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Business Legal Checklist

Posted by on Sep 8, 2015 in Articles, Business Sale & Purchase Articles, Commercial Agreement & Dispute Articles, Debt Recovery Articles, Lease Articles |

1. Does your Lease expire soon? Do you need to request a new Lease? A Lease over your business premises is an important part of your business. You should check when the Lease expires and, if soon, you must negotiate a new one with your landlord immediately. Otherwise, it will be highly disruptive to have to find and move to new premises. 2. If you are entitled to renew the Lease, when does the option period expire? Normally, you will have a three month window to exercise the option for a further term of years. You should check when this option period ends because if you miss out then it will be too late and you may be forced to vacate your business premises at the end of the Lease. 3. If you operate the business in partnership with others, do you have a written partnership agreement? If there are two or more owners of the business it is highly advisable to set out the rights and obligations between them in a written partnership agreement rather than just leaving it to chance. The agreement will cover many aspects including division of profits, salaries, roles of each partner, how disagreements will be handled and the rights of partners if one wants to leave or the business is sold. 4. If you operate the business through a company, do you have a written shareholders agreement? Where the business trades by way of a company it is highly advisable to have a shareholders agreement which will regulate the management of the company and will include clauses about various matters such as decision making, the rights of shareholders to appoint and remove directors, contributions by shareholders and resolution of disputes. 5. Do you know your obligations as a business to consumers under the Australian Consumer Law? The Australian Consumer Law imposes many obligations on retailers when selling their products or services to consumers who have corresponding rights and remedies available to them. For instance, retailers should be aware of the obligation not to engage in misleading or deceptive conduct, not to have unfair contractual terms and to comply with various consumer guarantees. 6. Do you know your rights under the Australian Consumer Law as a business consumer with respect to business suppliers? The Australian Consumer Law also offers businesses consumer rights against suppliers of goods and services if the upfront price payable under the contract is no more than $300,000.00 or $1 million if the contract is for more than 12 months. It is worthwhile to ascertain what those rights are if you have a dispute with a supplier. 7. Does your business need standard Terms and Conditions to give to consumers? Having...

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Things to Consider When Buying a Business

Posted by on Sep 4, 2015 in Articles, Business Sale & Purchase Articles, Commercial Agreement & Dispute Articles |

There are many advantages to buying an existing business. You won’t be starting from scratch and most often you will be acquiring a business with an existing customer or client base and regular cash flow. To ensure that this is the situation you should carry out due diligence whereby you investigate all aspects of the business before you buy. During the period before you actually sign a contract to purchase the business you should have regard to the following issues: 1. Why is the owner selling the business? – Is the reason believable? If a check of the financial records reveal no downturn in the profits of the business that is a good sign but you should also research if new competition is moving into the area or if the industry will be subject to a new form of regulation; 2. What is the financial position of the business? – This can be considered with the assistance of an accountant who will look at the financial records of the business. You should carefully examine the inventory i.e. a list of the goods and materials of the business and the assets and liabilities of the business; 3. What business structure will you use? – You can operate the business by various methods including as a sole trader, partnership or a company. Each has different legal and tax consequences; 4. What staff will you use? – You can continue to employ some or all of the existing staff which may help to maintain the smooth running of the business. You can observe the business during a trial period after you enter into a contract to purchase the business and this will help you decide which employees to retain; and 5. Transfer of lease or new lease? – If there is an existing lease over the business premises then you can obtain a transfer of that lease subject to the consent of the landlord. However, if you feel that you want the benefit and security of a new long term lease then you can negotiate that with the landlord and the contract to purchase the business can be made conditional upon that...

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Transferring a Lease to a New Business Owner

Posted by on Aug 30, 2015 in Articles, Business Sale & Purchase Articles, Lease Articles |

As part of the sale of a business the vendor and the purchaser have to decide if the purchaser wishes to have a transfer over the existing lease of the business premises or wishes to apply to the lessor for a new lease. If it is to be the transfer of an existing Lease then for commercial premises the lease itself will set out the requirements to be satisfied but in the case of retail shop premises it is the Retail Leases Act 1994 NSW which regulates the arrangements betweens the parties. Normally, for both types of leases, an application will have to be made to the lessor to approve the transfer of Lease and the lessor will have to be provided with satisfactory evidence as to the purchaser’s financial standing and business experience. Provided the lessor does give its consent in principle to the transfer then the lessor’s solicitors will prepare a Deed of Assignment of Lease between the lessor, the outgoing lessee and the incoming lessee formally consenting and assigning the rights and obligations under the lease to the incoming lessee. The Deed will also deal with other matters including payment of any moneys owing under the lease and whether or not the outgoing lessee is to be released from future liability under the lease. The Deed of Assignment of Lease normally becomes effective on the date of settlement of the sale of the business. In the case of retail premises the Retail Leases Act sets out a number of additional steps or matters including: 1. The lessee must request the lessor’s consent to the transfer in writing. However, before making such request the lessee must furnish the proposed lessee with a copy of any Lessor’s Disclosure   Statement in respect of the lease given to the lessee together with details of any changes that occurred since; 2. The lessor is then entitled to request information it may reasonably require concerning the financial standing and business experience of the proposed incoming lessee. According to the recent NSW Court of Appeal decision of Lockrey v Historical Houses Trust of NSW the lessor can only request specific documents such as financial statements and tax returns for a specific period; 3. If the outgoing lessee (or any guarantor) wishes to be protected from ongoing liability under the lease it must give a copy of a Assignor’s Disclosure Statement to the incoming lessee and the lessor at least 7 clear days before the assignment becomes effective i.e. usually from the date of settlement of the sale of the business; 4. If the lessor does not deal with the request for consent to the transfer expeditiously there will be deemed consent if the...

