Well it’s only taken me 18 months, but I have finally “persuaded” a community project I help out with to get their act together in terms of their legal paperwork and responsibilities.
The following are some, but not all of the issues I have come across:
1. Lack of Commercial Awareness: they paid a one man band event organiser over £6,000 for organising an online conference. This person was also charging them £550/day rate for services rendered (sometimes, from my perspective, injecting themselves into attending meetings they really did not have anything to contribute to, but managed to get around this issue by taking minutes).
2. Appointment of Non Exec Directors: people were asked to join the project at post meeting gatherings without consulting with other Board members. At one point they had over 20 non exec members,
3. Appointing Sub Contract Staff: decisions were made to appoint staff into what HMRC considers to be Office holding positions and therefore subject to their IR35 policy. When I raised this issue at a meeting, the sub contractor themself did not know what IR35 was, but I was assured by another Director that IR 35 did not apply.
Small companies are currently exempt from these tax rules, but in business you cannot assume that because you are only dealing with one person that they are not part of a medium company that would put them into IR35.
4. Appointment of Directors: there seem to be a few people who want to be a company director. Touch of the ego perhaps, maybe they think it makes them look more important. I guess from the outside it looks to be glamorous and exciting – Board meetings and expenses.
The truth is that being a director in a micro or SME is hard work; you have to adhere to legal and financial laws as well as do your day job and you can get prosecuted as well. It is your responsibility to know what is going on and unless irregularities that have been deliberately concealed have taken place, you will be liable; “I didn’t know” won’t wash in a court of law.
Despite asking many times, no one took on responsibility for assigning roles and responsibilities to the directors. A few worked hard, others just attended meetings – already an unbalance.
Needless to say that this resulted in the Sub contract staff doing more work; great for them given they were getting paid and no one else was….!
5. Company Documents: When you register a new business at Companies House, you need to pay attention to the Articles of Association and Shareholders’ Agreement as this dictates the laws of the game for your company.
They may look like scary documents, but you do need to read them and /or ask someone to check them on your behalf. You can change the standard documents at the time of incorporation and at any time in the future subject to the terms therein; you only need to be concerned about this if you have any other shareholders.
With this project, the documents listed at CH still have a heading of “model documents” and it’s clear that no one has modified them…
