial agreements and the means of obtaining information relating to a spouse’s finances, legally”. It’s not just about parents transferring business assets to the next generation; it’s about the management of that business, the business structures and it’s strategies relating to wealth preservation.

For instance, a company may need to think very carefully before new family members are introduced to the business, to consider things likes nuptial agreements, estate planning, tax advice and divorce settlements and how should non-family members invest in the business?”

For Claire, one of the most satisfying areas of the Family Law Committee is facilitating a true collaboration of all family groups regionally, to help individuals access the right information to enable them to access justice.

She said: “I feel we’ve all got a responsibility to make sure that families and children are safeguarded, and I feel privileged to be a part of a family justice system where we can work together, from whatever discipline, to make sure we’re doing the very best we can.

It’s also critical for us to promote Birmingham Law Society’s members, really highlighting what we’re doing to make the City and our wider regions stand out. We have fantastic services locally and such a lot to offer for those that need them.”

Keep yourself up to date ‘A joint Birmingham Law Society and Resolution annual Family Law Conference is being held in Birmingham on Saturday 3 October.

The conference will be a unique opportunity to receive essential updates relating to practice, procedure and key developments in child law and finance cases. In particular, the conference will focus on alternative dispute resolution and key developments in international law, with an insight into local initiatives.

For more details and to book a space, visit www.birminghamlawsociety.co.uk

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PROFILE Higgs & Sons

Wealth protection is never simply black and white Philip Barnsley, head of Higgs & Sons’ family team explains the background to a ground breaking White Paper he is set to launch in October “No two family situations are ever the same, that is why we have built up a broad base of specialist expertise to meet the needs of this ever changing area of law.”

A family lawyer with over 18 years’ experience, Philip feels that developing specialisms within the framework of a holistic service is the most effective way of meeting the needs of clients who come seeking such wide ranging advice.

“You never know what situations you may be facing from day to day. That is why we have specialists who can advise on everything from separation, divorce and child arrangements through to family mediation and wealth protection – a growing area of concern for clients coming to us at the moment.”

This increased emphasis on wealth protection has led Philip write a ground breaking White Paper addressing key issues for those who advise on wealth protection. “Nuptial agreements are a vital instrument in any wealth protection strategy,” continues Philip who sits on the National Committee of Resolution. “Professionals offering advice on wealth protection strategies need to be aware of the potential that these agreements offer their clients as part of a comprehensive and effective long term strategy.”

Though there is yet to be binding legislation on nuptial agreements, Philip points to an increasing willingness for Courts to uphold the contents of properly executed agreements. He cites a growing body of case law following the landmark Radmacher -v- Granatino [2010] ruling in which the judge held that: “The court should give effect to a nuptial

agreement that is freely entered into by each party with a full appreciation of its implication…”

Philip has also seen a growing distinction between those who have such an agreement, and those who do not.

“The Daily Mail is full of examples of individuals without such protection who find themselves before the court sharing vast sums in huge divorce settlements whilst spending terrifying amounts on their legal fees.

“We are seeing much more negotiation in the initial preparation of agreements and, given the

“Nuptial agreements are a vital instrument in any wealth protection strategy” courts’ willingness to uphold these, we expect there to be an increasing trend towards this in future months and years.”

It is an environment which led Philip to write the White Paper.

“Clients are seeking advice from professionals, not purely on the mitigation of tax, but increasingly on the protection of their wealth for future generations.

“We believe it is incumbent upon every wealth protection professional to advise their clients to prepare for such an eventuality. That is the essence of our White Paper.”

Philip points out that the future for nuptial agreements is changing rapidly and being properly informed is the only way to ensure clients’ needs are continually being met.

“Advising clients of the opportunities that

Philip Barnsley

entering into a nuptial agreement may offer can result in increased client satisfaction and a feeling that their advisory team are ahead of the game in terms of protecting their assets.

“Our White Paper will offer a key tool for all professional advisers working with clients who are looking to protect their wealth.

The launch of Higgs & Sons’ White Paper will take place at Birmingham’s Bar Opus on October 15.

Leading barrister and Deputy High Court Judge, Nicholas Cusworth QC will be introducing the paper to the invited audience.

Philip Barnsley is head of one of the largest and most experienced family teams in the region.

Acting for individuals locally, nationally, and internationally it specialises in all aspects of private family law, with particular emphasis on complex financial issues. The team also advises on children matters, pre and post-nuptial and cohabitation agreements and the breakdown of relationships including cohabiting and civil partners.

All of Higgs & Sons’ Family team are members of Resolution and are highly rated in both Chambers & Partners and Legal 500.

Contact Philip Barnsley on 01384 327180 or philip.barnsley@higgsandsons.co.uk

PROFILE Irwin Mitchell

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Once bitten twice shy “Marrying for the second time (or subsequent occasion) might suggest you could be ‘older’ but it does not mean you are necessarily ‘wiser’ “ states Clare Wiseman, Partner, in the family team at Irwin Mitchell We are experiencing a significant increase in the number of clients seeking advice in connection with second or third marriages/cohabiting relationships.

