Whether you’re just starting up a new business, or you’ve been running your own business for a while, it’s important to ensure you have all the correct legal measures in place. Some things you will need to consider/implement include:
- Deciding on a business structure
- Internal agreements (shareholders’ agreement, partnership agreement, employment agreements, etc.)
- Intellectual property protection (trade marks, business name, copyright, patents, etc.)
- Dealing with real estate (leases, options, ownership, etc.)
- Understanding regulatory requirements
- Implementing effective terms and conditions of trade
- Obtaining and maintaining appropriate insurance
- Understanding relevant laws (tax laws, Australian consumer law, occupational health and safety laws, etc.)
- Understanding your privacy obligations and implementing a privacy policy, if required
For the purposes of this article, we are going to address five of the above points. However, this is not to suggest that the other points are not important. If you have any questions or concerns about anything relating to your business or the above points, please don’t hesitate to contact Lynn & Brown Lawyers for expert legal advice.
Internal agreements – Shareholders’ agreement
A shareholders’ agreement is a contract, binding on the shareholders of a business, that sets out their respective rights, responsibilities and obligations. They commonly include clauses such as:
- Circumstances in which a dividend will be paid
- How shares can be bought and sold
- Dispute resolution (how disputes between shareholders should be resolved)
- Death or liquidation of a shareholder
- Shareholders’ rights to inspect company documents and premises
- Restraint of trade of shareholders
- Confidentiality provisions
- A business plan
- Matters which require unanimous or majority consent of shareholders
When everything is going well in your business, it can be easy to fall into the trap of thinking you don’t need a shareholders’ agreement. However, if you wait until your relationship with your fellow shareholders starts to get rocky before you think about creating a shareholders’ agreement, it will probably be too late.
We highly recommend that everyone starting up a new business gets a lawyer to prepare a shareholders’ agreement for them, because it could save a lot of hassle (and legal costs) down the track.
The very process of creating a shareholders’ agreement can also be beneficial because it will encourage conversations about how everyone thinks particular situations should be handled and will make sure everyone is on the same page.
For more information about shareholders’ agreements (and an example of when not having one went badly) have a look at our article: Commercial Law – Do I need a shareholders’ agreement?
Intellectual property
Your business will have intellectual property, potentially including things like your business name, particular processes you use, your logo and packaging and designs or formulas you have created.
A common misconception in relation to intellectual property is that your business name is protected as soon as it is registered. This is not correct. Simply registering your business name will not give you exclusive rights over that business name, so someone else can legitimately use it even if it is registered. To properly protect your business name, you should trade mark the name.
There are lots of things to consider when protecting your business’ intellectual property. A lawyer will be able to assist you to protect your intellectual property in a number of ways, including making sure you’re using an appropriate business structure.
Terms and conditions
Your terms and conditions govern how your business operates and engages with the rest of the world. They are like the rules of a board game – without them, the game can’t be played properly. Terms and conditions play the same role for a business. Terms and condition will usually include clauses such as:
- The passing of risk
- Your liability
- Payment terms
- Invoicing
- Warranties and representations
- Dispute resolution
Terms and conditions are essentially a contract that you have with all of your clients/customers. If prepared correctly, they should offer protection to your business by doing things such as limiting your liability and setting out payment terms that are required of your customers.
For more information about terms and conditions, see our previous article: Downloading Free Terms & Conditions – Make sure to check the fine print.
Privacy policy
Some businesses are covered by the Privacy Act 1988 (Cth) (“Privacy Act”), which means they have to have a privacy policy. If your business’ annual turnover is greater than $3 million, then you must have a privacy policy.
Businesses with an annual turnover of $3 million or less are classified as ‘small businesses’ and most of them do not have to have a privacy policy, however, some do. For example, if a small business ‘trades in personal information’ or is a health service provider, they need a privacy policy. To find out whether your business is covered by the Privacy Act, and therefore needs a privacy policy, you can check out the comprehensive list of businesses who are covered here: Australian Government – Office of the Australian Information Commissioner website.
There are 13 principles called National Privacy Principals, or NPP’s, that all businesses that are covered by the Privacy Act need to comply with. The NPP’s include things like ‘open and transparent management of personal information’ and ‘use or disclosure of information’. For a more detailed analysis of the NPP’s, you can have a look at our previous article: Commercial Law: Are you keeping your clients’ safe?
We also have another article about recent changes in Australian privacy law, which you may also want to read: Does your business comply wit the new privacy laws?
Australian consumer law (“ACL”)
The ACL is located in Schedule 2 of the Competition and Consumer Act 2010 (Cth). The ACL establishes a set of standards that are designed to protect consumers of both goods and services in Australia. It covers things like sales practices, unfair contract terms, minimum warranty provisions for goods and services and product safety, among many other things.
Individual consumers can commence legal proceedings against businesses for breaches of the ACL, however, if the issue is one of public interest, the Australian Competition and Consumer Commission (“ACCC”) may commence legal action on behalf of consumers.
Some recent examples of the ACCC bringing businesses to court for breaches of the ACL include:
- ACCC commences action against Lorna Jane for misleading consumers about anti-virus activewear
- Experiencing NBN issues? Now Telstra, Optus and TPG are, thanks to the ACCC
If your business trades with the public, whether it provides goods and/or services, you need to be aware of your obligations under the ACL.
When to get legal advice
This article has touched very briefly on five legal measures that business owners should be aware of. However, as we mentioned at the start of this article, there are a very wide range of things that are important for businesses to create/implement/understand.
If you own a business, you should meet with a lawyer to run through some of these things to ensure that your business is protected and is complying with its legal and regulatory obligations. Just like getting a regular medical check-up, businesses that have been operating for a while should get their legal essentials regularly checked to ensure they are keeping up with changes to the law. A lawyer will be able to identify any areas of particular importance or concern in relation to your particular business. At Lynn & Brown, we have a team of lawyers who specialise in commercial law, who will be able to assist you with all your business-related needs.
About the authors:This article has been co-authored by Chelsea McNeill and Steven Brown. Chelsea is a Law Graduate from Murdoch University. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
