Your business is thriving and you are looking to scale it to maximise its full potential. But scaling a business presents various legal challenges that need to be considered and confronted at the outset.

At Fisher Jones Greenwood, we work with SMEs at different stages of growth, and often find that the legal structures and agreements that worked perfectly well when a business was smaller begin to show weaknesses as it scales. Below are some of the areas our teams commonly address with clients before growth accelerates.

Governance and constitution

If your goal is to scale your business, the starting point should be reviewing your existing governance framework and ensuring it is fit for purpose.

If your business is a limited company, it is time to review its internal rulebook – its articles of association. The articles should deal with important matters such as:

  • What happens to a shareholder’s shares if they die or become critically ill?
  • Are there pre-emption rights giving the company or existing shareholders a right of first refusal before shares are sold to third parties?
  • How many directors are required to hold a valid board meeting?

Companies must ensure that they are acting in accordance with their articles of association, as failure to do so can call into question the validity of actions taken. We sometimes see this in the context of board meetings, where a company’s articles require two directors to be present to hold a valid board meeting, yet the company has been operating with only one. Problems like this may go unnoticed while a business is small, but can become significant when an investor or buyer begins due diligence.

If the business has been operating as a partnership, is there a partnership agreement in place? A robust partnership agreement should document how profits are to be shared, what the process is if a partner wishes to resign, and how partnership disputes are to be resolved.

If the governance of the business is non-existent or the parties have not reviewed and put in place robust constitutional documents, this can cause significant issues further down the line; particularly when a potential investor or buyer conducts due diligence.

Contracts with customers and suppliers

As part of preparing a business for growth, our Corporate & Commercial Team will typically look at whether contracts and agreements with customers and suppliers are current and properly documented and whose terms govern the relationship.

It might be the case that agreements have expired, and the parties continue to trade without a written contract in place. Alternatively, you might be contracting on another party’s standard terms of business. Do you know the terms on which you are contracting? Have you reviewed those terms?

It is essential all commercial relationships are properly recorded in written contracts, particularly if you are looking to raise funds, as lenders can be reluctant to lend where there are no written terms in place. Binding written terms provide certainty, which is what lenders often look out for when making lending decisions.

If you have consumer clients, it is important to ensure your terms and conditions comply with the Consumer Rights Act 2015 and that you are aware of your obligations thereunder. We regularly help businesses review or replace documentation that was created during their early stages, which may have been drafted without professional legal advice or using AI tools. Whilst this may appear to be a cost-saving measure in the early stages of a business, it is worth noting that AI can produce inaccurate or incomplete outputs. It is always advisable to seek specialist legal advice to avoid legal disputes further down the line.

Intellectual property

Our Corporate & Commercial Team can help identify what intellectual property the business relies upon, who legally owns it and whether additional protection is needed before investors, funders or potential purchasers become involved.

If your business has a website or uses logos and branding, there are several intellectual property questions to address.

Do you know who owns the domain name of the website? Have the business name and logo been registered as a trademark with the Intellectual Property Office? Have you sought express permission to use a third party’s logo on your website?

Additionally, it should be clearly identified whether the limited company owns the website domain and trademark registrations, or whether these are held personally by the individual owners. Having a clear understanding of who owns what intellectual property is essential, particularly when it comes to valuing the business or onboarding investors.

Website compliance

If the business has a website, it is important that it includes appropriate privacy notices and complies with its obligations under the UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018. At a minimum, a website should include:

  • A privacy policy that clearly explains how personal data is collected, used, and stored
  • A cookie policy and consent mechanism; explicit consent must be obtained before non-essential cookies are placed on a user’s device
  • Appropriate safeguards to ensure that any personal data collected from customers is processed lawfully, fairly, and transparently.

Employment contracts and policies

Do you have employment contracts and workplace policies that are compliant with current employment legislation?

Growth can change the complexity of managing people very quickly. Often, SMEs take a lax approach to employment matters, and this can become a serious risk if employment issues arise, such as unfair dismissal claims, disputes over restrictive covenants, or non-compliance with statutory requirements.

We can also help businesses put appropriate contracts, policies and procedures in place as their workforce expands, rather than waiting until a costly employee dispute exposes weaknesses in existing arrangements.

Exit and succession planning

It is important when scaling your business to consider what the exit plan may be in the near or medium-term. Understanding the owner’s long-term ambition allows us to work backwards from that goal. Whether the eventual plan is a family succession, third-party sale or management buyout, our teams can advise on the legal and tax implications and help structure the business today in a way that supports that future outcome.

Looking to the future

Scaling a business is an exciting journey, but it is one that requires careful legal planning. The issues outlined above are not exhaustive, but they represent the areas where we most commonly see SMEs encounter difficulties.

The best time to address these issues is often before rapid growth exposes them.

If you are considering scaling your business, Fisher Jones Greenwood can help.

At Fisher Jones Greenwood, our experts provide clear, practical advice to help you put the best possible plans in place for you and your business.

Contact our team on 0845 543 5700, by email [email protected] or complete our online enquiry form here.