Statistics show that the majority of people leaving one spouse/partner will go on to cohabit and/or remarry. Whilst many are now very familiar with the concept of the preparation of pre-nuptial/post-nuptial agreements to seek to protect assets in the event of a further divorce, many do not address their minds as to what should/could happen in the event of their death.

There is still a surprising lack of understanding, amongst the general public, that marriage revokes a will and divorce affects provisions in a will in favour of a former spouse. This may be what you want but it may not.

“It is imperative that, when entering or exiting a marriage or relationship you consider the terms of your will,” advises Gavin Faber, Partner in the Will, Trust and Estate Disputes team at Irwin Mitchell.

“You can find that children from prior marriages or relationships are left out in the cold and current or former partners are provided for in a way you would not expect”.

The recently reported case of Chekov v Fryer (June 2015) dealt with the not uncommon situation where a couple had divorced, pursuant to which they had had obtained a ‘clean break’ order in respect of their finances. This, on the face of it, prevented them from making any further claims against one another in the event of their subsequent death. Following the husband’s death some years later, however, his former wife made a claim against his estate.

They had resumed a relationship post degree absolute. The High Court has allowed Mrs Chekov to proceed with her claim for provision from her former spouse’s estate on the basis that they were co-habiting at the date of his death. This issue could be exacerbated further following the widely reported decision in Ilott v Mitson (July 2015) where the Court of Appeal awarded

Gavin Faber and Clare Wiseman, both partners at Irwin Mitchell

“There may be more to the saying “once bitten twice shy” than meets the eye” an estranged adult daughter, one third of her mother’s estate, despite the mother’s wishes for this not to happen. This was an extreme case but we have seen a significant surge in the number of enquiries from children wishing to challenge a parent’s will.

Similar exposure may occur following the making of an order upon divorce, which provides for maintenance/capital provision for a former spouse. If you then, voluntarily, make payments in excess of that provision (as many people might, particularly where children are involved) you could leave yourself exposed to further financial claims notwithstanding your belief that you had secured finality in any financial agreement, court order or will.

With the rights of co-habitants only set to strengthen in the future - simply failing to ‘

take the plunge and tie the knot’ for the second time, may not be enough to protect you. In circumstances where your career may have progressed since you separated, early legal advice is essential. The relaxation of the pensions regime might not be the only demon facing the more mature divorcee. There may be more to the saying “once bitten twice shy” than meets the eye.

If you would like more information or to talk to a lawyer about family law advice, please contact Clare Wiseman on 0121 214 5274 or email claire.wiseman@irwinmitchell.com If you are concerned about a will or trust dispute and would like more advice, please contact Gavin Faber on 0121 203 5366 or email Gavin.Faber@Irwinmitchell.com.

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PROFILE Clarke Willmott

Protection of business interests within divorce Rayner Grice Head of Clarke Willmott’s Birmingham family team and Legal Executive Caroline Young offer some informed and impartial advice on protecting business interests within divorce For those involved in running a business a significant concern when facing divorce proceedings is how the situation will affect their business interests.-The reality for those families is that the business provides the main source of income. Concern centres on the impact on the family finances and whether the divorce will destroy the business or impact on their shareholding.

The interest in the business or the value of the shareholding will need to be determined by agreement or by the Court. However, the importance of valuing business interests depends on the nature and value of the business and/or shareholding. It is important to be clear why the value of the business interest is important, particularly as the cost of an independent valuation report can be expensive.

Focus should be on consideration of the income produced, ownership of property or other fixed assets and their value, whether there is a company or business pension and whether it is possible to extract capital from the business to fund a settlement without affecting the viability of the business.

The issues facing a sole trader who runs his business from home with limited assets will be very different from those of a shareholder with a controlling interest in a limited company with significant assets. Further as the business is likely to be the family’s main source of income the Court will want to protect the viability of that business.

Other considerations to take into account would be the extent of ownership within the business. If the spouse has a minority shareholding then it is the value of that shareholding that is relevant on divorce.

The Court will consider, in those circumstances, whether that spouse has any control over the decision making of the business. If that is not the case then the Court will apply a discount to that shareholding and will be less likely to order the assets of the

Caroline Young and Rayner Grice

“The service I received was outstanding in every aspect. The advice was spot on and the service was both professional and friendly” business to be sold or to extract capital from the business in other ways.

HOW TO PROTECT YOUR INTERESTS The best way to protect your interest is to have entered into a pre or post nuptial agreement that clearly records your intention with regard to the business on divorce.

Although not fully binding they are now being increasingly recognised by the Court if certain preconditions have been met.

It is important that the spouse provides full information regarding their business interest and that there are no attempts to conceal or devalue the profitability. It is not possible to remove the business asset from consideration by the Court and it is important that you retain your credibility as the treatment of the business may not be as harsh as first feared.

Clarke Willmott’s Birmingham Family team, led by Rayner Grice, has nearly 20 years experience in dealing with all areas of family law. They specialise in dealing with complex and high value financial resolution arising from relationship breakdown with particular

expertise in dealing with family owned businesses. Chambers 2015 recognised Rayner Grice as “Up and Coming” with her quickly developing a reputation for her handling of financial remedy proceedings.

