1. the Business Sale Contract should be made conditional upon the transfer and acquisition of all necessary local and state licenses and approvals for the business.
2. particular attention should be paid to any key supplier agreements to ensure continuity of supply to the business.
3. State health and safety laws must be met in regard to food storage units and cooking equipment.

When considering the purchase of a cafe or similar business you will no doubt need to consider such things as the location of the business and parking for customers, the amount of passing trade and regular orders that come into the shop, and whether the current profit the shop is making is sustainable and can be increased. However, there are some other important issues that must also be considered prior to signing a contract for the purchase of a cafe.

Local Government Approvals                           

It is important to ascertain what licences and approvals are required from the local government in order to conduct the business from its premises such as food licences, liquor licences and outdoor dining licences. A buyer will also need to ascertain whether the business currently has these licences and approvals, whether they are transferable and whether the buyer will be able to continue to meet any conditions contained in the licences and approvals.

Coffee shops are generally required to meet many legal obligations under local laws in relation to advertising signage, health laws, workplace health and safety, and environmental laws (such as cooking emissions and fumes). Many coffee shops will require multiple licenses and certificates from their local government prior to being able to operate the business.

Therefore, a buyer should discuss with a specialist business lawyer whether the contract should be made conditional upon the satisfactory approval or transfer of all necessary licences by way of carefully worded special conditions being inserted into the contract.

Key Suppliers

The REIQ Business Sale Contract makes provision for the transfer of supply contracts and hire agreements at settlement. However it does not make provision for the buyer to ensure they are satisfied with the terms of each of the existing agreements prior to their transfer.

Therefore, if there are key suppliers important to the business’ continuity, it may be advantages to include a special condition in the Contract to ensure the buyer has time to ensure that they are satisfied with the terms of the agreements prior to the Contract becoming unconditional.

Cafe Equipment

It is also important to ascertain that all food storage units and cooking equipment are not just working but that they meet the requirements of local and state health and safety laws.

Though the seller provides warranties in the REIQ Business Sale Contract in regard to the working order of all plant and equipment, it does not provide a mechanism for testing the accuracy of the warranties. Nor does the Contract provide any warranty as to whether the equipment meets local and state health and safety laws.

In some local government areas a mandatory local government health inspection (which is required to be conducted prior to the settlement) may be sufficient to dispel any concerns a buyer may have. However, in those areas where a health inspection is not mandatory it may be advantageous to discuss, with a specialist business lawyer, whether there is a need to have a special condition inserted into the contract to allow the buyer time to have the premises and equipment inspected.

Restraint of Trade

The REIQ contract only includes a restraint of trade by time and geographical area. Whilst this is often adequate in relation to a coffee shop, it does not prevent the seller from canvassing or dealing with existing customers, poaching key staff or disclosing confidential information about the business to a competitor following settlement.

If a buyer is concerned that the restraint may not be sufficient to protect the business then they should discuss with their specialist business lawyer whether a more detailed restraint of trade clause would be beneficial to protect the goodwill of the business.

Conclusion

It is important for a buyer to seek the advice of a specialist business lawyer prior to signing a contract. If a buyer does not seek his proper advice, they may find themselves forced to settle without the necessary licenses and approvals to conduct the business; being unable to meet local or state laws or even without the necessary stock from key suppliers. Without these protections in place a buyer may find they are unable to run their new business properly, or at all, following settlement.

What to do next: If you would like more information on buying or selling a cafe business, or for all queries regarding business sales and assistance, call Joe Kafrouni or Rob Montes on (07) 3354 8888 or joe@klaw.com.au or rob@klaw.com.au.

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. You 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.

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Every trust must have a trustee. This is the entity that controls the trust and is the legal owner of all trust property (owning it for the benefit of the beneficiaries of the trust). Therefore, the business broker must simply find out:

• the complete name of the trust (e.g. The Johnson Family Trust);
• the complete name of the trustee(s) (e.g. JMT Enterprises Pty Ltd A.C.N 456 789 123).

Be careful to ensure that all trustees are ascertained as there could be more then one. This information is found in the trust deed itself. Every trust has one. This is the document that sets out the powers and responsibilities of the trust. What it can and cannot do.

Therefore, in the example given above, the party would be noted on the contract as: JMT Enterprises Pty Ltd A.C.N. 456 789 123 ATF The Johnson Family Trust. The trustee is always written first and the acronym “ATF” stands for “As Trustee For”. When the trustee is a company, inserting the ACN is also recommended for identification purposes.

Getting this right upfront could avoid a big problem for a party and at the very least some mucking around to get the information right down the track.

What to do next: If you would like more information on dealing with trusts, or for all queries regarding business sales and assistance, call Joe Kafrouni or Rob Montes on (07) 3354 8888 or joe@klaw.com.au or rob@klaw.com.au.

