GF writes: My business partner and I ran a financial advisory partnership until 1998 when we converted it into a private limited company. We retired last year and the company ceased trading. We have now received a claim relating to advice given in 1990 when the business was a partnership. We have received advice that “it is not legally possible or binding for a firm to transfer liabilities without the consent of the claimant or creditor, and even then only in certain circumstances”. What can we do?
Your question demonstrates the importance of making sure you purchase adequate run-off insurance before you cease trading, writes Jon Sutcliffe, partner at Kingston Smith LLP. The advice you have already received is broadly correct, so the claim is against the partners personally. You will need to take legal advice as to whether the claim has been made in time.
If the claim is made in time, you will need to consider whether it is covered by insurance and whether you have been indemnified against all liabilities. An indemnity of this kind should have been in the business transfer document, and this should also have dealt with the apportionment of insured liabilities between the partnership and the company. If you feel the claim may be insured, notify the insurer straight away.
The transfer of a business to a limited liability company or limited liability partnership will provide only a degree of protection to the partners from claims being made against them personally.
SACKING A LIAR
LD writes: We run a small family business with five employees. During an expansion programme we employed a full-time member of staff to help with secretarial work. She seemed the ideal candidate and sailed through the interview and her three-month training period and has been with us for just over 12 months. However, her performance and behaviour recently have been diabolical. She is a persistent liar, never turns up on time and rarely finishes her work. She is untrustworthy and unreliable, and has caused friction among my staff. What is the best way of sacking her?
You need to hold a meeting with her to discuss her behaviour and whether she has an explanation, writes Peter Done, managing director of Peninsula.
It is important to determine if there is a problem. If, for example, it is to do with her home life, there is little you can do other than being understanding and supportive. If, however, the change is caused by work — for example, she is being bullied or harassed by another member of staff — you need to know so that you can take action. If no explanation is forthcoming, you should proceed to a formal disciplinary hearing.
Send her a letter explaining her right to be represented, her right to state her case and the right to appeal if a decision is reached with which she disagrees.
You need to detail the areas of concern and exactly why her behaviour has been unacceptable. Give examples of when she has lied; list all the occasions when she has been late; and give examples of unfinished work. Attach any documents such as witness statements that you intend to rely on and also inform her of the possible outcomes.
Conduct the hearing, ensure that she has the opportunity to respond to the charges and then adjourn to consider your decision.
When you reconvene the meeting, tell her your decision. Confirm it all in a letter. Explain that if her performance doesn’t improve it will lead to the next stage of the process. Repeat right to appeal.
Ensure that you comply with your contractual disciplinary procedures and with statutory disputes resolution.
Kingston Smith, the chartered accountant, and Peninsula, the employment-law firm, can advise owner-managers on their problems. If you have any questions, please send them to Business Doctor, The Sunday Times, 1 Pennington Street, London E98 1ST or fax them to 020 7782 5765. Advice is given without legal responsibility
bizdoc@kingstonsmith.co.uk