She won praise for her attention to detail and was reported as “meticulous” The team aims for a high level of client service and focuses on resolving matters pragmatically and swiftly to achieve a resolution that is tailored to the individual needs of the client.

Rayner Grice T: 0845 209 1382 / 0117 305 6382 E: rayner.grice@clarkewillmott.com Caroline Young T : 0845 209 1404 / 0117 305 6404 E : caroline.young@clarkewillmott.com

PROFILE

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Anthony Collins

‘Jaw, jaw not war, war’ – family mediation is the future Whilst it’s been a long-standing joke that lawyers are paid by the hour for talking, it now seems that encouraging clients to do so brings mutual benefit, as mediation becomes more popular Talking instead of litigating means we no longer have ‘see you in court’ with the flinging of the wedding ring but ‘let’s work this out together’.

“Couples who have successfully resolved their disputes wisely, efficiently and cost effectively through mediation certainly need no convincing of its benefits in comparison to costly, time consuming, antagonistic litigation processes which lead only to superficial victories”. The Which?

Guide to Divorce “Skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the powers of the lawyers and the courts to achieve”. Lord Woolf Mediation is a voluntary and confidential process, which is flexible and cost-effective.

Divorcing or separating couples meet to disclose their financial circumstances, decide how their assets will be divided, or who is to care for any children, and explore their options. It’s based on mutual respect often resulting in preservation of dignity as well as costs and looking forward constructively and pragmatically, rather picking over the bones of a relationship.

A Mediation Information and Assessment Meeting (MIAM), is the first step in mediation to see if issues can be resolved before going to court.

They have been recommended from as early as April 2011 and following a slow start, momentum is building. Mediation enquiries have doubled year-on-year from January to June 2015, to over 3,400 (National Family Mediation), whilst court applications declined due to: • The Children and Families Act 2014 declaring an expectation that prospective litigants would attend a MIAM. • In April 2014 this became compulsory – save for exceptional circumstances.

Elisabeth Howe

• Legal Aid was withdrawn from family matters.

• The growing realisation that an under-resourced court system, with long delays and high costs, is not the solution. Government research reveals qualified lawyer mediators conduct, on average, 10 MIAMs and 3 full mediations each month.

Court statistics support mediation’s success; of 300 cases in a court study, 19% had attended a MIAM, 41% hadn’t, showing fewer cases go to court when people are aware of mediation.

WHAT WOULD A TYPICAL SCENARIO BE? Elisabeth Howe and Maria Ramon lead the mediation practice at Anthony Collins Solicitors and confirm this finding. A typical scenario would be: Former cohabitants, Robert and Jane: • had been at deadlock for some time, failing to resolve their outstanding dispute over shares and division of three properties, one owned jointly and the others in Robert’s sole name; • had each taken legal advice previously; had exchanged correspondence; and • recognised pursuing formal court proceedings to resolve their dispute would be

Maria Ramon

disproportionately costly and time consuming.

Consequently, all direct communication had broken down and the couple’s solicitors asked us to undertake individual MIAMs with their clients, which in turn lead to an immediate joint, first mediation session. This proved successful and full agreement was reached on all issues.

Now that of course is not always the case, but mediation allows a focus and narrowing of issues.

Separation should not be about winners and losers, but traditional court proceedings can often make it feel that way. Crucially, mediation keeps any children out of the firing line and at the forefront of the agenda and is a civilised way to end a relationship. Margaret Atwood’s famous remark: ’divorce is like an amputation, you survive but there’s less of you’ is usually true, but talking rather than litigating is definitely the way forward for those who can rise to the challenge.

Anthony Collins Solicitors LLP

“Skilled mediators are now able to achieve results satisfactory to both parties in many cases which are quite beyond the powers of the lawyers and the courts to achieve”

134 Edmund Street, Birmingham, B3 2ES Telephone: 0121 200 3242 Website: www.anthonycollins.com Twitter: @ACSLLP

BIG ISSUES Making connections A dedicated network club for ambitious entrepreneurs is needed in the West Midlands, to bridge the ‘knowledge gap’ and help small businesses grow.

That was one of the leading outcomes of ‘Entrepreneurship in the 21st century’, an event hosted by Barclays at its premises in Snow Hill, Birmingham in July.

More than 40 entrepreneurs listened to top speakers and a panel of business experts, debating the opportunities and challenges facing high growth businesses across the region. James Villarreal, the co-founder and chief executive of Glide Utilities, which has grown from launch in 2006 to an expected £17m turnover in the next 12 months, said his success was an example of “how not to do it” because his business initially lacked the knowledge and connections.

Glide, based in Birmingham, which has 69 full-time equivalent staff and more than 40,000 customers, allows tenants in shared houses to split utility bills with individual itemised bills, and provides landlords with one bill covering all their properties.

But James said: “We’ve had all the pain!

When I look back, I think if only I’d known then what I’ve now learned, we could be a £50m business!”

He said “not having the right people around

you” was the challenge for entrepreneurs and added: “We’re dealing with people now who we initially didn’t know we could have access to, and growth is becoming easier because of that.

