Commercial Law
Commercial law primarily relates to commerce and commercial transactions and covers a diverse field of areas such as contracts, sale and purchase of businesses and assets, export and import of merchandise, company and partnership law, supply of goods and services (including terms and conditions of trade, franchising, supply and distributorship arrangements, reseller arrangements, contracting and outsourcing), trade practices law (including misleading and deceptive conduct, consumer protection, anti-competitive and unfair market practices, product safety and liability) and commercial dispute resolution.
Issues
- The lack of legal due diligence and appropriate legal representation may jeopardise the commercial asset being purchased.
- The temptation to avoid a Shareholders Agreement should be weighed against the reduction in asset value and control of the organisation and decision making abilities.
- Statements and representations made prior to any contractual agreement must be considered in light of any potential conflict.
- The basic structure of any contractual arrangement typically has more far reaching implications in the medium term than were ever envisaged
- Particular commercial decisions such as price determination or supply arrangements may lead to ACCC investigations or serious penalties.
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Franchising - As a Franchisor
The franchise agreement is the basis of a critical relationship between the franchisor and franchisee. The development and ongoing management requires a detailed understanding of key areas such as supply terms, corporate structure, termination and default, financial payments, disclosure requirements, marketing, rebates, intellectual property, pricing, and dispute resolution procedures. The exact form of the franchise agreement must reflect the commercial intent and means of operation of the business rather than be structured purely on legal considerations. A franchise agreement by its nature has enormous variety from one to the next and there are different structures such as master franchise, multi unit franchise, area developer franchise, and joint venture agreements to name a few. The distinction between a franchise agreement and license, agency or supplier agreements is often blurred and depending on the jurisdiction it is important to identify ramifications of an incorrect classification.
Issues
- The development of the franchise agreement is a specialist area that is too often the recipient of a commoditised amateur approach
- A poorly structured franchise agreement at the outset has a long legacy in any franchise relationship and often is the catalyst for future dispute
- A franchise agreement is too often overloaded with every possible scenario to the detriment of the commercial operation of the business
- A lack of understanding of specific franchise laws can result in contractual relationships being incorrectly classified as licenses or franchises
- The hidden costs in franchising are the future dispute processes and costs which are magnified if the initial contract has weaknesses or mistakes
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Franchising - As a Franchisee
A franchise contract and relationship needs to be balanced and respect the need for both parties to benefit commerically. A franchisee is advised to seek independent advise prior to entering into a franchise agreement to ensure any decision is fully informed. There are critical areas where franchisee rights need to be clearly defined such as key responsibiities, termination and default, payment of monies, supply side relationships, territorial rights, ownership and asset rights, prior disclosure, lease obligations or rights, and bank guarantees. A franchise agreement is a serious contractual relationship that details the rights of both parties for years to come. In the event of a dispute it is the starting point for understanding where each party stands and if the agreement is in breach of any jurisdictional codes of conduct or established case law there are often strong grounds for a franchisee to evalaute their position or obligations.
Issues
- Obtain advise from a specialist with demonstrated franchise experience to avoid needless exchanges and costs with the franchisor
- Ensure your position as a franchisee is compliant with the Franchise Code of Conduct
- Any surrounding documentation such as an offer to lease or prior representation statement are critical to receive independent advice
- Manage the costs associated with any independent advice as the money is better spent in the business
- Be clear on what you are purchasing with reference to territory, intellectual property and the term of your licence.
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Licensing & Distribution
A license or distribution arrangement will possess significant variety in the core commercial terms. In the development of any license or distribution contract it is important to consider critical areas such as product or service requirements, minimum performance criteria, pricing structures, supply arrangements, obligations, responsibilities, termination, payment processing, territories, product recall, promotion, marketing and intellectual property. A distribution arrangement can vary significantly from prescriptive to very unstructured supply arrangements. Agency, supply, license, cooperative, dealer, broker, and franchise are all forms of distribution arrangement that can be developed to reflect the specific commercial intent of the relationship.
Issues
- A lack of consideration for the issues associated with third line forcing supply and regulatory issues associated with pricing
- A distribution contract must reflect the commercial intent of distribution of a product or service rather than a strict legal interpretation
- Territorial rights need to be clearly identified with clearly defined restraints for competitors
- The investigation of Intellectual Property rights often is neglected
- Different products and services may have particular restrictions relating to importation or certification
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Legal Compliance
Any businesses, no matter what their shape or size must all operate in an increasingly complex regulatory environment and the challenge faced by all is that we must do so without contravening the legal and regulatory obligations and to avoid breaches that have the potential to substantially affect profits and to reduce business value. It is not uncommon that in the spirit of competition an organisation may employ tactics which often test the boundaries of the law. The role of the lawyer is to assist the organisation to comply with the relevant laws in respect to dealing with compliance and their risk management processes.
Issues
- Understanding the importance of risk management, risk identification and risk appetite within an organisation
- Explaining practical ways to identify and manage risk and influence a risk management culture within the organisation
- Identifying practical ways to assist with board and risk management committees in the risk management process
- Planned and sound advice from the outset generally leads to a well founded and successful business
- A developed and heavily regulated country, watchdogs are actively investigating and prosecuting those that infringe our local laws and regulations.
