© m. scheurer, 2002ct218 professional issues1 professional issues – lect.3 1. running your own...

© M. Scheurer, 2002 CT218 Professional Issues 1

Professional Issues – Lect.3

1. Running your own business

2. Contractual issues in Employment and Self Employment

© M. Scheurer, 2002 Professional Issues / Lecture 2

Running your own Business

The Alternatives: Sole Trader Cooperative Partnership Limited Company


Sole Trader (1) Characteristics

Individual operating his/her own business

No legal formalities Tax status Register with Inland Revenue May have to register with Customs &

Excise for VAT


Sole Trader (2) Advantages

Easy to start Little or no formalities Flexible / simple

Disadvantages May lack credibility Unlimited liability (insurance)


Co-operative Support and “companionship” “All in it together” No hierarchy Complementary skills Limited interdependency


Partnership (1)

“The relationship which subsists between persons carrying on a business in common with a view to profit” [the Partnership Act 1890]

Required structure for some professions:e.g. Solicitors, General Practitioners

Can have partnership without formal agreement


Partnership (2) Advantages

High personal commitment Stability

Disadvantages Unlimited liability for the debts of the

partnership High level of Interdependency More difficult to move into and out of

Partnership


Company (1)

Characteristics: The Company has an independent

existence as a legal person (entity)It can participate in any legal process in its own right (e.g. Buy and sell, sue and be sued)

Regulated by the Companies Act (1985 + 1989)


Company (2)

Two types: Public Company (PLC or plc)

May offer their shares to the public Minimum capital required Formal (heavy) structure

Private Company (Ltd) 2 types:

Limited by guarantee Limited by shares


Private Company Limited by Guarantee

Characteristics Each member undertakes to pay a fixed

sum towards the company’s debts in the event of the company being wound up

Members have no other liability for the debts of the company

Used by professional bodies and charities Not used by commercial organisations


Private company Limited by shares (1)

Characteristics Ownership of the company is

divided into shares Minimum capital Shareholders are people or

organisations who own a number of shares in the company

Shares can be traded (within limits)



Advantages Liability of each shareholder (Member)

is limited to the shares he/she owns If the company is wound up, all its

debts must be met (if possible) out of the assets of the company

Anything left over is distributed amongst the shareholders

Cannot lose more that the value of the shares they own



Disadvantages Structure is quite formal

But the Companies Act [1989] provides for a lighter structure for SMEs

Small company

Turnover up to £2m Up to 50 employees Balance sheet total up to £975,000



Memorandum and Articles of Association regulate: The authorised share capital The number and nominal value of shares Who are the initial shareholders How many shares each holds How many shares are issued Whether the shares are fully or partly paid Voting rights Etc.


Memorandum of Association

Controls external relations of the company Name of the company Country of registration (E&W / W / Scotland) Objects of the company (type of business) Liability Authorised share capital Declaration of association “We, … are desirous of being formed into a company in

pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the company set out opposite our respective names”


Articles of AssociationInternal Rules of the Company (Table A)

Rules to apply to allotment of new shares Rules governing the transfer of shares Meetings of members (General Meetings)

Annual General Meeting (AGM) - required Extraordinary General Meetings – optional

Appointment / removal of Directors Powers of Directors Dividends and reserves


Company Directors Elected by the shareholders to run the

company on their behalf Have considerable powers Have obligations:

Act in good faith and in the interest of the company

Exercise skill and care (= negligence) Duty to disclose conflicts of interest Special obligations if company is insolvent


Company Secretary Company Secretary

May be a Director Often an outside professional advisor

(e.g. Solicitor, Accountant) Statutory duty to keep the records of

the company Provide annual return and Accounts

to Companies House


Organisational Structure

Organisation of a M edium Size to Large Company

FinancialD irector

B u dg e tA ccou n ts

O perationsD irector

R e ven u e E arn ingP ro je ct C o m p le tion

Sales & M arketingD irector

S e lling th e C o m p a n y'sP ro du c ts

TechnicalD irector

Q u ality M a n ag e m e ntT e ch n ica l T ra in in g / R & D

PersonalD irector

H u m anR e so u rces

M anagingD irector

C hairm an


Employee Share Ownership Employee Share Ownership

Used to give employees a stake in the company

The company can provide financial assistance to employees to acquire shares in the company

Sometimes done by issuing new share capital Common in HiTech companies

Employee Share Options Gives employee the right to acquire shares in

the company at an agreed price (which may be lower than actual value of shares)

Tax incentives


Virtual Organisation

Portal to promote your work and to interact with other professionals Become more visible on the www Online support (discussion group) More resources Opportunities for joint tenders, etc. Networking opportunities without travel Part of a “one stop shop”


Professional Organisations / Informal Groups Membership may increase credibility

(Code of Conduct / qualifications for membership)

Provide training and guidance Provide support Common resources Opportunity to meet others in similar

circumstances Opportunities to network


Contractual Issues in Employment and Self-Employment

CT218


General Contractual Issues Pre-Contractual obligations

Confidentiality agreements (see example) Invitation to Tender Offer and Acceptance Consideration Unfair Contracts Terms European legislation Law applicable Forum


Contractual Issues - Employment Enquire about opportunities:

to learn from others to learn new skills (training) to work on a variety of projects

Conditions of work Privacy Technical support Hours of work/travel/Overseas

secondment Career prospects and rewards

(e.g. shares / share options)


Contractual Issues – Employment (2)

Who owns the software you develop (IPR) What rewards will you get if you develop a

product which is a market winner? Your reward for introducing clients What happens if the company is taken over? Benefits (bonus / health plan / pension) What happens when you leave the company

Restrictions to who you can work for Restrictions as to what you can do Restrictions as to the use of your software


Contractual Issues – Employment (3) Unethical or illegal behaviour by

Employer or Fellow Employees Software Piracy IPR violations Infringement of legal obligations

(e.g DPA) Invasion of Privacy (legal or illegal

snooping)


Contractual Issues – Self Employment (1) Working for an Agency

Work specification (realistic deadlines) Terms and conditions of payment Your liability Professional Insurance Agency’s Membership of professional

body Your Membership of professional body The Agency’s reputation with Contractors


Contractual Issues – Self Employment (2) Working for Direct Clients

Terms and conditions (whose?) Who owns the IPR Detailed specifications / milestones Scheduled payment linked to milestones Compensation for late delivery Availability of resources from the Client Procedure to resolve conflicts (arbitration)

Will be dealt with in greater depth in Lecture on “Software Contracts”


Contractual Issues – Self Employment (3)

What happens if the client does not want the product any more? Realistic expectations of benefit of the

product for the company Realistic expectations of market prospects

Other issues: Staff training (on use of software) Data population Additional / changed requirements Change of hardware / platform Data Protection Act


CT218

Next Lecture

Software Contracts

© m. scheurer, 2002ct218 professional issues1 professional issues – lect.3 1. running your own...

Documents

company shares

shares slide

professional issues

partnership slide

professional bodies

contractual issues

vat slide

limits slide