Family businesses can often struggle in a globally competitive market. The Harvard Business Review published in its January 2012 issue that approximately 70 per cent of American family-owned businesses fail before the second generation can even get a chance to lead. However, a smart solution is to build a strong succession plan so that the business can be prosperous for future generations too. “Smooth succession is an oxymoron… Succession in a family business is probably the most complex management challenge anybody faces” said Peter Davis, director of the division of family business studies at Wharton School of Business. Quoted in the very first volume of the Family Business Review from winter 1988, his words still ring true today.

Even in contemporary times, succession planning is rarely implemented. Indeed, PricewaterhouseCoopers’ 2014 global family business survey, titled ‘Up close and professional: the family factor’, found that only 16 per cent had a robust succession plan.

Often succession plans are not organised with strategy or finesse. This is particularly problematic for family businesses, as they may need to manage disputes between siblings or face problems when children have not been adequately groomed for leading the business. Quality training and skill building is critical for helping the business stay within the family.

Importance of legal consultation 

Wendy C. Handler wrote in an article for the Family Business Review in 1994 that “researchers in the field of family business agree that succession is the most important issue that most family firms face” because it requires passing down the baton of the business to the next generation. The safest way to procure a smooth transition is to solicit legal advice.

It is important to be objective, rational and practical with succession planning so that the best candidate for the job is selected and trained accordingly. Such objectivity can understandably be difficult when dealing with family members, and so drafting a succession plan with expert lawyers provides customisation for the needs of a family business.

On March 12, work to update and change the Privacy Act 1988 commenced. The Office of the Australian Information Commissioner (OAIC) has made it their mission over the previous year to work with businesses, agencies and organisations to ensure compliance with privacy laws for their customers.

Timothy Pilgrim, the Australian privacy commissioner, noted in the OAIC press release that he was impressed by the encouragement and positive support from businesses on this matter. He added their enthusiasm is “recognition that good privacy practices are good for business, particularly in building customer trust”.

The Privacy Act 1988 will be updated by adding a series of Australian Privacy Principles (APPs), which include changes to the current credit reporting provisions and a need for businesses to transparently and openly inform customers how their personal information is managed, stored and protected.

These changes are OAIC’s solution to the multitude of privacy complaints received throughout the past twelve months, which increased by 43 per cent from the previous year.

Implementing changes to their privacy policy is more economic for businesses in the long run. Indeed, as Mr. Pilgrim reiterated in the press release, “my message for all organisations and agencies is: it is more effective, and ultimately cheaper, to embed privacy in day-to-day processes than it is to respond to issues such as data breaches as they arise”.

These legal updates to the Privacy Act 1988 are deigned to foster a culture of privacy that can be enjoyed by customers and businesses alike. Data breaches can lead to legal action, so be careful and professional in handling customers’ private information.

Your business privacy policies should respond to this updated legislation. Consult with commercial lawyers to develop the best changes to your existing policies in light of these updates to the Privacy Act 1988.

The decision to launch a business requires careful planning, research, financial management and sound legal advice.

Anthony K. Tjan wrote in the Harvard Business Review on March 23 that “great founders start businesses not to create a company but to solve a problem, to serve a calling, and to understand that they have a purpose that can actually make a meaningful difference”. Indeed, starting a business often stems from a passion and commitment to making a mark in the world.

However, to ensure this starting process is smart, smooth and strategic, consulting with expert commercial lawyers can significantly help.

Smart 

In the early stages of starting a business, even simple decisions such as choosing a name and logo can have legal repercussions if another business has registered the same intellectual property (IP). The smart thing to do is to use the correct legal channels to register trademarks, patents and copyrights.

Protecting intellectual assets cements the business brand, comprising its slogans, colours and other identifying or differentiating material. As a new business, establishing a unique and distinct brand is clever as it builds competitive advantage and champions unique selling points.

If the new business is introducing innovative products and services to the market, it is particularly important to legally safeguard these. Unfortunately, the Australian Bureau of Statistics found only 29.3 per cent of businesses protected their IP in 2013. Start a business shrewdly by securing IP rights early.

Smooth

Choosing the most beneficial business structure should be a priority in the early stages. In Australia, the four main structures are sole trader, partnership, trust and company. It can be difficult to identify which is best suited, particularly as each comes with different tax implications.