“But it’s crucial to bridge that knowledge gap and create a support network for new companies. It’s really important to bring people together to learn from each other, using and exploiting all that knowledge.”

Denys Shortt, the chairman and chief executive of DCS Group, which sells and distributes health, beauty and household brands, suggested that banks like Barclays could help make this happen.

Denys, whose company, based in Stratfordupon-Avon, has more than doubled annual revenues in the last five years to £185m, said: “Barclays could set up a ‘connections’ network, find out what people want to help with, then find out who needs that help.

“Mentoring is part of my business plan, but then you need a mechanism to run it.

Entrepreneurs event, showing Sandra Garlick speaking

A Company like Barclays can provide that glue.” Rob Hallmark, an entrepreneur who owns and runs fragrance company Gruhme UK Ltd, suggested: “Why don’t Barclays launch a business award, or a ‘Birmingham Fast 50’ network club? This would open doors for entrepreneurs.”

Panel experts included Professor Mark Hart, of Aston Business School, and Sandra Garlick, managing director of De Marco Business Advisors. They also discussed other challenges facing high growth businesses, such as the skills gap, and agreed that getting entrepreneurs into schools and the subject onto the curriculum could help.

Richard Heggie, Barclays’ head of proposition and delivery for entrepreneurs, chaired the expert panel and said: “It’s key that we engage and listen carefully to the challenges inspirational local entrepreneurs are facing in building high growth businesses so that we can identify the right ways to help and add value.”

“But it’s crucial to bridge that knowledge gap and create a support network for new companies. It’s really important to bring people together to learn from each other, using and exploiting all that knowledge”

BIG ISSUES Legal and finance quarter - family law edition

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We’re looking up

Don’t penalise top cars

West Midlands manufacturers are leading the way in business confidence and exports, according to a new report from EEF, the manufacturers’ organisation, and global law firm DLA Piper. The report – Regional Manufacturing Outlook – draws on survey data and the latest ONS figures to provide a longer-term picture of the state of UK manufacturing. It shows that manufacturers in the West Midlands are in pole position in the business confidence league, scoring 6.86 out of a possible ten points for confidence, which is the top score out of nine regions across the UK. The region also scores high for exports, making the second biggest contribution to the UK’s total manufactured exports at 12.1%, meaning that £1 in every £8 earned from the UK’s manufactured exports is from the West Midlands. The West Midlands is the also UK’s 6th highest region in terms of manufacturing output, accounting for 13.9% of regional output and contributing more than 10% to the UK’s overall manufacturing output. However, productivity in the region – at 88.2% – is low compared with other regions. On the employment front, West Midlands manufacturers employ over one in ten (13%) of the region’s total workforce, with almost 336,000 jobs at manufacturers across the region. Richard Halstead, regional director at EEF, said: “This report shows that West Midlands’ manufacturers are punching above their weight and putting our region on the map.” And Noel Haywood, partner in DLA Piper’s Birmingham office, said: “Consistent and sustained output growth, strong exposure to high performing sector segments such as automotive, and a healthy and globally diversified export market all underpin the region’s confidence.”

A leading West Midlands business academic has attacked what he claims is George Osborne’s decision to penalise luxury cars.

Professor Lord Kumar Bhattacharyya, chairman of WMG, based at the University of Warwick, said he welcomed the statutory apprenticeship levy announced in the Budget which would help industry by raising around £2bn for skills training each year. But he said the Chancellor had also made “several poor choices” that meant the same Budget

“The West Midlands is the also UK’s 6th highest region in terms of manufacturing output, accounting for 13.9% of regional output and contributing more than 10% to the UK’s overall manufacturing output”

Big players bully SMEs Large businesses are bullying SMEs into accepting long-term settlement of their invoices, according to a leading business adviser. Henry Briggs, senior partner at the Birmingham office of Haines Watts, said: “On average, every small business is waiting for nearly £32,000 in overdue payments – which has a knock on effect on their ability to manage cash flow and plan for growth.”

The comments follow the recent publication of an interim report from the Department for Business Innovation and Skills, summarising responses to a consultation on the issue.

Briggs added: “Worryingly, according to the report, a quarter of all SMEs state that an outstanding £20,000 or less debt is enough to jeopardise their business prospects. “The majority of respondents stated that late payment and unfair terms were an issue for them. One representative organisation reported only 10% of its members were paid within 30 days more than 80% of the time.

“Another said only 72% of public sector contracts were paid within 30 days. This goes against government policy and is jeopardising not only the prospects of the company but jobs also.”Mr Briggs added: “All too often, this is a David and Goliath struggle where at the moment, it is almost always Goliath that is the winner.”

“I don’t see why the Government wants to levy a punitive charge that will discourage innovation in low emissions cars” was squeezing makers of top-of-the-range vehicles. Professor Bhattacharyya said: “Take the excise duty surcharge on vehicles costing over £40,000, whatever the emissions level. The premium automotive sector is one of our few manufacturing success stories, competing against one of the best trained and innovative workforces in the world in Germany. “I don’t see why the Government wants to levy a punitive charge that will discourage innovation in low emissions cars.”

