Category Archives: Insight Article

As businesses increasingly turn to AI-driven solutions, the dynamics of decision-making, risk management and strategic planning have undergone a profound evolution. Directors must navigate the demanding interplay between technology and corporate governance to steer their companies towards a successful and ethically sound future in the AI-influenced corporate world.

Understanding AI impact

Strategic decision-making

Directors need to grasp how artificial intelligence affects the company’s strategic decisions. This includes understanding how it can optimise processes, enhance product development and improve customer experiences. Without this knowledge, they might miss out on innovative opportunities it can provide.

Ethical considerations

AI applications often involve complex ethical considerations, including issues related to bias in algorithms, data privacy and the impact of AI on society. Awareness of these ethical concerns is essential to ensure the company’s AI initiatives align with ethical standards and public expectations.

Risk assessment

AI implementation introduces its own set of risks, such as cybersecurity threats and legal challenges. Directors must be well-versed in these risks to make informed decisions about its adoption, develop risk mitigation strategies, and ensure the company operates within legal boundaries.

Compliance and regulation

The legal landscape surrounding AI is continually evolving. Directors need to understand the regulatory requirements related to AI applications in the jurisdictions where the company operates. Compliance with these regulations is a legal obligation and a crucial aspect of maintaining the company’s reputation and customer trust.

Financial implications

AI implementation involves significant financial investments. Directors must understand the financial implications, including the costs of implementing AI solutions, potential return on investment, and long-term financial sustainability. This understanding is essential for budgeting, financial planning, and resource allocation.

Stakeholder expectations

Shareholders, customers, employees, and other stakeholders may have varying expectations and concerns regarding AI. Directors must be aware of these expectations to address concerns transparently and align initiatives with stakeholder interests.

Overseeing Implementation and Use

In terms of oversight and use, the scrutiny applied to AI should mirror the rigorous approach directors take towards other critical aspects of the business, such as management, compliance, risk, and disclosure:

Transparency and accountability

Directors must ensure transparency in AI-related decision-making processes. Transparency fosters accountability, which is essential for building trust among stakeholders.

Regular assessment

AI initiatives should be regularly assessed and evaluated, just like other aspects of the business. Directors should demand comprehensive reports on performance, risks and compliance to make data-driven decisions and adjust strategies as needed.

Continuous learning

The field of artificial intelligence is rapidly evolving. Directors must continuously learn to stay abreast of the latest advancements, emerging trends and best practices. This knowledge equips them to make informed decisions and guide the company toward sustainable adoption.

By ensuring that their understanding of AI’s impact is comprehensive and their oversight approach is thorough, directors can effectively navigate the challenges and harness the opportunities and plethora of ever-increasing benefits presented by artificial intelligence.

Contact corporate partner Victoria Holland today.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

Understanding charities

Charities are organisations focused on benefiting others rather than personal gain. The UK has over 160,000 registered charities, all defined by the Charity Commission as altruistic entities. Charities often arise to address unmet needs, and often, they emerge from personal experiences or community projects. While major charities get attention, smaller ones can also significantly impact communities.

Charity vs. business

Charities solely serve their charitable purposes, unlike businesses that mix charitable and non-charitable activities. To generate profits through a charity business, consider social enterprises or Community Interest Companies.

Fundraising

Starting a charity requires dedication and sustainable funding. While government grants are common, competition is tough. Relying solely on grants may not be viable. Diversifying funding sources like using the National Lottery grants and creating a solid charity business plan are crucial if you want your charity to have a lasting impact.

A well-crafted business plan guides a charity’s operations and understands beneficiaries’ needs. Thorough research into your business plan will help you secure funding, as most applications require a comprehensive plan.

Rules and regulations

Once your charity generates more than £5,000 in revenue, it becomes mandatory to register with the Charity Commission. Registration is a rigorous process, and registered charities must comply with a set of standards outlined by the commission. Before registering, your charity must establish a robust charity structure, which typically involves adopting a governing document and appointing trustees.

Four common charity structures

Unincorporated associations: Suitable for small charities that do not anticipate exceeding a certain revenue threshold. However, trustees of unincorporated associations bear personal liability for the charity’s activities, and this structure lacks a separate legal status.

Trusts: Appropriate for charities that already possess funds they wish to contribute to a charitable cause. Trusts also lack a separate legal status.

Charitable incorporated organisations: Charitable incorporated organisations are a relatively new legal structure for charities that combine the benefits of limited liability companies with the simplicity of registering with the Charity Commission.

Charitable companies: Operate similarly to private companies limited by guarantee, providing the flexibility to employ staff, own property, and engage in various business activities. This structure protects personal finances and assets, as the charity possesses its own legal identity. Additionally, charitable companies must register with Companies House.

