Business Law

The success of any business requires constant and continued planning. For the past 50 years Snedden Hall & Gallop has collaborated with many successful businesses no matter how large or small.

Almost every business involves a consideration of contract advice, appropriate structure, commercial leasing, intellectual property, franchising, and finance and business succession. Those considerations should involve a range of advisors including your accountant, your banker and your financial planner. Our lawyers drive that conversation. We have expertise in just this type of discussion and have helped in business structures, business sales and purchases and corporate law.

• Contract Advice
  

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  A contract is a binding document which sets out the relationship of the parties. Whether you have an existing contract or are about to enter into one, we will interpret the terms and explain your rights and obligations and any laws that govern the contract.
  
  Contracts come in many different shapes and forms, they include contracts for services provided to or by a business, employment contracts, etc. It is advised that every contract you enter be in writing and clearly set out the obligations of all of the parties involved.
  
  Some of the important considerations are:
  

  • The term (if any) of the contract
  • Consideration (payment or performance) required
  • Termination procedures
  • Dispute resolution mechanisms

  
  ‘A promise by one party to another to do or forebear from doing, certain specified acts in consideration of a payment’, but what does this mean for your business?
  
  Does every agreement have to be in writing, and does every printed form of agreement adequately cover your business operations? These are the issues that are dealt with on a day to day basis by our lawyers. The object should always be to achieve a solution which benefits your business. Our contract lawyers will listen to your needs, draft carefully, consider options and advise you effectively.
  
  Contract negotiations, particularly in the IT area, require a wide range of skills and a clear idea of the end game. You need to think at an early stage, what the negotiations are endeavouring to achieve. We often see that negotiation of important contractual terms are left to the very end, after possible lengthy and tiring selection process, a less than satisfactory outcome is achieved. Accordingly, comprehensive negotiations at an early stage are a good way to get rid of these stress factors, before the real work commences.
  
  Some people believe that a negotiated contract is the end of the matter and the contract can be left in the bottom drawer, never to be looked at again. In the real world, this is all too often not the case. Cutting corners at the stage of negotiation can be your biggest mistake and lead to significant disputation later. A well drawn up contract should protect you and the other party, against unforeseen circumstances that will divert your attention from the main game plan.
  
  Snedden Hall & Gallop have the breadth of experience and skills needed to support your business’ negotiations and important contact negotiations. Whether a standard terms and conditions are used, or a new contract is drawn with unique terms, we are able to walk with you through the negotiation process, to achieve a timely, cost effective and appropriate contract outcome.
  
  In addition to drafting all manner of contracts, we can assist during all stages of contractual negotiations, including:
  

  • reviewing documents drafted by another party;
  • providing advice on clauses to be included or deleted;
  • negotiating with other parties in order to finalise the contract;
  • assistance with execution and, if necessary, registration of the contract;
  • assistance with resolving disputes regarding contractual drafting, application or interpretation.

  
  
• Structuring your Business
  

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  There is no “one size fits all” approach to your business structure. We will tailor a structure to best suit your needs, often in conjunction with your accountant.
  
  Snedden Hall & Gallop has an experienced Business Team, and can provide assistance with establishing the correct business structure for your needs. Typical business structures include:
  
  Sole Trader
  
  This is the most simple of all structures. It consists of a single person carrying on a business in that person’s name, or using a business name that that person has registered.
  
  The sole trader owns and controls the business and the business assets. The trader also, therefore, bears all of the business liabilities and is responsible for any debts of the business.
  
  This is a simple approach for anyone looking at starting a business or dealing with a relatively small per annum profit. We would not recommend it for more complex business dealings or potential high-wealth businesses.
  
  Partnership
  
  This is generally a situation where two or more sole traders wish to conduct their business together. The general definition of partnerships is a relationship between two or more persons carrying on business with a view for profit. The partnership will need to acquire a business name in order to operate.
  
  Partnerships are governed by each specific jurisdiction in Australia. In the Australian Capital Territory, they are governed by the Partnerships Act 1958.
  
  Essentially, every partnership should have a partnership agreement, which sets out matters including:
  

  • duties of partners;
  • activities of the partnership;
  • personal liabilities; and
  • decision making roles.

  
  Company
  
  Many people will opt to incorporate a company in order to carry on business. A company has a separate legal entity from the person who incorporates it.
  
  Companies are regulated under the Corporations Act 2001 and its corresponding regulations. Companies have shareholders, directors, general meetings and must report annually to the Australian Securities and Investments Commission.
  
