Thursday, 24 November 2011
What questions should I ask the franchisor prior to purchasing a franchise?
Bennett Carroll Solicitors CEO, Guy Gibbons provides free advice to anyone buying a franchise.
Web: http://www.bcglaw.com/
Facebook: http://www.facebook.com/pages/Bennett-Carroll-Solicitors/196139377080162
Wednesday, 23 November 2011
New Federal Asbestos Legislation
If your workplace or commercial holdings were constructed prior to 31 December 2003, then the new federal asbestos laws will apply to you.
You will need a current Asbestos Register and current Management Plan to comply with legislation commencing 1 January 2012. You will also need to ensure your reviews are up to date.
If you do not have a current Asbestos Register or current Management Plan and have not had a review, Quality Building Management (QBM) can take steps to ensure you comply with legislation.
You will need a current Asbestos Register and current Management Plan to comply with legislation commencing 1 January 2012. You will also need to ensure your reviews are up to date.
If you do not have a current Asbestos Register or current Management Plan and have not had a review, Quality Building Management (QBM) can take steps to ensure you comply with legislation.
Thursday, 3 November 2011
After the Contract is signed
The mechanics of the business sale process, and the timing of certain steps, can be very critical to the success of the Contract, and if done incorrectly or in the wrong order, it can cause lasting damages to your business.
Time of the Essence
Any Contract will have in it the expression, "time is of the essence". This obscure little sentence can profoundly affect the party's rights.
What it means, in effect, is that, unless the parties agree otherwise, all of the time limits specified in the Contract, are set in concrete, and failure to comply with those time limits will gain one party rights, and lose the rights of the other party.
It is essential that you diarise each of these dates (Finance, Due Diligence and completion are the most obvious ones), and understand the consequences of non-compliance.
Due Diligence
Most "standard" template Contracts do not have a Due Diligence clause. It is most often inserted as a special condition. Unfortunately, many times, the wording of this clause is composed by the broker or, worse still, by the buyer.
There are subtle variations in Due Diligence clauses. Some will simply say that the buyer is able to make various enquiries and if the buyer notifies by the Due Diligence date, that the enquiries are unsatisfactory, the buyer may terminate the Contract. Other (the ones which favour you) will deem the Due Diligence satisfactory unless you are notified otherwise by the Due Diligence date. Yet others will create a specific obligation upon you to provide material by a particular date, and the Due Diligence will not start until all of that material has been provided.
Some clauses will give you a right to terminate if you don't hear anything by the date, but the option to proceed on to completion.
The wording of these clauses is absolutely critical.
Finance
In the same way as Due Diligence, there are subtle variations in finance clauses. The main variations are, if finance is not concluded by the date:-
a) The buyer may terminate, but if nothing is done, finance is deemed to be approved;
b) The Contract is automatically over;
c) The buyer may terminate, but if nothing is done then you have the option to press on to completion;
d) The buyer may terminate but if nothing is done, then either party has the right to terminate at any time before completion.
This last clause, though not common, is the most dangerous, because it gives you an uncertainty, right up until the date of completion. The current Real Estate Institute of Queensland (the Real Estate Agent's Union), standard Residential Contract, contains just such a clause. It is designed to give the agent the best chance of securing a commission, but does nothing to help either of the parties.
Unlike a Due Diligence clause however, even if the buyer is unable to get finance, there are still obligation. You are entitled to call for evidence that the buyer has made reasonable efforts to obtain finance in the amount and from the organisation, listed in the Contract. For this reason, when it comes to inserting details of the financial institution and the amount required, into the Contract, it is in your interest to have those parameters placed as widely as possible.
The Lease
The mechanics of the Assignment of Lease will, in the same way, be contained in the Terms of the Contract. There are slight variations from contract to contract and State to State.
Most, however, place the obligation upon you to make reasonable efforts to secure consent from your landlord to the Assignment of the Lease. This is principally because you have the contractual relationship with the landlord, and is in your interest not to have the buyer directly quizzing the landlord.