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. You should always consult their own legal advisors to discuss you 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.

Local & State Government Approvals                                                                             

It is important to ascertain what licences and approvals are required from the local government in order to conduct the business from its premises. A buyer will also need to ascertain whether the business currently has these licences and approvals, whether they are transferable and whether the buyer will be able to continue to meet any conditions contained in the licences and approvals.

Manufacturing businesses are generally required to meet many legal obligations under state and local laws in relation to fire safety, workplace health and safety, and environmental laws such as noise reduction and trade wastes. Many manufacturing business will require multiple licenses and certificates from their local government prior to being able to operate the business. It is therefore imperative that the contract is made conditional upon the approval or transfer of all necessary licences by way of a carefully worded special conditions being inserted into the contract.

Lease, Plant & Equipment

If the premises are leased, whether there is to be an assignment of an existing lease or the negotiation of a new lease, it is important to ensure that the premises are fit for the purpose of the business, particularly in regard to structure and floor load bearings. Also, due to many manufacturing businesses having large fixed plant and equipment, attention should be paid to the length of the lease and whether any options for renewal are satisfactory.

It is also vital to ascertain the working order, age and repair requirements of all plant and equipment. If the machinery itself is imported, are there locally trained technicians that can repair the machinery and are spare parts available locally? Are all warranties for the machinery capable of being transferred?

As the premises, plant and equipment are vital to the business, it is imperative that a special condition is inserted in the contract to ensure that the buyer has the time to have the machinery and premises inspected by qualified professionals. Without such a special condition the contract will not be subject to the buyer being satisfied that the premises is fit for the intended purpose; and that all the plant and equipment is in good working order, is suitable for the intended purpose and that any warranties can be transferred to the buyer. Also, a special condition should be inserted to ensure that the contract is subject to the buyer’s satisfaction with the proposed lease.

Intellectual Property

A vital element to the continuity of the business is its intellectual property, both registered and un-registered. It is important to ensure that all of the business’ intellectual property, including such things as patterns, designs, recipes, patents, trademarks and manuals, are included in the contract for purchase of the business. If the seller is not including particular items of intellectual property in the sale then these should be specifically listed in an annexure to the contract.

Distribution & Supply Agreements

Another important issue is the business’ relationship with its suppliers and distributors. It must be ascertained whether agreements between the seller and its suppliers and distributors are in writing, whether they are adequate and whether they are able to be transferred to the buyer. Attention should be paid to whether any agreements are exclusive and therefore tie the buyer into being only able to deal with one supplier or distributor, thereby limiting the current and future potential of the business.

It is therefore imperative that the contract is made conditional, by way of a special condition, upon the buyer’s satisfaction and transfer or negotiation of new agreements for all suppliers and distributors.

Conclusion                          

Without the assistance of a specialist business lawyer, prior to signing a contract, to ensure that all assets of the business are included and that all the above issues can be address, a buyer may find that their business runs into legal and financial trouble soon after settlement.

What to do next: If you would like more information on buying or selling a manufacturing business, or for all queries regarding business sales and assistance, call Joe Kafrouni or Rob Montes on (07) 3354 8888 or joe@klaw.com.au or rob@klaw.com.au.

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. You 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.

1. The Business Sale Contract should be conditional upon a thorough investigation of the financial standing of the gym.
2. The Business Sale Contract should be made conditional upon the buyer’s satisfaction with the terms of all Personal Trainer contractor agreements.
3. Investigations should be made into the suitability of the premises and equipment for its intended use.

Prior to signing a contract to purchase a gym it is likely that a buyer will have ascertained the extent of the gym’s membership, whether the business is well situated and whether the premises has enough parking or ease of access for its members. However, there are some other very important issues that must also be considered in gym sales prior to signing a contract.

Financial Investigations

As a gym is heavily reliant on income from its membership fees, it must be ascertained whether these are sufficient and reliable enough to conduct the business on a day-to-day basis. The REIQ Business Sale Contract only provides a buyer with ten (10) business days to verify whether the financial accounts of the business are true and correct.

A specialist business lawyer can assist by drafting a special condition to allow a buyer enough time and access to financial information to ascertain the true value and running requirements of the gym. A buyer should undertake these investigations with their accountant or financial advisor.

Key Gym Contractors

It is common for gyms to have a mixture of employees and contractors working for them. Most personal trainers will contract to the gym for their services, whilst most sales and administrative staff will be employees. Personal trainers are often key staff members of a gym so the terms of their contracts will be important.

Although the REIQ Business Sale Contract makes provision for a buyer to select which employees it will take on, the Contract simply provides for the transfer of personal trainers contracts. It does not provide a mechanism for a buyer to determine whether it is satisfied with the terms of each of the contracts.