  There are many advantages to having a separate legal entity to carry on business, as that entity can deal with matters as though it were a person. That means it can sue or be sued in its own name, it can enter into contracts, and its profits and losses can be retained within the company structure. Furthermore, the liability of shareholders for the acts of the company is limited by their shares.
  
  Unfortunately, companies do have drawbacks. They are more expensive than the simpler structures, and have annual reporting obligations. They also require the election of directors and maintenance of a company register, as well as a comprehensive shareholder’s agreement.
  
  Joint Ventures
  
  The parties who are part of a joint venture project usually come together for a particular purpose. Generally, parties would have a joint venture agreement that clearly sets out the specific venture on which they are joining, and specifies that their dealings will go no further than that. Each of the parties will usually bring its particular skills, equipment, capital and know-how to the venture. As a result, a joint venture is more for one-off arrangements rather than a continuing business arrangement.
  
  Trusts
  
  Trusts are a creature of equity dating back to law in the United Kingdom. They are also now governed by legislation in most jurisdictions.
  
  A company can be set up to hold its profits and assets on trust for specific people (often a family in a Family Discretionary Trust). It can then deal with the profit and assets only for the benefit of the members of the trust (the beneficiaries). A trustee has very specific obligations to its beneficiaries.
  
  As a result, there is a degree of separation between the assets, the company carrying on the business, and the people who will ultimately benefit from that. This is beneficial for tax purposes and also to protect assets should anything go wrong and people seek to recover debts from the company.
  
  There are a number of different types of trusts:
  

  • Discretionary Trust
  • Fixed Trust
  • Unit trust

  
  
• Business Sales and Acquisitions
  

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  Business sales and acquisitions might include the sale or purchase of the assets of a business, or of the entity that operates that business. Care needs to be taken to ensure that the terms of sale protect you, whether you are a buyer or a seller.
  
  Snedden Hall & Gallop will guide you through the negotiation phase, the drafting of the documentation, its implementation and the processes required to complete the transaction. This invariably includes liaising with your accountant, the landlord, various government instrumentalities, your lender and other third parties.
  
  Matters for consideration include:
  

  • Property leases;
  • Equipment leases;
  • Employee schedules;
  • Licences;
  • Financial statements;
  • Planning instruments;
  • Title, company, bankruptcy, business name searches etc;
  • Depreciation schedule;
  • Records;
  • Valuations;
  • etc

  
  
• Commercial Leasing
  

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  Every business needs a home. Most businesses lease their premises, rather than own them. Most commercial and retail leases are regulated.
  
  Our many years' experience acting for both landlords and tenants, gives us the ability to anticipate the needs of both sides of the transaction which saves a lot of time and costs.
  
  Matters for consideration include:
  

  • Capacity of Landlord and Tenant
  • Disclosure Statement;
  • Obligations under the Leases (Commercial and Retail) Act 2001 (if regulated lease);
  • Guarantee (personal and bank);
  • Permitted use in Crown Lease;
  • Rent review;
  • Options for renewal, purchase, etc
  • Repair and make good obligations
  • Registration requirements for Lease.

  
  
• Corporate Law
  

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  The Corporations Act 2001 ("Act") is the umbrella under which Australian companies both operate and receive protection. Promoters and company officers regularly need comprehensive advice on the impact of the Act, the company’s constitution and the operation of common law on their conduct and management of the company.
  
  Key areas for consideration:
  

  • Appointment, retirement and removal of directors and other officers
  • Conduct of meetings (including quorums)
  • Company records
  • Directors' duties
  • Raising money and securities
  • Insolvency and the appointment of liquidators, receivers and administrators ( please see our Dispute Resolution page for more information )
  • Shareholders

  
  
• Intellectual Property
  

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  Your intellectual property rights protect important assets in your business including your identity and your ideas. The following chart shows some different ways in which intellectual property can be protected.
  
  The most common areas of IP with which we are asked to help our clients are:
  

  

  Confidential Information
  
  Confidential information relates to all manner of ideas, works or other intellectual property that you create or own and which is vital to your business success. This information may not be protected under one of the various pieces of legislation, but equally must be preserved for your sole use.
  
  You can protect confidential information through the use of Non Disclosure Agreements, strict clauses in employment agreements, and wise business practices. You should seek our professional advice if you are concerned about your confidential information and its protection.
  
