Starting a company prematurely

[Miss Ellie]

Most restrictive clauses are badly written. I have been told by an employment barrister that -

If a term in an employment contract is too restrictive it could be deemed unreasonable in a court of law, and the entire unreasonable term would be struck out, and a reasonable interpretation cannot be substitued in it's place.

And I view that notification or asking an employer for permission on directorships is too restrictive. For example my block of flats puts each purchaser of a flat down as a director of the maintenance company for the building (you don't have any choice in the matter you can't be a director you ain't welcome), and asking an employer for permission for a directorship like this is like asking an employer permission to buy your own dwelling.

So it's a case of commonsense. If your company is not trading and therefore not threatening the profitability of your current employer or bringing it into disrepute, and you have a good arguement to prove such a clause in a contract is too restrictive then ignore the clause.

[philip@wellwoodhoyle]

I don't think you'll be successful in applying for VAT registration until you get a contract. HMRC have recently tightened up the registration process and now do a lot of checks to make sure that applicants are genuine. In recent cases of mine, they've insisted on proof of a company bank account being set up and at least one other "proof" of trading - normally we've had signed contracts from the agency or end-user but otherwise we've had to resort to sending them proof of PI or business combined insurance to prove they're serious!

As to other aspects, the company formation is just a few days at the most, company bank account is a couple of weeks. Assuming you get things moving when you get your contract, everything should be in place for when you want to raise your first invoice a few weeks later.

As for claiming expenses and VAT prior to the company being formed, no problem, this is a common scenario allowed for. As long as the company repays you for the expenses you incurred and you have the invoices etc., you'll be able to claim.

[XLMonkey]

And I view that notification or asking an employer for permission on directorships is too restrictive.

you might view it as restrictive, but the courts generally do not. If your contract states that you may not take on other directorships, then the court's view is that you should not do so without asking permission first (the logic being that, as a director you are under certain statutory obligations that might conflict with your responsibilities under the employment contract). Like I said, it dates back to the days when the serfs had contracts of employment and only "gentlemen" were directors. Still the law, though.

The principle that your barrister is (probably) referring to one, refers to restraint of trade clauses. This is where your employment contract states that, when you leave employment, you may not work for a competitor (or solicit work with one of your current employer's clients) for a period of time. These are generally viewed by the courts as being an unfair restraint of trade, and thus not legal (although even here, the law is complex and if the restraint clause is worded sufficiently tightly, it can still be enforced).

[Miss Ellie]

you might view it as restrictive, but the courts generally do not. If your contract states that you may not take on other directorships, then the court's view is that you should not do so without asking permission first (the logic being that, as a director you are under certain statutory obligations that might conflict with your responsibilities under the employment contract). Like I said, it dates back to the days when the serfs had contracts of employment and only "gentlemen" were directors. Still the law, though.

This issue is not black and white it depends on the exact wording of the employment contract and that wording must not breach the implied terms in employment contracts and contracts in the different UK laws.

If the wording is clear that it restricts you to not doing anything that is competitive to the your current employer while you are working then it is reasonable. If the wording is very wide and it is not restrictive enough, then you can argue that it breaches contract law in your particular circumstances by being ridiculous unless what you want to do is competitive to your current employer. Setting a non-trading business and having to notify or ask your employer permission is in affect giving your employer notice of your departure months or even years in advance particularly if they question you on what is the purpose of the business and refuse to let you be a director, unless you give them that information. This could lead to unpleasant consequences for you in terms of unfair treatment at work.

The principle that your barrister is (probably) referring to one, refers to restraint of trade clauses. This is where your employment contract states that, when you leave employment, you may not work for a competitor (or solicit work with one of your current employer's clients) for a period of time. These are generally viewed by the courts as being an unfair restraint of trade, and thus not legal (although even here, the law is complex and if the restraint clause is worded sufficiently tightly, it can still be enforced).

No I was asking the barrister about lots of different terms and clauses in contracts trying to find out where someones duties as an employee ended and their rights as a private individual began as lots of employers word contracts in a way that gives employees no rights to be private individuals with outside interests or have information that they can withhold from their employer about their personal circumstances. The courts have always implied you can have a private life even before the Human Rights Act came into force.

This guy was from one of the top chambers (Clositers) and so I was getting as much free infor as possible, because the guy I have normal access to while is an employment barrister doesn't have it has his first speciality.