The recent April 2015 CommSec ‘State of the States’ quarterly report noted that the ACT ranks sixth in Australia in terms of its economy, however the state’s economic growth and output levels were 15.2 per cent higher than the decade average.

This is excellent news for people running a business in the ACT. Moreover, the ACT saw a 9.1 per cent increase in retail spending. This bodes well for SMEs worried about sales and consumer confidence levels.

“Looking forward, the future for the ACT economy is very positive – we are ranked third in terms of economic growth and we have the second lowest unemployment rate in the country”, said Chief Minister Andrew Barr in an interview with The Canberra Times on April 20.

Indeed, the ACT boasted the third-highest economic growth levels as well as housing finance figures compared to the rest of the states and territories. As for unemployment, the ACT ranks second-lowest in the country with a rate of 4.4 per cent. The low unemployment trend seems set to stay in place, but businesses should keep several legal concerns in mind when hiring new employees.

To help businesses in the ACT make the most of this economic growth, there are a few cost-effective and time saving legal tools available online. These eServices offer vast digital libraries of legal documents at the click of a mouse, including business law templates.

Although the ACT is currently the sixth-best performing economy in Australia, businesses can seek tailored and customised legal advice from expert commercial lawyers to devise strategies to improve performance. A variety of legal measures can boost profit margins, such as registering for a trademark or patent to protect intellectual property in a competitive market.

Overall, the report found that NSW has the best economic performance. Given the close proximity between the ACT and NSW, perhaps some domino effect economic activity can be enjoyed.

A central concern during succession planning in family businesses is whether adult children should be admitted into a self-managed super fund (SMSF). It is understandably a complex decision-making process, given that it impacts both personal and business succession planning. Moreover, it also plays a part in affecting family relationships and finances.

According to the Australian Taxation Office, there were 534,176 SMSFs in Australia as per the most recent count in June 2014. Clearly, many Australians are adopting this method of saving for their future. However, there are some important considerations SME owners should keep in mind before adding family members to an SMSF. Here are three key ones.

Is this a cost-effective method?

Because the fund’s fixed costs are shared over two generations of family members in the same SMSF, it can indeed minimise costs overall. However, financial woes can arise if the inter-generational SMSF has a portfolio including only one or two main assets to support the costs.

For instance, if the main high-value asset in the fund is the business property, it would need to either stay within the fund so that the adult children can continue to use the premises in the business or be sold in order to pay out the parent’s death benefits on their death. This can result in not only a funding issue but also further tax and stamp duty costs.

How will it impact family relationships?

Under Australian Law, there is a four-member limit for a SMSF. This can be problematic for families with more than three adult children. Another issue is if the members disagree on investment ideas or goals. It can also be difficult if the members have different risk tolerance levels. Combined, these factors could potentially cause family conflict.

How can legal advice help?

Since SMSF’s are so crucial for retirement savings and estate planning, expert legal advice can help manage the fund carefully. Each step of the legal process, from advice on the fund’s structure to ensuring that the SMSF is compliant with relevant legislation, can be eased with guidance from commercial lawyers.

 

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Millennials or Gen-Yers currently make up a large proportion of the workforce, with numbers expected to increase over the next few years. As individuals born between 1980 and 1995, millennials have a different set of values and expectations from their workplace. Businesses need to keep these in mind when moving forward to make the most of their future employees.

Adapting certain workplace policies or employment structures with expert advice from commercial lawyers can help a business optimise productivity and innovation from millennial employees. Currently in Australia, 38 per cent of millennials work more than 40 hours a week, according to the Australian Bureau of Statistics. Restructuring certain business models to suit millennials can have wider reaching benefits for profit margins, by enabling this large sector of the staff to excel and help the business grow.

What do millennials prioritise? 

According to PricewaterhouseCoopers’ 2013 ‘NextGen: A global generational study’ on millennials, work-life balance was very important for this group. As urban, multicultural and transient individuals, millennials also desired creativity and flexibility in office culture. They also appreciate a strong team-oriented environment and a sense of community at work. The desire for occasionally working from home or at satellite offices is also strong.

In turn, millennials are keen to support employers through innovation and break-through ideas to drive the business forward. They would like to manage projects with global markets in mind, helping businesses compete internationally. By valuing ingenuity and creative power, they can develop products and services to help a business constantly maintain a unique selling point. Their intuition for how consumers think and use social media is also an asset.

What legal steps can help? 

Re-drafting current workplace policies can help better accommodate the needs of millennials. Researching by using legal services online such as an employment library of relevant documents can help generate ideas for how to contract millennials or entice them to work with your business.

