At Francis Wilks & Jones we cannot manage all risks that you and your business may face, but we have great experience helping directors and business owners manage their risk and minimise the worst effects. Speak to our friendly team today and we can assist.

Let’s face it, business is risky. 

Risks can include a wide range of things such as

  • demand being too low (with resulting cash flow problems),
  • demand being too high (also leading to cash flow problems),
  • the business not being structured properly to manage the legal, taxation and cash flow obligations,
  • failure to plan against competition; or
  • failure for the owners and directors to work together.

There are many risks when starting a business, but if proper planning is adopted, these risks can be managed and the returns will make the risks worthwhile.

Risk however never goes away and there is always a threat in a competitive marketplace such as the UK.  A change in legislation or a pandemic (such as our recent experience of Covid-19) provides clear proof of why planning for the unforeseen is necessary.

At Francis Wilks & Jones our experience of the biggest risks faced by businesses is often the people and how they interact to grow and make the business successful.  If they are not together, it is often the case that a partisan self-centered approach taken by some will ultimately lead to the business failing or being subject to some sort of complex litigation and buy out or, worse still, insolvency.

Company risk

As a shareholder, the only risk that you will really face is entrusting the running of the company to directors.  For the majority of companies, the shareholders are also the directors (quasi-partnerships or close companies) and there is no real issue here. 

However, where the shareholders (or a shareholder) has no engagement with the company other than as a shareholder, this does present some risk to their interest.

For directors, provided they are acting in accordance with the company’s Articles of Association and the legislation, are not in breach of any of their fiduciary duties and are ensuring the company acts in accordance with any shareholders agreement, the risk is minimal.

However, and despite the limited liability status of companies, there are significant risks to directors – particularly where a company struggles and insolvency is threatened.  Our director services pages help detail the type of risks that directors face.

Partnership risk

For partnership businesses historically, the risk of partnership was that the partners could potentially face the same personal risk which the business faces, should it find itself in difficulty.  For an unincorporated partnership, a partnership winding-up is usually closely followed by the personal bankruptcy of its partners.

However, since almost the turn of the century, Limited Liability Partnerships (“LLPs”) have been introduced into the business environment as a method of maintaining the various benefits of a partnership with the more limited risks to liability of a company.

However, it remains the case that as with a company an LLP is often ran by the few (Designated Members) on behalf of all of its members, and partnership regulations provide that a partnership agreement (which often must be entered into to join a partnership) provides for the waiver of any partner’s rights to claim unfair prejudice of their interests.

Partners also face similar risks to directors, in terms of disqualification proceedings, liability for breaches of duty and liabilities to HMRC.

Mitigating and reducing risk

Ideally, good corporate governance is necessary to mitigate risk, although it can never be removed.  Many businesses will understand that in today’s regulated environment, with a grave wariness of the misuse of SME businesses to perpetrate fraud, such risk can only be mitigated by proper planning ahead of such risks arising. 

This requires regular board interaction at meeting, early dealing with issues of concern and an honest and open approach to steps taken on behalf of the company (and its shareholders).

In respect of corporate and partnership disputes, then a properly and fairly drafted partnership agreement or shareholders agreement should provide against such risks.  Our team can assist in drafting a suitable shareholder or partnership agreement for you if you do not have one, or need to update an existing one.

For directors, they can seek insurance against many such risks (although fraud is largely un-insurable) and generally good accounting records maintained to a rigorous high standard should protect against any information gaps which may cause future problems.

There are of course business risks associated to appropriate debt collection and other connected issues which are beyond the scope of this article but at Francis Wilks & Jones we have strong connections to institutional investors in respect of cash flow management and we can also assist greatly with your credit control to ensure unpaid debts do not turn a profitable year into an unprofitable one.


Should you require any assistance, please contact our shareholder and director services team who can discuss such matters with you.

Key contacts

Maria Koureas-Jones

Maria Koureas-Jones

Partner

Carly Moore-Martin

Carly Moore-Martin

Senior Associate

Stephen Downie

Stephen Downie

Partner

Contact us in confidence