Therefore, it is important to discuss the issue of contractors with a specialist business lawyer to ensure, where necessary, a special condition is inserted into the Contract to ensure that a buyer has the opportunity to decide whether it is satisfied with the terms of all existing contractor agreements.

Premises & Equipment

Whether the premises are to be leased or are being purchased, it is important to ensure that the premises are fit for the purpose of the business, particularly in regard to local government approvals, structure and floor loadings. It is also important to ascertain the suitability, age and repair requirements of all of the fitness equipment.

Whilst the REIQ Contract provides a warranty that all plant and equipment will be in good working order at settlement, it does not provide a mechanism for testing the accuracy of the warranty.

As the premises and equipment are important to the success of the business, it may be advantageous to have a special condition inserted into the contract to allow the buyer time to have the premises and equipment inspected to ensure they are of the quality needed to conduct the business.

Conclusion

To ensure that a buyer has sufficient opportunity to investigate and be satisfied with the business’ financials, equipment and supply contracts, it is essential that the buyer discusses its individual circumstances with a specialist business lawyer. Without this assistance, a buyer may find their business runs into serious financial trouble soon after settlement.

What to do next: If you would like more information on buying or selling a gym, or for all queries regarding business sales and assistance, call Joe Kafrouni or Rob Montes on (07) 3354 8888 or joe@klaw.com.au or rob@klaw.com.au.

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. You 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.

This Guide provides a summary of the key factors in determining the independant contractor versus employee issue.

What to do next: If you would like more information on the distinction between employees and independent contractors and the impact on your business call Rob Montes or Joe Kafrouni on (07) 3354 8888 or rob@klaw.com.au or joe@klaw.com.au.

Download (PDF, 226.5KB)

For a seller (vendor), the Guide provides an important checklist of things to consider when listing a business for sale. It should be helpful in understanding how the law will work, what’s included and excluded from the business, timing, notices and so on. For a potential buyer, it provides a better understanding of what the proposed Contract actually means and what to expect during the process.

What to do next: If you would like more information on buying or selling a business, or assistance in doing so, call Joe Kafrouni or Rob Montes on (07) 3354 8888 or joe@klaw.com.au or rob@klaw.com.au.

Download (PDF, 1020.44KB)

Regulation & Pharmaceutical Benefits Scheme

There are strict requirements under Queensland law as to who can and cannot own a pharmacy business. In order to purchase a pharmacy in Queensland, the buyer, whether a company or individual, must meet the strict legal requirements set out in the Pharmacy Business Ownership Act 2001. Failure to meet the requirements of these laws before commencing business could incur fines of up to $20,000.00 and could potentially mean you own a business that cannot legally operate. Therefore, before signing a contract for the purchase of a pharmacy, consideration should be given to the process and time frame for making all applications for the necessary approvals, licenses and permits required to own and operate the business. Only once approval has been obtained from the appropriate state authority will Medicare Australia consider an application for the necessary approval for the business under the pharmaceutical benefits scheme.

It is therefore imperative that a contract for the purchase of a pharmacy is made conditional upon the buyer obtaining the necessary state and federal approvals by way of carefully worded special conditions.

Trading Stock & Suppliers                                

The continued supply of stock such as prescription medicines, health supplements, first aid products and often beauty and infant supplies are important to the continued undisrupted trading of the business following settlement. It will be important to ascertain whether existing supply agreements and their inclusion, such as display and shop fittings, can be transferred or if new agreements will need to be negotiated and put into place from settlement.  In order to accommodate this investigative and negotiation period it is important to make the settlement of the contract subject to obtaining satisfactory due diligence and also the satisfactory transfer or negotiation of new supply contracts. The only way to accomplish this is by the insertion of precise special conditions.

Account Customers                                                            

Most pharmacies will have customers who purchase goods from the pharmacy by way of a monthly account. Special attention should be paid to the amount of these accounts, their record of payment and any discounts that the current owner has agreed to provide to each account customer.  It is advisable to make the settlement of the contract subject to a special condition to obtain a satisfactory inspection of the business’ financial accounts, in order to give a buyer and its financial advisors time to ascertain whether aside from the rest of the financial records, they are satisfied with the customer account arrangements..

Conclusion

In order to protect their business, a buyer of a pharmacy should always seek the advice of a specialist business lawyer prior to signing a contract. Without this assistance and the inclusion of all necessary special conditions in the contract, a buyer could become the owner of a business without the necessary stock and trade, or worse a business they cannot legally operate.

What to do next: If you would like more information on buying or selling a professional services firm, or for all queries regarding business sales and assistance, call Joe Kafrouni or Rob Montes on (07) 3354 8888 or joe@klaw.com.au or rob@klaw.com.au.

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. You 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.