Moreover, developing succession plans that carefully consider how best to train and manage millennials can be very valuable for long-term business success. Developing your current commercial property by updating office spaces into more open plan areas can also be a smart step.

Commercial lawyers can help with each of these steps to set up a brighter future for your business – one which capitalises on an increasingly millennial workforce.

Workplace health and safety legislation changes marginally state by state. In the Australian Capital Territory (ACT), businesses must comply with the Work Health and Safety Act 2011.

According to Safe Work Australia’s ‘Key Work Health and Safety Statistics 2013’ report, the ACT had the highest rate of long-term serious worker compensation claims between 2010 and 2011. These involve a minimum of 12 weeks of compensation.

Data shows 4.5 per every 1,000 employees in the ACT lodged such a claim. Current research is ongoing, however the ACT was significantly higher than the other states during this period. The second-highest rates were experienced by Tasmania at 3.6 for every 1,000, whereas the lowest was almost half the ACT’s with only 2.4 among every 1,000 filing this claim in the Northern Territory.

Businesses should be aware of the legislation around workplace health and safety, particularly when drafting workplace policies. Consulting with expert commercial lawyers when making these legal documents can help devise customised safety regulations specific to the needs of the respective industry.

This is especially important for businesses dealing with machinery or potentially hazardous equipment. Indeed, the Australian Bureau of Statistics found that 82 employees in every 1,000 working in the manufacturing industry sustained an injury in the workplace between 2013 and 2014.

However, there are a wide range of considerations for businesses in every sector. Here are three things businesses should keep in mind:

1. What constitutes a ‘workplace’ is broader than you may think

The definition of ‘place’ under this law includes “a vehicle, vessel, aircraft or other mobile structure”. If you send staff off on an errand in a company car, it counts as part of their workplace. Similarly, any work on water also falls under the definition of ‘workplace’ – whether this be along a river or at sea.

2. A vast range of ‘workers’ fall under the protection of the Act

It is not only employees on the pay roll that are recognised as ‘workers’ in this legislation. Volunteers, apprentices, trainees and students gaining relevant industry experience are also classified as workers.

Moreover, the employee of a contractor or subcontractor you hire – even though they are not directly your staff – counts as a worker under this Law. Therefore, comprehensive workplace safety policies are important. Conducting regular safety performance reviews can also help ensure policies are being upheld.

3. Even accommodation must be kept safe in certain cases 

If a worker lives in a place that is owned, managed or controlled by a business, or if living there is necessary for the purposes of their job and other accommodation is unavailable, it is part of the business leader’s duties to maintain the premises as far as is reasonably practicable.

To kick-start conversations on workplace health and safety, businesses can turn to online legal services. These include libraries of relevant legal documents and business law templates.

In the current competitive global market, speed and innovation are the cogs for success. Establishing a firm competitive advantage is difficult without continually revitalising the core offerings of your business.

Any business which moves past the early start-up stage tends to optimise itself for efficiency rather than strategic agility. The latter involves avoiding threats with speed and confidence, as well as swiftly capitalising on opportunities that present themselves.

The Harvard Business Review published an article in 2012 devoted to the topic of speed in business, titled ‘Accelerate!’ by author John P Kotter. Kotter warned that winning in the current fast-moving world requires rethinking company direction regularly, or at the very least every few years. Adapting to change also requires implementing operational reforms that respond to this constant flux.

Perhaps the biggest gem of advice on the importance of speed in business was offered by Klaus Schwab, the founder and executive chairman of the World Economic Forum. He asserted that “in the new world, it is not the big fish which eats the small fish, it’s the fast fish which eats the slow fish.”

Taking this advice on board, there are several ways to legally safeguard your businesses to help its innovation and productivity. From selecting the best business structure to allow growth and progress, to applying for registration of intellectual property

Anchor with legal protection

No venture can be successful without secure legal foundations. The ramifications of not seeking sound legal advice when starting a business include potentially costly tax implications if the incorrect business structure was chosen, or disputes in court if employment law is not complied with.

Under Australian Law, several key pieces of legislation such as the Corporations Act and Trade Practices Act dictate how businesses should proceed legally. Steaming ahead often relies on putting the proper coal in the engine, and expert commercial lawyers can offer businesses the advice and tools needed to achieve this.

Sail with a strategic eye on the horizon

Developing novel products, goods or services requires constantly researching the current market to see where the gaps are. Given that speed is so crucial for success and profitability in today’s economy, the importance of protecting the ideas which create the speed should not be underestimated.

Protecting intellectual property through patents, trademarks and copyright can help a business keep its assets and unique selling points safe from theft or infringement.

The Australian government’s Competition Policy Review, also known as the Harper Review, released its final report on March 31.

