• May 1, 2020 in Agricultural Law, Commercial Law

    INLAND RAIL – QUEENSLAND RESUMPTIONS

    IT’S COMING LIKE IT OR NOT: YOUR GUIDE TO WHAT TO DO

    Queensland position:

    While about two third of the route from Melbourne to Brisbane will use existing rail corridors, in Queensland the position is different and will require substantial compulsory acquisitions (resumptions)  in relation to the following Queensland stages: –

    – NSW border (Yelarbon) to Gowrie.

    – Gowrie to Helidon

    – Helidon to Calvert

    – Calvert to Kagaru

    – Kagaru to Acacia Ridge/Bromelton

    The Yelarbon to Gowrie stage is currently attracting the most concern because of its potential impact on the viability of agriculturally important and valuable Condamine flood plain properties. Equally significant impacts will likely be caused in all stages depending upon the specific and differing impact of resumption on each particular affected landowner.

    Purpose and Objective of this Publication

    The objective of this publication is to assist any affected parties in making sure you are in a position to achieve the best outcome from any resumption of your property.

    We will briefly outline the process and make general suggestions as to the types of preparatory action you should be talking at various stages in the process.

    The impact of a resumption can differ vastly from property to property. For example if the resumed land is in poor country and on the boundary of the property so that it has no major impact upon the operation and viability of the property, the position is comparatively simple. It is a case of just making sure you get proper compensation for the value of the resumed land. On the other hand if the resumed land bisects the property it is likely that it will present much more complex issues. Those issues include: –

    • Access difficulties in trying to operate a property divided by rail line.
    • Impact on water flows and consequential ramifications including economic, environmental or  erosion .
    • Ongoing economic impact on the cost of operation and ease of management of a divided property.

    Process Steps

    While there is no legal obligation on the constructing authority (i.e. the party making the resumption) to consult with affected parties prior to issuing a formal notice of intention to resume, the Australian Rail Track Corporation (ARTC) has indicated that it intends to work with the Queensland constructing authority which will be making the required resumptions (Constructing Authority) to consult with affected landowners during the design process.

    If your property is likely to be seriously impacted by a proposed resumption then it will be important for you to engage seriously in this informal process as the Constructing Authority may be prepared to agree to variations of modifications that will minimise the impact of any resumption on your operations. We understand that this process has commenced but in many cases without resulting in any significantly useful outcomes for affected landowners.

    In order to get the best outcome it will be necessary for you to obtain experienced accounting advice as to the likely impact of the resumption on the ongoing profitability of your operations even at this early stage. If the constructing is already can see you have a significant claim for compensation because of the resumption, it is likely to make them more responsive to changes in order to minimise the likely compensation claim.

    Notice of Intention to Resume

    The Constructing Authority is required to give you a notice of intention to resume your land. Once that notice is served you have the right to make an objection in writing to the land being taken before a date not less than 30 days after the date of the notice

    Matters pertaining to the amount or payment of compensation are not grounds for objection. In general term objectors are entitled to procedural fairness by the Constructing Authority. Despite that in the case of a project such as the Inland Rail our view is that it will only be in exceptional cases that the objection process is likely to totally prevent a resumption. The objection process may however in some cases result in meaningful amendments to the proposed resumption area.

    If no objections are made or if after due consideration ,  the Constructing Authority is satisfied the resumption should proceed then the Constructing Authority can apply to the relevant minister to take the land by means of a gazette resumption notice. This application is required to be made within 12 months after the notice of intention to resume is served

    Gazette Resumption Notice – Compensation Rights

    From the date of the publication of the relevant gazette, title to the resumed land passes to the Constructing Authority. Parties having an interest in the resumed land whether as owner ,lessee, mortgagee or easement holder have a right to claim compensation under the  Acquisition of Land Act !967 (the Act. The amount of compensation can be negotiated between the claimant and the Constructing Authority subject to consent of any mortgagee.

    Making a Claim for Compensation

    If the claimant is not able to negotiate the amount of compensation , the onus is on the claimant to serve on the Constructing Authority a written compensation claim within three years of the land been taken. The compensation claim must set out various matters set out in section 19 of the Act. In practical terms to key matter is an itemised statement of the claim showing the nature and particulars of each item as well as the total amount of compensation claimed.