Unfortunately, most landlords are disinterested in taking diligent steps to make a decision about a new tenant. Most solicitors for landlords do not care about preparing documents in a timely fashion, in order to assist you with your transaction. Consequently, it is important to get this process started as soon as possible, by approaching the landlord and asking specifically what the requirements are for consent to Assignment of the Lease.
Landlords have wildly varying requirements all the way from "Oh just send me a short summary of who they are and it will be alright", through an informal list of assets and liabilities, and perhaps a face to face meeting, all the way up to a formal multi page application, requiring the provision of certified copies of financials, and an in depth assessment of industry capability.
Whatever those requirements are, you need to obtain them and pass them onto the buyer as soon as possible. You may then have to take a hand in ensuring that the material is provided. In practice, the solicitor for the buyer will take it from there, and will chase all the material. This does not mean that you should abdicate that responsibility.
With respect to protecting your staff from the anxiety of worrying about the sale of the business, it is important that you consider the confidentiality aspects of contact with your landlord and with the buyer. If the knowledge that you have signed a Contract to sell the business is sensitive and likely to cause destabilisation (as it would be in most cases), some confidentiality obligations for all of the parties, until particular milestones have been completed, would be very worthwhile. Again, this is mostly missing from standard Template Contracts.
Most Contracts are subject to and conditional upon the Assignment of the Lease. After all, what is the buyer buying, if the buyer can't get the right to occupy the premises? Beware, however, that some Template Contracts surreptitiously compromise those rights of the parties in the REIQ Template Contract, are lost, if the buyer enters into pre-contract training. This may be to your advantage.
The message is, "make sure that you know the terms of your Contract".
Assignment on Different Terms
Some landlords presently are using the consent to assignment process to attempt to get more security and comfort from a new tenant. Traditionally, landlords have accepted Directors's Guarantees, or alternatively a Rent Guarantee (sometimes called a deposit bond). A Rent Guarantee is, in effect, a cheque for between three and six months rent, provided by your bank, which can be cashed immediately, without reference to you, in the event that you default. You pay a relatively small quarterly fee to your bank to have this facility available, and, for larger tenants where the directors are perhaps not all shareholders, it avoided the need for Directors' Guarantees. In hard times, landlords have seized upon the assignment request as an opportunity to seek both a Rent Guarantee and a Directors' Guarantee.
Landlords are also routinely now asking for guarantees from spouses, having realised that the director presented by the buyer may not have any assets at all. Many standard business Template Contracts are silent as to whether any assignment consent will do. This is another item to check in your Contract, when it is presented to you for signing.
Time of the Essence
Any Contract will have in it the expression, "time is of the essence". This obscure little sentence can profoundly affect the party's rights.
What it means, in effect, is that, unless the parties agree otherwise, all of the time limits specified in the Contract, are set in concrete, and failure to comply with those time limits will gain one party rights, and lose the rights of the other party.
It is essential that you diarise each of these dates (Finance, Due Diligence and completion are the most obvious ones), and understand the consequences of non-compliance.
Due Diligence
Most "standard" template Contracts do not have a Due Diligence clause. It is most often inserted as a special condition. Unfortunately, many times, the wording of this clause is composed by the broker or, worse still, by the buyer.
There are subtle variations in Due Diligence clauses. Some will simply say that the buyer is able to make various enquiries and if the buyer notifies by the Due Diligence date, that the enquiries are unsatisfactory, the buyer may terminate the Contract. Other (the ones which favour you) will deem the Due Diligence satisfactory unless you are notified otherwise by the Due Diligence date. Yet others will create a specific obligation upon you to provide material by a particular date, and the Due Diligence will not start until all of that material has been provided.
Some clauses will give you a right to terminate if you don't hear anything by the date, but the option to proceed on to completion.
The wording of these clauses is absolutely critical.
