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Credit Crunch: Businesses need sound legal advice

Source: The Law Society, with additional comments from Chris Burke, Commercial Litigation Partner at Pearson Hinchliffe Commercial Law. 

With banks, investors and consumers tightening their belts in light of the credit crunch, businesses around the country are feeling the strain.

Few businesses will be cocooned from the effects of the economic downturn though some will feel the effects more than others. All businesses need to look carefully at how they operate in the current market, and those considering cutbacks to limit the severity of the economic impact need to ensure their plans are legally compliant, says the Law Society.

Paul Marsh, Law Society president, says:

'Businesses and individuals are reviewing their expenditure and tightening their belts. In difficult economic climates businesses large and small may be forced to confront complex legal issues relating to restructuring, shedding staff and selling assets. In times like these it is essential to ensure compliance with finance, employment and tax laws and regulations, to avoid the costs involved with breaching some of those laws. Businesses need to keep abreast of the latest developments with regards to rules and regulations, which can be a difficult and daunting task. Seeking advice from a solicitor will help alleviate the risks and could significantly reduce the overall costs.'

The Law Society recommends seeking specialist legal advice from a solicitor. Lawyers For Your Business, a network of 1,000 solicitor firms in England and Wales, offers specialist business-related legal advice to small and medium-sized businesses.

Lawyers For Your Business offers a free half-hour initial consultation with a solicitor in your area who is a member of the scheme. Advice can be sought on a range of legal issues including finance, taxes, employment law, contracts, company structure, and health and safety.

Paul Marsh says:

'Seeking advice from a specialist solicitor at an early stage will help reduce many of the risks and also limit the overall financial liability. It could also remove many hours of unnecessary anxiety and worry. The costs of breaching complex laws can be very high, particularly in areas such as employment law, so early legal consultation is advisable in order to identify the relevant law that may need to be complied with so as to plan a strategy which is watertight.'

Pearson Hinchliffe Commercial Law is a member of Lawyers For Your Business.

Chris Burke, Commercial Litigation Partner Comments:

“We are seeing an unprecedented number of calls in my team relating to the recovery of debts. In the current economic climate businesses are looking to stimulate previously slow or stagnated areas of cash flow. The surge in enquiries is from across the industrial sector, but we’re also seeing increasingly larger companies seeking to outsource their credit control and debt recovery functions to us. This in itself is a cost cutting measure and makes sense for forward thinking managers reviewing their financial priorities at this challenging time”.

Chris adds “It is in our Employment Law department however, that the change in the nature of clients’ priorities has been most visibly apparent.  Employers considering downsizing and redundancies realise they have to tread carefully. But many of the managers we work with have little or no decision-making experience within a downturn situation, the danger being they fail to follow procedures, fall foul of the strict employment laws and invite employee litigation.  However, I would say the greater danger when implementing redundancies is a lack of strategic thinking.  The temptation may be to rapidly cut overheads but this may mean shedding the very skills and experience that could be vital later on when attempting recover lost ground as the economy improves, which it surely will.”

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Pearson Hinchliffe Commercial Law | Hollinwood Business Centre, Albert Street, Hollinwood, Gtr Manchester, OL8 3QL
Telephone: +44 (0)161 785 3500, Fax: +44 (0)161 624 2589, Email: enquiries@pearson-hinchliffe.co.uk