  Copyright Law
  
  This protects a person’s original works – whether they are in writing, drawn, photographed or recorded. Protection is automatic under the Copyright Act 1958 though you should ensure that you label your original works with:
  
  "© 2011, YOUR NAME"
  
  Trade Marks
  
  Snedden Hall & Gallop is experienced in assisting with trade mark applications to protect a business brand. This can include a logo, name, slogan, or even a specific colour, sound or scent.
  
  The Trade Marks Act 1974 provides a system for the registration of trade marks, though your identity may also be protected at common law (that is, by the courts) through the law of passing off.
  
  Snedden Hall & Gallop can advise you about the suitability of your trade mark for registration, and the process involved. We also assist with trade mark disputes, and can help you where another business opposes the registration of your trade mark or where a competitor uses or copies your trade mark.
  
  Patents and Designs
  
  An owner of a registered patent or design has the exclusive right to use their invention within the marketplace.
  
  To be patented, an invention must be a “manner of manufacture” that is novel and useful.
  
  A design can be registered if it relates to the overall appearance of a product.
  
  Both designs and patents must be protected before they become publicly disclosed, so you must take care when speaking to others about your ideas.
  
  Infringement of Intellectual Property
  
  If you suspect that someone has copied your works without your permission, or is trying to cash in on your business identity, they may be in breach of one or more pieces of legislation, or your common law rights. You may therefore be entitled to a range of remedies including an injunction, an account of profits and/or damages.
  
  We often assist clients who need to take swift action to ensure infringement does not continue and is appropriately compensated.
  
  Licence of Intellectual Property
  
  Your intellectual property can be one of your most important assets. You may have the opportunity to licence or even assign it to someone else. If you do so, you need to protect the integrity of your intellectual property, and ensure you are appropriately remunerated.
  
  Snedden Hall & Gallop can assist with the preparation of an appropriate licence or transfer of intellectual property that adequately protects your rights.
  
  
• Franchising
  

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  Franchising is a business system which requires careful consideration. We assist franchisors to prepare appropriate documentation including Franchise Agreements and Disclosure Documents and associated documentation. We also assist franchisees looking to buy a franchise, or those who are already involved in one.
  
  Some of the areas where we can assist you include:
  

  • Preparation of the franchise agreement and associated documentation
  • Advice about legal obligations of franchisors and franchisees
  • Marketing franchises
  • Licences of intellectual property
  • Negotiations over franchise terms
  • Dispute resolution including mediation and litigation
  • Dealing with poor performing or problem franchisees
  • Termination
  • Renewal

  
  
• Finance
  

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  Finance arrangements can be stressful and costly. You need to take care to ensure you are fully aware of your rights and responsibilities when it comes to handling your finances. We can assist with the following:
  
  Dealing with Financial Institutions
  
  Whether you are borrowing for the first time, refinancing, or simply extending a line of credit, we can explain your rights and responsibilities and advise you on how best to protect your interests.
  
  Asset Securities
  
  The rules about securities in property are changing. The Personal Property Securities Act 2009 is soon to be implemented. This will affect how securities such as fixed and floating charges, bills of sale and retention of title clauses are dealt with and prioritised.
  
  Guarantees
  
  Increasingly, banks are asking for guarantees of business and personal loans and other financial arrangements. The role of the guarantee is therefore integral to the success of the financial transaction and the risk the guarantor bears is significant.
  
  Before you sign a guarantee make sure you seek legal advice about exactly what your liability is likely to be.
  
  
• Business Succession
  

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  The provision of business succession planning, structuring and estate planning requires broad thinking to create solutions for individuals and families. Many business people are too busy working "in" their business to work "on" their business. Most of these people have a personal will but fail to take the important step of organising an adequate business succession plan.
  
  Our lawyers are trained to properly review your business and asset position and provide you with a tailored business succession package that best suits your needs. We also work with your accountants, financial planners and insurers to ensure that you have peace of mind to get on with the business.
  
  Family succession planning and business succession planning should be considered simultaneously, though of course there are differences between the two. ( please see our Wills and Estate Planning page for more information )
  
  

• Does a contract have to be in writing?
  

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  There are many types of contracts that can be made orally, however, they are often difficult to enforce. The most common types of contract that must be in writing in order to be enforceable are promises related to land interests, and promises to pay the debt of another.
  
  
• When is a contract formed?
  

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  A contract is formed when one party has made an offer and it has been accepted, and all terms agreed to, by another.
  
  When an offer is accepted, the accepting party does not need to accept all the terms of the initial offer and may make a counter offer on some of the terms. Once all the material terms of the deal have been agreed, either expressly or by reasonable implication, the contract is formed.
  