    In order to maximise the prospects of successfully and promptly negotiating settlement of a compensation claim at the maximum realistic figure it is important that the claim is prepared with care and proper professional advice where the resumption will put at risk or result in the loss of some form of animal welfare certification or approval  (such as the RSPCA) or an organic certification or approval the economic loss will be significant. In these and any other cases where the resumption impacts the viability of a business enterprise conducted on the remaining part of the resumed land, it will be vital to obtain specialist accounting advice from accountants experienced both in resumption and also more importantly the complex financial modelling applicable to the relevant industry be that agricultural or some other business. This is imperative in order to fully and properly determine the full extent of ongoing business losses. Some cases will also involve not just establishing the value of the resumed land and economic business losses but may also involve the cost of acquiring replacement land and relocation costs.

    Legal, valuation and other professional fees and costs reasonably incurred by the claimant in properly preparing and filing a claim are able to be claimed and so claimants will not be out of pocket for expenses properly incurred.

    In many cases it will be of significant financial advantage to ensure that the compensation claim is made and payable in a particular manner to ensure that it does not become taxable. We will be shortly adding a further section to this Guide, contributed by the Toowoomba office of RSM . RSM are very experienced in this type of resumption work and this section will set out some of the key factors for you to consider both in terms of calculating economic loss and ensuring tax effective structuring.

    Referral to Land Court

    The preferred course both in terms of time and cost is to resolve claims by negotiation with the Constructing Authority.  The actions we have suggested above and our approach to these matters are designed to maximise the prospects of negotiating a claim with the Constructing Authority for the highest realistically achievable amount.

    If the claimant and the Constructing Authority are not able to resolve the claim either the claimant or the Constructing Authority can refer the matter to the Land Court for de termination. This can be done at any time after the claim has been lodged with the Constructing Authority.

    Our Approach

    Our approach is as follows: –

    • Firstly to focus upon the specific circumstances and details of each individual claim in order to fully understand the impact of the resumption on the individual property. Only by adopting this approach can your claim be fully and properly made and the proper amount of compensation paid. Put shortly resumption claims are not sensibly dealt with by class actions because the impact of resumption differs so greatly from property to property.
    • Secondly in cases where the resumption will have a significant impact on the profitability or viability of an agricultural or other business enterprise, we believe it is critical to obtain the best financial advice in order to determine the full ongoing financial impact of the resumption. It is vital that this advice is both detailed and more importantly robust so that it will stand up to critical review by the Constructing an Authority and its advisors. In this regard we can confidently recommend RSM Australia Pty Ltd. We are confident Will Laird and David Lethbridge in the Toowoomba office have the required specialist experience in such matters and are familiar with local rural and other businesses
    • Thirdly in relation to valuations again it is important to engage valuers who are experienced in resumption matters and with knowledge of the local area. We have identified a number of local valuers who have a very good track record in producing valuations which are reliable and most importantly stand up to scrutiny in circumstances where other parties are seeking to challenge the valuation.
    • Fourthly we strongly believe in the old adage  “That  a champion team will always beat a team of champions” For that reason we have established strategic working relationships with the other vital professional advisors needed in these matters namely accountants and valuers.

    What this approach means to clients is that we have the ability to deliver a complete local team (working as a team) and with all the needed skills and local knowledge to deliver the best outcome.

  • April 3, 2020 in Commercial Law, Litigation

    Making sure you know what IS and what IS NOT captured as “Building Work”

    The Supreme Court’s recent decision in Waterford PPG Pty Ltd v Civil Constructors (Aust) Pty Ltd [2020] QSC 8, provides further clarity as to what is and what is not included as “building work” under the Queensland Building and Construction Commission Act 1991 (Qld) (the Act) – providing essential guidance as to what work requires an appropriate licence under the Act.

    Background

    Waterford PPG Pty Ltd (Waterford) entered into a contract with Civil Constructors (Aust) Pty Ltd (Civil Constructors) for the construction of roadworks, drainage, sewerage reticulation, water supply, conduits and stormwater quality for a 51 lot subdivision located at Ellen Grove, Queensland.