However, the decision can be very smooth if made in conjunction with tax advisory lawyers. They clarify how various taxes such as corporate tax, capital gains tax and income tax impact the business. They can also offer legal advice for managing taxes through consultation with accountants. The selection of a structure is thus made easier.

Strategic

Requesting customised and tailored legal advice specific to the business is the best strategy for success. Since legal advice covers a vast array of corporate needs, ranging from buying and selling assets to commercial disputes to attracting venture capital, seeking bespoke advice bolsters each strategy.

Developing the habit of consulting with lawyers for business matters early will help prolong the success of a business. Start strategically by scheduling an appointment with a law firm.

Business growth and profitability begins by starting strong. Good luck!

Entrepreneurs from all walks of life begin their journey with a bright idea.

Establishing a start-up takes courage and commitment, but no business strategy is complete without seeking legal advice.

The process can seem daunting, particularly when several legal documents need to be in order.

Rather than avoiding or delaying the completion of legal documentation necessary to establish your start-up, you can familiarise yourself with some of the key documents.

What are some of the legal documents needed for a start-up?

There are several documents needed, and each differs depending on your type of business and the relationship you wish to manage. For instance, backers and investors may require you to sign a loan agreement and personal guarantee deed.

For customers, there are legal documents which can help ensure your business complies with consumer rights while providing terms and conditions to manage malicious customers. These include, but are not limited to, terms and conditions for sale of goods, services agreements, and e-commerce terms and conditions.

My start-up has several founders. Is there legal documentation to protect our individual rights? 

Yes. Often a start-up begins with several founders, and these relationships need to be structured early to efficiently manage the business. A shareholders agreement and partnership agreement are two useful documents, depending on your business structure. Intellectual property is one of the most valuable assets for a start-up and therefore documentation such as an IP deed of agreement between all founders is crucial.

My start-up will soon need to hire employees. What legal documents are involved in this process?

There are strict rules and regulations on workplace law and they will often be in employees’ favour, not yours. Protect your rights as an employer using legal documents such as a deed of restraint and confidentiality, or independent contractor agreements. Develop efficient workplace policies which are well-thought out in advance of employing people, so that the foundation of your start-up is solid in case of future legal disputes.

Where can I get help? 

You can access customised legal packages for your start-up to complete such legal documents. Lawyers can offer expert guidance throughout this process to ensure your start-up is protected using the correct methods.

Five years after plans to form a Small Business Ombudsman were announced during the 2010 federal election, the government has released its draft legislation this month on March 11.

Titled the Australian Small Business and Family Enterprise Ombudsman, it will replace the current Australian Small Business Commissioner.

Importantly, this new ombudsman is committed to helping SMEs and advocating for their rights in government.

Several strategies have been developed to enforce this.

Five ways this new ombudsman helps SMEs 

1. Drawing on legislation from states across the commonwealth of Australia, the ombudsman will operate on a nation-wide level to advocate for SMEs. This extensive level of support throughout the country will be a valuable asset for growing businesses.
2. If SMEs face disputes, the ombudsman will act as a concierge to help them find the best agencies to resolve their issue. Moreover, it will also provide its own dispute resolution channels. This is particularly beneficial as previously SMEs would have had to turn to the Fair Work Ombudsman for assistance, whereas this new ombudsman is specialised and focused on the needs of SMEs.
3. The ombudsman can investigate several areas useful for SMEs, including but not limited to fair trading provisions, codes of conduct, and a regulator’s actions and behaviour. To keep matters transparent, it can also investigate if government agency complaint systems are working properly.
4. Every quarter, it will conduct research on laws or policies which are negatively impacting SMEs. This research will be presented to the Small Business Minister.
5. Perhaps the best news of all, the ombudsman is devoted to lobbying for and contributing to laws and regulations which enhance and improve conditions for SMEs throughout the commonwealth.

In conjunction with seeking sound legal advice when faced with disputes or other important business matters, SMEs can make use of this new ombudsman to manage their business.

The government is now seeking public consultation on the draft legislation and feedback is invited before April 7.

World Intellectual Property Day falls next month on April 26, and to celebrate we are sharing some tips on how to protect your business using trade marks.

