Business

Terms & conditions to improve business cashflow

As 2016 draws to a close you might spend a bit of time reflecting on the year that was and what this means for your business. 

Questions on your business growth and your bottom line might come up. If your accountant was not already on your back about it, questions on the amount of people and businesses that owe you money might also be raised. With January being a month notoriously bad for cash flow, such questions seem fitting as the collective value of monies that remain owed from within the last year, leave you unable to kick off the new year in full swing.

Whilst we can certainly help businesses recover debts, we also think it is worth looking into why there are so many debts in the first place. If you use materials or incur any fees in undertaking work for someone, it is vital that you at least obtain that amount upfront. There is nothing worse than not getting paid for a job and then having to satisfy your suppliers out of your own pocket. You should also consider if there is anything further you can request upfront, or, can you make sure you have payment in full before you (for example) install the hot water system, or, hand over the client’s tax return refund? Although it sounds crazy, think of other businesses who generally have no client debts - when you get your haircut, can you pay for it 14 days later? Can you pay for your new car later on? Well sort of - if you arrange finance! Which leads to the next point. If you are offering a bigger ticket item, like an air conditioner, can you use a third party to offer finance? That way you get paid upfront. You may even attract a larger market share if your competitors don’t offer finance arrangements.

We often get feedback from clients that find their own customers are unwilling to pay much upfront, in case there are problems with the quality of work, or if they worry you will pocket the money and flee to Bali in the middle of the night. To provide assurance to them, why not have terms and conditions that set out how much of a deposit you require and when the balance is due? You can also cover when a customer can cancel their request and what type of warranty you will give. It could even include interest on any late payments. Increasingly we are finding terms and conditions that require a director to personally guarantee their company’s debts (and lease) as well, which can give you further options if a company owes you money and subsequently goes into liquidation. If there are any disagreements between you and the customer, you now have a starting place that should set out what you agreed to do and what they agreed to do.  Terms and conditions are a vital tool in improving communication between yourself and your customer and can also help get more payments in, quicker, so it is better for your cash flow as well.

At Coutts Solicitors & Conveyancers we can draft your terms and conditions and assist with debt recovery work too. Improve your business cashflow with some help from Coutts.

Changes to The State Revenue Legislation Amendment Act 2016

As a Licensed Conveyancer  at a Law Firm, I deal with many clients, from first home buyers to investors and businesses. The State Revenue Legislation Act  effects a large portion of my clients and determines what they can do, the grant amounts they will receive and the tax they need to pay. So when The NSW Office of State Revenue or OSR,  announced changes to the act with The State Revenue Amendment Act 2016, I realised many of my clients would be unaware or confused by the changes. So for those people or businesses undertaking a transaction with the OSR,  and to help you understand the changes, I have summarised the changes to the act below. The changes include:

  • To be classified as a "Substantially renovated home" for the purpose of the First Home Owner Grant and First Home New Home Exemption or Concession from Duty, the home must now be created by renovations that remove or replace all, or substantially all of the building.
  • To be classified as a "home built to replace demolished premises" for the purpose of the First Home Owner Grant, the home must be built on the same land that the demolished premises stood.
  • Unoccupied land which is eligible for the principal place of residence land tax exemption that is occupied by a person other than the owner can now be exempt for a period of up to 4 years from when that person stops using the land for residential purposes.
  • Wages that are paid to a person by a body corporate wholly owned by at least 2 local councils, for activities carried out for those councils, are now exempt from payroll tax.
  • After a successful objection or review, the chief Commissioner must now pay interest on a refund made to a taxpayer.
  • Enterprises may now voluntarily report amounts which are not classified as unclaimed because the total is $100 or less. The amount must be paid to the Chief Commissioner and can be claimed by the owner of the money.
  • The Chief Commissioner may now allow an owner of unclaimed money whose right to the money has expired to still claim the money.
  • References to anything done or held by a trustee of a unit trust scheme as trustee in respect of corporate reconstruction transactions and corporate consolidation transactions that are exempt from duty now extend to include anything done by or held by a custodian of the trustee of a managed investment scheme.

For more information on the The State Revenue Legislation Amendment Act 2016 click HERE.

If you need legal advice in relation to a property or business transaction. Coutts can give you the advice you need. 

