Legal Guidance
Tailored to Your Needs
BUSINESS SALES
AND PURCHASES
Buying or selling a business or shares in a company operating a business is a significant event for the Buyer and the Seller. The transaction often involves a lease of property or freehold in which the business is conducted.
There are also capital gains tax issues and GST applicability to be considered by both sides, and transfer duty by the Buyer, where applicable.
It is important for both Buyers and Sellers to engage the services of an experienced lawyer to properly document the agreement. The agreement should take into account the unique features of the business goodwill, IP and other assets involved, and approvals required for the transaction to be completed, for example, approvals required from landlords and regulatory bodies.
The contract should itemise all the assets, the title to which is being passed or assigned by lease from, for example, the lessor equipment, and a full list of employees and their entitlements. It should also list such things as restraints on the Seller competing with the business in the future, and the Seller’s obligation to deliver training before and after the transaction is completed.
A lawyer will advise both the Buyer and the Seller to take taxation and accounting advice before the documented agreement is signed. For the Buyer, this will include advice around the structure of the Buyer’s entity, for example, trust or company or sole trader and taxation implications.
Finally, a Buyer’s lawyer will ensure that there is provision in the agreement which provides for ‘due diligence’ and how it is to be conducted to the satisfaction of the Buyer, as a condition of the transaction being completed.
COMMERCIAL CONTRACTS AND AGREEMENTS, TRADEMARKING AND INTELLECTUAL PROPERTY:
Well drafted commercial contracts and agreements bring necessary clarity to a business relationship between a business, its customers, and other businesses with which the business deals. The most common examples are:
- Heads of Agreement leading to a fully negotiated Agreement;
- Shareholders’, Partnership and Joint Venture Agreements;
- Licence and Franchise Agreements;
- Supply and Distribution Agreements;
- Loan and Financing Agreements;
- Construction and Building Agreements ; and
- Terms and conditions applying to manufacture or sale or usage or rental of goods and the provision of services;
Contracts and agreements must be carefully worded to comply with various laws such as the Australian Consumer Law and not contain Unfair Contract Terms and Conditions, which will be void and may expose the provider of them to prosecution and penalties.
Well negotiated and documented commercial contracts and agreements represent insurance against the distractive cost to businesses of misunderstandings which can lead to expensive disruptions in commercial relationships and, in many cases, court proceedings.
A trademark is an agreement with Intellectual Property Australia (IPA) to grant you registration of, typically, the words or logo that you use to uniquely identify your product or service. This is your Intellectual Property (“IP”). The registration enables you to claim the words or logo as your own for your exclusive use and to the exclusion of others. A registered trademark thus becomes a significant asset of you and your business and can be sold, assigned, or licensed to other parties, with or without compensation. Non-authorised use of your trademark rights (infringement) is a serious matter, and the guilty party can be subject to prosecution by you for the infringement to stop usage and/or commercial damages. We register trademarks for client and represent them in infringement actions.
CONVEYANCING AND LEASING
Conveyancing involves transferring, with certainty, the right, title and interest in a property from the Seller to the Buyer. The applicable law is the Real Property Acts, or equivalents, of the various States.
Buying a property, whether as a residence or for investment purposes (be it residential or commercial property), is a significant transaction requiring the services of a conveyancing solicitor and in many instances, a qualified tax adviser. The taxes requiring consideration are transfer duty, land tax, GST, CGT, and income tax. In addition, the conveyancing solicitor will agree with the Buyer what searches the solicitor should undertake, such as those verifying the Seller’s proprietary interest in the property, and that the property is free of any actual or potential claims or regulations imposed on the property by third parties to the detriment of the Buyer.
Likewise, selling a property carries with it legal obligations as to disclosure and other matters which will affect the right title and interest of the Seller in the property to be sold.
Once agreement is reached between the parties as to the price and inclusions, it is for the legal representatives to document and give effect to their agreement. This is assisted by real estate agents acting for the Seller. The way this is done differs between NSW and Qld, where the Seller’s agent usually presents the standard REIQ contract with its standard inclusions, for signature by the Buyer. Our advice is that in Qld, a Buyer should not sign such a contract, until it has been vetted by the Buyer’s solicitors.
Leasing involves a landlord, by way of a leasing agreement, granting to a lessee (tenant) the right to occupy the landlord’s premises on certain terms and conditions which specify the rights and obligations of both parties. Retail Shop Leases are a government regulated process, requiring both the landlord and the tenant to undertake disclosure to each other and the tenant to certify that it has received its own legal and accounting advice.
Whether we act for a landlord or a tenant, we always advise that the parties should enter into a Heads of Agreement (HoA) detailing the ‘deal points’ of both parties on matters of importance to them, no matter whether they relate to standard or usual conditions or some other special requirements. The HoA is then used by the Landlord’s solicitor to prepare the lease document for review by the tenant’s solicitor, thus making the process clearer and less time-consuming and costly.