    After a dispute arose following a payment claim and payment schedule being issued, Civil Constructors made an application for adjudication for the disputed owing amount. The adjudicator found in Civil Constructor’s favour and, as a result, Waterford appealed the Adjudicator’s decision to the Supreme Court.

    What the Court considered?

    Waterford argued that pursuant to s.42 of the Act, Civil Constructors could not carry out “building work” as defined under the Act because they did not hold the necessary licence to conduct sewerage works. Given the breach under the Act, Waterford argued that Civil Constructors had no entitlement to make the application for adjudication and the contract between the parties was unenforceable.

    Civil Constructors argued that the sewerage works undertaken were not “building work” for the purposes of s.42 of the Act. Instead, they said the exceptions contained in clause 11 of Schedule 1 of the Act excluded sewerage systems from the definition of “building work”. This was because Civil Constructors did not conduct works which involved a connection of a sewer system to any particular building or proposed building.

    What was the decision?

    The works undertaken by Civil Constructors involved the installation and connection of waste tanks to the pressure sewer mains in proposed streets within the subdivision.

    Civil Constructors’ installation of the waste tanks themselves did not constitute a structure which amounts to connecting a building to a main of that system and rather, fell within the constructions of the sewerage system which requires additional work to be undertaken to connect any building or proposed building.

    At the time Civil Constructors undertook the works, there was no proposed building or even the existence of proposed subdivided lots. The Court also considered that if “building work” was to include undertaking work involving the construction of a sewerage system (including the installation of waste tanks and connections to pressure mains), this would specifically defeat the express wording of the exceptions to “building work” as contained clause 11 of Schedule 1 of the Act.

    Accordingly, Boddice J dismissed Waterford’s appeal and found:

    • Civil Constructors did not contravene s.42 of the Act;
    • Civil Constructors undertook the works pursuant to the contract and therefore was entitled to dispute the payment schedule under the relevant Act; and
    • The adjudication application was properly made and the adjudicator had jurisdiction to make her decision.

    How can Creevey Russell Lawyers assist?

    Irrespective of whether you are a Principal or Contractor, the works you are undertaking or works conducted by a contractor may be captured by the definition of “building work” under the Act. This of course is relevant to enforcement mechanisms most appropriate or available should a dispute arise resulting from a payment claim or payment schedule.

    If you would like further information, we recommend getting in touch with the team at Creevey Russell Lawyers by contacting our office on (07) 3009 6555 or emailing .

    Jakob Mignone
    Paralegal
    Ph:   07 3009 6555
    Email: jmignone@crlawyers.com.au
    Josh Mountford
    Associate
    Ph:   07 3009 6555
    Email: jmountford@crlawyers.com.au

    Prepared by Jakob Mignone and settled by Josh Mountford of Creevey Russell Lawyers. The contents of this article are for general information purposes only and do not constitute legal advice.

  • April 2, 2020 in Commercial Law, Litigation

    How to navigate your business and commercial contracts or agreements through COVID-19

    With the rapid economic shockwaves of COVID-19 being felt around the world, many businesses in Australia will experience how COVID-19 will impact their current and future business contractual obligations.

    Trade, supply or distribution agreements, or commercial contracts often contain a provision called a force majeure clause. If a force majeure clause is not included or applicable, parties to an agreement may attempt to rely on common law relief based on the doctrine of frustration.

    What is a force majeure clause?

    A force majeure clause contained in a contract or agreement will define what a “Force Majeure Event” is, thereby governing what circumstances the parties have decided relief should be available from performance of their contractual obligations following an unexpected or unforeseen event.

    A Force Majeure Event typically captures:

    • an act of God (including weather events);
    • acts of war or acts of public enemies;
    • terrorist acts, riots or civil commotions; or
    • industrial actions which involves a blockage, labour disputes or strikes,

    which are not caused by and are outside the control of either party to the contract or agreement.

    Relief from COVID-19?

