Whether you are a new or existing café owner, your brand is a fundamental aspect of your business’ future growth and success. Brand building and protection may not seem like an urgent priority, but the ramifications of not protecting your brand early on could be significant and costly. Registering a trade mark for your café is a key step in protecting and building your brand. This article sets out three reasons why registering a trade mark for your café is an essential part of building a successful business.
1. Brand Protection
It is important to recognise the difference between registering your business name and registering a trade mark. Registering your business name and obtaining an Australian Business Number (ABN) does not prevent other businesses from using that name. Only by registering a trade mark do you get the right to use that name to the exclusion of others. To register a trade mark, you need to submit an application for a trade mark to IP Australia. Once registered, a trade mark lasts for ten years, making it an excellent long-term investment in your brand.
Registering a trade mark is valuable for new and established cafés alike. A trade mark can be a valuable asset and provide critical protection from others trying to use your brand. Protecting your brand is of particular importance for established, valuable brands that others may want to use to their advantage. In addition, brand protection is extremely valuable if the market in which you operate is highly competitive.
You may also want to consider registering a trade mark across various categories. A themed café is a good example where you may want to use your branding on a variety of items or merchandise, such as:

t-shirts;
caps; or
mugs.

Protecting your name across various categories allows you to add value to your business in different ways. Importantly, your competitors will be legally unable to replicate such merchandise, thus maintaining the value of your brand.
2. Avoid Disputes Over Similar Names
The ramifications of failing to protect your name with a trade mark early on could be costly. If another business registers a trade mark that is similar to a part of your brand, you could find yourself in a lengthy dispute over one of your most valuable intangible assets. This is of particular risk if your brand is well known and of value to competitors. The last thing you want is a litigation battle to obtain the rights to your name or brand in which you may have invested heavily.
If you do find yourself in a dispute over the rights to your mark, you need to demonstrate the use of the mark prior to the other party registering it.

For example, you would need to show that your café has already been operating under the name or brand.

Depending on the type of objection you raise, you may need to show at least three years of prior use. This could be problematic if you have only just started up.
3. Facilitate Growth
A trade mark can also facilitate business growth. A strong, secure brand attracts customers and can also attract investors. This may provide you with the opportunity to franchise or license the trade mark to others in expanding your brand locally or internationally.

For example, The Coffee Club trade mark is registered and used across all their franchises. This is known as franchising which gives other people the right to use the trade mark. The Coffee Club essentially sells the right to use the trade mark to franchisees. As the trade mark is registered, it cannot be stolen by local or international competitors. As a result, franchisees are willing to invest in purchasing the rights to the trade mark, knowing that the brand will retain its value.
By franchising, The Coffee Club is still able to control how their brand is used. Through a franchising agreement, The Coffee Club sets out clear and specific guidelines as to how the franchisees are to use the brand so that the brand retains its integrity. This is an excellent example of how a strong brand has utilised a trade mark and franchising to grow their brand.
Alternatively, The Coffee Club could license their trade mark to others. However, this would give them a lesser level of control over how their brand is used. It is important to understand the key differences between licensing and franchising.

Key Takeaways
As a café owner, you probably have many competing priorities. It is easy to forget to prioritise your brand. However, investing in your brand early on will pay off in the long-run.
Registering a trade mark for your café can help to:

build a strong brand;
avoid disputes over similar names; and
facilitate growth.

If you have any questions about trade marks or about the process of registering a trade mark, contact LegalVision’s trade mark lawyers on 1300 544 755 or fill out the form on this page.

