Business and Franchise
The Sale and Purchase of Business and Franchise publications seek to assist the practitioner to successfully navigate the complex process that is business conveyancing.
The commentaries set out the tax consequences of sale price apportionment and explain the tax treatment of stock, long service leave and other employee entitlements, the status of the premises and many other important issues.
The many precedents include the By Lawyers Uniform Contract for Sale of Business which covers all aspects of the transaction from pre-exchange vendor warranties and purchaser guarantees, by shareholders where applicable, to completion, the effective release of PPSR security interests, the transfer of business assets including copyright works, trade marks, supplier contracts and the ASIC requirements for the transfer of the business name. The contract also customises the competition restraints so they are enforceable, binds the key people and deals with confidential information and non-solicitation of staff and customers.
The comprehensive matter plan is an effective risk management tool, assisting practitioners to work though the matter ensuring the necessary steps of a typical matter are considered as required.
The Business Structures and the Comparative Table commentary usefully compares the various business structures. This is particularly useful when advising purchasers.
The Franchises commentary is a comprehensive manual on franchise agreements.
Recent updates can be viewed on Obiter - our News & Updates site.
Popular precedents in this publication include:
- By Lawyers Uniform Contract for Sale of Business
- Retainer instructions
- Library of 24 special conditions
- Library of 19 other contracts, licences and agreements
- Settlement adjustment sheet
- Client Enclosure - Summary of relevant considerations
Guides in this publication
MATTER PLAN
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“ Commentaries ”
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“ Contents ”
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“ In the legal profession the term ‘costs’ refers to the fees and other expenses a practitioner charges a client for their professional services and other payments that arise out of the provision of legal services, including disbursements such as court fees. Costs are one of the most heavily ... ”
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“ Nature of disclosure6 Timing of disclosure7 ”
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“ Costs disclosure is not required in relation to certain clients, described in the legislation as ‘sophisticated clients’ or ‘government or commercial clients’ as defined by the relevant legislation to include clients such as lawyers, law firms, public companies, liquidators and government entities. ... ”
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“ Cost agreements are not always required, although clearly, as between the practitioner and their client, there will be disclosure but without the need for formal compliance with the regulation. The limits are: ”
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“ In New South Wales and Victoria there is a standard costs disclosure for fees under $3,000 which is included in the precedents. If the total legal costs in a matter (excluding GST and disbursements) are not likely to exceed $3,000 (the higher threshold), a practitioner may, instead of making a ... ”
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“ Knowing that clients are disinclined to read, sign and return cost agreements, the letter sending them usually provides that unless heard to the contrary the practitioner will assume agreement. There will almost always be a later opportunity to have the agreement signed. Of course, many ... ”
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“ Costs are remuneration for professional work when acting in the capacity of a barrister or solicitor. Payments to a practitioner for work which is not professional work, are not costs. Disbursements are payments made, or liabilities incurred in the course of practice and which the practitioner is ... ”
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“ Practitioners are required to provide an estimate of the total of costs, excluding GST and disbursements, and information on the impact of any significant change to these costs. A practitioner must take all reasonable steps to satisfy itself that the client has understood and consented to the ... ”
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“ What is a disbursement Disbursements are payments made, or liabilities incurred in the course of practice, and which the practitioner is bound to pay whether put in funds by the client or not; or payments which, by established custom and practice of the profession, the practitioner is bound to pay. ... ”
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“ A practitioner may request money on account of fees be paid into a trust account before the work begins. This is particularly so in criminal and other court matters where the inclination to pay may wane with an unwanted outcome. Experience confirms that if a client is reluctant to pay such ... ”
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“ The costs agreement will set out the billing cycle. Commonly a regular monthly billing cycle is adopted covering work undertaken during the previous month, or when the WIP reaches a specified amount, whichever is the earlier. ”
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“ A lump sum invoice is one which sets out a recital describing the legal service provided and a total amount. An itemised invoice is one which sets out in detail each of the legal services provided, the date they were provided, and the cost for each service. An itemised invoice allows for an invoice ... ”
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“ A practitioner cannot charge for the time spent in preparing an invoice. A practitioner cannot charge for the time spent in preparing an itemised invoice for a client who has already received a lump sum invoice. ”
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“ All bills should be accompanied by a written statement setting out the avenues that are open to the client in the event of a dispute and any time limits that apply to the taking of such action. Under the uniform law in New South Wales and Victoria each bill or covering letter must be signed by a ... ”
