Commercial & Business Law
Buying or selling a business
If you are looking to buy or sell a business, shares, or a company, it is important to get advice from an experienced lawyer. We can draft, review, and negotiate the sale conditions, recommend due diligence, and ensure that your legal rights are protected. We often recommend that clients also obtain input from their accountant who we can work with to structure the transaction to provide an optimum outcome that considers the legal, financial and taxation implications.
The sale and purchase of a business may include incidental agreements, for example, a commercial lease for the use of premises from which to run the business. Buyers will need to consider the provisions of the lease and how it will be transferred. The transfer of intellectual property, domain names and trading names may also be relevant.
Choosing a business structure
If you are running a business, it is important to have the right business structure to support your business goals.
An individual can set up as a sole trader using an Australian Business Number (ABN). Operating as a sole trader is simple and cost effective however the owner is wholly liable for the debts and activities of the business.
A partnership may be ideal when two or more people share the same vision of success with each contributing their skills, experience, and resources to run the business. The downside is that there is potential for conflict between partners and the partners are jointly and severally liable for all debts of the business, no matter how those debts are incurred.
An incorporated company structure is popular for small-medium sized businesses and may be a better option, particularly if you want to grow your business. While there are some setup and ongoing costs for a company, companies may be able to access more favourable tax rates and transfer of ownership can be affected through the sale of shares. A company is a separate legal entity and can also provide a certain level of protection for its officeholders.
A trust structure can help to protect assets and may offer taxation benefits. Trusts can be complex, however, and must be set up and administered correctly so they obtain their anticipated objectives.
We can help you choose a structure that is suitable for your needs and, if relevant, provides for the future growth of your business and the protection of assets.
Commercial and retail leasing
A commercial lease sets out the arrangements between a lessor and lessee regarding the lessee’s right to occupy commercial premises to run its business. Typical terms of a lease include, but are not limited to:
- Area to be leased – a description of the premises including the use of facilities such as carparks, storage, amenities, etc.
- Term of the lease – terms and renewal options that should coincide with the respective parties’ business and investment objectives.
- Rent and outgoings – including the method and time for reviewing rent and the outgoings payable by the lessee.
- Permitted use – allowing for the lessee’s intended use which may need to consider any proposed growth in business activities.
- Fit-out and refurbishment – any fit-out permitted, who is responsible for costs and installation and requirements for removal at the end of the lease.
A retail lease is essentially a commercial lease for premises that fall within the definition of ‘retail’ under retail leasing legislation. These laws require lessors to provide prospective tenants with certain disclosure documents, to follow set processes during negotiations, and to ensure that the terms of a retail lease comply with prescribed requirements.
Commercial leases should be prepared and reviewed by an experienced lawyer to ensure the terms are complete, compliant with relevant legislation, and balance the rights between the lessor and lessee.
Partnership and shareholder agreements
If you are a partner or shareholder of a business, it is important to have strategies in place to manage the relationship between the parties. Shareholder and partnership agreements form an integral part of business planning and risk management. They set out the rights and responsibilities of the respective parties and deal with a range of issues that could threaten the ongoing operations of the business if left unresolved.
Shareholder and partnership agreements can deal with planned and unplanned events such as the retirement, death or illness of a key business partner or shareholder. They can also include deadlock breakers (provisions where shareholders or partners have intractable differences regarding the management of the business), share valuation methods and dispute resolution processes.
Franchises
A franchise is an arrangement whereby the owner of a branded product or service (the franchisor) assigns to an independent third party (the franchisee) the right to sell that product or service using the franchisor’s brand, marketing, and systems. Examples include Dominos and Jim’s Mowing.
The franchisee buys a licence to run the franchise business through its own business entity but operates using the franchisor’s existing structure. The licence entitles the franchisee to access the franchisor’s standard procedures, administrative and marketing systems, and training.
Franchises in Australia are regulated by the Franchising Code of Conduct which sets out mandatory requirements for the sale, purchase and operation of franchises and provides important protection for franchisees.
Companies and directors’ liability
Companies are a popular choice for operating small to medium-sized businesses. When a company is registered, one or more directors are appointed to conduct its affairs. While there are exceptions, company directors are generally not personally liable for the company’s debts. Directors, however, have several responsibilities including a duty to:
- run the company with care, skill, and diligence
- prevent insolvent trading (i.e., not allow the company to operate when it cannot meet its debts)
- act in good faith and in the best interests of the company
- maintain proper records and prepare financial reports
- not improperly use their position for personal gain
In a challenging market, directors can face financial and other challenges that may put them at risk of breaching their duties. If you are uncertain about your position, we recommend you seek legal advice. Certain defences may be available to a director who has breached a duty to avoid insolvent trading and it is critical that directors of companies facing financial difficulties seek professional help early.
If you need assistance, contact [email protected] or call 02 9724 7188 for expert legal advice.