Business Law

Minimising Bad Debts For Businesses


The decision for a business to trade on credit terms carries risks which need to be properly assessed and mitigated at the outset.


The use of an effective and up-to-date Credit Application form and Terms and Conditions (T&Cs) are critical to minimising the risk of bad debts - however, there are also other simple checks which may point to increased credit risks.


General Risk Factors

You should consider and assess the following issues before deciding whether to proceed with a credit transaction:

  • is the other party an existing customer of your business. If so, for how long?

  • how was the other party referred to you?

  • how long has the other party been trading? Is it a start-up or well established business? What is its payment history like? Has this deteriorated recently?

  • is the other party a trustee company?

  • is the other party domiciled in Australia or overseas? Where are its assets located? What are its assets?

  • what industry sector is the other party is in? Is this an industry which is trading poorly or in structural decline?

  • does the other party’s business have a stable revenue base - or does it generate revenue from being awarded irregular contracts?

  • what is the size of the transaction relative to the size of your business? If you do not receive payment will this threaten the viability of your business?

  • has the other party displayed recent adverse signs - for example the loss of key staff or adverse publicity?


Sourcing further information


More specific information on the other party can be sourced by:

  • obtaining credit reports from one of the leading credit agencies operating in Australia ie Equifax (formerly Veda Advantage):, Experian: or Dun and Bradstreet (D&B):;

  • an ASIC (Australian Securities and Investment Commission) search:;

  • a PPSR (Personal Property Securities Register) search:;

  • searching Court lists for current litigation or Court judgments:;

  • land title and lease searches (NSW Land Registry Services):;

  • bankruptcy searches (for an individual):;

  • checking the other party’s web-site and social media sites (the absence of a web-site or recent social media activity could be a cause for concern);

  • online reviews (check if the reviews are recent and whether there is a pattern of adverse reviews);

  • speaking with trade referees and other existing customers and suppliers with recent trading experience with the other party.


Credit Application

Also essential to mitigating bad debts is having an effective and comprehensive Credit Application form which obtains as much information as possible in relation to:

  • the financial position of the other party including, where appropriate, the provision of copies of financial statements, management accounts and bank statements;

  • all current addresses, telephone numbers, email addresses and, where appropriate, photo identification of the other party and its director/s;

  • names of trade referees and their contact details.


Together with the Credit Application form should be your Terms and Conditions which set the legal framework for the transaction. T&Cs should be comprehensive and, where appropriate, include provision for:

  • directors guarantees;

  • security (including PPSR compliance);

  • suspension of supply and set-off clauses;

  • jurisdiction clauses.

It is highly recommended that your Credit Application and T&Cs be reviewed regularly by a lawyer to deal with changes in the law and changes in the nature of your business and/or the product or service being supplied.

Expert legal advice can also be provided to ensure that the T&Cs will withstand legal challenge under the new “unfair contract laws” - which since November 2016 can apply in relation to business-to-business standard form contracts.


The risk of bad debtors is ever-present - however, from our experience, the risk can be reduced by:

  • effective and targeted due diligence before entering into a credit transaction and throughout the trading relationship; and

  • an effective Credit Application and T&Cs.

Coutts has considerable experience in preparing Credit Applications and T&Cs for a range of clients across different industries and in recovering bad debts when they arise.

Please feel free to contact Daniel St George if you would like to discuss or if you require any assistance in relation to reducing your bad debt risks.

Daniel St George
Senior Associate
1300 268 887

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

The 2016 Census, your small business and privacy


The 2016 Census was meant to be to a seminal moment in our history. For the first time a snapshot of our society was to occur online.

However, instead of the excitement of something new, and kudos to the government for implementing a new system said to save tax payers around $100 million, all of the publicity related to our concerns about Privacy. We wanted to know how the information we had willing provided in years past was going to be used, accessed and stored. If anything, the 2016 Census showed how much people value their privacy and how any transaction online sets of alarm bells.

Privacy may not be a particularly interesting topic of conversation, but you can bet your bottom line that your customers are concerned about their personal information and what you are doing with it. If there is even a perception that you will not respect their privacy, they will vote with their feet.

Personal information is any detail about a person that allows that person to be identified - their name, address, date of birth, bank account details, medical records, photographs and even information about their shopping habits and where they work may be included. Much of this information is routinely collected by businesses. If your business collects personal information there are strict requirements about how you use it and store it. If you misuse this material, you are likely to lose customers and business partners. You may also risk a fine.

When you are collecting information, you should state what the information is used for and refer customers to your privacy policy. Consider if you actually need the information - “because it might be useful later on” is not a good enough reason to request it. A clear privacy policy will provide reassurance to your customers that you respect their privacy. If you collect any type of financial information from customers they will expect it to remain private, in fact they are entitled to have it protected from disclosure.

Next, consider how you store personal information. Have sophisticated passwords for your server, a firewall and don’t leave physical copies of information physically lying around where others can see it. You need a process in place to manage the information. If you have staff members, you will need to let them know about the process.  The process is an important tool to protect your business from fines, complaints and a loss of customers so it is worth getting the process right from the start.

If you will share the information with a third party, you must state this in your privacy policy.

A business with an annual turnover of more than $3,000,000.00 must comply with the Privacy Act. If your business has less turnover, it is still a good idea to demonstrate to your customers that you value their personal information, it's great PR. If your business provides health services you must comply with the Privacy Act and the Heath Records Information Act, irrespective of your annual turnover. If you have any contracts or funding from government, you are likely to have to comply with any privacy polices of that agency as part of your agreement.

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, 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.

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.

Coutts win the Regional Business Award!

Coutts win the Regional Business Award! Coutts Solicitors and Conveyancers are proud to announce our selection as the winner of the Regional NSW Business Chamber award for excellence in small business. The team were over the moon! This award recognises the dedication from all of the employees at Coutts,  who have worked together to drive the business to succeed. The awards criteria assessed the performance of each business over the last 3 years. The contributing factors to winning first place were due to increasing staff numbers, opening an additional location in 2014, increasing revenue and proactive and forward thinking in marketing and client services.  Coutts is now a finalist in the State NSW Business Chamber awards, for the same category "Excellence in small business", which will be announced at the awards ceremony in Darling Harbour on Friday November 27th.

Coutts Solicitors & Conveyancers would like to thank our clients for recommending us to others and trusting us with their own legal and conveyancing matters. Also, we would like to thank our loyal referral partners who recommend us to their clients and the staff who continually strive for excellence in their own roles, earning the business an excellent reputation for legal services and conveyancing.

If you would like to talk to one of our friendly staff, please call 1300 268 887 your initial consultation is free for up to 1 hour.

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.