If you are a start-up, you have dedicated yourself to the ingenious idea which sparked your business.

However, each year approximately 300,000 new small businesses have to cease operations, as noted by the Reserve Bank of Australia in their Small Business Finance Roundtable report.

With the momentous occasion of World Intellectual Property Day around the corner, now is an excellent time to avoid such failure by safeguarding your business with trade marks.

Why should you care about trade marks? 

Securing a trade mark is crucial for protecting your business assets and brand. Legally, your business name can only be considered your property if it has been registered as a trade mark. Similarly, any material which distinguishes your product should also be trade marked. Such material can be diverse, ranging from your logo and brand colours to your business slogan.

Without protecting these with a trade mark, other competitive businesses can copy your work or even register them as their own intellectual property (IP). This would be a big disadvantage, requiring you to extensively revise your current branding.

Moreover, simply registering your business name without applying for a trade mark is problematic because this does not allow you to stop others from using the same name. Only a trade mark gives you the legal right to do so.

Three tips to trade mark your business

1. It is essential to seek legal advice customised to your business needs to ensure your valuable ideas, products and branding are trade marked using the correct legal channels. Such customisation differs depending on the legal structure of your business. For instance, sole traders require different legal customisation to companies.
2. Since trade mark laws may change from state to state, schedule a meeting with an intellectual property lawyer so that your registration process aligns with ACT IP Laws as well as protects your business interests in other regions.
3. Often a business will need tailored IP licences to suit their needs. Lawyers can utilise their years of expertise to develop the best strategy specific to your business.

These tips can help cement your start-up’s success for years to come.

To sell your business quickly and smoothly, and for the highest possible price requires between 12 to 24 months of effort and planning to make the business “sale ready”.

Listed below are some of the key things you should have locked down before you sell your business to maximise its value and attractiveness to potential purchasers.

“Clean” Financial Position

You should have proper, up-to-date financial statements and tax returns. You should have a clear understanding of the loans and other financial commitments that will be discharged or transferred upon sale.

GST – going concern?

GST must be charged on the sale price unless the business is being sold as a “going concern”. This can be a surprisingly technical and difficult thing to determine, especially with commercial and rural property.

Key contracts – clients/ customers & suppliers

Your business may depend on a number of key contacts which may require them to be transferred if you sell your business. Your business is more valuable if these key contracts are locked down and in writing. You will need to manage the way in which you pass the benefit of these contracts to the buyer and you may need to get your client or supplier’s consent.

Business Assets

Your business is more valuable if you have a clear statement of assets that comprise the business and can prove you own them.

PPSR

Suppliers and customers may register their security interest in an asset or the business as a whole to protect themselves if the business is not able to pay money owed to them. You may be very surprised to discover that third parties believe they own, or have some entitlement to your business assets. This contested ownership needs to be resolved before the sale can proceed.

Commercial Lease Agreement

Most businesses are more valuable  – and more likely to be “going concerns” if they can continue trading in the same premises. This will require the landlord’s consent to a new or assigned lease. The sale will fall over if the landlord’s consent is not obtained.

Employees

The rights and obligations when dealing with employees can be complicated. Whether employees transfer, or simply have their employment terminated, employees either agree to transfer to the buyer or they can be terminated will most certainly affect the sale price.

Intellectual Property/ Trade Marks

Intellectual property is an important and valuable asset. The better you can prove and document your intellectual property rights, the more valuable  your business will be. If there is a key IP you want to retain, you will need to carefully identify and exclude it, perhaps even put in place licence arrangements so the new owner has the use, but not ownership, of your IP.

Tax implications

Tax can be one of the biggest expenses when you are selling a business and a substantial portion of your selling price may be taxed. There are various tax strategies and concessions available depending on the size and structure of the business. Small businesses may be eligible for various CGT concessions while larger corporations may restructure their companies.

Chamberlains can help you ensure all of these things are in place so that you are in the best position to obtain maximum return on your business sale. For more information and advice contact our Commercial Team.

In the recent decision of In2Ply Pty Ltd v Amerind Pty Ltd (in liq) (recs and mgrs apptd) [2014] VSC 603 the Victorian Supreme Court set aside a creditor’s statutory demand because the Court held that there was a valid offsetting claim despite the fact that it was not available as a cross-claim.

