What to know before you buy a business!

When you buy a business, you are often doing much more than purchasing some business stock or equipment. You are placing yourself in the heart of a complicated network of business and legal relationships with customers, employees, suppliers, and many more.

Buying a business means not just transferring business assets, but ensuring that you are buying what you believe is required to continue the running of the business. This means that a comprehensive due diligence process is an absolute must before you commit to anything.

Some of the considerations to take into account in any purchase of a business include:

If you are buying a business, it is very important to only do so with quality professional advice from both your lawyer and your accountant. Elringtons’ Commercial Law team have assisted in the purchase of countless businesses ranging from small family-owned businesses right up to large commercial enterprises in both the ACT and NSW. Different complications and considerations arise apply to the various types of businesses. We can help guide you through this complicated legal process.

You may also be interested in our article – What to know before you sell a business.

For more information or to make an appointment in either our Canberra or Queanbeyan office please do not hesitate to contact Shalini Sree or Mitchell Evelyn:

+61 2 6206 1300 | e: info@elringtons.com.au

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What you need to know about selling your business!

Selling a business can be a very complicated affair. You are doing much more than simply selling an asset – you could be severing or transferring a multitude of contracts to the buyer, transferring both tangible property (for instance, stock or equipment) and intangible property (such as Intellectual Property, goodwill, or even social media accounts), and extricating yourself from the complex network of promises, personal guarantees, and personal business relationships.

Selling a business – and doing it properly – involves taking each of the small components which together make your business run, and transferring them to someone new. Most of these will not follow the business automatically. Some of the most common considerations which need to be taken into account in any sale of business are listed below:

You may also be interested in our article – What to know before you buy a business.

For more information or to make an appointment in either our Canberra or Queanbeyan office please do not hesitate to contact Shalini Sree or Mitchell Evelyn:

+61 2 6206 1300 | e: info@elringtons.com.au

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How can you protect your business from bullying, harassment and discrimination claims?

It should be standard practice for all business, big or small, to have policies in place that deal with workplace discrimination, harassment and bullying. If you do not have such policies in place, it could expose your business to possible claims of discriminatory, bullying and harassing behaviours.

By not managing accordingly the risks, or the possible risks, caused by the workplace discrimination, harassment and bullying, it could give raise to a number of possible claims:

  • Your business being liable for the conduct or actions of your employees while employed, or in connection with their employment. That represents vicarious liability.
  • In such situations, an employer could be relying on ‘all reasonable steps’ defence in relation to such a claim. However, the ‘all reasonable steps’ defence is not defined in the legislation and it applies to employers in different ways depending on the size of the business, number of employees, number of offices, nature of work and other characteristics that may be relevant.
  • The perpetrators could be personally liable for their actions even though such actions were taken while at work or in connections with their employment.
  • Both you and the employee could be held jointly liable for the actions or behaviors that could amount to discrimination, harassment or bullying.

You can protect your business by implementing and adopting risk management policies. Preventing possible claims from occurring should be done through current and complete policies. Such policies should provide the tools needed by your business (or your HR department) to manage any claims and if possible to prevent them from being referred to external government agencies like anti-discrimination commissions or tribunals.

  • As a minimal way of protecting your business, you should consider the following:
  • To provide copies of relevant policies to all new employees upon commencement of employment
  • To review the policies on regular basis so they reflect any changes in legislation
  • To make employees aware of any updates and changes to their policies within a reasonable period of time
  • To conduct formal or informal training sessions in relation to discrimination, bullying and harassment
  • To make it clear that treating a fellow employee in a discriminatory or harassing way is against the law
  • The policies should discuss breaches that could occur through social media even though the social media platform is accessed and used during employee’s private time or from employee’s personal device (i.e. a mobile phone during a lunch break)
  • The policies to identify the relevant acts that deal with such behaviour.