Small business protection from unfair contracts

The Australian Consumer Laws are designed to protect an individual against unfair practices. Under the proposed Unfair Contracts, some of these protections will be extended to protect small businesses as well (who don’t fall within the definition of consumer). The unfair Contracts Act is designed to make it harder for a business to enforce certain standardized contracts, or at least certain clauses in those contracts, against a small business. The kinds of terms that will be in the firing line include:

  • Clauses that allow one party to increase the price without allowing the other party to then terminate the contract.
  • Clauses that allow a party to vary the terms of the contract without informing the other party and allowing them to then terminate the contract.
  • Clauses that allow one party but not the other to terminate

Will these protections apply to franchising? Yes, if the upfront price of the contract is either less than $100,000.00 or if the contract duration is 12 months or more, the upfront price is no more than $300,000.00. Given the vast majority of franchise agreements are presented or a ‘take it or leave it’ basis and often do not allow the individual or small to terminate the agreement before the term, there could be a flurry of activity as franchisors update their agreements. Other typically clauses in franchise agreements that allow the franchisor to buy back the franchised business at an unfair amount or to reduce the obligations they offer to provide are likely to be now enforceable.

This Act was passed in October 2015 by Parliament and is expected to come into effect by the end of 2017. If you use a standardised contract, such as terms and conditions, now is the time to review your contracts. If you find clauses that give you all the power and your customer- be they an individual or a small business- none, you might need to re-phase the clause or perhaps get rid of it completely. Ask yourself if that clause is necessary to do business with you and protect your legitimate interests. If you have been using a standard contract “borrowed” off another business or maybe downloaded from www.whoknowswheres.com, it’s a great time to chat to us about getting a contract, or, terms and conditions that complies with these new amendments and is tailor made to your industry and your business.

The amendments to the Unfair Contracts bill mean, if you are a small business you will soon have another string on your bow if you were to end up in a dispute over a contract.

For advice on your business contracts click here to contact Coutts.

Different Business Structures

If you are buying a business or starting a business, you will need to make a decision on the type of Business Structure you need.  Firstly you need to know what the different Business Structures are and what suits your business.

Sole trader

A sole trader is the simplest business structure you can have. It is easy to set up and easy to wind up. Many favour this structure as there is less formal paperwork required than other structures and you generally have complete control over your business. One major risk is that you are personally liable for any debts or liabilities of your person and this is a limitless liability. This means there is no distinction between your business property and your personal property. It can also be harder to sell a business as a sole trader as potential purchaser’s may find it hard to see value in the business once you have gone (a reasonable conclusion!). If you start as a sole trader it is easy to change structures, which many do as their business expands.

Partnership

Once the hallmark of an accountants practice or a firm of lawyers, partnerships are less common than they used to be. However, partnerships still have their place in the modern business world. It still suits 2 or more people who want operate a business together and want a more flexible structure. As with sole trader, liability and responsibility for debts of the business (even if the business has a separate name) is shared equally by the partners…if one partner disappears the other can be left with all of the debts. Partners can split profits as income and offer partnerships to high performing employees. Whilst not compulsory, any partnership should have a written agreement clearly setting out how the partners want the business to operate and what they will do if a dispute arises.

Company

Commonly a company is a Pty Ltd (a proprietary limited) company. A company is responsible for its own obligations and debts. Shareholders are not responsible for company debts. Directors of a company are only liable for company in a limited circumstances. A company has higher set up costs then partnerships and sole traders and has ongoing obligations and reporting requirements with ASIC. Some information regarding the company, such as its directors, shareholders and registered office is publically available.

Trust

Trusts can often offer the highest level of asset protection for an individual in business. Trusts can also be flexible in how they distribute income to beneficiaries so there can be some tax advantages. Details of trusts are not generally publically available and so offer more privacy then a company. However, they can be expensive to set up and have ongoing reporting requirements (so your accountant will love it!). The complex structures of trusts can make it harder to use loans and financing arrangements

Which structure suits me?

As shown above each structure has positive aspects and negative aspects. Different models suit different types of businesses. An accountant is the best person to advise on which structure best suits your business and we can prepare the necessary documents to put those structures in the place.

For any further advice or legal assistance on this issue, please contact us at Coutts on 1300 268 887.