    Given the World Health Organisation has declared COVID-19 a “pandemic”, some force majeure clauses may provide relief to parties if they are appropriately structured. For example, a Force Majeure Event, if drafted to cover a wider spectrum of events, may include events such as a “pandemic” or “epidemic”.

    The continuous impact of COVID-19 also has the ability to trigger events, trade controls or operating restrictions which are out of the control of the contracting parties. For example, measures which have already been put in place with respect to the Government mandating forced business closures for particular industries.

    It is important for contracting parties to review their contracts or agreements to ensure that future unforeseen events may be covered by a force majeure clause and to explore whether any relief may be available given the wide-spread impacts of COVID-19.

    Still feeling frustrated?

    If a force majeure clause does not provide either one or both of the parties relief during this unprecedented COVID-19 crisis, parties may be able to rely upon the doctrine of frustration instead.

    In Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, Lord Radcliffe described frustration as occurring whenever the law recognises:

    “…that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract…”.

    It is important to note that parties cannot simply rely on a contract being frustrated as relief if one party merely faces an increased financial burden to perform their obligations under the contract. A frustrating event must directly relate to and make it nearly impossible for a contracting party to perform its obligations. For example, if the Government issues a COVID-19 compliance ruling, performance by one party to a contract may become unlawful.

    It is also important to bear in mind the nature of frustration. Frustration can only arise where the performance of the contract cannot continue in the manner intended by the parties. Where the parties have included a force majeure clause, the inference has to be that they have turned their mind to the manner in which the contract might be frustrated and have provided for those eventualities. Therefore, a higher level of event would be required to invoke the doctrine.

    How can Creevey Russell Lawyers assist?

    There is not a blanket solution for all businesses who continue to operate during this COVID-19 crisis.

    We recommend you get in touch with the team at Creevey Russell Lawyers to discuss whether you have the ability to exercise any rights under a force majeure clause in your contract or whether performance of your contract will be hindered by frustration. Please do not hesitate to contact our office on (07) 3009 6555 or .

    Jakob Mignone
    Paralegal
    Ph:   07 3009 6555
    Email: jmignone@crlawyers.com.au
    Josh Mountford
    Associate
    Ph:   07 3009 6555
    Email: jmountford@crlawyers.com.au

    Prepared by Jakob Mignone and settled by Josh Mountford of Creevey Russell Lawyers. The contents of this article are for general information purposes only and do not constitute legal advice.

  • March 29, 2020 in Commercial Law

    COVID-19 SCAMS – BEWARE

    Coronavirus (COVID-19) SCAM

    This is a time of great uncertainty and introspection. As we face an unprecedented health crisis, unlike any we have seen in the last century, we must not only take measures to protect ourselves and others from the disease, but also from those who seek to benefit from the ongoing harm in the community.

    The World Health Organisation (“WHO”) has released an official statement regarding scam emails and “phishing” by individuals and groups purporting to be the WHO and seeking donations to assist those affected by the virus and in the pursuit of research funding towards a vaccine.

    We must all be careful in these unprecedented times in our lives. Many of us feel the need to donate to the cause. Those who donate should be commended for the collective effort to band together as a nation support of our fellow man.

    That being said, where there is tragedy, there is empathy, and people with a lesser moral code see this as an opportunity to pray upon the kind heartedness of others.

    Please make sure any donations you make are to a valid organisation. DO NOT donate to websites that appear in any way to be illegitimate. Try to avoid donating to sources solicited through emails. ALWAYS verify the source you intend to donate too through legitimate websites, like the government or recognised charitable organisations. Legitimate websites have specific details in their IP address that will help you verify the validity.

    For example, the WHO will never contact you via email except with an @who.int address. Anything after the @ symbol that is not who.int is not a legitimate email. They do not operate .com or .org addresses.

    Please remain vigilant to these scams and others and report any emails that concern you to the actual organisation from which they purport to represent.

    Everyone needs to be especially vigilant in these times, both with our own health, the health of others and against the pathetic individuals and groups who would seek to profit from this international crisis.

     

    Michael Burrows
    Senior Associate
    Ph:   07 3009 6555
    Email:
  • February 12, 2020 in Commercial Law

    Why Do I Need Business Terms and Conditions?