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Managing a successful franchise is a complex and challenging venture. Issues range from franchisor-franchisee disputes, compliance obligations to recruitment and training. This article will highlight a few of the common issues that arise in managing a franchise and provide practical suggestions to combat them.
Managing a Franchise Network
An essential aspect of any successful franchise is maintaining the high-quality delivery of services and maintaining consistency across all locations. This is a challenging task as franchisees often join at various stages of the business. It is therefore important to ensure clear communication of standards. You should also aim to maintain transparency of decisions that may affect franchisees to help them understand and accept decisions made by management.
Franchisees should receive fair and equal treatment. It may be tempting to provide incentives such as discounts to franchisees with valuable business or industry experience to get them on board. However, you should avoid doing this to prevent other franchisees in the network from becoming bitter.
Franchisee Recruitment
One of the most critical aspects of creating a successful franchise is recruitment. The number of franchisees in a franchise system is often a key measure of success. As a result, it is often tempting to grow the network quickly to increase revenue and brand recognition.
Adopt a balanced approach when it comes to recruitment, with a focus on quality over quantity. Recruiting poor quality franchisees can become troublesome, especially if they all fail at once or if it leads to litigation. This situation can be both stressful and financially draining on the entire franchise network.
Hiring an external consultant who has expertise in franchise recruitment can assist in the recruitment and training process. Often these consultants are paid on a commission basis, for example, 25% of the initial franchise fee. Although this can be costly, a lasting relationship with a franchisee and building a quality franchise network can pay dividends in the long run.
Franchisee Training
Training franchisees is crucial to assisting in their success and creating a lasting relationship. The initial training period is particularly important. Training is a critical period when franchisees learn everything necessary to run the business. Early losses in confidence can ruin the franchisor-franchisee relationship. It can be a very intimidating and overwhelming experience for independent franchisees if they are not provided with adequate support.
The operations manual is the main document that explains to the franchisee how to run the business. This document should provide the franchisee with all the necessary information to run the business and adhere to the requirements in the franchise agreement. This should be paired with a highly structured initial training period to give the franchisee the knowledge they need to be successful.
Putting yourself in the shoes of the franchisee can assist in structuring the content of training or training material. Including pictures, diagrams and videos can significantly assist franchisees in understanding the systems and processes. These materials should be refined and improved through franchisees’ feedback. Engaging an external consultant with expertise can also be a great way to get a fresh perspective and feedback on training materials and processes.
Developing a mentoring program where more established franchisees assist new ones can also be a great way to assist franchisees. It allows franchisees to build a network and feel supported by the franchise network.
Franchisor and Franchisee Compliance
Regulations have set out strict requirements for franchisors. Franchise obligations have become increasingly strict in recent times as a result of a number of high profile court cases. The Australian Competition and Consumer Commission (ACCC) has sought to enforce these compliance obligations against franchisors.
An example of these heightened compliance requirements is the introduction of legislation such as the Protecting Vulnerable Workers Act. This legislation looks to hold franchisors responsible for franchisees underpaying employees. It enforces a particularly high standard as it keeps franchisors accountable for the actions of franchisees.
Increasingly, regulations are placing more and more emphasis on the responsibility that franchisors have for their franchisees. You can take proactive steps to reduce your risk of infringement by educating franchisees on their legal obligations. For example, you could incorporate an employment law module into their training.
Franchisor-Franchisee Disputes
In any franchise system that is around for a number of years, franchisee-franchisor disputes are likely to occur. It is crucial that you prepare yourself for these situations. Do not simply assume you or the franchisees will not breach the franchise agreement. You can take steps to prevent disputes from arising by:

ensuring quality recruitment;
providing comprehensive training; and
providing ongoing support to your network.

Proactively prevent conflict by having clear avenues of communication and providing support. Doing so will allow you to understand the issues affecting franchisees so that you can take steps to prevent disagreements from escalating.
You should develop an action plan to deal with issues that arise at the franchisee level. This plan will likely include taking steps to understand the causes of the franchisee’s problems and develop a plan which works towards the resolution of this issue.

For example, if the franchisee cannot find appropriate staff, the plan could involve having them attend a course on recruitment or having them work with a recruiter.

These action plans may also involve decreasing fees or providing financial support in order to get them back on track. You should make sure that the arrangement is in writing, temporary and strictly confidential. This will show the franchisee that you care and that you are willing to work with them to achieve mutual success. Also, consider creating a formal procedure and policy to deal with employees and general complaints at the franchisee and franchisor level.
Key Takeaways
Running a successful franchise requires careful structuring and preparation. There are changing regulations that need to be carefully adhered to and obligations that need to be fulfilled. Ongoing support and training, as well as formal policies and procedures, can assist in avoiding disputes with franchisees. If a dispute arises, it is vital that you attend to the situation appropriately and provide the franchisee with the proper tools to remedy the situation. If you have any questions about expanding your franchise or about franchise regulations or structures, get in touch with LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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Franchise agreements can be strict arrangements that leave you with little room to make specific changes to how you operate the business. Are you in a situation where your franchisor has failed to disclose important information? You may be able to ‘cancel’ your franchise agreement. In legal terms, you may be able to have your agreement set aside or voided. This article sets out when you may be able to ‘cancel’ your franchise agreement.
Franchisor Disclosure Obligations
There are strict disclosure obligations of a franchisor under the Franchising Code of Conduct (the Code). A failure to meet the disclosure obligations under the Code may mean that you are able to ‘cancel’ your franchise agreement. If your franchise agreement is cancelled, it becomes unenforceable. Once your franchise agreement is unenforceable, you no longer have to meet your obligations under the contract. However, whether a franchisor has fulfilled the disclosure obligations under the Code will depend on the circumstances.
What Documents Should I Receive When Purchasing a Franchise?
When you purchase a franchise, the franchisor should provide you with the following documents:

a franchise agreement;
a disclosure document (this document contains all the financial records and the solvency statement);
an information statement;
the Franchising Code of Conduct; and
any other documents relating to the franchise (e.g. sub-lease documents).

The purpose of these documents is to help you make a reasonably informed decision about whether you should buy the franchise. So, what happens if a franchisor does not provide you with a document?
Voiding or Setting Aside a Franchise Agreement
If the franchisor did not provide one of the key documents listed above, a court can ‘cancel’ or make your franchise agreement void. If this is the case, then you and the franchisor will be put back in the position as if there was no agreement. All costs incurred in relation to the franchise would be recoverable from the franchisor.

For example, this could mean that you are refunded any money you spent purchasing the franchise (as if you never purchased it).

If, however, the court sets aside the agreement, it is no longer effective. Having the agreement set aside means you will not be liable for future fees under the franchise agreement.
Circumstances Where a Franchise Agreement May Be Set Aside or Voided
Failure to Provide the Disclosure Document or Omitting Vital Information
It may be possible to ‘cancel’ the franchise agreement if the franchisor has not provided the disclosure document or omitted vital information. The disclosure document will set out the following:

the type of business that the franchisor currently operates;
details about the 14 day cooling off period;
the franchisor’s previous ten years of business experience;
details of all payments required under the franchise agreement;
cost of marketing and other common funds;
details of the intellectual property included in the agreement;
contact details for any franchisee within the past three years;
details regarding the site or territory for your franchise;
details regarding the supply of goods or services;
the exit process at the end of the franchise agreement;
details of any litigation involving the franchisor; and
a solvency statement including the franchisor’s financials from the past financial year

This list provides valuable information that helps the franchisee determine the state of the franchise and the experience of the franchisor. When deciding whether to enter the franchise agreement, this information, along with professional advice, should be enough to make an informed decision. This standard is what the court will be looking at when making their determination.
Failure to Provide Up-to-Date Information
The franchisor must provide a prospective franchisee with an updated version of the disclosure document. The disclosure document contains the financial records and solvency statement for the last financial year.
The franchisor needs to prepare a new disclosure document at the start of each financial year (July 1). The accountant needs to perform an audit of the last year, and any relevant litigation the franchisor is a party to needs to be examined. Franchisors may also want to increase fees after looking at the financial records.
The delay in preparing the disclosure document can create difficulties for franchisees. This is particularly the case if they are looking to enter into a franchise agreement shortly after July 1 as they may not have access to the most current information.

In a recent Queensland case, a franchisee sought to enter into a franchise agreement shortly after July 1, and did not have access to the most recent financial information. In this case, the disclosure document had not been updated in over a year. As a result, they were unable to make an informed decision. The most recent records would have shown that the franchise had taken a considerable downturn and was in serious financial trouble. As a result, the court determined that the agreement was unenforceable, so the franchisee was no longer bound by the ongoing obligations of the franchise agreement.

Failure to Provide Continuing Disclosure
In addition to providing all the relevant documents, franchisors must also inform the franchisee about certain events. They must do so within 14 days of becoming aware of the events. For example:

franchisees initiating court proceedings;
change of ownership; and
external administration etc.