Choosing the right charity structure

Selecting the appropriate charity structure for your organisation is a critical decision that impacts various aspects of its operations. Factors to consider include who will run the charity, how it will be governed, and the range of activities it can undertake. Each structure has its advantages and disadvantages, and it is essential to assess your specific needs and objectives before making a choice.

Unincorporated associations are suitable for small charities with limited resources. At the same time, trusts are ideal for those with existing funds to contribute. Charitable incorporated organisations offer the benefits of limited liability companies without the administrative complexity. In contrast, charitable companies provide flexibility in employing staff, owning property, and conducting business activities. You should carefully evaluate your requirements and, if necessary, consult legal professionals to determine the most suitable structure for your charity.

Converting a limited company to a charity

If you currently operate a registered limited company and wish to transition it into a registered charity limited by guarantee, it is possible to change your Articles of Association rather than initiate the process of starting a new charity. This option allows you to leverage the existing structure and resources of your company while aligning its activities with charitable purposes.

By amending your Articles of Association, you can reflect the new charitable direction of your organisation and ensure compliance with charity regulations. Working with legal professionals or utilising online resources can guide you through converting your limited company into a registered charity, enabling a seamless transition while maintaining continuity.

Conclusion

Establishing a charity represents an opportunity to make a lasting impact on society and contribute to causes that align with your values. While the process can be complex, understanding the legal considerations and following the necessary steps outlined in this guide will help you navigate the path to successfully launching your own charity in the UK. By conducting thorough research, crafting a comprehensive charity business plan, and selecting the appropriate structure, you can set the foundation for a sustainable and impactful charitable organisation. Remember, seeking advice and professional support throughout the process can provide valuable insights and ensure compliance with legal requirements, allowing you to focus on making a meaningful difference in the lives of others.

Contact corporate partner Victoria Holland today.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

Digital contracts: How going digital boosts contract security

Digital contracts are agreements or e-contracts created and executed using digital methods. Parties no longer need to print, manually sign, scan, and email (or post) various sections or counterparts. It’s a development that offers better security and authenticity than traditional ‘wet ink’ methods, says Patrick Simpson.

Now or never: When’s the right time for an acquisition?

Acquisitions can be a vital strategy for business growth. They can increase outreach and value by adding depth and scale to both your people and operations. However, if poorly handled, an acquisition can cause disruption, unsettle the workforce, and decrease the business’ overall value. Evangelos Kyveris outlines five things you should consider before acquiring a business.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

In this article, corporate partner Victoria Holland highlights examples of the Unfair Contract Terms Act (UCTA)’s reasonableness test by looking at two examples of case law.

St Albans City and District Council v International Computers Ltd

Case background

The St Albans council bought a computer system from International Computers Limited (ICL) to collect a new local tax. St Albans overestimated the number of taxpayers because of a fault in the software and set the rate too low. It sued ICL for over £1 million in damages for breach of contract. ICL relied on a clause in its standard terms of business limiting its liability to £100,000.

Decision time

Both the High Court and the Court of Appeal held that the limit of £100,000 was unreasonable under UCTA. The main reasons for finding the limit unreasonable were:

• ICL was a large company with substantial assets and well insured. Therefore, it was better positioned to bear losses than the St Albans local authority. The local authority would have to meet losses from increased local taxes, reduced services or both.
• It was reasonable for the person making the profit to carry the risk.
• ICL was in a strong bargaining position. St Albans had no realistic alternative to accepting ICL’s terms. St Albans had objected to the limitation clause in negotiations. However, ICL said St Albans had to refer any changes back to its legal department. The resulting delay would have made it impossible to launch the new tax on time.
• St Albans had not been offered any inducement, such as a reduction in price, to accept the limitation.
• St Albans had no opportunity of getting better terms elsewhere because other sellers were offering similar terms (with the same cap on liability).
• The limitation of £100,000 bore no relation to ICL’s insurance cover of £50 million, and ICL had not attempted to justify the difference.

As an aside, the Court of Appeal reduced the award of damages on unrelated grounds.

Phoenix Interior Design Ltd v Henley Homes plc and another

Case background

Interior design services were provided to the defendants by Phoenix Interior Design for the refurbishment and fitting out of the 5-star Dunalastair Hotel in the Scottish Highlands. Phoenix sought payment of outstanding invoiced sums, representing 50% of the total contract value. The defendants argued that the contract had not been completed based on various allegations that the goods and services supplied had been defective and counterclaimed for damages for breaches of warranty.

