Commercial Law

Buying or selling a business

Buying or selling a business requires careful planning to ensure that negotiated terms and conditions are documented in a binding written contract. The contract should detail the parties’ rights and obligations, deal with GST matters and set out processes to manage various contingencies.

Sufficient funds will be required to cover not only the purchase price for the business but also any legal, regulatory, stamp duty and GST costs, as well as operational expenses to assist with cashflow, particularly during the initial phases.

Undertaking due diligence when purchasing a business involves activities such as reviewing the sales history, considering financial records like profit and loss statements, wages and running costs, completing an inventory of assets and liabilities and interviewing key personnel.

If you are considering buying a business, there are a number of steps that we can assist with. Consulting with your lawyer and a financial professional can help to minimise risk and avoid some of the common pitfalls encountered with many new business ventures.

Business structures

The structure through which your business operates should be chosen in consideration of your personal and financial circumstances, the objectives and future growth plans for the business, and minimisation of personal risk for the owners.

Operating as a sole trader is common when first starting out. Although this is the most simple business structure, it is important to understand the risk of the proprietor’s personal liability for the debts of the business.

If you choose to operate as a partnership, a formal partnership agreement is essential to govern the parties’ relationship, management of the enterprise and agreed processes for dealing with interests on the retirement or death of a partner or sale of the business entity.

A registered company is a separate legal entity through which a business can operate. Incorporating a company provides a certain level of protection from liability for the company’s officers and shareholders. Companies however have additional regulatory and reporting requirements, and directors must be aware of their duties and obligations under relevant laws.

A trust structure may provide asset protection and favourable taxation benefits, however trusts are complex and must be properly set up and administered to ensure the benefits outweigh the costs and ongoing fees.

Business contracts

Business contracts are fundamental to any enterprise and govern the legal rights and responsibilities of the parties for a range of commercial transactions. These include supply / service agreements, partnership / shareholder agreements, licence agreements, employment contracts and loan agreements.

It is important for business owners to obtain legal advice when entering significant business contracts to ensure their rights are protected and that the agreement accurately reflects the parties’ negotiations.

Commercial and retail leases

A commercial lease governs the relationship between a landlord (lessor) and tenant (lessee) regarding the lessee’s right to occupy premises owned by the lessor. Commercial leases are frequently the subject of legal disputes which often occur due to poorly drafted, ambiguous, or non-existent lease agreements, and / or the failure of the parties to understand the terms of the lease.

Retail leases are commercial leases regulated by specific legislation which typically applies to premises within shopping centres or that are used wholly or predominantly for conducting a retail business. Retail leasing legislation aims to enhance consumer protection by stipulating minimum terms and conditions and limiting certain provisions that are deemed unreasonable for a lessee. The legislation also imposes certain disclosure obligations upon a lessor.

Many lease disputes can be avoided by a compliant and carefully drafted lease agreement to ensure all terms and conditions are clear and that the parties understand their respective obligations.

Debt recovery

Debt recovery is an unfortunate but common situation experienced by many businesses. There are various ways to pursue an unpaid debt including the commencement of Court proceedings or by serving a statutory demand under the Corporations Act 2001. Choosing the most cost effective and appropriate method is important to avoid costly mistakes.

Insolvency

Insolvency arises when a company cannot pay its debts when they are due. Companies facing insolvency or potential insolvency have various options to manage the situation. Directors of companies facing cashflow problems should immediately obtain legal advice to ensure the best possible outcome for the company, and to mitigate the potential risk of personal liability for insolvent trading.

We act for a range of entities, advising and implementing strategies and legal solutions for the many planned and unplanned events that occur throughout the lifecycle of a business.

If you need any assistance contact [email protected] or call 0401 234 710 for a no-obligation discussion and for expert legal advice.