How to buy a business

If your New Years Resolution is to buy a business you might be surprised to know that buying a business can be quite a complicated process, depending on what you are buying and how you are buying it. That's not to say you shouldn't do it, if you have had a dream to buy a business, it is definitely worth doing, however getting the right advice will help you to make the best decision on what to buy and the process to buy a business. Coutts has expertise in advising clients on buying and selling businesses, including franchises, Pty Ltd companies and Sole traders. We can also advise you on the best structure to use to buy a business- you don’t need to keep the structure you are buying.

If you are buying an established business you need to first determine what exactly you are buying- stock? Equipment? A registered business name? In some cases, you might also be buying debt, employees with long service leave entitlements and a bunch of creditors you have no chance of pursuing.

A properly prepared Contract for Sale of Business will note down everything included in the sale and will also set out the conditions that you are buying the business on. Making sure the Contract is correct can involve what seems like a lot of “to and fro” between the solicitors, however, it’s the contract that protects all parties so it is vital it is correct. Even if both the seller and the buyer have agreed on the big picture items, such as the price and the date for handover, there are lots of smaller details that your solicitor will confirm, such as:

  • Are you buying stock? At what value?

  • Is the equipment included in the sale or is it lease?

  • Are any of the employees staying on after the sale? Do they have long service leave entitlements about to crystallise?

  • Do you need a licence to run the business?

  • Is the soon-to-be former owner prevented from opening up a competing business nearby?

Do you know you cannot buy a lease? If a business operates in a leased premises, that lease must be either assigned (transferred) to you, or, a new lease will be offered. Bear in mind it is up to the landlord to decide to you give you a lease, it is not up to the seller. What will you do if you buy a business, but cannot get a lease on your terms? It is standard for the incoming tenant to pay the landlord’s legal fees (in addition to their own) associated with transferring the lease or obtaining a new lease.

Do you know you need to pay stamp duty on purchases of businesses? You may also need to pay Capital Gains Tax and GST.

Buying a business can be an exciting time when you finally become your own boss. But there is also a lot that can go wrong. You need a trusted, legal adviser to make sure that you are getting everything you think you are getting and leaving out the things you don’t want. You need enforceable contracts to protect you if things go pear shaped. You need to understand your lease. You need to be fully aware of the financial circumstances of the business and know that all of its debts are paid. Buying a business with unpaid tax debts, pending lawsuits and old stock would be a costly purchase indeed. Good advice is often worth far more than it costs and when you use a solicitor you are paying for their expertise and your peace of mind.

For any further advice or legal assistance on this issue, please contact us at Coutts on 1300 268 887.

What situations can cause franchise disputes?

What do pizza and petrol have in common?At the moment there are two big businesses making headlines for franchise disputes- Pizza Hut and United Petroleum. Around 80 owners of Pizza Hut Franchisees are currently in the Federal Court claiming the $4.95 pizza range the franchisor has required them to sell is too cheap- they cannot make any profit and remain in business. Part of their argument is that the franchisor is not acting in their best interests and it is unconscionable to require the franchisees to sell pizzas at such a low rate. Initially unsuccessful in obtaining an order to stop the requirement to sell the cheap pizzas, the matter is now chugging along towards a final decision. It is expected that the judgment, whomever the Judge agrees with, will provide much needed clarity on exactly what kind of care the franchisor owes to the franchisee.  

A more recent conflict to emerge involves a franchisee of United Petroleum. While in some respects it is hard to imagine not turning a profit from petrol, the franchisee is claiming that he was required to sell gas bottles and confectionery at a high price and was forced to change electricity suppliers that charged a much higher price. United was able to terminate the franchise agreement due to Mr Nijhawin’s failure to pay electricity bills. In speaking to the ABC’s news service, the franchisee said “We're devastated, totally. Financially, emotionally, physically…we're finished,"[1].

A lawyer representing two other (now former) united Petroleum franchisees, claims that it is in the interests of United Petroleum for a franchisee to commit a breach, so they can then take back the business and re-sell it to a new franchisee, netting around $145,000.00 each time the business changes hands[2]. Another disgruntled franchisee commented that his business struggled because United dictated what products its franchisees sold and at what price, including United Petroleum home branded products[3]. He shut up shop in March 2015.