His comments came in the House of Lords as he stressed that the UK’s economic future rested on significant improvements in productivity, which he said meant a need for greater support for innovation, investment and skills.

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PROFILE ART Business Loans

A loan at last – and from someone who understands

Over the past 18 years, ART has delivered loans of up to £150,000 to over 750 businesses, working in a wide range of market sectors. The majority of ART’s borrowers are, in one way or another, family businesses and are either micro (under 9 employees) or small (10 - 50 employees). “It is these businesses that are the backbone of the UK economy,” says Steve Walker, Chief Executive of ART Business Loans. “It is vital that, when the banks are unable to help, there is additional specialist finance available to enable these businesses to ride out the ups and downs of a competitive marketplace, survive and flourish.”

ART loans can be used for any business purpose, including to support cashflow. Steve says: “Some of our customers come back to us for top up or new loans over a number of years. Others take advantage of the opportunity to repay early, with no penalty.”

Lending across the West Midlands, ART often works in partnership with others – including the banks – to make up a package of finance. A record 2014/15 saw ART delivering loans totalling £3.1m to 101 businesses, and the high demand looks

StayDry A trip to Walt Disney World 15 years ago sparked an idea that was to grow into a thriving multi-national business for Dave and Sue Perry. “We purchased a rain poncho when it started to rain,” recalls Dave, “and wondered how they would go down in the UK.” When they got home, they did some

Photographer: Marc Kirsten

ART Business Loans was set up to enable businesses that do not fit the banks’ lending criteria, or have reached their limit with the banks, to access the finance they need to grow and create jobs, or survive and protect jobs

ART Business Loans team (l-r) Steve Walker, Graham Donaldson, Martin Edmonds, Barbara Seaton, Andy King, Christine Allen-Lloyd set to continue. “We have clear evidence that if we had more to lend, we could support more businesses,” says Steve. Based at Innovation Birmingham Campus, the ART Business Loans team has extensive and up-to-date knowledge of business finance options and can signpost, if appropriate, to other lenders and support.

research, established a supply chain and set up a website as their sales channel. Sue started the business as a sole trader. Dave later joined her in a partnership and the business expanded then incorporated into a limited company. Their son James, among others, has now joined the business to help meet a growing demand from major tourist

(l-r) Warren Delo, Sue, James and Dave Perry

ART’s website contains a wealth of information and advice as well as a selection of inspiring stories from borrowers. www.artbusinessloans.co.uk Call ART on 0121 359 2444

attractions and leisure companies as well as individuals ordering for occasions such as festivals. Cashflow can be an issue, as Finance Director Warren Delo explains: “Ours is a cyclical business, with a reduced income over the winter months. We have a significant working capital requirement as we secure business for the next season and replenish stock. The bank reduced our overdraft facility by more than two thirds between November and February. This was a significant challenge.” Exploring options, Warren approached ART Business Loans. “Martin at ART was able to very quickly understand the business model and what we needed,” he says.

“Thank goodness organisations like ART exist to support the SME sector. Thanks to them we can now look to a brighter future!” www.staydry.co.uk

FAMILY AND OWNER MANAGED BUSINESSES IN PARTNERSHIP WITH:

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SPECIAL FEATURE

The future landscape for family businesses

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OVERVIEW Family and owner managed businesses

Research reveals the changing face of families in business A major survey of UK family businesses has revealed a changing face of the family unit working together in family firms today, with 25 percent having ‘blended families’ and an increase in the number of generations working together The survey, conducted by Families in Business (FiB), the independent organisation dedicated to supporting family firms, identified how the changing face of the modern family is evidenced within a growing proportion of family businesses as a result of divorces and second marriages that has led to more step and adopted children joining a family business.

The findings confirmed the multi-generational structure of family firms – with 12% having directors over 81 years old, and 33% over 71.

The majority of family firms (45%) have two generations working in the business, with 18% having three and 2% five generations still involved.

The average age of a CEO of a family firm is 60, compared to 54 in other UK businesses, whilst the average age for a founder is 40.

FiB’s survey also challenged governance matters ever-present in a family firm, with some startling results – only 4% have a robust succession plan, and less than a quarter (19%) a shareholders agreement.

In nearly half of family business collapses, the failure is precipitated by the founder’s death; the findings reveal a small minority of firms have planned for the unexpected, and yet almost half (48%) admit they would be vulnerable if something happened to key directors and family members.

Open and trusted communication continues to be a challenge, with 74% seeing this as a problem, up by 5% on FiB’s 2014 survey.

Professional advisers are the main individuals family business leaders turn to for support, but the survey identified a growing paradox between what professional advisers believe family members want from their business, and what the owners and leaders actually want.

49% want growth for the family business

Dani Saveker CEO of Families in Business

The family unit continues to change and now there are more generations of one family working within the business with exit firmly in mind, whilst 27% strive to ‘build something’ for the next generation.

However, advisers are 100% focused on succession, believing this to be the main purpose for all family in the firm, and at best offer technical expertise rather than considering the associated, more emotional, challenges. FiB’s CEO Dani Saveker comments: “The family unit continues to change and now there are more generations of one family working within the business.