Whilst the development of applications can be through a number of retailers, this article will refer to the process involving the development and approval of an iPhone application through Apple.  In this regard, a business will need to consider its legal relationship with Apple, as well as the risks arising with an end user.

Consider Issues with the iPhone Application                                                                                                                

When dealing with the potential risks of an iPhone application, it is important to firstly consider the potential issues that might arise with someone using the application.  Some applications (e.g. Angry Birds) might be fairly innocuous and low risk, whereas others (e.g. location services) might have serious consequences.

By way of example, consider the development of an iPhone application that relies upon third party location services in order to track business assets and capture important reference data for field work.  An obvious risk would be the possibility of inaccurate information being provided by the application.  It might cause the end user a loss of time or money if their location was displayed incorrectly or if assets being tracked were recorded incorrectly.

Another issue is whether the application is infringing on a third party’s copyright.  In the above example, third party sources of information (e.g. Google Maps and Open Street Maps) were used.  Therefore, it was necessary to obtain the terms of use of those third party applications to determine what could and could not be done in terms of incorporating those third party services into the application.  Also, depending on what was being used and the extent to which it was being used, you might require a provision in your own end user licence agreement to deal with the use of such third party applications.

Standard End User Licence Agreements

Fortunately, Apple Inc. has a standard End User License Agreement (EULA) that you can adopt as part of the iPhone development approval process.  As license agreements go, the current version is generally very good and covers most of the issues.   It is fairly comprehensive in terms of excluding or limiting liabilities and any warranties (promises) about the application.  However, because it is a generally worded document, it does not cater for specific iPhone applications that have their own requirements.  Consequently, you need to ensure that your end user licence agreement covers the important issues.

In reference to the above example, one issue with the standard EULA was that it did not cater for the requirements of third parties (e.g. Google Maps).  Given the manner in which the application was incorporating the location services of third parties, the business needed to explicitly state in their terms of use that users were agreeing, by using the application, to be bound by Google’s terms of use.  In this regard, the business also had to be mindful of using a third party’s information which was subject to copyright.  In the very least, you may need to ensure that copyright and trademark notices remain on the information presented in the iPhone application.  You may also need to incorporate pop-up windows in the application (with a link attached) to ensure that users agree to be bound by the third party’s terms of use.

Another issue that might arise is the need for a privacy policy.  If the application enables any party to gain access to information about users of the application (including personally identifying information or non-personally identifying usage information) you may need to have a privacy policy incorporated into the application or linked to the application.

Given that some iPhone applications use third party software, you should determine whether you need to keep up-to-date with the third party’s terms of use, which may change over time.  For example, an application that uses third party maps (e.g. Google) may have a limit to the number of daily downloads.  That may change over time forcing the application to subscribe to a premium service allowing greater downloads or curtailing the use of the third party software.  If you do not keep up-to-date with the terms of your use of the third party application, you could find yourself in breach of copyright or in breach of a third party’s terms of use.

Conclusion

Businesses and developers must be aware of the potential legal risk posed by the development and distribution of an iPhone application.  Consideration should be given not only to the legal relationship between the business and the retailer, but also to the risks between the business and the end user.  Also, developers should be mindful of using third party software and the implications.  Issues such as copyright and breaches of intellectual property need to be addressed.

Properly drafted terms and conditions tailored to the particular circumstances of each iPhone application will help manage the risks posed by such applications.

What to do next: If you would like more information on dealing with software applications development, call Rob Montes or Joe Kafrouni on (07) 3354 8888 or email rob@klaw.com.au or joe@klaw.com.au.

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Software developers 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.

The Act does allow for conduct inferring consent but this has not been tested in court as yet and can be hard to prove. It is therefore better to obtain documented consent prior to forwarding the contract documentation to the other party.

This requirement can be answered by simply sending the contracting party or their solicitor an initial email requesting that they consent by return email to accept the documentation and all further communications in regard to the contract by email or fax.

Example:

Please confirm by return email/fax that you agree to accept all contract documentation [on your client’s behalf] in relation to your proposed contract by electronic means. We are required to gain your consent prior to forwarding the contract documentation under the Electronic Transactions (Queensland) Act 2001.

Further, it is important that a condition (or special condition) be inserted into the contract to provide for the signing of the contract by counterpart via email or fax and that the counterparts will be binding on the parties. Such a special condition will only be effective if the above email/fax has been sent and return by the recipient or their solicitor.

What to do next: If you would like more information on dealing with this issue, or for all queries regarding business sales and assistance, call Joe Kafrouni or Rob Montes on (07) 3354 8888 or joe@klaw.com.au or rob@klaw.com.au.

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Buyers and sellers of businesses 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.

I was also fortunate to have Kafrouni Lawyers do me a fantastic lease agreement for the business, as I was the owner occupier of my business and now the landlord.

I recommend Kafrouni Lawyers to anyone needing legal assistance for their business.