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Do You Need A Solicitor When Selling Your Business?

Posted by on Aug 24, 2015 in Articles, Business Sale & Purchase Articles, Commercial Agreement & Dispute Articles |

When you are ready to sell your business there are many legal issues to consider which is best done with the assistance of a solicitor experienced in business transactions. This will help ensure that you avoid the many pitfalls that may be encountered along the way. Once the purchaser has completed any due diligence whereby it obtains all the information it needs with regard to your business, a Contract for Sale of Business will need to be prepared which is something that only an experienced solicitor is normally qualified to do. The first thing a solicitor will do is to investigate the party that is buying your business. If it is a company, as opposed to a natural person, he will check that the company is registered. If so, he will then ensure that the directors of that company enter into a Deed of Guarantee guaranteeing that the company performs its obligations under the Contract. Otherwise the company might be able to walk away from the Contract having little capital leaving you “holding the bag”. Another major issue is the Lease over the premises on which the business is conducted. You and the purchaser have to decide whether you wish there to be a transfer of the Lease or whether the purchaser wishes to apply to the lessor (the owner of the premises) to negotiate a fresh Lease. In either case, the Contract has to be made subject to this occurring. If there is to be a transfer of the Lease is up to your solicitor to apply to the lessor’s solicitor for the consent of the lessor. The lessor’s solicitor will then prepare a Deed of Consent to Transfer of Lease between the lessor, you as lessee and the purchaser as the incoming lessee. This Deed will often require intense negotiation to ensure that it is in your best interests particularly if you want to be released from liability under the Lease once the purchaser takes over. Otherwise you could be made liable for any breach of Lease by the purchaser after you have left the business. A further issue of concern to you as a vendor is to ensure that any restraints on you that the purchaser seeks with regard to your trading in a similar business, once your business is sold, over a certain geographical area and over a certain time period are reasonable as these restraints will always appear in the Contract. An experienced solicitor can assist you in deciding what reasonable restraints should apply. There are many other legal matters that a solicitor can help you with or arrange including: (a) the transfer of the business name; (b) whether the business is to be...

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How to Create a Sale of Business Contract

Posted by on Aug 19, 2015 in Articles, Business Sale & Purchase Articles, Commercial Agreement & Dispute Articles |

Once the owner of a business (the vendor) and the buyer (the purchaser) agree on the sale of that business the details of the deal have to be incorporated into a a written agreement called a Contract for the Sale of Business. Normally, it is the vendor’s solicitor who prepares the Contract and submits it to the solicitor for the purchaser. In order to save time and money it is important that the parties work out as many details of the arrangement before instructing their legal representatives. The matters that the parties should resolve as early as possible include: (a) the names and details of the parties involved in the transaction; (b) the sale price; (c) the apportionment of the sale price between goodwill and equipment; (d) the terms of the restraint on the vendor competing against the purchaser over a certain time and geographical area; (e) the inventory of equipment; (f) the trial period the purchaser is to be allowed before settlement and the training period after settlement; (g) whether the business is to be sold as a going concern to avoid payment of GST; and (h) whether the purchaser will be getting a transfer of the existing Lease or a new Lease from the lessor. Once the purchaser’s solicitor receives the Contract, legal advice will given to the purchaser which may result in further amendments to the Contract being negotiated between the parties. As soon as the Contract is in its final form each party will sign a counterpart Contract and the solicitors will exchange Contracts at which time the purchaser will pay the 10% deposit. From that moment both parties will be legally bound to proceed with the...

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Buying a Franchise

Posted by on Jul 14, 2015 in Articles, Business Sale & Purchase Articles, Commercial Agreement & Dispute Articles, Lease Articles |

A franchise involves a business owner (the franchisor) giving you (the franchisee) the right, upon payment of a fee, to market and sell the franchisor’s products or services in accordance with the franchisor’s system of management and operational procedures. Franchising is regulated by the mandatory Franchising Code Of Conduct which requires franchisors to give prospective franchisees certain information to allow them to asses whether or not to enter into the arrangement. The Code also deals with dispute resolution processes and the termination of franchise agreements. Most franchises will also involve the franchisee having to enter into a Lease over commercial or retail premises. It is therefore important for a prospective franchisee to carefully consider the franchisee’s disclosure document, the franchise agreement, the Franchising Code of Conduct and any associated Lease before entering into the transaction....

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