Apprenticeship reform roll out, Shareholder Agreements for limited companies, how to ascertain whether your business still qualifies as an SME, and a U-turn for HMRC’s helpline services
Major reforms to apprenticeships announced
The Prime Minister, Rishi Sunak, has announced reforms to apprenticeships that will enable up to 20,000 more apprenticeships and could be especially welcome news to small businesses.
With effect from April 1st, the government will pay the full cost of training for anyone up to the age of 21.
If you are a small employer this will mean that you no longer need to meet some of the training costs and may mean that taking on an apprentice becomes more viable.
Education providers will also benefit as they currently need to source funding both from businesses and the government.
Gillian Keegan, Education Secretary, commenting on the reforms said: “Apprenticeships are a fantastic way for businesses to develop the skills they need, and these new measures will help more businesses and young people benefit from them.”
Shareholder Agreements for limited companies: What you need to know
When there are several shareholders, a new company is being formed, a shareholder wants to pass their shares or pass them to their children, someone is nearing retirement, or the company has borrowed money from a shareholder, issues can easily arise that jeopardise the continued success of a business.
Shareholder agreements are crucial documents that set out the rights and responsibilities of shareholders within a company. These agreements, which are often overlooked, have a significant influence in shaping the trajectory of a business and safeguarding the interests of both shareholders and the company itself.
In this article we look at the areas where a good shareholder agreement can benefit a business and its shareholders.
Defining rights and responsibilities
A good shareholder agreement clearly outlines the rights and responsibilities of each shareholder within the company. This includes details such as voting rights, dividend distribution, and obligations related to financial contributions or management responsibilities.
With these parameters established upfront, shareholder agreements provide clarity and can minimise potential conflicts and disputes among shareholders.
Mechanism for resolving conflicts
While business ventures start with all good intentions, almost inevitably disagreements can arise among shareholders on important business decisions or operational matters. Such disputes can end up paralysing a business and hold it back from reaching its potential.
Shareholder agreements typically include mechanisms for resolving conflicts, such as mediation, arbitration, or predetermined procedures for making decisions. Because there is then a structured framework for dealing with conflict, the agreement helps reduce the risk that a dispute could escalate to the point of disrupting the business.
Protection of minority shareholders
Shareholder agreements often include provisions designed to protect the rights of minority shareholders. Generally, decisions within a company are decided by majority vote. Therefore, if a company has a single or a small group of majority shareholders, they are able to control all decisions made.
This may not be desirable in all scenarios, and actions could be taken that disproportionately benefit majority shareholders.
Therefore, an agreement may include provisions that ensure minority shareholders have a say in certain key decisions, and safeguards against certain actions that could unfairly disadvantage minority shareholders. The agreement can therefore promote fairness and equity within the company.
Keeping the company on track
The stability and direction of a company can be helped by a shareholder agreement. It might be used to establish guidelines for significant corporate actions, such as mergers, acquisitions, or changes in company structure.
The agreement might require certain decisions to be approved by a specified majority of shareholders and so prevent a single individual taking an action that might undermine the company’s strategic objectives or corporate governance.
Succession planning and business continuity
The long-term sustainability of any business relies on changes in ownership or management being well planned for.
Shareholder agreements often address succession planning by outlining procedures for transferring shares, resolving disputes related to a transition in ownership, or specifying how a buyout must happen in the event a shareholder leaves or dies.
With the clarity and certainty these provisions can bring, a business is in a much better place to be able to continue with minimal disruption.
Confidentiality and non-compete clauses
A shareholder may decide to leave the company and set up on their own or move to a competitor. In this circumstance, a shareholder agreement can help to protect the company’s confidential information and prevent shareholders doing something that might harm the business.
The agreement might include clauses that help safeguard the company’s intellectual property, trade secrets, and competitive advantage. These can all help the company keep its market position and reputation.
In summary, a good shareholder agreement can provide a company with a comprehensive framework that helps it remain stable and fair while bringing long-term success to both the business and its shareholders.
Please talk to us if you need help in planning for an agreement. We can help with a list of key areas to consider, as well as with share and company valuations and putting the wishes of the shareholders into an agreement with a local solicitor.
Increase to small company thresholds
Thresholds based on a company’s accounts and employee numbers determine whether a company is categorised as small or not. Being able to qualify as a small or medium sized business can cut red tape for a business with the reduced amount of both non-financial and financial reporting a small or medium sized business is required to do.
The Prime Minister, Rishi Sunak, has announced that there will be 50% uplift to the current thresholds that determine a company’s size. The government expects that this will benefit up to 132,000 businesses.
The current thresholds were set by the EU, who recently uplifted its thresholds by 25%. However, following Brexit, the UK has greater freedom to set its own thresholds and so is opting for a larger increase.
It is intended that the new thresholds will apply to financial years that start on or after 1 October 2024.
The new thresholds mean that a company with less than £632,000 turnover will now qualify as a micro-entity. A small company will be one with turnover less than £15m, and the upper medium threshold will increase to £54m. Companies with a turnover above £54m will be classified as large.
HMRC announces and then halts changes to helpline services
Last week, HM Revenue and Customs (HMRC) announced changes to its helpline services that will encourage people to go online first.
However, in a fast about turn, the very next day they halted these changes while they consider how best to help taxpayers make more use of online services.
The changes HMRC are proposing apply to Self Assessment, PAYE and VAT services. Feedback though suggests that there is still a significant number of people who are reluctant to deal with their tax affairs online.
HMRC are keen to pursue online services because of the cost savings they bring. They revealed that last year they received more than three million calls on queries that could have been carried out online, including on questions such as resetting an online password, getting a tax code, or finding out a National Insurance number.
The changes they are proposing include:
- Closing the Self Assessment helpline between April and September and directing callers to self-serve using online services.
- Opening the Self Assessment helpline between October and March for priority queries. Straightforward queries will still be directed to HMRC’s online services.
- Opening the VAT helpline for 5 days each month ahead of the deadline for filing VAT returns. At other times, callers will be directed to use online services.
- The PAYE helpline no longer taking calls on refunds.
- Having HMRC advisers continue to be available to support those who cannot use online services or need additional support because of their health or personal circumstances.
Jim Harra, HMRC Chief Executive, said: “Making best use of online services allows HMRC to help more taxpayers and get the most out of every pound of taxpayers’ money by boosting productivity. … However the pace of this change needs to match the public appetite for managing their tax affairs online.”
If you need any help in dealing with HMRC, please feel free to get in touch and we will be pleased to help you.
See: https://www.gov.uk/government/news/hmrc-helpline-changes-halted