“This is the third year we have conducted our survey of family firms and professional advisers, which included in-depth interviews with family business leaders - these revealed

a rise in the number of same sex partnerships working in the business, and highlighted growing numbers of women delaying having children until their thirties.

“This means children will not be mentored by parents in the family business as they once were - and if anything happens to their parents, there’s an increased risk and gap of suitable next generation leaders ready to take the baton; a situation exacerbated by the low number with a succession plan.

“Many of the findings are concerning; from this lack of planning, belief that succession and shareholder agreements are unnecessary, to growing reliance on activities or substances, such as alcohol, to help them cope.

“The survey gathered information on how family businesses are planning for the next generation, and prioritising investment in opportunities and innovation, through R&D, skills, or talent. It also examined professional advisers, intermediaries, stakeholders and service providers to identify how well they understand family businesses.

“There would seem a paradox of what professional advisers believe family businesses want from them - our findings point to a need for helping the business to succeed and grow, and not purely with succession. Perhaps advisers should review questions they ask family businesses, to uncover accurate insights and data. It’s not easy as family businesses are private, but a shift in emphasis is in order, as professional services are facing a move towards adding yet greater value to clients.”

The FiB Annual Guide 2015/2016 - ‘The Future Landscape’ - includes the surveys’ key findings and practical advice. FiB members receive a complimentary copy, or request the report via www.fibcommunity.com.

PROFILE Smith Cooper

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The aftermath of the budget – how does the budget impact family businesses?

In July we saw the Chancellor announce a number of changes which will impact owner managed businesses. These include changes to the taxation of dividends; changes to inheritance tax thresholds; introduction of the living wage and pensions changes. These were accompanied by increased focus on tax avoidance and targeted campaigns.

So where does this leave family businesses?

The introduction of the living wage will cause the wage bill for many businesses to increase thereby impacting profitability. As well as increases to the cost of employing staff, the cost of compliance is also increasing. Over recent years, HMRC have increased the number of national minimum wage audits they are undertaking which, without the right assistance, can be very difficult and time consuming for the owners of businesses to deal with. There are also many traps which businesses need to ensure they don’t fall foul of. This is becoming a very specialised area with a number of complexities which companies need to be aware of and which we expect will expand to cover the living wage.

The second area of focus of this report is in respect to the taxation of dividends. Many owners have historically paid themselves small salaries, whilst waiting until the end of the year before extracting funds via dividends. Tax rates applicable to dividend income have, in many instances, been more beneficial than tax rates applicable when extracting funds via a salary.

This has increased the propensity for business owners to pay dividends as a tax efficient method of extracting funds from their companies. The chancellor announced measures to remove this beneficial treatment by increasing the rate at which dividends will be taxed. When looking at the impact of the changes, for an additional rate tax payer, tax on dividends is being increased

“Another tax efficient method for extracting funds from a family business has been via pension contributions”

Jackie Hendley, Smith Cooper to 38.1% from 30.5%. Shareholders who have historically extracted funds from their companies via dividends should review the impact of these changes, giving consideration to timing and method of extracting income from companies.

Another tax efficient method for extracting funds from a family business has been via pension contributions. There has been further tightening in this area with the treasury announcing reductions in the amount which can attract relief when paid into a pension fund.

This has also been accompanied with a reduction in the lifetime allowance which is also being reduced to £1million. Business owners should, therefore, review their current pension payments and pension schemes and, potentially, look at alternative methods for extracting funds and saving for their retirement.

HMRC are continuing to increase their focus on tax avoidance, increasing both the number of investigators and the use of data analytics (through their “Connect” system) to identify individuals and companies they believe have underpaid tax. The continuing pressure and publicity being used by HMRC, together with the complexity of the tax legislation, leads many family businesses who try to adhere to the

legislation to continually worry that the taxman may come after them.

Now onto some positive changes as we move onto the topic of inheritance tax. Business Property Relief remains unchanged with 100% relief still being available for shareholdings in a trading company or the holding company of a trading group which are transferred on death. This can prove to be a tax efficient way of passing family companies to the next generation.

The nil rate band for individuals for inheritance tax purposes is currently £325,000 per person.

In the budget the chancellor announced an increased nil rate band in respect of a property that has been the individual’s main residence at some stage and that is left to a direct descendant. This additional band will be phased in from 6 April 2017, starting at £100,000 and rising to £175,000 by 2020/21.

In light of the above changes, now is a good time for family businesses to review their forecast tax liabilities and cash flows to assess the impact of the above; to identify alternative tax efficient opportunities; and to review opportunities to make savings elsewhere. Owners should also re-assess their personal savings and pension plans and review their wills and inheritance tax planning to ensure these remain efficient.

Over the past 30 years, Smith Cooper has become one of the largest independently owned accountancy and business advisory firms for owner managed businesses across the Midlands. Smith Cooper provide a wide range of specialist services to both corporate and individual clients, including accounting, taxation, corporate finance and a range of IT services. To find out more contact Jackie Hendley on 0121 236 6789.