    Business terms and conditions are basically your terms of trade, your contract with your clients.  Payment for the supply of goods and services is what keeps a business running, unpaid invoices cause cash flow issues and can impede the success of a business.

    Too often we see businesses negatively affected where they do not have terms and conditions which could otherwise have assisted them and minimised their losses.

    Why should I have Business Terms and Conditions?

    Terms and conditions should be used for each transaction your business enters into with your customers (or clients) before you commence work.

    They exist to protect your rights and further your interests.  They can allocate risk to parties in the event of a dispute or disagreement and avoid frustration when conflict arises.  Your business terms and conditions should cover a wide range of issues as set out below and be adequately drafted to provide the best protection for your business.

    Benefits of having Business Terms and Conditions

    A well drafted set of terms and conditions can define the entire relationship between supplier and customer from the start and through any ongoing relationship.  From what product or service is being supplied and how and when payment is made and what the obligations of each person are. Having well drafted terms and conditions in place at the outset of a transaction with your customer can minimise disputes later on in the working relationship.

    Things to consider

    Prior to drafting the following items should be considered at a minimum:

    1. Who are the parties?;
    2. What are the products or services you are supplying and what legislation is relevant to these products and services?;
    3. How do you want to enforce non-payment?;
    4. What happens in the event of a dispute between the parties?; and
    5. What happens in the event of bankruptcy and liquidation of your customer or you?

    Key Terms and Conditions

    The following are examples of some key matters that should be covered in an effective set of business terms and conditions:

    1. A clear definition of your products and services;
    2. Payment terms and your rights to charge interests on amounts owing to you under your contract;
    3. Warranties and guarantees;
    4. Delivery terms; ;
    5. Default provisions;
    6. Quality of goods (if applicable);
    7. Defects and damage ;
    8. The passing of ownership and risk of the goods;
    9. Intellectual property rights (if applicable);
    10. How the contract can be terminated;
    11. Any fixed term of the agreement (if applicable); and
    12. Relevant laws that govern your contract or your business or that you are required by law to disclose, such as Competition and Consumer Act 2010.

    Your business terms and conditions should be specifically drafted depending on your business and what products and services you provide to your customers and the manner in which you provide them.

    Many seemingly minor issues that are relevant to most business will be covered in business terms and conditions and will save business owners time, stress and money when a dispute arises down with a customer down the track.

    Regular Reviews

    As the laws applicable to your business and your business itself will change over time, your business terms and conditions should be reviewed to ensure they are still relevant.

    Reviews should be conducted against new industry regulations or changes to legislation which affect your particular business.

    If you require any assistance with the drafting or enforcing any terms of trade or with any other commercial legal issue, please do not hesitate to contact our dedicated commercial team.

     

    Helen Kay
    Partner
    Ph:   07 3009 6555
    Email: 
    Grace Hobbs
    Lawyer
    Ph:   07 3009 6555
    Email: 

     

  • February 5, 2020 in Commercial Law

    Do I Need a Heads of Agreement?

    What is a heads of agreement?

    A heads of agreement is generally a non-binding document prepared in anticipation of entering into a further agreement. The heads of agreement sets out the terms and conditions between the parties who will be subject to the further agreement as well as detailing the intention or purpose of the further agreement and the key terms and conditions that will apply to the transaction. Heads of agreements are usually prepared for various commercial transactions including but not limited to asset sales, land transactions, business contracts, partnerships, investments and majority of contracts with a commercial nature (read our article on the 5 Stages of a Business Sale by following the link).

    Is it binding?

    Although a heads of agreement is not intended to be binding it is still a legal document and therefore is subject to the principles of contract law. If found in court that the Heads of Agreement satisfies the three elements that constitute a formal contract you may be bound to the obligations in the agreement. For this reason, to avoid any doubt, your heads of agreement should include a statement somewhere within the document stating that the parties agree and acknowledge that the heads of agreement either is or is not binding on the parties.

    Benefits of having one?