Prior to signing the lease, tenants are well-advised to have a lawyer provide them with a written review of the lease (mandatory in the case of Retail Shop Leases), as standard lease documents have a tendency to be somewhat confusing, even to the most experienced tenant and need to be vetted to see that they contain no illegal or unfair terms and conditions.
WILLS, POWERS OF ATTORNEY
(ESTATE PLANNING) AND PROBATE
Everyone has an estate which is represented by all a person owns or has a right to, either now or at the date of their passing. The estate can comprise your home; your superannuation; investments; an insurance payout on death; your personal chattels and effects; amounts owing to you (net or amounts you owe); and cash and shares and all other assets.
What is Estate Planning?
Estate planning is process,your lawyer uses to analyse and then document in your Will and elsewhere, how you want the assets of your Estate to be utilised or distributed after you decease, taking into account taxation and other considerations.
Your Will: on your death, what does it provide for?
It will specify who you want to be the Executor of your estate to obtain Probate of your will, if that is necessary. This is the same person who will be the trustee of your estate assets to hold and distribute them in accordance with your wishes expressed in your will. As a willmaker, you should make provision for an alternate Executor and Trustee, to cover a situation where your nominated first choice either dies or becomes incapable of performing the role.
Where relevant, your will should specify who will be Guardian of your children, if their other parent predeceases you.
In addition to standard “giving” clauses to loved ones and charities, a Will may include a Testamentary Trust to make provision for, say, a child who is injured and not able to look after himself/herself after you pass.
It is usual for a husband to leave all his assets to his wife and vice versa. However, second marriages or blended families often do not follow this standard approach and care has to be taken in drafting “giving clauses”, so as not to breach fundamental legal principles and attract future litigation from disgruntled family members by way of “Family Provision”claims.
Finally, your will should make provision for such things as the transfer and/or sale of your business after your death, and who will assume the role of director or trustee of companies and trusts where you hold these positions.
Additional considerations while you are alive?
Our approach is to recommend inclusion in your estate plan an Enduring Power of Attorney, which is a document that covers you during your life in relation to being able to have someone manage your financial, health and lifestyle matters, in the event that you become of unsound mine, or simply unable to look after yourself, for whatever reason.
These documents are material to what your estate will compromise at your passing, when your Will comes into effect.
It may well be that you want to be particularly specific about the type of medical care you receive, should you not be able to make these decisions yourself, during your lifetime. These wishes are contained in a document called an Advanced Health Care Directive.
We also address with clients the need, during their lives, to include life insurance to provide for their family at their death and disability and income insurance to replace their income if they cannot work due to illness or injury We refer clients to their insurance agents and work in conjunction with these professionals.
Finally, we clarify with clients their satisfaction or otherwise that any personal investments and superannuation is in the form of investments suitable from a taxation and risk perspective and, should there be any concerns in this regard, we refer them to licensed financial planners and tax advisers for further advice.
An Estate Plan incorporating a Will is not a “set and forget” exercise. It is an ongoing process. Your plan should be regularly reviewed and updated with your lawyer, as your family and financial situations (and laws) change over your lifetime. We recommend a 3–5-year review, at a minimum. We offer a no-charge 30- minute consultation to discuss how things may have changed for you over time and whether it will be necessary to make amendments to your estate plan, including your will.
Dispute resolution/litigation.
Disputes between parties usually arise through lack of clarity of understanding expressed by the parties in their documented arrangements. This is why legal advice on completion of a Heads of Agreement and/or Deal Terms Sheet is so important for parties before their arrangements or agreements are finalised; these require the parties to devote careful thought to what they see is the basis of the deal and what particular factors are important to them.
Contracting parties should not enter into arrangements or agreements without them containing a dispute resolution clause, which requires bona fide attempts to mediate of arbitrate an outcome before launching into full scale litigation in the courts, which is a very expensive exercise. It is not widely recognised by the public that when matters get before the court invariably, at an early stage, the court will order that the parties endeavour to mediate a mutually beneficially outcome, before proceeding with the action (this does not oblige them to settle the dispute, but they must act in a bona fide manner).
The benefit of dispute resolution via mediation or an equivalent process is that it can be undertaken much faster and is usually far less costly than litigation in court. However, all of the parties involved in a mediation have to replace emotion and singlemindedness with commercial logic and a “win-win” mentality. This can often be difficult to achieve when a party holds the view that the other party has acted unreasonably or tried to take advantage of the other.
Finally, it is important for people to realise that when negotiating, documenting, and giving effect to an arrangement or agreement, they should keep detailed notes and records of the history of the engagement, as it will be necessary, with legal advice, to incorporate these items into a personal Statement by them as to the basis of the complaint against the other party. The first step in making or defending a complaint is to have prepared a Statement under the guidance of a lawyer.
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