If you are considering a franchise you must, must, must fully understand the franchise document. You need to be aware of clauses that allow the franchisor to dictate your resale price. If you get caught in the cross fire of a pricing war, as is currently raging between Pizza Hut and Dominos, your business could be the first casualty. If the franchiser dictates your supplier and you can get a better deal elsewhere- what are your rights to go elsewhere? Read between the lines- is this document passing on all the risk of running the business solely to you, without giving you the power to make decisions that impact on its profitability? While the franchising model of business can be a profitable way of running a business, often enjoying instant brand recognition, training, support and extensive marketing, as with most of life’s decisions, your decision to buy a franchise must be an informed decision. Coutts have experience in reviewing a variety of franchising documents as well as acting for parties in franchising disputes.

If you are thinking of starting a franchise business. Coutts Solicitors is hosting a FREE Webinar on Monday 7th September 2pm with the ABC's of starting a business. Our Commercial Law expert Adriana Care can help you decide the best way to set your business up, to be a success from the start!

To register for the ABC Business Start up Webinar click on the link:

https://attendee.gotowebinar.com/register/4031324567032270850

or if you would like to talk to one of our business lawyers call

1300 268 887

for a free initial consultation.

Labelling for Businesses

ACCC launches guidance on country of origin labelling for businesses

Today, the ACCC has published its revised guidance on country of origin labelling which will help businesses comply with the Australian Consumer Law (ACL) when making country of origin claims.

The ACL provides ‘safe harbour’ defences for ‘Made in’, ‘Product of’ and ‘Grown in’ country of origin claims. If goods satisfy the criteria, the business is deemed not to have engaged in misleading or deceptive conduct or made a false or misleading representation under certain sections of the ACL. Businesses that do not qualify for these defences are still able to make country of origin claims provided they are not false, misleading or deceptive.The ACCC’s guidance provides information and examples to illustrate when businesses can rely on the ‘safe harbour’ defences in the ACL.

The Country of origin claims and the Australian Consumer Law publication is available on the ACCC website. For further information, please also see the ACCC’s media release.

Government releases competition review papers

The Harper panel has now released an issues paper and fact sheet regarding the Australian Government’s ‘root and branch’ review of competition laws and policy.

Copies of these documents are attached and can be found online at http://competitionpolicyreview.gov.au/consultation/

Submissions will be open until Tuesday 10 June 2014 and can be submitted online at http://competitionpolicyreview.gov.au/submissions/.

Do you provide goods on credit, consignment or under a lease? Is your interest in those goods protected in the event of bankruptcy or insolvency?

You can protect your secured property by registering your interest on the Australian Government’s Personal Property Security Register (the PPSA). If you don’t register your interest and the business holding those goods is placed into receivership (or an individual declared bankrupt), you may find yourself treated as an unsecured creditor, uncertain whether you will ever see your money or goods again.

Before 2009, if a business or individual loaned money, leased goods or provided goods on credit or consignment they could register their security and protect that interest with ASIC or a variety of registers that existed in various states. Now, there is one register, the PPSA. The PPSA records the registration of an interest in personal goods, such as cars, boats, caravans, machinery, shares, crops and livestock. It does not include real estate. An interest in real estate is (still) registered by lodging a caveat with Land and Property Information (formerly, the Land Titles Office).

For the past few years ASIC has encouraged anyone with a registered interest to move that registration onto the PPSA. From 30 January 2014 other registers will no longer operate.

Armed with a registered security interest, you are treated as a secured creditor and will be given priority over unsecured creditors by the receivers.

You can no longer rely on a retention clause or some other contractual agreement to protect your goods.

For example ABC Office Supplies enters into a lease agreement with XYZ Accounting services for 2 computers. XYZ Accounting does not make any repayments and subsequently goes into receivership. If ABC secured their interest in those computers on the PPSR the receiver should pay to ABC money from the sale of those computers. If ABC did not register its interest, it will be an unsecured creditor and might not receive anything, even if there is loan agreement between ABC and XYZ containing a clause stating the title in the computers does not pass to XYZ until ABC has received payment in full for the computers.

But I registered my interest on the ASIC register, is that still ok?

No. The PPSA replaces older registers, such as the ASIC Register of Company charges and “REVS” (Register of Encumbered Vehicles). From 30 January 2014, any interest registered elsewhere will be invalid. If you have a registered interest you need to immediately move it to the PPSA. Coutts can attend to this quickly on your behalf.

How do I register on the PPSA?