If you would like advice on drafting, reviewing or implementing policies on bullying, harassment or discrimination in your business contact Matthew Bridger:

e: mbridger@elringtons.com.au | p: 02 6206 1300

Health Check for Business Owners

All good businesses should review and renew regularly, to ensure that they are operating efficiently, cutting costs and maximising potential.

The following checklist is not exhaustive but is a good start for a healthy new year audit of your business:

  • Is your business structure the most appropriate for your needs – do you have the most effective asset protection structure in place? Are you maximising tax benefits? Should you have a trust ownership structure? If you have a family trust, are you up to date about whether this offers you adequate asset protection? If you are incorporated, are you fully aware of your obligations and potential exposure as a director ?
  • What if something happens to you – do you have Powers of Attorney so that the appropriate people will make management decisions in your absence? Does your business plan offer certainty should an untimely event occur, and does it allow the appropriate people to manage the business if you are temporarily incapacitated, with minimal interference to your operation and cash flow? Do you have a Will? Who will take control, and benefit in the growth of your business, after your death? Do you know what assets and liabilities will form part of your estate (and therefore be dealt with in your Will)? Are you aware that superannuation does not automatically form part of your estate and may instead be distributed at the discretion of your fund’s trustee? This may mean that money which you planned to be available for business debts (or protected from business debts) will not be so.
  • Should you have a Self Managed Super Fund – the advantages are that you will have greater control over your investments and a wider choice of assets in which to invest, however you need to ensure that the administrative costs are not going to outweigh the benefits. If you have one, you need to be vigilant about complying with legislative requirements (such as the sole purpose test of saving for your retirement) or you will attract penalties.
  • Do you own or lease? Is your lease value for money, is it energy efficient? Is the landlord conducting appropriate renovations and repairs? Are you complying with your lease obligations? Have you allowed your business premises lease to lapse, putting you into a “holding over” arrangement? If so, you are at risk of eviction. If you own your premises, is ownership the most effective structure for you?
  • Are you owed lots of money? – and should you be taking steps to recover outstanding debts? Have you got efficient systems in place to chase your debtors? Have you got strategies to ensure that you are most likely to be paid. For example, you can have your customers sign payment agreements once a quote has been accepted which could include provision for up front payment, or payment of a deposit. Service contracts also provide certainty about the service that you will be providing, what is included in the price and what will attract additional costs. Pursuing outstanding debts through the Court system can be managed effectively and efficiently on your behalf when customers refuse to pay, but having the correct systems up front in order to secure payment in the first place is even more efficient.
  • What shape are your borrowings in? – do you have the best deal for your finance arrangements, the best rates and the best flexibility? Can you consolidate your borrowings? Is your bank aware of exactly what your business does, allowing it to tailor its services to your needs.
  • Conduct a review of your employment contracts, your consultant contracts and your supplier contracts – these may be outdated, and employment contracts in particular may not comply with current legislation. If you don’t have employment contracts in place this should be remedied. Or you may be inadvertently breaching the ones that you have. Your suppliers should be complying with their obligations to you which may include extra services on the side or discounts for certain levels of purchasing.

These are some key areas you should assess as part of your new year audit, and seek appropriate and skilled advice.

For more information on Property Law or Business Services contact elringtons:

p: 02 6206 1300 | e: info@elringtons.com.au

Wind Turbines – Legal Advice for Landowners

Wind farms have the ability to produce clean energy, generate jobs and income and have minimal environmental impacts when appropriately located. They can also generate income for the owners of the land upon which they are constructed.

In 2016 Australia had 79 wind farms with approximately 2106 turbines in operation, with a combined capacity of 4327 MW.  These wind farms produced 30.8 per cent of the country’s clean energy and supplied 5.3 per cent of Australia’s overall electricity during the year[1]. Wind farms have also delivered considerable benefits to regional communities.

It can be expected then that wind energy companies are looking for suitable land to construct wind farms.

What should you consider before installing Wind Turbines on your land?