    Heads of agreement set out the terms and conditions of an agreement prior to a contract being prepared. Having a heads of agreement in place can save time and money in the drafting process of a further contract. A good heads of agreement will address the pressing commercial issues agreed by the parties. When prepared to this standard it is generally safe to say the main aspects of the agreement have been addressed and therefore will not require significant negotiations later down the track.  If majority of the terms and conditions have been ironed out in the heads of agreement it will prevent additional work for your lawyer in negotiating and drafting the terms of the formal agreement, which will in turn save you money.

    When a heads of agreement is well drafted it will minimise the risk of any crucial terms important to either party being left out.

    Additionally, having a heads of agreement in place means that both parties will know the intention of the formal agreement. This means when the formal agreement is being prepared there should be no significant differences in the expectations of the parties and therefore no delays in a formal agreement being finalised and signed.

  • December 2, 2019 in Commercial Law

    Is Your Lease Eligible for an Exemption?

    From 2 December 2019 transferees of state leasehold property in Queensland may be exempt from the requirement to apply for the chief executive’s approval before lodging their Transfer Form 1 to transfer their property.

    The Department of Natural Resources, Mines and Energy (DNRME) has today recorded administrative advices on eligible titles pursuant to section 322AA of the Land Title Act 1994. This exemption applies to the majority of residential, commercial and primary production leases. The change could save landowners potentially hundreds of dollars in application fees and well as save time in waiting for consent to be obtained.

    The exemption will however not apply where the transferring party in a transaction is a mortgagee in possession, a mortgagee exercising a power of sale, or an appointed receiver/manager must still obtain approval for a transfer. These transferees will still need to follow the current process of seeking chief executive approval prior to lodging your Transfer Form 1.

    How can you find out if your property is exempt?

    You will need to conduct a current title search on your property to determine whether the relevant administrative advice has been recorded. If an administrative advice has not been recorded you will need to follow the existing lease transfer process.

    Please contact our commercial and property team here at Creevey Russell Lawyers to discuss if you are unsure how this change affects you or your property transaction.

    Helen Kay
    Partner
    Ph:   07 3009 6555
    Email: 
    Tessa Knight
    Lawyer
    Ph:   07 4617 8777
    Email: 
  • December 2, 2019 in Commercial Law

    How a Shareholders Agreement Can Protect Your Business

    Too often we see businesses get embroiled in costly disputes in circumstances where a shareholders agreement could have prevented these unnecessary legal costs. Most successful businesses we deal with have well drafted shareholders agreements in place.

    When entering into a business arrangement, whether it is with a colleague, family member, friend or strictly business partner, it is imperative that the nature of the relationship and terms and conditions of the arrangement are documented to protect the interests of all parties.

    1. What is a shareholders agreement?

    A shareholders agreement is an agreement that will formalise the arrangement that you intend to enter into, or have entered into, with your business partners and set out how the business will run. It should cover a range of matters some of which are set out below. The below is not an exhaustive list of clauses that should be covered off on in your shareholders agreement, however it should give you a brief idea of the number of matters that need to be considered and covered off on within the shareholders agreement.

    1. When should you get one?

    We suggest entering into a Shareholders Agreement as soon as possible and before your new idea is launched or before any of the parties involved have made any financial or other contribution. As you will read below the Shareholders Agreement should cover a number of critical aspects to the business operations, rules and regulations and it is therefore prudent that these matters are agreed between business partners at the outset of the arrangement.

    1. What does the shareholders agreement cover?

    The following are examples of clauses your Shareholders Agreement should cover to best protect the interests of the parties and the business:

    a. Sale of Shares

    A Shareholders Agreement should outline the process involved with sale or sale of shares. Generally this will include drag-along and tag-along rights, pre-emptive rights and what happens in the event that a shareholder is totally and permanently disabled. These clauses provide both minority and majority shareholders with protections with respect to the transfer of shares.

    b. How the Business is to be Managed

    In addition to information regarding sale of shares, a shareholders agreement should include all other required policies and procedures including general management of the company, how and when decisions can be made, how what happens in the event that a director defaults under the shareholders agreement and when the shareholders agreement can or will be terminated, how dividends are calculated and paid. These policies and procedures are included in the shareholders agreement to clarify from the outset how important decisions will be made for the business in the further.

    c. Dispute Resolution

    This clause will typically require one shareholder to issue the other shareholder/s with a notice of dispute then require the parties to explore other options to resolve the dispute (for example by way of informal dispute resolution techniques such as negotiation, mediation or independent expert appraisal). The Shareholders Agreement may set out the order of these informal disputes resolution options (typically from least formal to most formal) and may also require certain steps to be taken within a particular timeframe to avoid having disputes drag out unnecessarily.

