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Commercial Law

Commercial law encompasses a wide range of matters and transactions affecting a business enterprise. Businesses should retain expert legal and other professional advice (such as an accountant) to support their endeavours, sustainability and growth, to minimise disputes and to protect stakeholders such as proprietors, shareholders and directors from personal liability.

Buying or selling a business

Buying or selling a business requires careful planning to ensure that agreed terms and conditions are properly and effectively negotiated and then documented in a written contract. The contract should detail, among other things, the parties’ rights and obligations, deal with GST and other taxation matters, and set out processes and procedures to manage various contingencies.

If the business is a franchise, it will be governed by a Franchising Code of Conduct which sets out the rights and responsibilities applicable to franchisors and franchisees. It is important for the parties to be aware of these obligations when entering into a franchise agreement.

Retaining a lawyer to review your contracts and incidental documents (such as commercial and retail leases and hire purchase agreements), negotiate terms, and carry out necessary due diligence on your behalf, can help minimise potential pitfalls and unnecessary expense.

Business structures

Business structures are an important consideration with any venture. The structure through which your business operates should be chosen with regard to your personal and financial circumstances, your goals and future plans for the business.

For small enterprises it may be appropriate to operate as a sole trader or partnership.

A formal partnership agreement assists in governing the parties’ relationship and sets out, among other things, agreed processes for matters such as termination, retirement, sale of partnership shares and business succession.

The business may operate through a corporate structure by registering a limited liability company which provides a certain level of protection for its officers (directors and managers) and shareholders for liability for the company’s debts.

Alternatively, a trust structure may be appropriate, providing asset protection and favorable taxation benefits for its beneficiaries, however these are complex and must be properly set up and administered to ensure the benefits outweigh the costs and ongoing fees.

Commercial contracts

Businesses enter into numerous commercial transactions during their lifetime. The subject matter of a commercial contract can vary considerably, from a single transaction for the sale of a product, to the ongoing provision of services over many months.

Business transactions should be documented to create enforceable obligations that balance and protect the interests of the parties. Contracts should set out each parties’ obligations, exit strategies and contain essential terms to govern the relationship. Involving a lawyer in preparing a business contract can help keep negotiations on track, protect personal and business interests, and ensure that important provisions are included and not overlooked.

Commercial and retail leases

Commercial and retail leases set out the legal terms and conditions through which the business may occupy premises to conduct and run the enterprise. Whether you are a lessor or lessee, a lease agreement should be formally prepared and reviewed by an experienced lawyer to ensure a balance of rights and obligations between the parties. Many lease disputes that arise can be avoided or minimised by having in place a carefully drafted agreement to ensure all terms and conditions are clear and complete.

Debt recovery

Debt recovery is an unfortunate but common situation experienced by many businesses. There are various ways to pursue a debtor for unpaid debt including the commencement of Court proceedings in the proper jurisdiction or by serving a statutory demand under the Corporations Act 2001. Choosing the most cost-effective and appropriate method is important to avoid wasting time and costly mistakes.

Insolvency

Insolvency arises when a company cannot pay its debts when they are due. Companies facing insolvency or potential insolvency may have various options to manage the situation. Directors of companies facing cashflow problems should immediately obtain legal advice to ensure the best possible outcome for the company and to mitigate the potential risk of personal liability for insolvent trading.

Directors’ responsibilities

When a company is formed or a business is incorporated, one or more directors are appointed as authorised officers to conduct the company’s business affairs. Directors hold a position of power and trust and therefor have common law duty and statutory duty to act in the company’s best interests. Essentially, directors must:

  • act honestly and use their powers to make decisions based on what is right or beneficial for the company as a whole;
  • avoid conflicts of interest and not use their position for personal profit or gain to the detriment of the company;
  • exercise care, skill and diligence in performing or carrying out their duties;
  • prevent insolvent trading.

Company directors face many situations and challenges that may place them in danger of breaching their fiduciary and statutory duties. In the case of uncertainty, directors should seek urgent advice to clarify their position.

Certain defences may be available to a director who has breached a duty to avoid insolvent trading and it is critical that directors of companies facing financial difficulties seek professional assistance early.

Commercial disputes

Commercial disputes may be resolved without resorting to protracted expensive litigation and Court proceedings. Disputes can become even more complex if not managed quickly and effectively from the outset. Our lawyers will review your situation to explain the most appropriate and cost-effective way to resolve a commercial dispute.

These are just some of the matters you will encounter as a business owner or company director. Our commercial lawyers act for a range of business entities and will discuss your individual circumstances to tailor solutions for the many planned and unplanned events that occur throughout the life of a business.

If you need any assistance contact one of our lawyers at [email protected] or call 02 8249 1996 for a no-obligation general discussion and once retained for expert legal advice.