November 2024 Newsletter

A message from Jen Kitson, Managing Director and General Counsel (Private Sector)

Welcome to the next Kennedy Cater newsletter!

This time we look at the new duty on employers to prevent sexual harassment at work, we shine a spotlight on one of our long-term retainer clients and discuss how Kennedy Cater has supported them over the years. We also look at the importance of shareholders agreements as well as the impact of the Digital Operational Resilience Act which impacts not only financial firms but the IT outsourced providers who perform ‘critical or important’ functions for them.

Should you wish to find out more about any of these topics please do not hesitate to reach out to me or your usual Kennedy Cater team member!

Jen

NEW: Duty to prevent sexual harassment at work

Our Partner Draper Lang LLP wishes to share with Kennedy Cater clients an article on the new duty on employers to prevent sexual harassment at work.

On 26 October 2024, the Worker Protection Act introduces a new positive duty on employers to take reasonable steps to prevent sexual harassment at work.

This is called the “preventative duty” and requires employers to take proactive steps to prevent all forms of sexual harassment, not just to manage situations well when they arise. The Government’s aim is to try to transform workplace cultures and, ultimately, consign workplace sexual harassment to history.

How can employers prevent sexual harassment?

The duty on employers is to take “reasonable steps”.

Reasonable steps will vary depending on the circumstances but will include carrying out risk assessments, having anti-harassment policies, mandatory staff training, zero-tolerance approach, appropriate means of reporting, appropriate procedure for investigating allegations, consulting unions and workplace representatives and appointing workplace champions.

The Equality and Human Rights Commission (EHRC) has issued an amended guidance on preventing workplace sexual harassment and has published a brief eight-step guide for employers on preventing sexual harassment at work.

The EHRC make it clear that:

Employers who do not comply with the new duty are breaking the law.

Risk assessments are vital - an employer is unlikely to be able to show that they have complied with the preventative duty unless they have carried out a risk assessment.

Employers should consider the risk of sexual harassment in the workplace but also in respect of other locations, matters and events connected with work.

What is reasonable will vary from employer to employer and depend on factors such as the employer's size, the sector, the working environment, the risks present in the workplace and third parties with whom workers may come into contact.

The preventative duty includes an obligation on employers to take reasonable steps to prevent harassment between colleagues, but also to prevent the harassment of workers by third parties, such as customers, clients or service-users.

How with the duty be enforced?

Complaints can be made direct to the EHRC who will be able to enforce the new duty in various ways, including by issuing unlawful act notices and injunctions.

In addition, Employment Tribunals will be able to increase compensation for sexual harassment by up to 25% where they find there has been a breach of the duty.

What should employers do now?

We recommend that every employer undertakes a risk assessment, as well as auditing current policies, resources and training. Consider when sexual harassment has occurred in the past and assess how or when it may occur in the future. Then consider and put in place appropriate measures to try to prevent sexual harassment in future and diarise a regular and ongoing review process. Essentially, the risk of sexual harassment should be treated by employers with the same level of gravity as a Health and Safety risk.

We can help and support you at every stage, please contact the team if you would like to know more.

A Client Spotlight: Grayling Communications Limited

Grayling Communications Limited is a global public relations company with 30 offices located around the world, from London to Singapore. Grayling consists of a team of publicists, planners, researchers, analysts, designers, creative and producers who seek the best for their clients in order protect the reputation of their clients through creative communication. Grayling provides more than just standard PR services and goes the extra mile in all forms of communications for its clients.

Kenney Cater has been working with Grayling for over 8 years, supporting its various legal needs. Through its retainer, the Grayling team are able to come to Kennedy Cater for support on any legal need that arises, and Kennedy Cater will support directly, or turn to their extensive panel of law firms, barristers or other legal experts to meet that need, effectively acting as Grayling’s outsourced legal function.

Elissa Jelowicki, a commercial contracts specialist, handles all legal negotiations of Grayling’s commercial contracts for the US, Europe and the UK regions. She negotiates and deals with Grayling’s vast client and supplier base in order to achieve the best possible outcome for Grayling. As any good Legal Counsel knows, understanding the legal position is only a part of what Elissa does as external Legal Counsel. Commercial awareness and the ability to work collaboratively with key stakeholders within the company, mainly with the Finance Department, however also with the board and management team, is just as crucial to ensure the smooth running of the business.

Kennedy Cater also supports Grayling with UK employment law advice through its partner Draper Lang LLP. Grayling is able, through its retainer, to contact dedicated, commercial, practical and problem-solving Partner level employment lawyers for advice. Non-contentious UK employment law advice is provided on an unlimited basis under the retainer and covers not only the provision of advice on specific matters impacting the workforce as they arise but also the creation and maintenance of core employment engagement documentation (such as employment contracts, employee handbook, policies, consultancy agreements, intern agreements etc.) Contentious support (if needed) is available on a call-off basis at discounted rates.

Benefits

There are many benefits of this working partnership. The lawyers supporting Grayling have developed a deep understanding of Grayling’s business, risk profile and core legal needs and Grayling is able to obtain first-class legal support without the hefty price tag frequently seen from law firms. It's great value for money in return for excellent on-hand legal services.

A dedicated team available for all of Grayling’s legal challenges, able to source legal support on a global level.

Trusted and dedicated team players who thrive on challenges and who are always eager to help Grayling in any tricky situation.