  
• What if I change my mind?
  

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  As long as nothing has been paid or given up to hold an offer open, the offer can be withdrawn at any time before it is accepted.
  
  
• What is 'consideration'?
  

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  In order for a contract to be binding, there must be bargaining for something of value. The value can be a tangible thing or an intangible advantage (e.g. in consideration of your paying me $500,000, I will sell you my house, or, in consideration of your paying my medical bills, I will discontinue my legal proceedings against you). The underlying value upon which the contract is based is called consideration.
  
  
• What is a breach of contract?
  

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  A breach of contract occurs when a party to the contract fails to perform a specified duty under the contract. Following a breach, the non-breaching party can usually seek some sort of legal or equitable remedy.
  
  
• How are damages calculated for the breach of a contract?
  

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  Damages largely depend on the type of breach. If the wronged party has not sustained provable damages (eg. loss of profits from business), the party can normally only claim for nominal damages can be proved, compensatory damages are usually awarded. Compensatory damages aim to restore the position in which the wronged party would have been if the contract had been properly performed (i.e., the non-breaching party is paid the amount of the loss only).. Nominal damages are usually a small amount that is paid to recognise that the wronged party's rights have been breached but no substantial loss has been suffered. If the breach caused losses that
  
  
• How old must you be to form a valid contract?
  

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  In most states and territories in Australia, you must be an adult to form a valid contract. A person is considered to be an adult (or to have reached his or her age of majority) at the age of 18.
  
  
• Apart from age, is there any other restriction on who can enter into a binding contract?
  

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  Generally, a person must have contractual competency. A contract may be voidable if one party, because of mental illness or impaired intellectual ability, is either unable to understand the transaction, or incapable of reasonably fulfilling his or her responsibilities under the contract.
  
  

• Can I have a sole director/shareholder company?
  

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  Yes, a company have as few as one director and/or shareholder and as many directors and/or shareholders as its constitution allows.
  
  
• When setting up my business, what sort of agreement do I need?
  

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  This will depend on the kind of business that you are setting up. If you are entering into a partnership, then you need a partnership agreement with your partners. If you are entering into a company, then the company needs a constitution, and you need a shareholders agreement with the fellow shareholders in the company (if any). If you are entering into a joint venture, then you need a joint venture agreement.
  
  In addition to these agreements that govern the relationship behind the business, the business will necessarily enter into various agreements with suppliers, landlords, etc. You should make sure that you obtain legal advice about each of those agreements to properly understand your rights and obligations.
  
  
• Will having a company protect me from any liability?
  

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  Not always. While a company has a separate legal entity and therefore enters into many of its contracts individually, without binding the directors or shareholders, the directors can be made liable for any debts of the company if they trade it into insolvency and are found to have been deficient in their duty to the company.
  
  Similarly, directors are often called upon the guarantee a loan or a lease that the company enters into and therefore may become personally liable if the company cannot pay its debts.
  
  
• I am considering entering into a joint venture. What should I do?
  

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  If you are considering entering into a joint venture with a person or entity, you must ensure that that agreement is properly set down in writing. Confidentiality is important in the early stages of the discussion over a joint venture because too often parties share more than they ought to before the agreement is made. Therefore, before sharing any of your business secrets, you should insist on a confidentiality agreement.
  
  See further discussion under our Intellectual Property Services [link?].
  
  
• Are companies superior to partnerships?
  

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  Generally, yes. They are regulated by the Corporations Act 2001, which provides a comprehensive code about the operation of companies and the responsibilities of directors. With partnerships, a much larger degree of trust is involved and, therefore, there is a greater scope for things to go wrong. In most circumstances, we would recommend that our clients enter into a company rather than a partnership. However, it is important that you receive advice relevant to your own personal situation and you can contact our experienced team of business lawyers for that advice.
  
  

• What is a restraint of trade?
  

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  If you are buying or selling a business, it is important to consider the restraint on trade. This clause prohibits the seller of a business from setting up in competition to the business that they have just sold. If you think of this in terms of a shopping centre, it would be highly disadvantageous to a buyer if the seller of “Mario’s Meats” opened up a shop nearby called, “Mario’s Meats Times Two” after selling Mario’s Meats.
  
  The restraint is designed to protect a buyer so that when a seller sells his/her business, the goodwill stays with the business and does not follow the seller. However, it is necessary to know that the more wide ranging restraints on trade are, the more difficult they are to enforce. Therefore, you should obtain advice about a proposed restraint of trade in order to ensure that it is legally enforceable.
  
