
Compulsory Purchase
Quantification of business losses
Vero Consulting provides expert and authoritative analysis and opinions on the financial, accounting and tax implications of disputes and investigations.
The key to having a successful relationship with a commercial agent who is acting on behalf of your company in the UK, is planning ahead.
We see it all too often; Company/Commercial agent partnerships operate with unwritten agreement as the business is small and in a start-up phase.
However, once the business starts to grow and increase its revenue the principal may want to reduce costs by lowering the amount of commission they are paying to the commercial agent.
This is when difficulty can start.
My advice for solicitors when arranging a commercial agent agreement:
– Prepare a formal written contract.
– Have the contract worded so that the compensation provisions do not apply.
– Understand how the agent operates and their cost and revenue base.
It’s essential to know how the agent operates when it comes to quantifying the compensation due on termination, so you need to accumulate as much information as possible well before there is any thought of terminating the contract.
In most cases a commercial agent has few overheads, so the potential for a large claim is considerable.
Quite often a lot of accounting analysis and negotiations are needed to settle a commercial agent dispute so it is always best to talk to Vero first, to determine the expected costs before terminating an agent and the options.
To find out more about commercial agent compensation, please click here and I’d be happy to have a ‘commitment free’ discussion about your issue.
Regards,
Charles Lazarevic
For a lot of international businesses looking to branch into the UK market, they will initially engage a commercial agent to represent the company to generate local sales for the business.
This can, on the surface, appear to be a risk-free option for a company that wants to dip their toe in the UK market, without the burden of the big overheads associated with opening a new office.
However, overseas companies, particularly those from outside the EU, overlook the protection that commercial agencies have when the agreement is terminated.
For example, if an international company may decide to set up their own sales team inhouse after an initial successful prior of growth using a commercial agent. A principal wishing to terminate the commercial agent’s agreement is likely to be faced with a claim for compensation. This often comes as a surprise to principals operating in other English-speaking countries, such as the US, Australia and Canada, who may have assumed their laws will be similar.
Although the UK is no longer part of the EU, the commercial agent compensation laws continue to be based on EU regulations. This means that a commercial agent can ask for compensation for the value of the business. This applies even if they had not initially created that business – which can come as a complete shock to some international businesses.
A well structured contract, and careful monitoring of the arrangement during the life of the agency, can simplify the process of terminating a commercial agent agreement. We are able to draw on our experience of assisting parties that have faced compensation claims to advise parties when negotiating new agreements so they minimise the risk of large claims.
To find out more about commercial agent compensation, please click here and I’d be happy to have a ‘commitment free’ discussion about your issue.
Regards,
Charles Lazarevic
Businesses come in all shapes and sizes, as such, no two disputes are the same.
It can be hard to know when there may be a dispute after the sale and where there will be a need for an expert determination to settle the business valuation.
So, here are some examples of where we have been appointed to provide an expert determination in various industries.
A business being sold with ageing plant and machinery that may require upgrading or repair, it is vital that both parties investigate the state of the equipment before concluding sale negotiations. We have seen situations where the new owner has claimed after the sale that machinery was in such a poor state of repair that it was worthless or needed a great deal of attention, thus reducing its value in the completion accounts or charging for repairs, thus reducing the reported profits and the earn out payment.
The same goes for a business where the buyer needs to introduce changes in practices and restructuring will be required going forward. We have seen situations were the buyer has incurred considerable restructuring costs and reduced the earn out figure to almost nothing. In this situation it is vital the SPA is drafted in such a way that these reorganisation costs fall on the new business owner and the seller is not disadvantaged in any earn out payments due.
For a business involving facility management, such as a nursing home or care facility, the business will rely on plant and utilities that are essential to maintain the safe continuation of the business. Without knowing the state of these utilities, a buyer can be in for a rude shock once they take over the property if they discover that the utility equipment do not meet health and safety standards. After all, it will be in the buyer’s interest to make their own pessimistic assessment of the value adjustments and so lower the value of the business and payment to the seller..
We have acted in many expert determinations and can draw on this experience to help sellers when agreeing the terms for completion accounts and earn out calculations. We can also help when preparing submissions to an expert appointed to prepare an expert determination in order to put their best case forward in a convincing way.
To find out more about our expert determination experience, please click here and I’d be happy to have a ‘commitment free’ discussion about your issue.
Regards,
Charles Lazarevic
When a business sale dispute reaches the point where negotiations over the completion accounts or earn out have stalled, that’s when an expert determination can move the process along and produce a quick and final resolution.
When Vero is first engaged to perform an expert determination, both parties will be asked to submit papers to demonstrate the history of the case up to the point of dispute. Once this paperwork is submitted both parties will have an opportunity to respond to the other party’s case.
After careful consideration, further questionnaires and investigation, the determination will be handed down, and this decision is final. At this point the dispute is resolved, and the funds can then change hands to finalise the sale.
Can an expert determination be overturned?
The benefit of expert determination is how quickly the process can take place, without the cost of lengthy legal proceedings, and with the benefit of having had an expert eye address the issues impartially.
The only way to overturn an expert determination, there needs to be evidence of a serious error i.e., ‘manifest error’, clearly demonstrating that the expert has got it wrong.
This does mean you have to carefully choose your expert as it is very rare that an expert determination will be overruled.
To find out more about expert determination, please click here and I’d be happy to have a ‘commitment free’ discussion about your issue.
Regards,
Charles Lazarevic