Be prepared and avoid disruptions early

Posted on 7 Nov 2014 by The Manufacturer

Irwin Mitchell is extending its services beyond traditional areas of the law. It makes a point of seeking to help its clients save money by avoiding problems before they happen, Ruari McCallion learned.

Dorrien-PetersThe law has become more complicated and legal firms that are on the ball have to follow suit. The list of potential pitfalls manufacturing companies face is endless, and ranges from building regulations through employment law, intellectual property (IP) protection, financing, corporate needs, commercial disputes and beyond.

Irwin Mitchell is a national legal firm headquartered in Yorkshire and is a long-established firm with a modern outlook. It was established in Sheffield in 1912 and now has offices in 11 UK cities, including London. It has deliberately gone down the road of specialisation and has recruited people from outside the traditional legal corridors, as appropriate, as it believes that clients will have more confidence in someone has a background in manufacturing, for example. But before getting into that level of detail, what is the difference between ‘corporate law’ and ‘commercial law’?

Dorrien Peters, a partner with the firm at its Sheffield office, qualified as a solicitor after a career in the aerospace industry. He gets involved in a range of issues, particularly representing manufacturers when issues arise with suppliers and customers. Disputes arise often because of misunderstandings, differences of interpretation or variations in expectations, he maintains. Some problems are avoidable with planning ahead, some seem very difficult to foresee.

“Take IT for example,” said Peters. “One of the biggest risks arises when systems need to be replaced. It is one of the many ‘growing pains’ of businesses. Standard documentation doesn’t always do the job and disputes arise when there are differences between expectation and delivery.” He has also been involved with significant manufacturing and design disputes.

“If a casting or a forging fails the manufacturer will often identify issues with the design, but the designer will often identify issues with the manufacturing process,” he explains. How do you find a way out? “Liaison is crucial. The manufacturer will know about the need to design for manufacture; the designer will often be focusing on design for performance. Make sure the contract is properly drafted and properly thought through. Make everyone’s obligations and understanding absolutely clear. Inevitably unclear clauses will be used to pursue a party’s own advantage, so it is important to specify in as much detail as possible.” It may cost and the resulting document may run to more than a few pages but it is worth spending a bit more upfront to avoid much higher costs and problems later.

Another area that is attracting a lot of attention is finance. A few years ago the banks were enmeshed in the credit crunch; financial needs remained but conventional funding had withered away. Nature abhors a vacuum and alternatives developed and gained momentum, including crowd funding and peer-to-peer lending. However, change is not always risk-free.

“The landscape is changing,” said Andrea Cropley, who heads the Northern Corporate practice of Irwin Mitchell. She has advised on investments, exits and ‘take private’ deals, as well as public and private M&A transactions and has a particular interest in finance. “In order to achieve desired rates of return, venture capital has moved up the chain and ‘angels’ have formed clubs to fill the space vacated by the VCs. New fast developing crowdfunding platforms have also emerged as a counter to the constraints on lending by traditional credit providers. These platforms have resulted in much editorial space but their impact has actually been minimal. These forms of funding have developed unregulated in part and there have been allegations of a ‘wild west’ situation; there are concerns that scandals will emerge.” However, the FCA started regulating ‘alternative finance’ in April 2014, with greater confidence anticipated as a result.

“It is expected that crowdfunding will become a credible alternative to mainstream sources; peer-to-peer lending is predicted to represent 20% of all debt in just a few years,” she continued. “The FCA will review the effect of its regulatory framework in 2016 to identify whether further changes are required.“ Meantime, Ms Cropley is working to bring together those who need finance with those who can provide it.

“We have run some events aimed at high growth companies, such as biotech and tech – businesses with rich IP,” she said. “We sponsored the Entrepreneur Festival in Sheffield in September, held a dinner and ran a debate on alternative funding.” As in the commercial arena, Irwin Mitchell seeks to reduce risk by making sure that both sides are clear on expectations and delivery – and that the potential minefield of finance is a bit less of a trap for the unwary. The firm could have adopted ‘Be prepared’ as its motto – if that wasn’t already taken!

Julie A. Kenny CBE DL, chair and chief executive of Pyronix Ltd, was acclaimed as the Private Business Woman of the Year at the Private Business Awards 2014. Her company is involved in security products, intruder alarm equipment, control panels, detectors and PC software. The company is expanding and bringing the manufacture of higher value-added products back to the UK from China.
“We are always careful to take advice to ensure we get the right end result,” Ms Kenny said. Pyronix has just launched a new Cloud Service operation. “Because it is so easy to get legal documents on the Internet, a lot of people are doing it. When we launched we wanted to make sure we had the right documents, correctly framed, in advance.” It avoids trouble later.

“Irwin Mitchell have that expertise,” she said and maintains that there’s simply no place today for generalist legal advice. “Irwin Mitchell have helped us out with a number of issues through the years, with acquisitions, IP and litigation. They help us to ensure the I’s are dotted and all the T’s are crossed.”