Knowledge

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Exiting the EU has created significant uncertainty for many businesses who continue to find themselves second-guessing what Brexit might mean for them.

To help prepare you for whatever Brexit might have in store, we have established a team of Brexit experts. Their advice is to avoid adopting a ‘wait and see’ approach, and instead to put your business on the front foot by starting your preparations now.

Our experts have compiled a Brexit checklist to help you get things started.

Employment law and employees

  • Find out how many staff may be affected by Brexit. How many of your employees are EU nationals? If large numbers were to return to their home country, how would your company cope?

  • Consider morale. To help slow the number of employees choosing to go home, you could review your benefit or employee engagement processes and offer rewards for good work to demonstrate to employees that they are valued.

  • Do you employ any UK nationals whose base of work is the EU? Visa arrangements may be required in these cases.

  • Check Right to Work evidence. It is good practice to ensure the correct documentation is in place as the law currently stands. This will also give you an indication of who may be planning to return home if their documents are due to expire. You may need to make these employees aware of the government’s Settled Status Scheme.

Commercial contracts

It is essential that you carry out a full review of your existing commercial contracts (in particular longer-term cross-border arrangements). The effects of Brexit are likely to be far-reaching when it comes to commercial arrangements. When auditing your contracts some of the things to consider are whether:

  • the contract can be terminated at short notice;
  • there are any minimum purchase commitments;
  • there are territorial references to ‘the EU’. If there are, you need to consider whether this includes the UK after Brexit;
  • there is a clause which deals with which party should bear the burden of increases in costs (including the payment of tariffs) and which has responsibility for customs clearance. It should also be considered whether Incoterms apply and whether these need to be amended to reflect each party’s agreed practices;
  • the pricing mechanisms in the contract effectively provide for potential changes in the scope and rates of VAT;
  • there is a force majeure clause in the contract and if so, what is the precise scope of such clause. Whilst Brexit will almost certainly not be considered a ‘force majeure event’ in itself, depending on the exact wording in the contract, it may be possible to invoke a force majeure clause in connection with changes to specific laws as a result of Brexit.

When considering future contracts, it is important to consider:

  • the location of the parties to the contract. There may be advantages in ensuring that the parties are both located in the UK or the EU;

  • whether it is appropriate to have a pricing formulae to vary prices in the event of changes to tariffs and to have provisions dealing with the parties’ responsibilities for customs clearance (including sufficient flexibility in the contract to deal with the potential impact delays in customs clearance may have on delivery times);

  • whether it is appropriate to include a termination for convenience clause, with a short notice period, or even a specific Brexit termination clause;

  • territorial references to the EU, which will need to make it clear whether or not ‘the EU’ includes the UK;

  • whether the contract needs flexibility to accommodate any future reorganisation of a party to ensure that certain functions stay within the EU;

  • which law is to govern the contract and which courts are to have jurisdiction in the event of a dispute between the parties. It may be more difficult after Brexit to enforce an English law judgment in an EU member state.

Data Protection

  • Identify whether any aspects of your business relies on personal data being transferred from the EU to the UK. Unless (and until) the European Commission decides that the UK provides an adequate level of protection for personal data, it is likely that additional measures will need to be taken for the lawful transfer of personal data. Such measures include the adoption of standard contractual clauses or binding corporate rules.
  • If your organisation offers goods or services to data subjects in the EU or monitors their behaviour, you will be subject to the extra-territorial provisions set out in EU data protection legislation, including the requirement to appoint a representative in the EU. Now is the time to start considering what steps you would need to take to ensure compliance with data protection laws from 29 March 2019 onwards.

Intellectual Property

It is essential that you carry out a full review of your existing commercial contracts (in particular longer-term cross-border arrangements). The effects of Brexit are likely to be far-reaching when it comes to commercial arrangements. When auditing your contracts some of the things to consider are whether:

  • Whilst the UK government has recently confirmed that EU trademarks and registered Community design rights already granted will continue to be protected in the UK after Brexit, it is not yet clear how the registration procedure will operate (although the government has stated that these protections will be granted at no cost and with minimal administrative burden on owners).
  • You should identify any EU trademarks and registered Community design rights which you own and consider whether it is appropriate to file a UK national right in parallel with the EU protection to provide commercial certainty, notwithstanding the protections referred to above. In respect of unregistered Community design rights, consider whether to further protect such rights (e.g. by making an application for registration).
  • It is worth pointing out that applicants for EU trademarks and registered Community design rights which are pending at the date of the UK’s exit from the EU will have a period of nine months to refile the application in the UK in order to maintain the priority date of the EU application.
  • At Beswicks we’re keen to support businesses through the Brexit process, helping them to prepare for changes that are on the horizon and overcome uncertainty. We’re delighted to be working closely with Staffordshire Chambers of Commerce and the International Trade team to ensure businesses are fully prepared.

    NICK PHILLIPS, BESWICKS LEGAL MANAGING PARTNER

Regulation and Compliance

Maintaining compliance with changing regulatory frameworks will be crucial to enabling a business to continue to operate and trade across the EU and non-EU countries as they do now and remain competitive. For example, businesses will need to consider how Brexit might impact their ability to access some tax reliefs; whether their current insurance provisions will still be appropriate; will the ability to operate and trade seamlessly in the EU be disrupted due to regulatory changes; and whether changes to legislation will impact audit and financial reporting requirements?

Financial Planning and Forecasting

Forecasting the impact of decisions and price shock uncertainty will be crucial to maintaining business continuity. Equally important will be the ability to access finance to fund suitable working capital requirements, including managing cashflow, tax implications and technology.

Trade

Can your supply chain withstand any Brexit related disruption without negatively affecting your business and your customers? Businesses need to consider the potential impact of increased customs duties, increased bureaucracy and greater regulation causing delays to the movement of goods and services; and the consequential knock-on, and the effects too cash-flow, lead times, customer relationships, product quality and fulfilment of contracts. Have you made sure your suppliers and their suppliers have thought about this? Also, have you considered sourcing new suppliers locally which may provide better terms?

People and Talent Management

Changes to UK immigration policy will have an impact and businesses should consider how they will continue to recruit and retain the right people to maintain business continuity and make the most of Brexit opportunities asprogressive businesses may well be more successful in attracting and/or retaining quality staff both domestically and in the EU.

Business Management

Avoiding disruption to core operations and maintaining business continuity will require careful planning and may involve restructuring the business or acquiring additional entities in different jurisdictions. This may also mean outsourcing key areas to increase efficiency and enable a business to focus resources elsewhere.

These are just some of the areas we suggest middle-market businesses should be looking at right now to gain a competitive advantage over businesses that are taking a wait and see approach. For more detail, please click here.

  • Brexit will present both challenges and opportunities, and we as a business must prepare for, and react to, those future changes in the interests of our clients. Given this backdrop, we look forward to working alongside the Staffordshire Chamber of Commerce and the Department of International Trade to strengthen the growth prospects of middle-market businesses.

    ANNE LAKIN, RSM OFFICE MANAGING PARTNER

Ryan DakinKnowledge