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“ – When to charge and how to charge Goods and Services Tax (GST) is a broad-based tax of 10% applied to most goods and services, including legal services. Businesses are required to register for GST if their turnover exceeds the $75,000 threshold. If turnover is less than $75,000, registration is ... ”
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“ Reducing fees can create goodwill but needs to be handled with care as some clients may take offence to the implication that they cannot afford to pay for the work they have retained. Similarly, it may create an expectation that any future costs will be discounted. It is also a hard-won reality ... ”
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“ Credit terms are quite common and need to be clearly documented and administered. ”
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“ Notification of rights is a requirement in all states and is found in all example invoice precedents. If the client has not been advised of their rights in a costs agreement, practitioners must advise the client of their rights at the time of issuing the invoice. ”
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“ Monthly accounting for work in progress is recommended in order to achieve target lockup days. If debtors are not followed up promptly cash flow reduces making it imperative to adopt a debtor’s policy for effective debtor control. All overdue accounts must be followed up promptly and repeatedly. ”
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“ When a retainer is terminated before completion, a practitioner may claim costs for the work done to the date of termination on a quantum meruit basis if: The client terminates the entire retainer; ”
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“ When there are costs owing to the practitioner from the client, the lawyer may retain possession of the client’s documents which are legitimately in the practitioner’s possession. However, the Australian Solicitors’ Rules specify that when a practitioner claims to exercise a lien for unpaid legal ... ”
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“ If a practitioner has an equitable charge over the client’s property incorporated into the costs agreement, ordinarily the practitioner could exercise that power in seeking payment of costs. However, general charges such as a charge over ‘all my estate, rights, title and interest in and to any real ... ”
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“ Sound financial management is absolutely critical to the success of a law practice. There is a high correlation between practices with poor financial management and increased probability of experiencing professional negligence claims. The link is clear. Principals, who do not manage their ... ”
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“ Methods of payment include: Credit card; ”
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“ All By Lawyers cost agreements include the following authority to transfer money to pay their invoices: Trust money ”
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“ Lawcover recommends that practitioners use the costs assessment scheme to recover costs. Instituting proceedings against a disgruntled client who refuses to pay an outstanding bill exposes practitioners to the risk of a cross-claim in negligence being filed. The advantage of the cost assessment ... ”
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“ The following outline of costs assessment was written for NSW but the procedure is similar in the other states. This publication will be expanded to cover cost assessment in the other states in due course. In the interim refer to the relevant State Supreme Court. NSW Procedure ”
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“ A client may be entitled to complain to the Legal Services Commissioner about a costs dispute. If the complaint is made after the law practice or client has already applied for assessment of such costs, the assessment will ordinarily be stayed until the complaint has been determined. Similarly, if ... ”
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“ Australian Competition & Consumer Commission Australian Securities and Investment Commission ”
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“ Companies, Trusts, Partnerships and Superannuation Personal Property Securities ”
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“ Before considering the requirements for the sale of a business, it is critical to understand the structure in which the business is held and the tax consequences of the intended transaction. If the business is owned by a company or trust, consideration should be given to the different tax outcomes ... ”
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“ Taking good instructions When receiving instructions from the client, the use of the precedent Retainer Instructions is a very useful risk management tool. It prevents overlooking important issues and records instructions which cannot be contradicted later. ”
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“ The sale of a business normally involves: the sale of tangible assets such as plant and equipment; ”
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“ Consideration of the tax payable by a vendor is an essential task to be undertaken prior to the sale of any business assets. Such planning may well result in the decision that the business should not be sold at all but rather the purchaser should be required to acquire the entity that owns the ... ”
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“ Structuring the sale of a business in the most tax advantageous manner presents an opportunity to save the client’s money. The rates of tax payable differ depending on the nature of the asset – whether the asset is a revenue asset or a capital asset – and, in the event that the asset is a capital ... ”
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“ Some preliminary issues that may need to be considered and agreements that a vendor and purchaser may enter into before or while negotiating the terms of the purchase contract follow. The heads of agreement for sale are negotiated based on limited information provided by the vendor either directly ... ”
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“ Usually a vendor, or their agent, will require prospective purchasers to enter into a confidentiality agreement often called a non-disclosure agreement before financial and other information about the business is disclosed. Sometimes this is required by brokers before even the name of the business ... ”