Kennedy Cater have become an integral part of the Grayling team and has established a great rapport with individuals of all levels within Grayling’s organization.

A friendly, risk-based approach by experienced lawyers to complex and sometimes sensitive legal problems.

What Grayling thinks

“I’m very pleased and grateful for the support I receive from Kennedy Cater. Elissa in particular is always available to chat through contractual issues, supporting me with her legal expertise. Elissa constantly is putting herself in Grayling’s shoes by considering what commercial impact may be as well. This makes Kennedy Cater a hugely valued partner.

Another huge positive with the support of Kennedy Cater is the extensive network of legal expertise which has been able to help us out at in multiple jurisdictions. Given Grayling have a large footprint globally, but particularly in Europe, it would be a huge time drain if we needed to sort legal support ourselves.”

Stephen Whiting - Grayling’s Finance Director.

Shareholder’s Agreements – What should you know?

Why are Shareholders Agreements Essential?

When entering into a business relationship, it is essential to set clear boundaries and prepare for the important eventualities. As Groucho Marx once said “Marriage is the chief cause of divorce.” This sentiment underscores the necessity to prepare for all eventualities in the relationship between shareholders, including what is to happen when the relationship comes to an end.

What is a Shareholders Agreement?

A shareholders' agreement is a contract among owners of a private company that outlines rights, obligations, and operational procedures, distinct from the company's constitution.

Why are Shareholders Agreements recommended?

A shareholders agreement is recommended for companies with multiple shareholders to prevent conflicts. It will be a requirement for funders when providing financing, so they can understand how the shareholders relate to each other and what is to happen in the case of deadlock or a dispute. It provides a clear framework for resolving disagreements and "divorces" among shareholders. It can provide flexibility and set out confidential provisions with respect to the governance of the company as shareholders agreements can override company constitutions and be amended more easily.

What does a Shareholders Agreement contain?

A good Shareholders Agreement should:

1. Regulate ownership and management aspects of the business.

2. Protect shareholders' interests and reduces potential disputes.

3. Maintain confidentiality, as it does not require filing with Companies House or equivalent authorities.

What are the typical clauses in a Shareholders Agreement?

1. Management Control - Clarifies the decision-making authority of directors vs. shareholders.

2. Funding strategy – it will clearly state how the company is to be funded after the initial capital investment; shareholder loans; bank finance; capital raising through share issuance, etc.

3. Share Transfer Restrictions - Limits on who can become a shareholder to ensure compatibility.

4. Personal Circumstances: Plans for changes in shareholders' situations (e.g., death, disability).

5. Non-Compete Clauses: Protection against former shareholders starting competing businesses.

6. Dividend Policy – it will set out when dividend can be declared, how often, how much and any retained capital.

7. Dispute Resolution - Establishes clear mechanisms for resolving conflicts and deadlocks.

8. Share Valuation - Determines how shares are valued during transfers or exits.

9. Exit Strategies - Outlines processes for shareholders wishing to exit, including buy-sell provisions, good leaver/bad leaver provisions, etc.

10. Confidentiality and Restrictions - Protects sensitive information and limits competition post-exit.

Conclusion

A well-drafted shareholders' agreement is crucial for minimising future disputes and ensuring smooth business operations, making it a vital component for any company with multiple shareholders.

Please reach out to the Kennedy Cater team should you require any support in creating or updating a Shareholders Agreement.

Digital Operational Resilience Act

The Digital Operational Resilience Act (DORA) is an EU regulation that entered into force on 16 January 2023 and will apply from 17 January 2025.

It aims to ensure that a European financial sector which is increasingly reliant on IT outsourced providers (Providers) is able to stay resilient in the event of a severe operational digital disruption. As those Providers are not currently directly supervised nor subject to the same regulatory frameworks as the financial firms regulated in the EU (including banks, payments and e-money firms, investment firms, insurers and cryptoasset firms) which are outsourcing to them (the Outsourcers), DORA addresses that supervisory gap by bringing Providers under direct regulatory supervision of the financial services regulators for the first time, which is a profound step-change for Providers.

The key requirements of DORA are:

Outsourcers will need to determine which of their Providers perform ‘critical or important’ functions for them. The Outsourcers will then need to update their contracts with these Providers to make them DORA compliant and to ensure increased oversight and continual monitoring of them.

The Outsourcers will also need to ensure they establish and maintain a robust a third-party ICT risk management function including a register of information related to critical and important Providers, business continuity and disaster recovery measures, incident response plans and a process for risk concentration management. Internal policies and procedures covering cyber security will need revising and board level reporting and training will be required to facilitate clear governance structures and top management accountability for IT risk management.

Providers will be in scope where they provide critical and important services to EU financial entities, irrespective of where they themselves are located, in order to facilitate compliance by the Outsourcers. Such Providers will be heavily impacted and required to concede to more intrusive pre-contractual due diligence and post contractual oversight related clauses, with exit and transitional provisions fundamental.

At Kennedy Cater, as well as advising the financial firms directly on the impact of DORA we are also seeing a steady stream of IT outsourced providers requesting legal support in how to negotiate the contractual changes being requested by their financial firm clients.

Should you require any advice on the impact of DORA on your business and contractual negotiations please get in contact.

Jon Brassey, Senior Consultant