April is the month I associate most with renewal and rebirth. Not only does it mark the beginning of spring (it certainly has this year) but we have also celebrated the end of a financial and tax year and can look forward to another financial year ahead with further very green shoots of growth in the Midlands and beyond.
I have written recently, here and on my blog, about the importance of relationships between businesses and their professional advisers. The start of April, the longer days and the increasing amounts of sunshine seem like an appropriate opportunity to refresh and renew those relationships.
I have recently advised a client who I had not heard from for nearly a year. It was good to hear from him after such a long time but unfortunately his query caused me some alarm. He telephoned to inform me that his company had just bought its own shares back from a minority shareholder and that he was keen to make some changes to the business that he now controlled outright. I asked him who had done the legal paperwork to document that share purchase and he replied quite casually “my accountant”. I asked to have a look at the paperwork just to be sure that all was in order because the buyback of shares by a company is a bit of a minefield.
Having looked at the documents I was disappointed to have to inform my client that in fact all that had happened was that the company had transferred a great deal of money to the minority shareholder in return for nothing. Legally, the minority shareholder still had his shares. The problem was that the paperwork contained many serious drafting errors and the required procedures had not been completed correctly. Once he had calmed down I discussed with him how to fix the problem and proceeded to do the job properly. Luckily we managed to sort it all out and he now really does have control of his own company and can start to execute his plan for growth.
I am afraid my client’s experience is not an isolated one, it seems all too often that the cost conscious director or business owner will seek to cut corners when it comes to professional advice. From his experience, my client will probably never again ask that accountant to draft legal documents.
My question to you is: if I, as a solicitor, offered to draft your company’s annual accounts, would you accept or would you laugh in my face? I do not understand why a client might consider asking an accountant to prepare legal documentation. If you insist on asking your accountant to draft a contract or other legal document, then that is your choice, but perhaps check that he or she is legally qualified to do so (and insured).
The rise of Google and the abundance of information on the internet in relation to matters legal and financial mean that business men and women can appear far more informed at first glance. But a wise man once said that a little bit of knowledge can be a dangerous thing. There is a reason why accountants train for years to be accountants and lawyers train for years to be lawyers.
A promising spring will hopefully turn into a busy summer. As you look to make changes or enter into new deals for the growth of your business, please do not forget to use the right tool for the job. As my client found, failing to do so may cost you in the long term.
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