Finance
In the same way as Due Diligence, there are subtle variations in finance clauses. The main variations are, if finance is not concluded by the date:-
a) The buyer may terminate, but if nothing is done, finance is deemed to be approved;
b) The Contract is automatically over;
c) The buyer may terminate, but if nothing is done then you have the option to press on to completion;
d) The buyer may terminate but if nothing is done, then either party has the right to terminate at any time before completion.
This last clause, though not common, is the most dangerous, because it gives you an uncertainty, right up until the date of completion. The current Real Estate Institute of Queensland (the Real Estate Agent's Union), standard Residential Contract, contains just such a clause. It is designed to give the agent the best chance of securing a commission, but does nothing to help either of the parties.
Unlike a Due Diligence clause however, even if the buyer is unable to get finance, there are still obligation. You are entitled to call for evidence that the buyer has made reasonable efforts to obtain finance in the amount and from the organisation, listed in the Contract. For this reason, when it comes to inserting details of the financial institution and the amount required, into the Contract, it is in your interest to have those parameters placed as widely as possible.
The Lease
The mechanics of the Assignment of Lease will, in the same way, be contained in the Terms of the Contract. There are slight variations from contract to contract and State to State.
Most, however, place the obligation upon you to make reasonable efforts to secure consent from your landlord to the Assignment of the Lease. This is principally because you have the contractual relationship with the landlord, and is in your interest not to have the buyer directly quizzing the landlord.
Unfortunately, most landlords are disinterested in taking diligent steps to make a decision about a new tenant. Most solicitors for landlords do not care about preparing documents in a timely fashion, in order to assist you with your transaction. Consequently, it is important to get this process started as soon as possible, by approaching the landlord and asking specifically what the requirements are for consent to Assignment of the Lease.
Landlords have wildly varying requirements all the way from "Oh just send me a short summary of who they are and it will be alright", through an informal list of assets and liabilities, and perhaps a face to face meeting, all the way up to a formal multi page application, requiring the provision of certified copies of financials, and an in depth assessment of industry capability.
Whatever those requirements are, you need to obtain them and pass them onto the buyer as soon as possible. You may then have to take a hand in ensuring that the material is provided. In practice, the solicitor for the buyer will take it from there, and will chase all the material. This does not mean that you should abdicate that responsibility.
With respect to protecting your staff from the anxiety of worrying about the sale of the business, it is important that you consider the confidentiality aspects of contact with your landlord and with the buyer. If the knowledge that you have signed a Contract to sell the business is sensitive and likely to cause destabilisation (as it would be in most cases), some confidentiality obligations for all of the parties, until particular milestones have been completed, would be very worthwhile. Again, this is mostly missing from standard Template Contracts.
Most Contracts are subject to and conditional upon the Assignment of the Lease. After all, what is the buyer buying, if the buyer can't get the right to occupy the premises? Beware, however, that some Template Contracts surreptitiously compromise those rights of the parties in the REIQ Template Contract, are lost, if the buyer enters into pre-contract training. This may be to your advantage.
The message is, "make sure that you know the terms of your Contract".
Assignment on Different Terms
Some landlords presently are using the consent to assignment process to attempt to get more security and comfort from a new tenant. Traditionally, landlords have accepted Directors's Guarantees, or alternatively a Rent Guarantee (sometimes called a deposit bond). A Rent Guarantee is, in effect, a cheque for between three and six months rent, provided by your bank, which can be cashed immediately, without reference to you, in the event that you default. You pay a relatively small quarterly fee to your bank to have this facility available, and, for larger tenants where the directors are perhaps not all shareholders, it avoided the need for Directors' Guarantees. In hard times, landlords have seized upon the assignment request as an opportunity to seek both a Rent Guarantee and a Directors' Guarantee.
Landlords are also routinely now asking for guarantees from spouses, having realised that the director presented by the buyer may not have any assets at all. Many standard business Template Contracts are silent as to whether any assignment consent will do. This is another item to check in your Contract, when it is presented to you for signing.
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