A key purpose of this review was to identify which regulations are restricting competition in the current economy and acting as a barrier to productivity. A further goal was to examine the Competition and Consumer Act 2010 (CCA) to assess its efficiency and performance in light of Australian businesses expanding into increasingly global markets.

Amongst the 56 recommendations made by the report, one included a change to Section 46 of the CCA. This section currently regulates unilateral conduct between businesses.

At present, Section 46 only deems misuse of power as an illegal conduct if the “purpose” is proven to be stopping a new competitor from entering the market or trying to eliminate them altogether.

The report found this law was deficient and outdated, failing to take into account international approaches to similar competition laws. It underscored small businesses struggle with the current definition in the legislation, especially the “taking advantage” clause that is used to distinguish competitive from anti-competitive unilateral conduct.

Their recommendation for resolving this issue is to amend the legislation by broadening the definition to include the effects and consequences of a company’s behaviour.

The proposal is to add the phrase “the purpose, effect or likely effect of substantially lessening competition” into the legislation to widen the scope of the definition, and to have some recourse for the negative impact small businesses suffer from being removed from a market. The review also suggested removing the “taking advantage” clause completely.

As a result of this new definition, companies with significant market power will be obliged to prove in court how their conduct was either pro- or anti-competitive. If the federal government adopts this change to Section 46, it will mean small businesses gain more power to take legal action against larger competitors who misuse their market power.

If small businesses feel they are being mistreated in the market, they can consider seeking legal advice to resolve the issue.

Contractual loan agreements are the best way to legally bind the repayment of money. However, individuals often forgo drafting legal documents in situations when they are sourcing funding from family members, or using money from one business to supply cash to their other enterprises on commercial terms.

The costly mistake here is that skipping this important legal step can have negative ramifications in the future, and perhaps even lead to disputes in court. It is important to always have a written loan agreement, ideally signed by all relevant parties, during the exchange of significant sums of money.

Even if you trust those involved, err on the side of caution with written documents to best protect everyone. These documents should deal with: how and when repayments should be made, if any interest will be applied, what the default processes might be and which security measures are being implemented.

The following scenarios spotlight some seemingly sheltered ways to seek a loan, yet these can be problematic if not protected with written agreements.

1. Relatives loaning money for launching a business.
2. Borrowing funds from a spouse to pay off a debt.
3. Owning multiple businesses and loaning funds from one entity to another on commercial terms.
4. Selling land or a lucrative asset using the ‘vendor finance’ method.
5. Parents lending money to children to buy a house.

 

The key thing to remember is that if one party to the loan arrangement dies, the other party will be left dealing the deceased’s estate – and the executor will not have first hand knowledge of what the agreement was or when the loan is repayable. Similarly, it is common to have a falling out between parties, which changes the relationship and can lead to a differing view on what the deal actually was. Often in family law disputes, parties will argue that a loan was actually a gift (or vice versa) if there is no contemporaneous agreement to prove otherwise.

Also, in each of the above cases there will be varying tax implications. Where money is lent between related businesses, written agreements can be crucial to show the Australian Tax Office or State Revenue offices that a deal is arms length and how it is characterised.

The best way to proceed is to discuss the implications with expert commercial lawyers, to ensure all parties are well informed about how the loan may impact them. Similarly, if security is being offered against mortgages or land charges, this can be risky and should be managed carefully.

Moreover, the language used in these documents must be clear and simple for all people to understand. Lawyers can help draft such language without compromising on legal validity by adding clauses that best protect those involved.

When considering a change to your business structure, consulting with expert commercial lawyers can help develop a plan best suited for the ongoing needs of your business. The following FAQs offer some guidance on the matter.

Under what circumstances might a business need to change its current structure?

Often businesses start small, with a legal structure to suit. However, as the business grows and profit margins increase, the initial structure of a sole trader or partnership may no longer be suitable. Registering as a company could be more beneficial for accommodating business growth, employing more staff, developing more goods or services, and expanding into bigger markets.

Another example would be if a sole trader expands by joining forces with others in similar trades, thus needing a partnership structure. In this context, legal advice is crucial for protecting the rights of all individuals involved as they move forward with the new business structure.

In other cases, a trust may be formed to offer more control by dictating the terms of use for future beneficiaries. A trust structure can better protect and legally safeguard assets.

What are the current trends for business structures in Australia?

According to the Australian Bureau of Statistics (ABS), the most common types of business structures between 2013 and 2014 were companies and trusts. There were approximately 700,000 companies and 500,000 trusts actively trading during this period.

The selection of these two types of structures increased from the previous year whereas sole proprietors, public sector businesses and partnership structures decreased. Research by the ABS also suggested a trust was most likely to survive from June 2010 to June 2014.

