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The Contract Date – What Is It?

The Usual Position At law, usually the contract date is the date that acceptance of the offer is notified to the offeror (the Postal Rule aside). In the context of business sales, it is the date the last party to sign the Contract (usually the seller) signs the...

Lawyer, Brisbane

“I enjoyed the interactive style of the REIQ presentation. Very practical.” Presentation at Queensland Law Society Symposium 2014 at the Brisbane Convention Centre on “REIQ Business Sale Contract: tricks and traps”. Delegate rating on session:...

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Company Director, Brisbane

“Joe, as you know we were in a very difficult position with our company before we engaged you as our lawyer and fortunately, even with the odds stacked heavily against us in our shareholders dispute, you managed to pull us through to victory. You are a true credit to the industry not only because of your skilled negotiating tactics but also due to your personable nature, which made us feel comfortable in such a volatile situation. read more…

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Business Assets – What’s Included?

Common Misunderstanding

In my experience, business brokers (and subsequently sellers) are of the view that only the physical assets itemised in the usual ”plant and equipment” type schedules to a business sale contract are included in the sale. Usually this is not so.

The Contract Position

When selling a business utilising the Contract, all assets of the business (excluding real property utilised with the business) are included in the sale.  Clause 3.1 of the REIQ Business Sale Contract (Queensland) provides that:

“The Business includes [emphasis added] the goodwill, fixtures, fittings, furniture, chattels and the plant and equipment, industrial and intellectual property, work-in-progress (if any), and stock in trade, permits, licences, and [emphasis added] any other assets set out in any schedules attached to this Contract (but excluding any Excluded Assets) and which assets are in this Contract referred to as the Business Assets”.

The use of the word “includes”, where emphasised, indicates that the subsequent list is not exhaustive. The use of the word “and”, where emphasised, further indicates that the assets set out in any schedules are only part of the bigger picture. This position is also supported by the inclusion of the definition “Excluded Assets” in clause 1.1.

Therefore, when utilising the Contract, a Seller must proceed on the basis that all assets of the business are included in the sale and not just those items listed in the schedules. If the seller wishes to retain any assets of the business, such assets should be specifically excluded by special condition.

Caution

Caution is required when a seller seeks to exclude business assets from a sale. This is because it may impact on whether the business sale is that of a “going concern” for GST purposes. An important requirement for a business sold as a “going concern”, and consequently GST free, is that all of the things necessary for the continued operation of the business is included. A failure to do so will make the sale subject to GST, again capable of causing a dispute or loss of a sale.

Solution

A suggested solution is to insert a special condition extending the definition of “Excluded Assets” to the assets sought to be excluded.

Author

Joe Kafrouni
Legal Practitioner Director
Kafrouni Lawyers

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

Liability limited by a scheme approved under professional standards legislation.

Apprentice Challenges The Master

When a worker leaves your business, they may start or join another business in direct competition with yours using confidential information about your customers and suppliers.

Think your workers wouldn’t harm your business even if your relationship with them deteriorates?

We urge you to reconsider. Even the best employer-employee relationship can turn sour for any number of reasons and there is simply no way of knowing what an employee who feels wronged may do. We can take steps now to protect you and your business from the harm a now hostile employee may cause.

Consider the following case study:

Company X employs Alfred. Company X and Alfred have an employment agreement. The agreement contains a clause prohibiting Alfred from competing with Company X for a set period of time after his employment ends. This is known as a ‘restraint of trade’ clause.

Alfred quits his job and sets up a competing business using confidential information about Company X customers and suppliers he gained during his employment. Company X is trying to have Alfred’s business stopped (Queensland Cosmetic Manufacturers P/L v Greig & Ors [2005] QSC 334 (17 November 2005)).

Reader’s Tip

While Company X did have an employment agreement with Alfred, it failed to cover everything it should have, particularly the need for all current and former employees to keep information about the company’s clients and suppliers in the strictest of confidence. We can advise you on all the associated risks from the outset and prepare a comprehensive employment agreement for your business. Should you so engage us, you will be able to act swiftly against any current or former employee who misuses confidential information and/or competes with your business.

Joe Kafrouni
Legal Practitioner Director
Kafrouni Lawyers

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

Liability limited by a scheme approved under professional standards legislation.

What’s In An Idea?

So far we have discussed many of the legal risks to your business. Let’s now talk about a business opportunity. Have you or your business created an idea, product or a service that no-one else has thought of before? If so, you may be able to protect that new idea, product or service and have other people or businesses pay you for the right to use it.

Think you or your business hasn’t created anything that anyone else would want to use?

We would ask you to think again. The range of innovations that can be protected and licensed for others to use is not limited to the big, life-changing inventions like the microwave oven. A more efficient filing system or a new way of meeting your clients’ needs could be legally protected and may even earn you some money.

Consider the following case study:

In 1972, the managing director of Kambrook (a company that makes house-hold electrical goods) developed what is now known as the electrical power-board. Kambrook failed to protect the power-board with a patent and missed their chance to fully exploit decades of consistently healthy demand for the power-board.

According to a Kambrook official, the company missed out on at least several million dollars (http://www.ipaustralia.gov.au/strategies/case_kambrk.shtml).

Reader’s Tip

Never underestimate the potential worth of a new idea, product or service that you or your business have created and are putting to good use at this very moment. In order to take full advantage of the innovations your workers create, you need a clause in all your employment agreements stating that all intellectual property created during the worker’s employment are the property of the business. The absence of such a clause can result in the employee earning the money from the innovation and not the business.

We can prepare comprehensive employment agreements for your business that will fully address this situation and many others. We can also refer you to an intellectual property specialist to maximize the gain you or your business could make from a new innovation.

Joe Kafrouni
Legal Practitioner Director
Kafrouni Lawyers

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

Liability limited by a scheme approved under professional standards legislation.

Leadership

Our firm is led by Joe Kafrouni, with over twenty years' experience in law. Joe is a Queensland Law Society Accredited Specialist in business law. “I am driven to help my clients succeed."

Expertise

We are business law specialists focused on the smaller end of town - SME, private and family companies only. We help business people start, buy, grow and exit businesses and solve business disputes.

Where We See Our Clients

We are based at:

Newstead: Level 2, Lobby 1, Gasworks Plaza, 76 Skyring Terrace, Newstead, Qld, 4006.

Parking: 2 hours free parking available at Newstead offices.

Our office is only one option – we are not attached to them. Here is how we regularly meet our clients. Tell us what suits you.

Contact us at:

Kafrouni Lawyers

Kafrouni Lawyers Level 36 Riparian Plaza 71 Eagle Street, Brisbane, Qld 4000 Phone (07) 3121 3177 Fax: (07) 3121 3157