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SECTOR PROFILE Family and owner managed businesses

Keeping it in the family

Leaders of family-owned businesses regularly feel isolated, according to research

by Families in Business (FiB). FiB’s founder Dani Saveker says this is all too common and something she recognises from her own family’s business “I spent 14 years working at my family’s business Savekers. For much of this time, I felt lonely and longed to talk with someone who really knew how I was feeling.

“These emotions were the inspiration behind FiB - that has become the ‘go to’ place for family businesses. A major feature of FiB is a growing team of exceptional professionals who ensure a network is available whenever there’s a need from family businesses.

“Alongside, I wanted to provide somewhere safe for those leading family firms to share experiences, plans, and worries, without fear of being judged, and always with ideas and support from individuals going or having been through similar challenges.

“Launched last year, the FiB Insight groups are part of the support - FIB also delivers unique, specialised consultancy and intervention services for individuals considering their exit strategy, or a family business that feels stuck or challenged.

“Each Insight group has 5 to 10 family business executives, and meets in a confidential, neutral setting to discuss challenges, evaluate opportunities and solve strategic, operational and often personal issues unique in family businesses.

“Each is facilitated by one of FIB’s team, who helps stimulate thinking, frames issues, and provides a sounding board for ideas. Many of our team have worked in a family business, so can support from a position of knowing, having ‘lived it’.”

Wendy Hill is the second generation of her family business General Building Plastics and a member of the West Midlands’ FiB Insight group.

“The Group sessions have been amazingly helpful,” she says. “For years I struggled with doubts over whether I was doing the right thing. The group has been a great support and non-judgmental place that’s allowed me to air views and get really good advice.”

GB Plastics was founded by Wendy’s mother

Neil Male, CEO GMS Group

Josie Morris, Woolcool

Janet Sutherland in 1990. Wendy is a Director with her brother Alan, and their sister Clare Falls re-joined the business this year.

Wendy says Insight’s safe environment is invaluable: “I find it useful to be able to talk to peers within a confidential environment.

Insight allows me to take time to think about the business, our goals, challenges and strategies.”

Celebrating its silver anniversary is one of a number of major milestones for GB Plastics this year: “We have opened our sixth branch in the Midlands, won the Red Ribbon Award for Small Family Business, and are in the process of fitting out a new Head Office.”

Award winning packaging company Woolcool is also a second generation Staffordshire family business. Its Sales & Marketing Director Josie Morris, the daughter of founder Angela Morris, is a FiB Champion and Insight member.

Like Wendy, Josie values Insight’s safe environment: “FiB feels like an extension of the family, and Insight is somewhere we can be honest without being judged. Being able to share experiences has been invaluable, especially the emotions integral to being part

Wendy Hill Director GB Plastics

of the family behind a business.

“It’s great to have a group who understand how a family business is different. Running a family business has unique challenges, and it can be impossible to switch off.

The individuals I have met through FiB all understand this.

“Woolcool recently opened a new depot, and the process surrounding this was new for me. FiB has put me in touch with people who understand and it was a great support being able to talk about how I was feeling with people who relate. They gave me informed advice that helped clarity and energy.”

GMS Group provides security and void property management services. Neil Male is CEO of the family business. He joined as an employee in 2000, and spearheaded another MBO that completed in May and saw him and his wife Emma take full ownership.

“The FiB Insight meetings were a useful forum for discussing my vision and thoughts for the MBO,” explains Neil. “Dani brings a calming, supportive influence, but also challenges us.

As well as being valuable from a professional point of view, Insight helped me on a personal level to achieve a better work/life balance.”

PROFILE Grant Thornton

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Alarm bells ring for the region’s “non-dom” entrepreneurs For many entrepreneurial families running businesses across the West Midlands, the Chancellor’s budget pledge to tackle tax rules relating to “non-doms” must have surely set alarm bells ringing. Sue Knight, partner in Grant Thornton’s Entrepreneurial Private Client team, explains why Although George Osborne paid tribute to the considerable contribution that non-doms have made to British public life and tax revenues since the status was introduced over 100 years ago, his stated goal is to tackle what he views as unfair aspects of the system and in the process raise an additional £1.5bn for the Exchequer.

So where does that leave our large non-dom community across the West Midlands, many of whom run some of the region’s most entrepreneurial and dynamic businesses?

If you are a non-dom and have been resident in the UK since 2002 you will come within the full UK tax regime in 2017, paying “full British taxes on all worldwide income and gains”, according to Osborne. The Government is consulting on some other aspects of the package of changes later this year, so there will be more detail to digest then. We’ll be keeping a close eye on developments and reporting back to clients as they unfold. But meanwhile there are some common circumstances affecting many entrepreneurial families and if these resonate, now is the time to act.

PREPARING TO SELL YOUR BUSINESS? A fairly typical structure for a non-dom family would be a trading or investment business structured through a non-UK incorporated company. While this company might be UK tax resident and therefore UK tax would be paid on all of the profits annually, under the current rules this structure allows for the cash realised on an ultimate sale of the business to be taxable only to the extent that the funds are remitted to the UK. But from 6 April 2017 non-dom shareholders will be taxed on any gains realised on sale as they arise. Consider whether disposals can be accelerated without necessarily triggering an immediate capital gains tax charge in order to take advantage of the current non-dom tax rules. It is also important to make sure that basic

pass non-UK assets (such as shares in foreign companies or cash held in offshore bank accounts) free of all inheritance tax on their death. If these treaties are amended or their effect altered as part of the changes then the estate planning strategy of families relying on these treaties will need to be reviewed.