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“ It can be highly advantageous to the prospective purchaser, particularly in a strong market or with an attractive business, to negotiate a period of exclusivity. During this period the vendor will not be able to negotiate with anyone else. This will allow the purchaser sufficient time to conduct ... ”
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“ Having agreed in principle on the key terms of the purchase and before beginning the process of due diligence and the drafting of the agreement, a general understanding of the key terms of a complex transaction might be set out in a Heads of Agreement which although not binding serves to record a ... ”
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“ Due diligence by the purchaser generally involves making reasonable investigations before deciding to enter into any investment so as to minimise, or at least understand, any risk involved. For a purchaser this means making all possible enquiries to ensure that the position with the ownership, ... ”
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“ Unlike the sale of real property, there are no legal requirements for disclosure for a sale of a business, except in relation to the assignment of a retail lease, which requires the vendor to provide a copy of the prescribed disclosure statement. It is therefore important for the vendor to provide ... ”
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“ There is no prescribed form for a contract for sale of business. As with conveyancing, the agreement for sale of business is normally drafted by the vendor’s legal representative. However, unlike conveyancing, there is no requirement that the draft contract be made available before or during ... ”
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“ The By Lawyers Uniform Contract for Sale of Business is widely used. It uses uniform terms and conditions, with all additions and variations made in the transaction summary. ”
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“ It is sometimes agreed that the company that owns and conducts the business will be sold rather than the business itself. This involves the sale of the shares of the company, rather than the sale of the company’s assets. Whilst there may be savings in stamp duty and possible tax and other ... ”
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“ Apportionment of the sale price – Depreciation It is customary, but not necessary, for the contract to show an apportionment of the sale price between the various assets that make up the business. Normally, the apportionment will be confined to identifying the part of the price attributed to plant ... ”
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“ Where the business includes motor vehicles the contract can and should specify them and provide for their formal transfer via Transport for New South Wales (TfNSW). Although there is no stamp duty on business sales, duty is payable on the transfer of motor vehicles even if as part of a business ... ”
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“ The transfer of a liquor licence can be quite complex. The most sensible place to start would be the Liquor & Gaming NSW Transfer your licence page. Liquor fact sheets may be of assistance. ”
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“ The contract should provide for the transfer of rights to any domains, websites, email addresses and social media accounts which are key assets and marketing tools of the business. Domains, websites and email addresses ”
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“ If the business has employees the purchaser may or may not want those employees to continue and the employees may or may not wish to do so. As an employment relationship is personal between an employer and employee, under general contract law principles the employment contract cannot be ... ”
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“ Every business name must be registered unless the proprietor is trading under their own name. Although business names are not strictly ‘intellectual property’ in the sense that trade marks are, it is clear that they can have substantial value. The sale of a business will usually include the ... ”
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“ The sale of a business will usually include the assignment of any trade marks from the vendor to the purchaser and the By Lawyers Uniform Contract for Sale of Business provides for this by requiring the vendor to provide to the purchaser duly executed transfers of all business intellectual property ... ”
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“ The objective as always is to incur the minimum tax liability arising from the sale. The tax rates applicable to the proceeds of sale depend on whether the asset sold is a revenue asset or a capital asset. Revenue assets are generally stock, and plant and equipment. Any taxable gain is taxed at the ... ”
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“ Example 1 – Tax advantages of a vendor selling shares Tax advantages of a vendor selling shares in the company rather than the company selling the business ”
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“ Agreements The sale of a business will usually include the assignment of any contracts relevant to the business from the vendor to the purchaser and the By Lawyers Uniform Contract for Sale of Business provides for this by requiring the vendor to provide to the purchaser assignments of all ... ”
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“ So far as time for completion is concerned, the contract stipulates a completion date, which usually is not of the essence but can be made so by a notice to complete. If time is important – for instance, just before Christmas trade – a special condition making time of the essence can be found in ... ”
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“ The contract may provide for various conditions to be met before the sale can be completed. Vendor training of the purchaser is a common one. There may also be the need to transfer a licence, such as a liquor licence, before the purchaser can start trading, or for the assignment of the lease. ”
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“ The transfer of a liquor licence can be quite complex. The most sensible place to start would be the Liquor & Gaming NSW Transfer your licence page. Liquor fact sheets may be of assistance. ”
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