What are some key factors to consider?

A strong strategy is built on research, and changing a business structure is no exception. There are several factors to be informed about. These include the tax requirements for different structures, the varying costs and capital, the legal implications, and the daily operations that may need to evolve using updated management methods.

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Increasing productivity in your workforce has wider reaching benefits on profit margins, employee engagement and company culture. Business owners can enhance productivity in their own tasks and lead by example to encourage staff to do the same.

Issues obstructing productivity 

Several factors are diminishing productivity in businesses. Disengaged workers and a lack of innovation in the workplace are two key examples.

Recent research by Gallup found that US companies are maximising only 5 per cent of their workforce, leading to disengaged workers and decreased productivity.

This echoes data from the Australian Bureau of Statistics, which found only 20 per cent of businesses introduced any new or innovative organisational and managerial processes between 2012 and 2013.

Such lack of innovation has negative domino effects on running a business, particularly by reducing its productivity. However, these issues can be resolved by implementing strategies to boost productivity.

Build strong relationships with employees 

An actively engaged workforce that takes pride in their job stems from a positive work culture. Often productivity has a strong correlation with workers being enthusiastic about their jobs and thus prioritising their work requirements.

Expert commercial lawyers can offer advice on creating documents and policies which clearly identify workplace decorum and behaviour. These documents set the foundation for strong relationships with employees.

Conduct an 80/20 analysis of your performance once a month 

This method involves identifying the 20 per cent of activities that led to 80 per cent of the results you were after, as well as the 20 per cent of tasks that consumed 80 per cent of your time. If you discover any overlap, or lack thereof, it will guide you on how to use time more efficiently and productively. In an article for Business Insider in 2013, entrepreneur and author Tim Ferriss noted he personally adopts this method and highly recommends it.

Optimise your work environment 

Since profitability is often directly related to productivity, review where and when you work best. Facilitate delivering to your maximum potential by constructing a daily routine which responds to your personal rhythm. Assess which technologies help to focus and which are distracting, and keep only the beneficial ones at your desk.

Jacqueline Whitmore, a contributor for The Entrepreneur, noted in a productivity article on February 25 that business owners who are inundated with online work could consider trying an app called Freedom. The app locks a person from the internet for up to eight hours at a time. This time can then be used as a digital detox to clear the mind and allow better quality work.

The inability to pay debts can be both financially and emotionally draining for business directors. In the December 2014 quarter alone, 1,122 individuals were deemed bankrupt as a result of their proprietary interest in a business, according to the Australian Bureau of Statistics.

Managing this difficult time can be challenging. Seeking financial and legal advice from commercial lawyers adept with debt recovery and insolvency would be a good plan. However, there are several wider legal considerations a business director facing insolvency should be aware of – here are six of them.

1. Be aware of your duties. 

Upon being deemed insolvent, or indeed even if there is a strong risk of insolvency, a business director is tasked with certain duties. Some are ethical, whilst others have legal obligations imposed by the Corporations Act.

A key duty is to is to keep conscientious books and records of all economic operations during the insolvency. Another is to safeguard the interests of all creditors involved, including stakeholders and employees. This involves not improperly using your position as director to further your own interests.

2. Do not trade while insolvent. 

It is your legal obligation to prevent your business from trading while it is insolvent. Since the business already owes debts, as the director it is your duty to disallow any further trade during insolvency.

3. Know the severe consequences for disobeying duties. 

Failure to abide by your duties can lead to crippling fines of up to $200,000 as pecuniary penalties. You could also face criminal charges if investigations into the insolvency find there was dishonesty involved, which could lead to up to five years in jail.

4. Compensation proceedings against you could lead to bankruptcy. 

Creditors who suffer a financial loss as a result of the business’ insolvency may seek compensation proceedings from you personally. A liquidator may be hired by them to gain these funds, or alternatively the Australian Securities and Investments Commission is also entitled to intervene. Depending on your financial situation, repaying these compensations could lead to your bankruptcy.

5. Being deemed bankrupt could cost you your job as director. 

Under Australian law, if you enter into a personal insolvency agreement under Part X of the Bankruptcy Act 1966, you are automatically disqualified from running or managing any corporations. In this case, you would cease to be a director.

6. There are early warning signs and solutions to help. 

Insolvency charges are understandably stressful, however there are some early steps which can help. Usually the start of an insolvency process stems from receiving a s222AOE penalty notice from the Commissioner of Taxation informing you of your businesses’ unpaid taxes. This notice offers a two week window to respond, so seeking legal council early can help minimise the risks of insolvency down the road.