  
• Who pays the debts, and who enjoys the profits, of a business on a sale?
  

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  Generally, the seller will be liable for all of the debts of the business up to and including the date of the sale. The buyer then takes over the business free of those debts, but is liable for any future debts.
  
  The same can be said for the profits of the business, which are apportioned in the same manner.
  
  
• Is there stamp duty on a business sale?
  

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  In the ACT, there is no stamp duty for the sale of a business, however, this is not the case in all states and territories in Australia, e.g., if you are selling a business in NSW, stamp duty may still apply to part of that transaction.
  
  
• If I sell my business, does the buyer take all the risk?
  

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  Often, sellers are required to provide guarantees and warranties to a buyer, in addition to making full disclosure of all of the relevant facts about that business. A buyer must be given the opportunity to understand completely the business that they are buying, and the seller can become responsible if any of the information that is provided has been misleading.
  
  
• What is goodwill?
  

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  Goodwill is the term used to define the general business identity and the existence of a market for that business. For example, where a certain shop attracts a certain number of customers, then those customers are taken to make up the goodwill of the business.
  
  
• I wish to buy a restaurant and need a liquor licence. Can you help?
  

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  Yes, Snedden Hall & Gallop is specialised in dealing with the Office of Regulatory Services in relation to liquor licences. We look after a number of clients in this area and are able to assist you.
  
  

• I am running my business through my company and we are taking a lease over some shop premises. I do not want to have to personally guarantee the obligation of my lease. What can I do about it?
  

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  Most landlords that lease commercial property to commercial tenants require two forms of protection for their lease. The first is payment of rent in advance (probably three months’ rent) by the tenant, which would be paid by bank guarantee or by bond, as security in case there is a failure by the tenant to pay rent for any extended period of time. The second are personal guarantees from the directors of the tenant company. This is a generally accepted commercial practice in order to protect the landlord against the company not having the assets to pay outstanding rent. However, as the negotiation of your commercial lease is a contractual matter, it may be possible to negotiate a waiver of one or both of these two conditions.
  
  
• Am I protected by the Leases (Commercial and Retail) Act?
  

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  The Leases Act covers most leases in the ACT. There is similar legislation across Australia.
  
  Not every commercial lease is covered by the Act, however, and some large premises, as well as some premises that are leased for special purposes do not fall within the definition within the Act. To find out whether the Act applies to your lease, you need to seek specific legal advice from our experienced business law team.
  
  
• Does my lease need to be registered?
  

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  If a lease that is regulated by the Leases (Commercial and Retail) Act, and if a tenant wishes the lease to be registered, the landlord must do so.
  
  
• Can I be locked out of my premises?
  

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  Yes you can. Landlords will reserve rights in most leases to re-enter premises in certain circumstances where the tenant is in breach of the lease, the most common being when the tenant fails to pay rent. If you think that you are falling into a position where you may be in breach of your lease, you should seek legal advice before it is too late.
  
  
• How do I get out of my lease?
  

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  Generally, leases are binding for a set term. In the ACT, this usually varies between three and five years. Leases often have an option to renew, but there are very specific terms about how that option must be exercised.
  
  If, during the life of your lease, you need to end it, this will require either the transfer of the lease to someone else, or an agreement by the landlord to terminate it. Generally, a landlord is entitled to require you to continue to pay rent until another tenant is found.
  
  
• Do I have to pay outgoings?
  

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  Under the Leases (Commercial and Retail) Act, tenants are required to pay outgoings where it is specifically provided for in the lease documentation. There are some outgoings that are prohibited under the Act, and the landlord must give full disclosure of the likely outgoings before the lease is entered into.
  
  

• What do I need to do to start a company?
  

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  Usually, you can register a company by purchasing a company from a business that specialises in marketing “shelf companies”.
  
  You need to provide details of your trading and registered office addresses, as well as the details of all directors and shareholders of the company, and the chosen name. Before you register a company, you will need to search to ensure that the name is unique.
  
  The registration of a company will also incur annual reporting requirements and fees, and should not be done unless you are certain that it is the right process for you to follow.
  
  
• Do I need a company to start my business?
  

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  No, you do not. Businesses can take various forms, including sole traders, who trade in their own name or with a registered business name; partnerships that register a business name; or companies. You can talk to our experienced business law team to see which structure best suits you.
  
  
• Do I need a shareholder’s agreement?
  

