Key legal considerations for growing your consultancy

Wherever you are on your growth journey, building your consulting business on strong legal foundations means you’re better prepared for whatever lays ahead. And while legal considerations might not always feel high on your priority list, if you don’t give them the attention they deserve, in the future they can absorb a considerable amount of your time and energy.

So, we invited John Woodhouse and Frank Jennings from Wallace solicitors to host our June webinar. They covered the five most relevant legal topics in 2020/21 for growing consulting businesses. 

Read on, and watch the clips of the webinar below, to find out just some of the insights John Woodhouse and Frank Jennings, both partners at Wallace Solicitors, kindly shared with us. 

1. Delayed IR35 changes and contracting with associates

The implementation of the new IR35 regulations might have been delayed until 6 April 2021, but to stay on the right side of HMRC, John explained the basic provisions that owners of consulting businesses should consider when contracting with associates. These main contractual characteristics will help show that you are hiring associates as independent contractors and not as employees.

Business owners should review their associate agreements to ensure that they properly reflect the intended legal status of each associate as an independent contractor.  There are simple contractual provisions which can significantly mitigate the risk and potential liability of HMRC challenging an associate’s legal status within your business.

2. Intellectual property

John outlined the challenges associated with intellectual property (IP) that is contributed both by employees and that developed by associates. “If your employees deliver the work, the IP is automatically owned by the company,” said John. “But when you’ve got contractors contributing to assets such as an online platform, that IP is not automatically owned by your business.”  Members also learned that if you have paid an external agency to develop your own website, it is not a given that you own all the IP within it.

John also flagged a number of IP risks when contracting with clients. “When you’re contracting with clients on their master services agreements, be really careful of some draconian IP provisions, and make sure you’re not granting extensive license rights or, worse still, giving away any IP during the course of your project.”

3. Employee incentives

John explained that enterprise management incentives (EMIs) are a useful, and relatively cheap, way to attract new staff and reward and retain existing employees. Helpfully there is plenty of flexibility around how and when to use them, and how the recipients can enjoy the benefit of the option going forward. 

Here is a clip of John explaining the benefits of exit-only EMI schemes.

He also shared why having a lapse provision is so important for when an employee leaves.

4. Brexit

As we come out of lockdown, Brexit is coming back onto the agenda. Frank helpfully explained what you  need to do over the next 6-12 months, in relation to existing or future team members domiciled outside of the UK, to comply with any new regulations. 

He also explained how Brexit will impact tariffs, exchange rates, data flows (including GDPR) and changes to contracts – potentially critical considerations for consultancies working in overseas locations.

5. Compliance

Finally, Frank explained the key compliance issues growing consultancies need to be aware of at the moment. These include GDPR, anti-bribery, modern slavery, health and safety and ESG (environmental, social and governance).

While some of these compliance issues are tick-box exercises due to the size of the businesses our members manage, Frank explained that others require careful attention. “If you’re dealing with a large customer or supplier who could be directly caught by this,” he said, “you’ll need to feed into their reporting mechanism to say they’re not engaged in, for example, modern slavery.”

Some compliance issues are also particularly relevant if you’re considering a future sale of your business, as John explained in this response to a question from one of our members:

John and Frank’s presentation sparked several other interesting questions from members. Visit our site to get hold of the entire webinar or find out about our upcoming events. These events are included in all our membership packages and non-members can join one event for free before deciding whether to join the network. If you would like to discuss becoming a member, contact George on george@consultancygrowthnetwork.com.