    1. Things to watch out for:

    a. Restraint of Trade

    Shareholders Agreements will more than likely include provisions regarding restraint of trade that will apply in the event you or your business partner leaves the business. This clause will generally include definitions of the restricted activity (being the activities the relevant person is restricted from carrying out), the restraint area (where the relevant person will be restricted from carrying out the restricted activity), and the restraint term (being the period of time the relevant person is restricted from carrying out the restricted activity within the restraint area). The parties must ensure that each of the restricted activity, restraint area and restraint term are not too onerous but still provide the requisite protection for the reaming partners and business. This clause should be reviewed and advised upon from both an exiting and a remaining shareholders perspective.

    b. Confidentiality

    A confidentiality clause will generally cover:

    • the information or type of information that is deemed to be confidential for the purposes of the Shareholders Agreement
    • who a party is able to disclose confidential information to
    • requirements when disclosing confidential information (the relevant third party may be required to enter into a confidentiality agreement)
    • what happens in the event that the confidentiality provisions are breached by a party

    Again, this clause needs to be considered and drafted carefully. If confidential information is leaked it could have detrimental effects on the business and in turn the shareholders. You will also need to consider your confidential information must continue to be kept confidential after termination of the shareholders agreement or if/when the business ceases to operate.

    c. Rights and Obligations

    Shareholders will have certain rights and obligations under their shareholders agreement and it is important that these rights and obligations are fully reviewed to ensure that they are fair in the circumstances and each shareholder must fully understand their rights and obligations so that they are carry out what is required of them. For example, certain shareholders may be entitled to appoint a director in the company. This could be based on classes of shares or any other factor set out under the shareholders agreement. If you are not a director, or do not have the right to appoint a director your rights may be limited with respect to receiving company information, or making decisions or entering into documents/agreements on behalf of the company.

    The above are not exhaustive lists of what your shareholders agreement should cover or what things you need to watch out for when your shareholders agreement is being prepared. Shareholders agreements are complicated documents that require a unique understanding of the current or proposed business operations and individual shareholders concerns in order for them to be drafted correctly.

    If you require any assistance preparing or negotiating your shareholders agreement or with any other commercial legal issue, please do not hesitate to contact our dedicated commercial team.

    Helen Kay
    Partner
    Ph:   07 3009 6555
    Email: 
    Tessa Knight
    Lawyer
    Ph:   07 4617 8777
    Email: 
  • November 20, 2019 in Commercial Law

    5 Stages of a Business Sale

    The sale of a business is a complicated process with many moving pieces and numerous critical deadlines which must be met. The process of a business sale can sometimes take months to finalise. If you are thinking about selling your business it is important to understand the process and the different stages of the transaction to ensure matters run as smooth as possible.

    We have summarised the business sale process into 5 key stages below.

    1.  PRE-CONTRACTUAL STAGE

    As the first stage in contract negotiation the seller and buyer may choose to enter into a heads of agreement which will set out the key terms and conditions which will ultimately be the basis of the contract of sale.  These could include:

     

    • The purchase price
    • What the sale includes (i.e. Plant and equipment, stock-in-trade, etc.)
    • Any deposit payable
    • Whether the contract will be subject to the buyer obtaining satisfactory finance

    Once the heads of agreement document has been agreed and entered into the parties’ solicitors can begin to prepare a contract of sale. The contract of sale may still be subject to some minor negotiations however as most of the key terms and conditions have been agreed under the heads of agreement only minor matters should be left to be addressed.

    We highly recommend that sellers seek advice from their accountant prior to entering into a contract so that the tax consequences of the sale can be determined before the parties enter into a binding agreement.

    Once the contract has been agreed and finalised the buyer should execute the contract of sale first and the seller second. The Contract is dated on the day that the last person executes the contract.