In order to register, you must submit a form to the PSSA registry, setting out the parties to the transaction and must describe the collateral and the security sufficiently. Any items that have a serial number should have that serial number included and any other relevant information that would identify your security. Make it easy for the receiver to identify the property you claim an interest in.

I have loaned money to a 3rd party for them to buy personal property- do I have an interest in the property and should I register it?

Yes. Where money is advanced to buy a specific item, for example a loan to purchase a photocopier, an interest exists and should be registered. However until the item is purchased, there is no security to attach that interest to. The only way to protect an interest during the period between when the loan is advanced and the item purchased, is to have a carefully worded clause in the Loan Agreement. Once an item is purchased, it is essential to register this interest, as the Agreement will no longer be sufficient.

For example, XYZ Accounting borrow money from OK Financing to lease computers from ABC Office Supplies. XYZ Accounting are placed into receivership and ABC and OK both claim an interest in the computers. Big Bank has also claimed an interest in all of XYZ Legal’s goods under a mortgage document executed several years ago.  If OK financing registered their interest before the computers were leased, their claim will fail as there were no goods to “attach” their interest to. If OK registered their interest after the computers were purchased their interest will be protected and will probably out rank the Big Bank’s general claim. ABC Office Supplies will also be treated as a secured creditor provided they registered their interest with the PPSR too.

I regularly buy second hand equipment- can I check the title of these items on the PPSA?

Yes. You can quickly search to see if the item has any registered interests, to ensure you are not buying an item that is actually leased to the seller or has some other restriction that may compromise your title to it.

For more information or to book an appointment with one of our expert solicitors contact us today.

Does your Business comply with the new Privacy Laws?

The laws relating to how businesses and individuals use and store personal information has changed. The National Privacy Principles (NPPs) are rules that govern the way personal information is collected, stored, disclosed and disposed of. It recognizes that individuals have a right to access information an organisation holds regarding them and correct it, if they believe the information is incorrect.

Personal information is information that allows an individual to be identified from that information. It includes names, addresses, financial information, marital status and billing details. It can also include photographs, surveys, opinions and complaints. You should only collect information that is necessary for you to complete your work and allow people to remain anonymous (if possible). For example, if you want to know the geographical area that your customers are coming from you could ask for their post code. As you don’t need anything further to establish this, you shouldn’t ask. An accountant preparing someone’s tax return needs far more information and it is appropriate that they collect tax file numbers, bank account details and the like.

If you pass personal information on, you must tell the person this. For example, if you pass the name and address of a client on to a debt collector tell them. If you are a travel agent and you pass information on to airlines and rail operators, tell them. Give people notice at the time you collect their information and seek their consent.

When you store information you should ensure that it is correct, complete and contemporary. It should also be safe. This usually means having secure passwords and lockable filing cabinets. Client names, addresses ect should not somewhere where non-staff can see. This may mean moving folders and files away from reception areas and meeting rooms or if that is not practical, “de-identifying” the files by removing full names for example. When you are finished with the information, it should be shredded or securely dumped- don’t throw client lists in a street bin!

Develop a Privacy Policy. This can be a brief document on display in your office or website stating what information you collect and why you collect it. Allow people to view their personal information and correct it if they think it is incorrect.

Here are some common mistakes you might be making:

  1. Thinking the Privacy rules don’t apply to you. If you run a business that has an annual turn over of $3,000,000.00 or more, you need to comply. Businesses with a smaller turnover are exempt from the Act unless they: are a health service provider, trade in personal information (ie buy and sell mailing lists) operate a residential tenancy database, related to a larger business that does comply or provide services under a Commonwealth contract.
  2. Thinking Privacy doesn’t matter. It does. The Privacy Commissioner can also investigate any complaints made about your organisation and may order an apology or compensation. Clients who know their privacy is respected are happy clients. Happy clients are good for business.
  3. Using personal information for direct marketing without that person’s consent.
  4. Not allowing people to opt out of marketing. All emails, sms and posted materials must contain an option for people to opt out or unsubscribe.
  5. Not training your staff on how to handle personal information they collect or store. It can be helpful to make someone responsible for privacy compliance.

Coutts can help you review and update the way you collect or store personal information. We can help you develop a Privacy Plan and prepare a Privacy Statement that complies with the Act and fits your business.