BUSINESS AND COMMERCIAL LAW
The first step is to decide with our client the most suitable vehicle for the client’s business, both immediately and in the future. From this decision we proceed to the structure.
The structure of the business may be decided on advantages of one structure as against another. Considerations include flexibility, tax, and limited liability.
A sole trader is a person operating in his/her own name or through a registered business name. Advantages include facility of set up. Disadvantages include higher tax rate and unlimited liability for the owner of the business.
Partnership has the advantages of a sole trader, but allows for the inclusion of others.
The disadvantages are unlimited liability and the liability of one partner for the other(s).
The advantages of a company are, first and foremost, limit of liability to the paid up capital of the company. The other two main advantages are lower tax and possibility to include others.
Branch or subsidiary
A branch is the registration of a foreign company in Australia. There may be tax advantages in consolidation of accounts and direct operation. The disadvantages include the necessity of translating all documents, including the constitution and the annual accounts, their lodgement at the Australian Securities & Investments Commission (ASIC). A subsidiary has the advantage of being an Australian company able to do all things that an individual may do. It is the most flexible way to operate business.
Once the structure has been decided, clients need to ensure that the name(s) under which they want to operate is/are available. There needs to be a check for existing company names, trademarks, and domain names.
Registrations required for business
Businesses require various registrations to operate. These include:
With Australian Securities Commission (ASIC) to obtain:
company number (ACN)
business name registration
With Australian Tax Office (ATO) to obtain registration for:
a business number (ABN)
Goods and Sales Tax (GST)
Retaining tax payments (PAYG and withholding)
AGREEMENTS FOR RUNNING THE COMPANY
Once established a company will need various contracts for its internal administration and ongoing expansion of funds and operations.
The principal internal administration contract is the shareholders’ agreement. This sets out the rules for the relationship between the shareholders for the present and the future. It may include provisions that govern the transfer of shares from one shareholder to another or to a third party, rights of pre-emption, obligations to find a third party purchaser for other shareholders, and obligations and rights in the vent of the death of a shareholder. These are important to anticipate because the constitution of a company does not generally make such provisions.
Employee share scheme
Many companies, especially start-ups want to incentivise employees and also open access for further funds. These goals may be achieved by making provision for shares to be taken up by employees according to criteria set out in share scheme.
Employee share option plan
This plan is similar to the share scheme but provides for options to take up shares in the future, generally on performance indicators.
Joint venture agreement
This is an agreement to allow two separate entities to join together for a particular project. The joint venturers will contract to provide certain service and funds, and to share profits in such proportions as they agree. The joint venture may be limited in time or not.
BUSINESS SALE AND PURCHASE
Sale and purchase of businesses requires care not only for first timers, but also for seasoned operators because of the issues involved and the obligations imposed by the law on these issues.
Negotiation and due diligence
Purchasers need to be very careful to ensure that what they get is what they bargained for. In this they are wise to work closely at the negotiation stage with their advisers, particularly accountants and lawyers.
Contract for sale and purchase
In this regard contracts need to be drafted and analysed carefully to ensure conformity with matters negotiated and legal obligations and rights.
Transfer of lease of premises
For some businesses, especially retail, location is all. For this occupation must form an integral part of the sale. Availability of the premises and duration of that are critical. It should be remembered that not only is the consent of the lessor required, but if the lessor has a mortgage, the consent of that mortgagee is also necessary.
Transfer or termination of employees
Employees have rights to payments on termination or transfer.
Transfer of intellectual property
If trade marks, patents and domain names are essential to the business then measures have to be taken to effect transfer or licence, so they continue to be available to the business.
Transfer of licences and contracts with suppliers
Similar advice applies to suppliers for the business.
Restraint of trade
Purchasers pay for goodwill with view to a certain exclusivity, such as territory and prevention of competition by the vendor. This security is obtained by restraints of trade on time and territory to be included in the contract for dale of business.
Once in business every action involves a contract - verbal, written, implied or a mixture. Our role is to work with clients to review, draft, enforce, defend and anticipate contractual obligations. These may be on daily or long term operations.
Businesses will be wise to look at reviewing or setting up:
distribution and supply agreements;
joint venture and partnership agreements;
terms and conditions for trading; and
All in compliance with the aims of the business and in conformity with legal requirements.
If you require any assistance, please contact us at or call us at +61 2 9232 8392