There are a number of different business structures that are available to anyone going into business. An analysis of each client’s requirements will lead to determining what the business structure should be. The principal business structures are:
It is appropriate when establishing a company structure that it is determined with the client having a wide range of advice. As a minimum, JAG Legal likes to work with the accountant of the client as well as the client themselves in choosing the best way forward for them.
Where there will be more than one business owner, it is important that the relationship and the understanding between the proposed business owners is also determined and resolved prior to the commencement of the business.
JAG Legal can advise as to the issues that should be addressed between the parties and the agreements made between the parties can be recorded in a shareholder’s agreement or a joint venture agreement between them. Where the structure for the business will be a company, the company constitution can then be prepared to reflect the shareholder’s agreement that has been reached.
It is important that whether for a purchaser or a vendor of a business that JAG Legal is able to review the agreement with the client prior to it being signed. Although there is a standard form for agreements for sale and purchase of a business, the transactions are not as standard as for a land sale and purchase transaction as each business is in itself unique and the respective positions of the purchaser and the vendor are also personal to them.
Purchasers need to ensure that the agreement protects them and ensures that the business they purchase is the business they were expecting to own. To achieve that often vendors are required to give a significant number of warranties because the vendor is the only party that knows the true position. For vendors, it is important that all of the warranties given are correct otherwise the vendor may find a disgruntled purchaser coming back to the vendor for compensation.
A purchaser needs to complete the due diligence both in terms of legal and financial matters, before entering the agreement or before the expiry of a due diligence condition included in the agreement.
Once the agreement is signed and unconditional, the transfer of any leases and the providing of securities to banks for any borrowings also need to be completed in time to enable settlement to occur on the appropriate date.
For many commercial entities, the business is carried on from premises which are owned by somebody else.
JAG Legal prepares leases, renewals of lease and variations of lease for landlord clients and review those documents and negotiate terms for tenant clients.
A franchisor needs assistance to establish a franchising business and determine the terms and conditions of the franchise agreement.
Franchisees of various business systems need assistance to negotiate the franchise agreement or to understand the obligations and rights of the franchisee under a franchise agreement that has already been signed.
Disputes can arise between business owners. That may occur within a partnership model or under a company model.
The rights of each partner in a partnership are determined either by the partnership agreement or by the Partnership Act.
In a company model there are provisions within the Companies Act that provide for the rights of minority shareholders as well as other provisions which provide for applications to the Court where there is a genuine deadlock situation between the shareholders.
As time progresses and businesses become bigger, smaller, purchase subsidiaries or have a change in the number of shareholders and directors, it is important to seek advice as to how the business should be restructured to meet the forward direction intended by the business owners.
As well as changing the company structures, it may be necessary to change and restructure the financing of the company and how the management decisions are made.