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  Generally, yes. You should always have a shareholder’s agreement if you are going into business in a company with one or more other people. The shareholders agreement sets out all of the rights and responsibilities of the shareholders, including what happens if one of the shareholders passes away or wishes to retire.
  
  
• Is the company my alter ego?
  

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  The company has a separate legal identity to you. This means that the company can enter into contracts, sue and be sued in its own name, and any claim against the company is not automatically a claim against its directors or shareholders.
  
  Directors can become liable for the actions of the company if they have traded while insolvent, have otherwise breached their duties to the company, or have personally guaranteed a contract into which the company has entered (usually a loan or a commercial lease).
  
  

• What is intellectual property?
  

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  "Intellectual property" is a term that refers to ownership of ideas. There are a number of common types of intellectual property, including your:
  

  • reputation;
  • trademarks;
  • copyrighted works;
  • plant species you have created;
  • patented inventions; and
  • registered designs.

  
  
• How can I protect my intellectual property?
  

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  The various types of intellectual property are protected in different ways. For example:
  

  • Copyright is automatically protected by the Copyright Act, however it is a good idea to “assert” your ownership by marking it with the copyright symbol ,“©”, and the year and your name.
  • Trade marks, designs and patents should all be registered with the government body, IP Australia, in order to enjoy the protection offered by its relevant pieces of legislation.
  • All intellectual property and confidential information can be protected by a contract between you and whomever you are dealing with by asking that a Confidential Non-Disclosure Deed be signed before you start dealing with that person.

  
  
• Can I use a trade mark without registering it?
  

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  Yes. A trade mark is any “mark” you use to identify your business, whether it is registered or not.
  
  You can assert your ownership of a trade mark by placing “™” after it. However, you must not use the registered symbol, “®”, if your trade mark is not registered, as this can only be applied to trade marks that have been registered with IP Australia.
  
  If you do want to register your trade mark, you must first determine whether it has been used by anyone else. This can be done by searching existing trade marks on the IP Australia website. Snedden Hall & Gallop can help you with this process, and with an online application for registration, if you wish.
  
  
• I have a great idea for a new invention. Can I tell my friends?
  

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  No, you should not tell your friends or any other people (event hose that might be able to help you develop your idea) unless you first enter into a Confidential Non-Disclosure Deed with them.
  
  This is very important for an invention because to register it as a patent, it must not be “public knowledge”. Therefore, if you have disclosed it to someone else, you might not be able to register it.
  
  If you want to register your patent, you need to contact a patent attorney.
  
  
• Someone is using my works, what can I do?
  

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  The meaning of the term, “use” can include:
  

  • adapt
  • publish
  • copy
  • sell
  • perform

  
  Therefore, if you believe that another person has used your work without your permission, and you can establish that the work does belong to you, you may be able to seek:
  

  • damages;
  • an injunction to stop the person using it further; and/or
  • an account of profits (that is, the person may be ordered to pay you the money that was made by using your works).

  
  As you can imagine, this is a complex area of litigation and it is important to get legal advice early to ensure that your intellectual property is protected, and to act quickly against anyone who infringes it.
  
  
• I have been accused of “passing off” – what does that mean?
  

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  Passing Off is a common-law action that relates to using someone else’s reputation. This is often combined with an infringement of a trademark, or a breach of the prohibition against “misleading and deceptive conduct” in the Trade Practices Act.
  
  If you have been accused of passing off, it is important to consider what circumstances exist that make the complainant think that you have used his or her reputation for your own benefit. There may be a perfectly reasonable explanation or defence against the claim, and seeking legal advice straight away may help prevent your being caught up in an expensive court action.
  
  
• I want to make money from my intellectual property. How can I do that?
  

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  Once you have established and, where necessary, registered ownership, of your intellectual property, you can start to make money from it. Ways of making money from your intellectual property can include:
  

  • using it (selling it, performing it, adapting it, etc);
  • selling the rights to someone else (often called an “assignment” or “transfer”); or
  • licensing the rights to someone else.

  
  If you are going to assign or license your intellectual property, the agreement by which you do that must be very carefully drafted to ensure that your rights are protected, that you can make some money from it, and to prevent things from going wrong.
  
  

• What is a franchise agreement?
  

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  A franchise agreement is a central document governing the relationship between the franchisee and the franchisor. This document is legally binding on both parties and sets out the rights and obligations of each.
  
  
• Who is the franchisor?
  

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  This is the person or company granting the franchisee the right to operate the business. The franchisor owns the intellectual property in the business and has established the operating system.
  