FAMILY TRUSTS There are currently a number of benefits to nondoms with interests in non-UK resident trusts holding either business or investment assets, including deferring tax on capital gains and inheritance tax benefits in certain instances, but some of these benefits may be eroded under the new regime. The Government has acknowledged that this is a complicated area and they will consult on how the proposed changes will affect families benefiting from such trusts.

planning is revisited such as maximising valuable Entrepreneurs’ Relief throughout the family, where possible.

These are just a few examples of how the new rules for non-doms may affect the tax affairs of entrepreneurial families like yours across the region. Given the complexity of these rules and to minimise the negative impact of the Budget changes you should seek specialist advice sooner rather than later, as any restructuring may need to span two tax years, with the first stage being undertaken before 6 April 2016.

Whilst there will be challenges to overcome, there will also be opportunities. Taking time now to plan for the new regime will help silence those alarm bells.

TREATIES ON INHERITANCE TAX UNDER THREAT Although not yet confirmed, there is some suggestion in the Budget documentation that certain double tax treaties will be reviewed as part of the changes. At the moment, there are particularly beneficial treaties with India, Pakistan, France and Italy such that individuals domiciled in those countries can potentially

For more information call Sue Knight on 0121 232 5167 or email sue.a.knight@uk.gt.com

Sue Knight

“Any restructuring may need to be undertaken before April 2016”

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PROFILE Yorkshire Bank

Unlocking the potential of the family business Yorkshire Bank’s Gareth Jones looks at ways the family business can fuel economic growth Family businesses make an enormous contribution to both the local and UK economies.

The longevity and continuity which family-run companies, by their very nature, generally enjoy mean that they offer a huge amount to our economic health.

Our portfolio shows that some of the most wellestablished, most successful companies are often family businesses. Family loyalty and the dynamic that creates is a key factor in that longevity.

A stronger bond instinctively helps create a management team that works well together, a vital element in any successful business.

Although some might argue that working with close relatives could be problematic, that’s rarely been my experience in dealing with family-run businesses operating across all industry sectors. In my view, close family bonds should be viewed as a strength and an asset to any company.

While recognising the attributes that makes these companies stand apart, it’s important to note that they face the same challenges which confront the wider business community.

Increasing competition and pressures on pricing and margins are factors affecting many firms in the current climate.

Those pressures demand a closer focus on productivity levels within companies, family-run or otherwise.

A key to improving productivity and efficiency is investing in the assets of the business whether that’s people, technology or other assets – tangible or otherwise – which add value.

The objective of investing further in the business has to be to unlock potential within those assets – for staff, that could mean investing to encourage innovation by incentivising employees to think creatively.

In short, anything that maximises the skills and talent staff possess to drive the business forward.

In research carried out recently for Yorkshire Bank, we asked more than 850 SMEs about investment intentions and priorities. The results showed: • Nearly half of those surveyed (45%) felt there were more opportunities for them to invest than the same time a year ago • More than one third (36%) said they were more

“From my perspective, the first step to adding value is understanding the business you’re dealing with and what the management team’s vision is”

Gareth Jones, Head of Commercial & Small Business Relationship Management, Yorkshire Bank likely to invest in growth opportunities than in the previous year • Three in five businesses believed they would be successful if they applied for a bank loan to fund growth ambitions • 30% said they were considering increasing their borrowing That increased optimism amongst businesses is welcome and, in response, we’re looking to offer support via a number of lending initiatives including: • Capital-free periods – up to five years for customers in certain situations, eg, when they are investing in their business • Extended lending terms – with potential to extend the repayment term of an existing loan facility • Funding for trading business premises up to 100% of value For any family business looking to invest further in growth, it’s important to foster a good relationship

with its bank – that means being open about challenges and also about sharing plans for the company, particularly beyond the short term.

Family businesses should expect their bank to add value and challenge them to detail how they can support their growth plans.

From my perspective, the first step to adding value is understanding the business you’re dealing with and what the management team’s vision is.

For family businesses, this is closely followed by understanding the family dynamic and where the strengths of the team lie. Family-run businesses have some unique strengths which, with the right investment, can help overcome the challenges of maximising efficiency and productivity.

Their aim should be to engage with a funding partner who can help tackle the factors which are acting as a restraint on growth ambitions and maximise the positive assets within the business which will help drive that growth.

Gareth Jones, Head of Commercial & Small Business - Relationship Management T: 07879 662 598 E: gareth.jones@eu.nabgroup.com W: www.ybonline.co.uk/business

Your passion is our business

We believe better relationships make for better business. That’s why our Relationship Managers work hard to get closer to what’s important to you and your business.

Business Banking To find out more contact Gareth Jones, Head of Commercial & Small Business – Relationship Management 07879 662 598

gareth.jones@eu.nabgroup.com | ybonline.co.uk/business

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