Lifecycle of a Business Part 6 - Assets, Employees and Data
BLM's Lifecycle of a Business series captures key elements of a business's growth story - from the highs of formation right through to lows of dissolution. Our experts’ advice and knowledge will
Business Assets, Employees and Data Management
You've decided on the appropriate business structure; company name; financing plan and clarified the relationship between shareholders and the directors by drawing up a written agreement. Now it is time for you to consider other legal issues that your company may face. For instance, what do you need to think about if you employ new staff and want to protect key business assets?
A company’s assets will belong to the company and not to the people owning, managing or running the company, such as directors. Under a partnership, it would be advisable to clarify in the partnership agreement the precise ownership of assets and whether the business can use the assets. Disputes may rise over an asset which has been obtained during the partnership. In absence of a Partnership Agreement, the Partnership Act 1890 provides all property brought into the partnership is the partnership’s property and belongs to the partnership business. Some assets in a partnership are easier to identify than others e.g. title deeds to a property or land.
It is vital that you protect and minimise the risk of losing or damaging the assets your business will acquire. You should manage your assets by properly documenting what your business owns and mapping out any potential threats that could arise.
Business assets are valuable items. You should first distinguish what type of business assets your company or partnership owns and keep track of them. They can range from liquid or cash, raw materials and stock, office equipment, buildings and intellectual property. These are categorised into tangible, current, fixed or intangible assets. Tangible assets are financial resources of your business such as cash, stock or machinery. Intangible assets are items such as brand or intellectual property (which for some businesses will be the most valuable asset of all). Current assets have a shorter life span and can be immediately accessible, for example deposit accounts or stock. Some assets can fall within more than one category.
So familiarise yourself with what your business owns and get the appropriate legal advice where applicable. Managing your business assets will not only help for accounting purposes, such as completing accurate balance sheets, but it will help you keep track of the business’ value. Make sure that your assets are properly insured and be aware that the values of assets such as intellectual property can change rapidly.
If you are concerned about the security of your assets, for example have cause to believe that your business’ intellectual property rights have been infringed, copied or exploited, then it is essential that you seek legal advice at the earliest opportunity.
In the case where your business is expanding and a larger workforce is required, you must now consider employing more staff for your business. Employees are a form of intangible asset and will add commercial value to your business.
Employment law will govern the relationship between the business and the employees. Employment law is a specialised, practice area separate from company law. A properly drafted employment service agreement is required, which should protect the interests of the business and its employees. It will help the employee know what is expected of them and help the owners of business to manage their staff efficiently.
These contracts are supplemented by handbooks, policies and procedures to regulate the relationship. It is essential that you seek legal advice for the drafting of an employment agreement, as it gets the relationship off on the right foot and should reduce the threat of expensive and avoidable litigation.
Every asset your business owns is important but, some are easier to protect than others. For example, premises can be fairly easily protected through physical security measures. Others, like data, may be harder to protect. Strategic confidential business information, commercially-sensitive data or intellectual property rights (IPR) are also at risk if they are not properly, developed, protected, managed or defended.
Data is information which is assembled together for reference analysis, and exploitation. There are different types of data that your business could hold for example, confidential business related information or personal data.
Data management is applicable to all business models regardless of the sector it is in. Data has been referred to as the ‘oil ‘of the digital age and personal data can be both a business’ core asset and potentially its biggest source of risk. Some businesses generate revenue solely from data acquisition, but many are simply unaware of their obligations pursuant to the GDPR and Data Protection Act 2018.
What type of data will affect your business?
When starting a business you will need to consider what type of data your business will acquire or have access to. There are different types of data that your business will have to manage and protect. The level of protection available depends on where the information is categorised by law.
From a business prospective, it is also important to protect any strategic business information. Your business will hold certain information that will be classified as confidential information. To protect business related confidential information is dependent upon the information that is at risk of being exposed. If for example an employee at ‘The Widget Fixer Ltd’ was to disclose designs or plans for development of new products this could cause damage to your business. This type of information will be categorised as Trade secrets.
The other crucial type of data that your business will need to manage is personal data. The General Data Protection Regulation (EU) 2016/679 (GDPR) was put in place in 2018 and aims to protect personal data. GDPR is directly applicable to all EU member states, with Brexit; GDPR is still relevant to UK entities because the UK government has incorporated it into UK domestic law.
To put it plainly, it is highly advisable that the appropriate safety nets are put in place to protect and avoid and mitigate against data breaches. Your business will risk facing legal consequences in the event of a personal data breach, regardless of your business model. Although your compliance strategy will depend upon the risk posed to individuals in terms of how you process their data, and accountability for that processing through proper policies and procedures being in place, civil claims by individuals arising from data breaches are becoming more common and we are soon likely to see the first real monetary penalties issued by the Information Commissioner’s Office since the GDPR came into force. In the digital and data-driven age, it is crucial to seek proper legal advice and “plan in peacetime”.
Our team of business experts can advise you on this key stage of your business, find out more and request further information to support you and your business.
Read further into our series with part 7: Lifecycle of a Business - Making decisions.
Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to clients of BLM. Specialist legal advice should always be sought in any particular case.