Non-execs: what does the role require?
Have you been asked to sit on the board of another company? Would you like to ask someone to provide independent input to your board? Either way, it is a good idea to know just what the statutory expectations of non-executive directors are, particularly given that the roles can vary quite substantially in practice. This is increasingly relevant as more and more SMEs are realising the real benefit and value that these advisors can bring to their businesses by drawing on their wider business experience and in providing checks and balances to the company’s corporate governance as a whole.
The Institute of Chartered Secretaries and Administrators (ICSA) has recently published guidance on the obligations and liabilities of non-executive directors including best practice methods designed to help those appointed prove that they have exercised due care, skill and diligence in the performance of their responsibilities. The guidance covers such issues as:
- Carrying out their own due diligence before joining a board
- Avoiding conflicts of interest
- Providing input into their induction programme and taking responsibility for their on-going training and continuous development
- Being prepared to provide independent oversight and constructive challenge to the board
- Insisting on receiving high-quality information sufficiently in advance of meetings, and any other important information between meetings when it becomes available
- Making decisions objectively in the interests of the company
For further detail on the new guidance check out the ICSA website or please get in touch.
Get invoices paid on time so you can concentrate on more important things!
New regulations to help supplier cash flow: In our February newsletter we talked about creditors’ statutory right to claim interest on debts that are paid late and how this can help get those troublesome outstanding invoices paid. We now have some more good news for creditors. New Regulations came into force on 16 March 2013 (The Late Payment of Commercial Debts Regulations 2013 which amend the Late Payments of Commercial Debts (Interest) Act 1998) the aim of which is to encourage prompt payment of invoices, in particular to protect small suppliers from suffering cash flow problems due to late payment of their invoices.
The Regulations apply to the supply of goods and services and impose new time limits to pay invoices in addition to the existing statutory rate of interest for overdue payments set out in the 1998 Act. The amendments will only apply to contracts made after 16 March 2013.
The 2013 Regulations introduce new time limits to pay invoices for the following types of contract:
- If the contract is silent on the payment term, payment must be made within 30 calendar days after the latest of the customer receiving the supplier’s invoice, receiving the good or services, or verifying or accepting the goods or services.
- If the contract contains an express payment term, the parties can agree payment up to 60 days from the date of invoice, receipt of goods or services or verification or acceptance of the goods or services. The parties can agree an extension to this limit and go above 60 days as long as this is in writing and not “grossly unfair”. The 2013 Regulations define “grossly unfair” as anything that is a gross deviation from good commercial practice and contrary to good faith and fair dealing, taking into account the goods and services in question, and whether the buyer has any objective reason to deviate from the standard 60-day period.
Business-to-public authority contracts.
- If the contract is silent on the payment term, payment must be made within 30 calendar days after the latest of the customer (i) receiving the supplier’s invoice, (ii) receiving the good or services, or (iii) verifying or accepting the goods or services. Public authorities must pay more quickly than businesses.
- If the contract contains an express payment term, public authorities must pay within 30 days from the date of invoice, receipt of goods or services, or verification or acceptance of the goods or services. There is no possibility to extend this period.
The 2013 Regulations do not change the statutory rate of interest that applies to late payments not made within the prescribed payment period. This remains at the current level of 8% over the Bank of England base rate (which is used as the base reference rate fixed on 1 January for the following six months and then on 1 July for the following six months). Parties may contract out of the statutory interest rate and negotiate their own more commercially acceptable interest rate as long as it provides a substantial remedy for late payment.
If you are a supplier you can claim a fixed charge for recovering the debt (£40, £70 or £100 depending on the size of the debt) plus any other reasonable costs of recovery. You may wish to amend your standard terms and conditions to include these charges.
If you are a customer, you may want to review your standard terms and conditions of purchase to see if they include a payment period that exceeds 60 days, as you will be required to justify that such a longer term is not grossly unfair to the supplier. Note that any term that completely excludes the right to claim interest will always be considered grossly unfair.
Credit: This article contains materials provided under licence by Practical Law Company and content produced by Baker & McKenzie LLP.