The following scenario provides an example of dealings between a land owner (Terry Firma) and a wind energy company (Breezey Pty Ltd) when negotiating the construction of a wind farm:

Breezey Pty Ltd contacts Terry to discuss testing his property for wind with the view to construct wind turbines on his property.  Breezey Pty Ltd outlines the process that will be followed:

  1. Breezey Pty Ltd provides an Agreement to Lease to Terry;
  2. The Agreement to Lease provides that Breezey Pty Ltd will test Terry’s property and if they are satisfied with the results, they will construct a wind farm and enter into a Lease with Terry as Lessor;
  3. The testing is carried out, the results reviewed and the decision of whether to enter into a Lease or not is made by Breezey Pty Ltd; and
  4. Once the Lease is operative, Terry will receive an annual fee for each Turbine on his property.

Although assured by Breezey that the contracts Terry is being asked to sign are standard contracts for wind projects and the terms of the contract are fixed and the same for everyone, Terry needs to make sure he fully understands the terms which are being offered by Breezey Pty Ltd. Terry takes the Agreement to Lease to his solicitor to review and advise him what the terms set out in it mean.

The solicitor advises Terry that the terms provide:

  1. The tests for the lands suitability will be undertaken within two years from the date of the Agreement to Lease;
  2. Breezey Pty Ltd may extend the period for conducting tests by giving notice to Terry 14 days prior to the end of the two year period;
  3. Once the tests are complete, Breezey Pty Ltd will advise Terry if they wish to proceed with the necessary works to obtain the necessary approvals and authorisations to construct the wind farm;
  4. Breezey Pty Ltd will endeavour to obtain the necessary approvals and authorisations within two years from the date they advise Terry they will proceed with obtaining them;
  5. Breezey Pty Ltd can extend the period for obtaining the necessary approvals and authorisations by advising Terry in writing 14 days prior to the two year period ending;
  6. Breezey Pty Ltd will commence construction of the wind farm within 6 months of receiving the necessary approvals and authorisations; and
  7. The period for commencing construction can be extended by Breezey Pty Ltd by giving notice to Terry within 14 days of the 6 month period ending.

So what does this mean for Terry? This means that under the terms provided by Breezey Pty Ltd, the Lease may not be entered into for up to four years, which can be extended even further at the discretion of Breezey Pty Ltd. No fees may be received by Terry until the Lease is commenced and Breezey Pty Ltd is in possession of part of Terry’s land and the wind farm is constructed.

Terry instructs his solcitor that the terms currently provided by Breezey Pty Ltd are not acceptable and alternate terms are drafted by the solicitor and forwarded to Breezey Pty Ltd for its consideration. The solicitor notes that an Option for Lease provides a superior framework for the rights and obligations of the parties. An option to lease agreement will normally allow a developer to access the property to assess the wind farm feasibility with an option to move into a lease agreement at a later stage.

There are many other other things to consider before entering into an Lease agreement for a Wind Farm with an energy development company for example:

  • Duration of the Contract
  • Renewable period
  • Tower removal responsibilities and specifications
  • Placement of access roads
  • Responsibility for roads, fences and gates
  • Renumeration and payment structures
  • Restrictions on the sale and/or future
    development of land
  • Energy credits
  • and more

Entering into an agreement with a wind energy company for the construction of a wind farm can be highly advantageous, which is why it is imperative that the terms of the agreement be carefully drafted. Once signed, all parties involved have given written approval of the provisions of that contract and are legally bound to fulfill the terms of the contract.

Therefore, if you don’t like something about a contract, negotiate a change before signing. The difficult part is knowing to what degree the various components of the contract can be changed that is why it is extremely important to seek competent legal advice before signing.

For more information or to make an appointment please contact Shalini Sree:

p: 6206 1300| e:  ssree@erlingtons.com.au

[1] Wind Energy – https://www.cleanenergycouncil.org.au/technologies/wind-energy.html