The case was tried over two weeks in the Queen’s Bench Division. The judgment considered the law on the incorporation of standard terms and conditions, UCTA’s reasonableness of exclusion clauses, acceptance, and contractual completion. The defence for the counterclaim related to the following clauses:

“8 Warranties and Liability

8.1 Subject to the conditions set out below, the Seller warrants that the Goods will correspond with their specification at the time of delivery (subject to the Seller’s right under clause 3.3 to alter and amend any specification) and will be free from defects in material and workmanship for a period of 3 months from delivery.

8.2 The above warranty is given by the Seller subject to the following conditions: ……

8.2.3  the Seller shall be under no liability under the above warranty (or any other warranty, condition or guarantee) if the total price of the Goods has not been paid by the due date for payment. “

Application of the reasonableness test

UCTA’s reasonableness test applies here where the terms seek to exclude liability. The court held that the exclusion was ineffective because it was an unusual clause hidden in the terms and conditions and hadn’t been properly highlighted to the customer. It was also unclear and exorbitant, which would bar all rights of redress against the supplier for even a slight delay or deduction. The following points were raised and should be taken into account when drafting and dealing with limitation clauses in standard terms:

Visibility and Signposting: Ensure that harsh and unusual exclusions and limitations are clearly visible and not hidden in small print. This helps to avoid disputes and challenges regarding their incorporation and enforceability.

Incorporation of Standard Terms: Make it easy for the counterparty to find the standard terms. Clearly state how the terms are incorporated into the contract. Even if the terms are not provided “overleaf” as stated in pre-contract proposal documents, they can still be considered incorporated if they are supplied separately to the customer, both in hard copy and by email.

Reasonableness Test: The same factors that affect the incorporation of standard terms are relevant to the reasonableness test under the Unfair Contract Terms Act (UCTA). If the exclusion or limitation clauses are clearly visible, the supplier will likely have a stronger case on reasonableness.

These practical points should help ensure that limitation clauses are effectively drafted and incorporated into contracts, reducing the risk of disputes and challenges.

Key takeaways

Applying the reasonableness test can be complex and highly fact-specific. When negotiating your commercial contracts, it is advisable to consult legal professionals well-versed in contract law and who can help navigate UCTA and other relevant statutory and case law.

Speak to corporate partner Victoria Holland for more detailed and accurate guidance on applying the reasonableness test under the Unfair Contract Terms Act. Call him today.

Note: This article is not legal advice; it provides information of general interest about current legal issues

Photo by Nick Collins on Unsplash

The Advertising Standards Authority (ASA) has found Shell guilty of ‘greenwashing’ with an advertising campaign themed ‘ready for cleaner’ that breached advertising guidelines.

The ASA ruled the petrochemical giant’s campaign was misleading as it left out information on Shell’s more polluting work with fossil fuels. The ASA banned the adverts from appearing in the future.

It’s the latest such breach confirmed by the ASA. This follows Tesco’s ban for a plant-based burger ad, a Persil advert, and two HSBC adverts. The ASA found all to be misleading in their claims of environmental benefits.

The ASA is the UK’s independent advertising regulator responsible for ensuring that ads across UK media stick to the advertising codes.

“Action like this to tackle inflated environmental sustainability claims is only likely to increase, as we see rising consumer and investor demands for products and services that fulfil sustainable objectives.

For example, companies who may have selectively highlighted some actions over others, or perhaps slapped a green label and a recycling logo on a product need to be aware that their customers are going to look below the surface to be sure that brands aren’t offering them empty promises.”

Victoria Holland, Partner and Head of Corporate and Commercial at RIAA Barker Gillette

The press has spotlighted corporate greenwashing in the financial services sector too. But, the Financial Conduct Authority has anti-greenwashing rules on its schedule for later this year. It intends to include them in its Sustainability Disclosure Requirements.

“Certainly, larger organisations need to focus on Environmental, Social, and Governance (ESG) ratings, as this increasingly drives investment decisions in financial markets. It is inevitable that this type of attention will filter down to smaller enterprises regarding consumer demands.”

Victoria Holland

The term ‘greenwashing’ was first coined by an environmentalist in the USA during the 1980s. However, it has only recently entered everyday use. Some of the examples highlighted as corporate greenwashing tactics include:

• Companies claiming that they have implemented positive ESG processes while the results or progress are yet to be seen
• Cherry-picking product attributes or data and ignoring others which would be negative in environmental terms
• Misuse of labelling schemes

The ASA and its sister organisation CAP (Committee of Advertising Practice) have published guidance. The guidance aims to help businesses comply with the ASA and CAP’s codes for broadcast and non-broadcast advertising, sales promotions and direct marketing communications. They also include postings on social media.

Contact Victoria Holland today.

Note: This article is not legal advice; it provides information of general interest about current legal issues.