Frequently Asked Questions. Business Law.
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The constitution of your organisation forms a fundamental part of the governance framework, which sets out particular rights and obligations of shareholders and directors, as well as define their roles and responsibilities. A company's constitution will also contain rules about the company's activities such as administrative matters, share class permissions, dispute resolution methods and whether certain rules under the Corporations Act (such as the replaceable rules) apply.
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A shareholders agreement is much more descriptive in detailing the specific processes and mechanisms of a company, including the relationships of all shareholders. More pointedly, it governs how the company, its board of directors and its shareholders relate to and interact with one another. The processes around the replacement of directors, share transfers or sales, shareholder disputes and mergers and acquisitions are usually documented in the agreement.
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While you'll likely be able to find many free shareholders agreement templates online, they are generic in nature and do not take into account the needs of your company and its shareholders. The number one danger of using a shareholders agreement template is being left completely unprotected after putting your time into preparing it. While your intentions are good, unfortunately, the DIY legal documents are not.
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In general terms there are 2 types of Commercial leases - retail and non-retail. Retail leases are more heavily regulated than non-retail leases (see below). Both retail and non-retail leases can be complex, with significant variations amongst lease terms. This means that it is up to the parties to negotiate for an even playing field. These factors, and the legally binding nature of commercial leases, is why we recommend you engage an experienced team of commercial lease solicitors. We can assist, advise and negotiate on your behalf.
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The Retail Shop Leases Act has an extensive list defining what are retail premises. Your lease might also be governed by the Act if it is non-retail but located in a Retail Shopping Centre (5 or more retail shops on the same level of the centre). Generally, all other commercial leases will not be covered by the Retail Shop Leases Act. Non-retail leases can require tenants to pay for land tax, capital expenditure, landlord’s legal costs and other things which are prohibited in retail leases. Retail leases also have disclosure obligations for landlords and tenants. Getting advice from a lawyer can help you get the best lease terms for your circumstances.
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Many businesses can think that they only need to engage commercial lease lawyers when commercial lease disputes arise. While lease lawyers are well versed in handling commercial leasing issues between landlords and tenants, the resolution process often begins by referring to the lease itself. So this makes it vital to have a robust and clearly drafted lease document in place to start with. Commercial leasing is an ordinary occurrence that involves extraordinary consideration and complexity. That's why it's best to access the services and legal advice from a commercial leasing lawyer before you sign your lease.
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We suggest you undertake all enquiries with respect to the Business before signing the Contract or during the Due Diligence period, as there may not be the opportunity to raise any issues following the Contract Date or expiry of the Due Diligence period.
You should be satisfied with all aspects of the Business purchase, including (but not limited to):
Verifying the books and records of the Business (through your Accountant);
Employee information, leave entitlements and wages;
Debts and liabilities of the business (and whether they have been paid by the Seller);
That all equipment is in working order;
The condition of any Leased Premises;
Whether the Business has all permits legally required for its operation (including town plan zoning); and
Other matters specific to the type of business or which are of particular concern to you. -
Commercial Contracts can be used for a lot of different scenarios. Some common examples include:
· Regulating terms of trade between parties;
· Share Sale Agreements;
· Shareholders Agreements;
· Joint Venture or Partnership Agreements;
· Sale of Commercial goods;
· Sale/Purchase of Business;
· Employment Agreements;
· Release/Settlement Deeds;
· Financing/Loan Agreements.
Wherever there is a Commercial obligation between parties, there is a need for a Commercial Contract to outline the terms, obligations and duties of both parties.
A well set-out and structured contract helps to avoid disputes, and to ensure all parties are aware of their obligations moving forward. -
A security over personal property is used for securing a loan, debt or obligation. Generally, when someone borrows money, a lender can take a security interest over personal property of the borrower to be in a position to enforce that debt if the borrower defaults on their repayment obligations. A common example would be a bank lending someone money to purchase a car and registering a security interest in respect of that car on the Personal Property Securities Register. The borrower will have a secured interest in that car in the event the borrower finds themselves suffering financial hardship. These Security Interests are created, regulated and registered pursuant to the Personal Properties Securities Act, and security interests are registered on the Personal Property Securities Register.
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The PPSA applies to Personal Property, which is any property which is not land, buildings or fixtures. Some examples are:
- Cars, trucks, trailers or other vehicles;
- Machinery,
- Tools;
- Building Materials (before they are fixed to the build);
- Business stock;
- Jewellery;
- Artwork.
There are many different ways to create a Security Interest, and many different reasons. Some people may register a Security Interest over a person’s personal property to secure a debt, whereas another person may register a Security Interest over a personal property of a person or entity to secure performance under an ongoing hire or rental agreement. -
A Share Sale Agreement is a commercial agreement that is used to create a legal binding agreement to sell shares in a Company from the Shareholder or Shareholders of a Company, to the Buyer of those Shares, who will ultimately become the Shareholder or Shareholders of that Company after Completion.
Parties to a standard Shareholders Agreement would generally include the Exiting Shareholder/Shareholders, the Incoming Shareholder/Shareholders, and any Guarantors (providing a personal guarantee) that have been negotiated as part of the process. -
A Business sale will usually consist of a sale from one person to another (or from one entity to another) of the Business Name (normally registered with ASIC), Goodwill, assets, stock, Work in Progress, staff and other such ordinary and usual things that consist of the Business. This type of sale represents a sale of the Business itself only, and not the sale of any controlling entity.
A Share Sale Agreement is the sale of Shares in a Company from one or all of the Shareholders to a Buyer or Buyers. For example, a Pty Ltd Company may operate a Business, and instead of purchasing the Business itself, it may be more appropriate for a Buyer to purchase the shares in the Company that owns the Business. Whether a Share Sale Agreement or a Business Sale Agreement is more appropriate when selling a Business will depend on the nature of the Business, the parties, and what the parties are trying to achieve.
If you would like to know more about any aspect of Business & Commercial Law, contact our Commercial Lawyers today on (07) 5441 1400 or complete the form below.
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