  
• Who is the franchisee?
  

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  This is the person to whom the franchise is granted under a franchise agreement. They are often entitled, under a properly drafted franchise agreement, to use the operating system and intellectual property devised by the franchisor in a specific territory.
  
  
• How long does a franchise last?
  

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  Generally, a franchise will have a specific term, as set out in a franchise agreement. Terms will vary from one franchise to another. Often a franchise agreement contains an option to renew.
  
  
• How much will a franchise cost?
  

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  Prices for franchises vary from one franchise system to another. Factors include goodwill, trademarks and intellectual property, equipment and fittings, stock levels and lease terms.
  
  When you are entering into a franchise agreement, you must be aware of hidden costs. In addition to a franchise fee, you may be asked to pay royalties, to only purchase stock from specified suppliers, and/or to pay into a marketing fund.
  
  
• I have been told that this franchise is a million-dollar business. How can I tell?
  

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  If the franchisor is making claims about the amount of revenue that you can expect from the franchise, you should ask for a statement of actual, average, projected or forecasted income from the franchisor and pre-existing franchisees. You should also use your own judgement to consider just how reliable those statements are. A franchise agreement will often exclude any representations made prior to your entering into it. Therefore, you must make sure that you are satisfied with these items before negotiating the franchise agreement.
  
  
• Do I have to get professional advice before entering into a franchise?
  

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  While there is no legal requirement for you to obtain professional advice, it is important to make sure that you understand your commitment, obligations and rights.
  
  
• I have developed a unique business that I wish to franchise. What should I do?
  

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  Given that you have a unique business, the first thing that you must do is to secure the intellectual property existing in that business. See our Intellectual Property team for assistance in that regard. [link?]
  
  Secondly, you need to make your business financially attractive for anyone who wants to purchase a franchise. Remember, this is a product that you are selling. We can assist you with the development of the necessary documents required for a franchise.
  
  Franchises in Australia are governed by the code of conduct for franchises under the Competition and Consumer Act 2010. Therefore, there are serious legal issues that must be dealt with by a lawyer to ensure that you, as franchisor, comply with your obligations.
  
  

• Is a mortgage the same as a loan?
  

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  No, mortgages and loans are different. A loan is a transaction in which a party (usually a bank or other financial institution) gives another party money, with the expectation that the full amount will be repaid. A mortgage is the security for the loan. It allows the lender to hold the deed to the property until the loan is repaid, but also allows the borrower to live in the property while the loan is being repaid.
  
  
• What is meant by first registered mortgage?
  

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  A lender usually carries out a valuation of a property to determine whether the value of the property would cover the amount of a loan if a borrower could not repay the loan. If the lender is satisfied with the valuation, the appropriate documents would be registered with the Land Titles Office (or its equivalent in other States) and a mortgage would be issued. A mortgage is a formal document that prevents anyone dealing with property, including the owner, before dealing with the lender. This is how lenders secure their loans.
  
  
• If my child wants to borrow some money, is it sensible for me, as a parent, to guarantee the loan?
  

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  To guarantee a loan is a very serious obligation and should only be undertaken after much thought and consideration, and perhaps independent advice. By guaranteeing a loan, you are committing to repay the loan if your child, for any reason (redundancy, illness) cannot.
  
  
• I run a business through a company and the bank is lending me some money but wants to charge me. What does that mean?
  

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  You are probably referring to a charge over the assets of the company, which is a document equivalent to a mortgage over real estate but which is registered with the Australian Securities Investments Commission (ASIC). It means that your company can continue trading, buying stock, selling stock, etc, but if it runs into financial difficulties and is unable to repay its debt to the lender, the lender can freeze the company’s ability to trade and can take possession of the assets of the company in order to sell them to recover its funds. This is usually when a “Receiver” is appointed.
  
  
• My accountant has structured my business so that I operate from a trust and he has assured me that if my company cannot repay loans to the bank, the bank cannot take my assets because they are in a trust. Is that correct?
  

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  There are very good reasons for using trusts to structure businesses. However, when a business operating through a trust borrows money (usually from a bank), the lender will want to see evidence that the trust authorises the business to borrow the money and to see an indemnity in the trust deed, protecting the lender if the trustee cannot repay the loan. In other words, as an exception to the asset protection nature of trusts, a lender will want to have access to the assets held by the trust, just as it would if the assets were held by a company that was not a trustee.
  
  
• Should I provide a guarantee?
  