The facts

Amerind had receivers and managers appointed.  Amerind issued a creditor’s statutory demand on In2Ply, with the affidavit in support sworn by one of the receivers.  Amerind had previously entered into a debtor finance agreement with its bank and the relevant debt had been assigned to the bank.

In2Ply applied to have the creditor’s statutory demand set aside on the basis that it had an offsetting claim.  Amerind argued that In2Ply did not have an offsetting claim because of 1) the change in creditor from Amerind to the bank and 2) the offsetting claim was not in the same right or capacity as the debt.

The decision

Regarding the first submission the Court held that the debt was due and payable to the bank, not Amerind as stated in the creditor’s statutory demand because the debt had been assigned to the bank.

In analysing the second submission the Court accepted the offsetting claim as a reason for setting aside the creditor’s statutory demand.  First the Court rejected Amerind’s argument regarding mutuality, holding that mutuality did not limit cross-demands.  Second the Court held that ‘cross-demand’ was broadly defined and not restricted to counterclaims that could be brought as court actions.

Take Home Message

When issuing creditor’s statutory demands, creditors should be careful to:

• Correctly identify the entity to whom the debt is due and payable; and
• Be aware of claims that could be raised against the creditor by the debtor.

Please contact the Dispute Resolution, Insolvency and Reconstruction team at Chamberlains Law Firm if you are considering issuing a creditor’s statutory demand.  We can advise on whether it is an appropriate option and we offer an affordable fixed fee for preparing and issuing your creditor’s statutory demand.

As a business grows, they will need to take steps to protect their intellectual property (IP). However, with so many different facets to this legal area it is equally important to ensure that owners understand this opportunity.

To help, here are three of the most common types of IP for business owners to understand:

1) Patents

Securing a patent is an important process for any company that wants to protect their inventions. Patents can be used to secure any new invention, process or substance that is new or useful. With this process in place, you will have exclusive rights to commercialise this invention.

For small businesses whose competitive advantage rests on having unique products and services, having these patented will ensure competitors can’t copy these processes without your permission.

2) Trademarks

Trademarks are essential for a company to secure. Your business name, for example, can only be considered your legal property if it has been registered as a trademark. The same approach goes for any other material that distinguishes your product, such as branding and a logo.

Without this level of protection, other organisations will be able to copy your branding and company name, or even register them as their IP, forcing you to revise your current branding and processes.

3) Copyright

Any creative work that a business produces will be protected by copyright so, unlike a trademark or patent, there is no need to apply for copyright for a work. This means that any books, trade publications or written material such as testimonials will be protected and cannot be copied without your permission.

These three are by no means an exhaustive list and other forms of IP may be required. Either way, it is important to consult with a commercial lawyer in order to move this process forward.

Start-ups will often find it harder to take on new staff members, especially when cash flow is tight and finding qualified workers is difficult. As a result, many smaller companies will consider implementing an employee share scheme or similar arrangement to help offset their staffing costs.

An employee share scheme allows companies to offer staff shares or securities in the company in place of a portion of their wages. Employers can also use a share scheme to offer staff the option of purchasing shares in the future.

Recently, new federal legislation has also been introduced that will make these schemes easier for employers to manage and ensure they remain an attractive option for small-business owners.

The proposed bill will revise the way these schemes are established and operated, reducing the ongoing costs and maintenance for companies that choose to pursue these options.

Organisations that want to offer this option to staff will also be able to offer a discount when they transfer ownership of these shares, with this up-front discount likely to be exempt from taxation.

Small Business Minister Bruce Billson also stated this new legislation would affect the way staff were offered the option to purchase stock in the future.

“In past options were taxed when they were provided to the employee. There was no real way of determining their true values, which meant that employees were hit with a substantial tax liability, even though there was no material capacity to generate the resources to pay it,” stated Mr Billson.

“Our amendments mean that the tax on the options is paid when there is an actual material value on the options.”

If your company is considering establishing an employee share scheme in the future, it will be important that you get the right legal advice ahead of time in order to minimise these costs. Organisations will still need to ensure they have the right legal advice, both when setting up this program and for ongoing responsibilities like taxation.