    1.  CONDITIONAL CONTRACT STAGE

    Once signed the clock will start ticking on any conditions that your business sale contract is subject to. These conditions may include:

    1. Finance;
    2. Due diligence;
    3. Review of and satisfaction of lease and other third party agreements.

    Your business sale contract may be subject to the buyer completing a ‘trail period’ whereby they will be permitted to trial the business for a set period in order to verify its trading performance.

    The above conditions are typically for the benefit of the buyer and must be either satisfied or waived by the buyer on or before the date each condition falls due.

    If you are selling a franchise business it is likely to be condition of the sale that you obtain the franchisor’s consent prior to the transfer taking place (read our article on How to Sell a Franchise Business by following the link).

    1.  UNCONDITIONAL CONTRACT STAGE

    Once all conditions of the contract have been ‘satisfied’ by the required party the contract becomes ‘unconditional’ meaning that settlement must proceed.

    A number of matters need to be actioned between the time that the business sale contract becomes unconditional and settlement.

    • Stock-in-Trade – if the purchase price under your business sale contract is stated to include stock-in-trade and work-in-progress. If these are not included in the purchase price the value of the stock-in-trade and work-in-progress must be determined and the relevant values must be added to the purchase price.
    • Employees – the buyer must, prior to settlement, notify you of the names of the employees they propose to employ following settlement and need to make an offer of employment to each relevant employee. The business sale contract will specify who is responsible for payment of the leave entitlements of the employees. Adjustments should be made to the purchase price for these amounts.
    • Security Interests – you may have registered security interests (for example with the Personal Property Security Register) over your stock-in-trade or business equipment. These will need to be released and any partial releases handed to the buyer at settlement so that the buyer has clear title of the business as will be required under your business sale contract.
    1.  SETTLEMENT STAGE

    Congratulations! You’ve reached your settlement date! Your solicitor will likely book your settlement to occur sometime in the early afternoon. All parties will attend a physical settlement where cheques, original documents and keys are handed over.

    1.  POST SETTLEMENT STAGE

    Although settlement has been completed for all intents and purposes, the following matters will still need to be dealt with post-settlement:

    1. Transfer of business name;
    2. Completion of transfer of lease and registration of documents with titles office as required; and
    3. Transfer of trade marks, websites, domain names, trademarks, email addresses and other contacts for the business, social media accounts.

    Your business sale contract may also be subject to a ‘seller’s assistance’ period. If this is a condition of the business sale contract you, or a nominee of yours who is familiar with the business, must attend the business for the specified period following settlement to give assistance to the buyer in relation to the conduct of the business.

    This is not an exhaustive list of matters which need to be dealt with following completion of your business sale and you solicitor will advise you of any matters which you need to action following settlement.

    OTHER MATTERS TO CONSIDER

    We highly recommend that all seller’s undertake a ‘Seller’s Due Diligence’ prior to entering into any negotiations with another party in order to prepare your business for sale. (Contact our office to find out more about our Seller’s Due Diligence).

    If you are thinking about selling your business and require any assistance with the business sale process, or any other commercial legal issue, please do not hesitate to contact our dedicated commercial team.

    Helen Kay
    Partner
    Ph:   07 3009 6555
    Email: 
    Tessa Knight
    Lawyer
    Ph:   07 4617 8777
    Email: 

     

  • October 1, 2019 in Commercial Law

    End of an Era; No More Paper Certificates of Title from Today (1 October 2019)

    From today, 1 October 2019, paper Certificates of Title will no longer have any legal effect and will not be required to be deposited with the Titles Registry when dealing with property. A paper Certificate of Title will simply now become an item of historic or sentimental value.  Any existing paper Certificate will not need to be destroyed or deposited with the Titles Registry, nor will they need to be dispensed with for a transaction to proceed.

    If you hold a paper certificate of title as security for a debt you might consider registering a mortgage against a debtors property as a new form of security. You should seek further legal advice in relation to protecting your interests.

    If you have any questions or concerns about these changes feel free to contact our Property team on (07) 4617 8777 or (07) 3009 6555.