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Intellectual Property
The intellectual property strategy for any business must take into account trademarks, processes and methods of business, domain names and countless other assets that are critical to the operation of the business. Any intellectual property definition and registration process should consider the evolution of the short and medium term needs. The registration of international trademarks is a global process that requires careful consideration of the requirements of the business and a cost effective strategy for global registration that balances protection against the reality of what will ever be used.
Issues
- There is no requirement to register a trademark across the entire global market if the business will never reach certain regions
- The registration of business names, domain names, and clarification of copyright on any logo drawings is too often an after thought
- Early determination of expansion and products & services to be offered will inevitably knock out potential competitors under a same or similar brand
- Who owns the intellectual property is a question our courts continue to face
- The value of intellectual property is determined by the level of protection provided from threats of 'passing off'
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Commercial & Retail Leasing
Commercial and Retail leasing deals with a lease transaction for business or commercial purposes, which if not properly drafted, either party can be significantly disadvantaged and that can cost you tens of thousands of dollars. There are many areas to preparing a properly drafted lease including preparing lease disclosure statements; advising and preparing lease documents; verifying details in lease disclosure statements; advising on and negotiating amendments to lease documents
Issues
- There is a plethora of case law in this area predominately focused on the failure to comply with standard procedures
- Legislation differs in most States and consideration for the intricate difference is paramount
- Knowing your rights under particular legislation may assist with the commercial negotiation of your lease
- An exit strategy in commercial or retail lease negotiations should always be top of mind
- Registration of leases ensures protection of the legal right to occupation
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Buying & Selling Businesses
The purchase of sale of a business is a complicated transaction that requires due consideration for all parties involved. As a buyer or seller preparation for the transaction is critical from a due diligence, definition of rights, obligation and contingent liabilities through to the detail surrounding the treatment of tax and GST. Often, if you operate the business through a Company, the Purchaser may want to buy all of the shares in the Company and acquire the business in this way rather than purchase the business and it's assets.
Issues
- The value of the tangible assets, plus an estimated value of the intangible assets such as goodwill, usually determine the value of a business
- Particular aspects to consider are intellectual property, guarantees, restrictive covenants, deferred consideration, due diligence and warranties
- There must also be consideration of the transfer of liabilities for staff entitlements such as superannuation and leave
- CGT and structural issues Stamp duty and GST considerations
- If the business is a franchise or license arrangement, there will be other issues to consider including the terms of the contractual arrangements
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Dispute Resolution
The process of dispute resolution is a complex people environment that requires clear communication and a commercial approach to any resolution. If possible a mediation or negotiation process will provide an opportunity for early resolution without recourse to the court proceedings. Any dispute is as much about the quality of preparation as it is about the main thrust of any argument. Preparation and a thorough discovery process creates the necessity to focus on the facts. Dispute resolution must be based on a pragmatic non emotional approach that seeks to manage costs from the outset.
Issues
- An overly emotional approach diminishes the possibility for a sensible, timely and financially sensible approach
- Contracts too often lack clarity around a dispute resolution process that is recognised by all parties involved
- Disputes often arise out of the failure to identify areas of contention and methods to be adopted for resolution
- A commercial approach to any dispute is paramount and the cost benefit analysis should always be at the forefront of any dispute
- Where a dispute is inevitably finding an efficient and most cost effective means of resolution should be well thought through from the outset
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International
International expansion is not only challenging but daunting when faced with setting up company structures, seeking tax advice, opening bank accounts, establishing business relationships and entering into contractual agreements under foreign jurisdictions. The specifics present in any foreign country are a constant challenge for overseas businesses seeking to trade or establish in a foreign jurisdication. It is a specialist area that requires an understanding of local tax, compliance, regulatory, workplace, financial market, supply, pricing, corporation and securities law and dispute and arbitration processes. The critical step is to identify a specialist with a proven track record rather than pay for the learning of any invidividual. The reality for most is the asset value of the business will be impacted by the ability to assimilate and comply with local regulation in a manner that maximises the position as a foreign entity.
Issues
- International advisors are not always the first place to start and there are far to many amateurs without the depth of experience or track record involved in cross border transactions
- Intellectual Property related matters and foreign ownership have a significant impact on business growth
- A myriad of arrangements exit for international growth, all which vary from region to region and business to business
- How do you manage and control business partners in foreign countries and what mechanisms should be put in place to limit such exposure
- Tax implications, revenue flow and what jurisdication is best for any international dispute
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Corporate Law
Corporate law is about big business, which has separate legal personality, with limited liability for its shareholders, who buy and sell their stocks depending on the performance of the board of directors. The five defining characteristics of the modern corporation are a separate legal personality of the corporation (the right to sue and be sued in its own name); limited liability of the shareholders (so that when the company is insolvent, they only owe the money that they subscribed for in shares); transferable shares; control of the company placed in the hands of a board of directors and investor ownership. Corporate law is often divided into corporate governance (which concerns the various power relations within a corporation) and corporate finance (which concerns the rules on how capital is used).
Issues
- A company may at times require legal assistance in the preparation of its shareholder agreements
- Assistance and guidance may be sought in respect to corporate restructure and schemes of arrangement
- Directors and Shareholders are not exempt from duties and obligations under the Corporations Act
- Working with company managers to advise on legal issues affecting their decisions that need to respect the law but still achieve the commercial objectives
- The Corporations Act is a far reaching piece of legislation that requires specialist consideration
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