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  As a general rule, the answer to this question is “no”. Guarantees are dangerous documents that provide a wide range of rights to the party receiving the guarantee over matters, which, often, the guarantor has, little control.
  
  The risks of providing a guarantee are many. However, frequently a landlord or a bank will not proceed without receiving some form of security and often that takes the form of a director’s guarantee. Therefore, these, despite being dangerous documents, are quite common in the business world. As long as you fully understand your risks and accept them, then there are some occasions where it might be appropriate to enter a guarantee.
  
  
• What are the risks if I provide a guarantee?
  

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  These will depend on whether you are guaranteeing the debts of another person or of a company over which you have control. Where you control the company, your financial success is generally closely linked to that of the company and providing a guarantee is not a huge risk. Where you are guaranteeing the debts of another person, you have little control over that person, even if the person is a family member, and you do not often have the chance to fully understand the person’s financial situation. Therefore, the risks are heightened.
  
  Generally, a guarantee document will require the guarantor (you) to meet any loss suffered by the party receiving the guarantee (commonly a bank). This can include more than just the amount of money promised under the guarantee, but it could also include expenses suffered by that party. If you do not have the money available to you to pay that debt, then the guaranteed party may bankrupt you or sue you in the courts.
  
  
• Will the bank only chase me after it has tried to sue my son?
  

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  If you have guaranteed the loan of your son or daughter, the bank does not need to sue them before it calls on your guarantee. The bank will often reserve the right to sue you before suing your son or daughter, especially if it sees you as a better target (i.e., a more likely source of funds).
  
  
• Can I go bankrupt to avoid my debts?
  

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  Depending on whether you are running a company or operating in your own name, you can either choose to enter into voluntary liquidation or administration of your company, or personally enter into bankruptcy. The decision to do this must not be taken lightly, as it has serious consequences for your business and for you personally. You must obtain advice from your accountant and lawyer, and, on many occasions, an insolvency practitioner.
  
  
• I am being pursued for a debt, what should I do?
  

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  You should seek advice immediately. Often, creditors will vigorously pursue debts in the hope that, if they are aggressive, they have more chance of being paid more quickly. However, not all creditors are entitled to the money that they are demanding and, in many cases where money is paid to satisfy one creditor to the detriment of another, this can have negative consequences in insolvency (whether corporate or personal). Therefore, you should seek legal advice and accounting advice if you feel that you are in a financially difficult situation.
  
  
• What is the difference between “joint” and “several”?
  

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  Often, where two parties together enter into a loan or other arrangement, they are required to be liable “jointly and severally”.
  
  Jointly means that both of the parties (or all of them if there are more than two) are liable for the debts.
  
  Severally means the each of the parties is liable for the debt.
  
  This gives the party receiving the benefit of that clause the power to decide whether to sue one, two, or more of the parties that are liable. That party will, therefore, choose which are the most likely sources of potential recovery of money and sue those parties before suing others.
  
  

• Isn’t my shareholder agreement adequate?
  

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  Traditionally, shareholders agreements covered situations where an owner of a business retired, was dismissed or resigned. However, these often do not deal with situations where there is an involuntary departure of a shareholder, such as where the shareholder dies, becomes disabled or is otherwise forced to leave the business. Failure to plan for these involuntary events may leave the business susceptible to financial difficulties and so a business succession plan, such as a buy/sell arrangement and insurances, can help protect you from that.
  
  
• Does business succession planning apply to all businesses?
  

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  No. Any business that is listed on the Stock Exchange can buy or sell shares at will and does not need a succession plan. Any business that is owned solely does not need rules to control business capital. However, the sole owner may wish to consider who will take over ownership if they no longer can run their business.
  
  
• What if my business partner and I go back many years and never argue?
  

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  Some reasons for a split can be disability, stroke, trauma or even death. No business can assume all of the original owners will be part of the negotiations and will be 100 per cent capable at the time of those negotiations. Illnesses like depression can strike anyone regardless of their age.
  
  
• Does business equity need to be sold out of the family?
  

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  No. Often equity is primarily passed down through business succession in a person’s will. That is, their shares in a business are passed on to their loved ones. This can be difficult though, where those loved ones do not wish to take on that business. In those circumstances, a more comprehensive business succession plan is needed.
  
  
• What is a business succession agreement?
  

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  This is a legally binding agreement between the shareholders of a company or the partners in a partnership. It draws out the elements of the exit planning strategies, corporate governance and dispute resolution so that all matters are agreed well in advance.