In addition, if a franchisee requests an updated disclosure document, the franchisor must provide this within 14 days. Similarly, the franchisor must provide an updated disclosure document 14 days prior to any renewal of the franchise agreement. However, if the franchisor provides the document late, this delay is not sufficient to void the agreement. Instead, penalties apply to franchisors who fail to comply with their disclosure requirements. If you have suffered financial loss because of information that the franchisor should have provided, then you may also be able to recover your loss.
Key Takeaways
Franchisors are now under increasingly strict disclosure obligations. The courts are placing stricter obligations on franchisors to provide all of the required information. Failure to disclose all required information now may result in a franchise agreement being set aside or voided. This is particularly if you, as the franchisee, can show that:

you would not have entered into the franchise agreement if the franchisor provided you with the information; or
the franchisor’s failure to provide the material prevented you from making a reasonably informed decision.

However, it is relatively difficult to prove the elements above to ‘cancel’ your franchise agreement due to the extent of proof required. If you have questions about ‘cancelling’ your franchise agreement, get in touch with LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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If you own a successful yoga studio, you may be considering expanding your business. One way you can do this is by starting a franchise. By setting up your yoga studio franchise carefully, you can maintain control over how your franchises operate and still separate yourself from day to day management. This article will outline the legal issues you should consider if you decide to start a yoga studio franchise.
Protecting Your Brand
If you franchise your business, you allow other people to use your:

branding;
business name; and
business model.

These aspects of your business are all part of your intellectual property (IP). Your IP defines your business and your brand.
Prospective franchisees will be interested in joining your franchise if you can show them that using your brand will attract clients in their area. If you do not have an established reputation or brand, prospective franchisees will wonder why they should pay to use your brand instead of simply setting up their own business. This means that you should have a strong brand before you decide to franchise your business.  
When you start a franchise system, you license your IP to other people to use. Make sure you have registered trademarks for your:

business name;
slogan; and
any logos.

This protects your IP.
Registering a trade mark gives you exclusive rights to the use of the trade mark. You can allow your franchisees to use your trade marks in your franchise agreement. Your trade marks should be recognisable and distinct from other studios’ branding to help customers remember and refer your yoga studio.
Choosing Locations and Lease Arrangements
It is your responsibility to approve the locations of your yoga studios. Where you decide to open your yoga studios can be crucial to your success. The first few franchises that you set up can determine the long term success of your franchise, so it is important to get this step right. When researching potential locations, consider:

the area’s potential client base;
your ability to soundproof or otherwise fit out the premises; and
any competition.

You should also decide who will hold the lease for your franchises. As the franchisor, you can:

hold the lease yourself and issue a premises licence to the franchisee; or
allow the franchisee to personally hold the lease.

Holding the lease yourself means that you have an additional level of control over the franchise. If you need to replace the franchisee, you can do so without consent from the landlord.
If the franchisee holds the lease personally, you will have less control over the location. However, if the franchisee decides to abandon the premises they will be responsible for covering rent, not you.
Should the Fit Out Be Consistent?
As a franchisor, you have substantial control over how franchisees set up your franchises. You can decide the extent and cost of the fit out. This may include:

buying and setting up a reception desk;
installing signage; or
painting the walls a specific colour.

It is important to keep fit outs relatively consistent so that customers can identify your brand at every franchise. Every location will be slightly different, but as a franchisor, you can specify a particular set up to maintain a sense of familiarity across your franchises.
What Insurance Do I Need?
People may occasionally injure themselves in your yoga classes. It is essential that you limit your liability by making sure that each yoga studio franchise has the right insurance. You may need to obtain:

general insurance; and
income insurance.

In addition, public liability insurance reduces your financial liability in the event of:

death or injury to third parties;
property loss or damage; or
economic loss due to negligence.

You can include a clause in your franchise agreement that requires your franchisees to have the correct insurance.
What Training Should I Offer Franchisees?
There are many different styles of yoga and yoga teaching. Your business has probably been successful because people enjoy your style of yoga and how you teach it. To maintain this success, you may need to provide regular training for your franchisees. You should specify all required training in your franchise agreement and maintain an ongoing program so that franchisees stay up to date with your preferred teaching style.
Key Takeaways
Deciding to expand your yoga studio into a franchise requires careful thought and planning. Before beginning the process, consider:

whether you need to protect your business name, logo, and slogans by registering them as trade marks;
where the yoga studio franchises will be located and who will be listed on the lease;
what elements of your studio fit out should be consistent across different franchises;
how you can limit your liability by obtaining public liability insurance and making it mandatory for your franchisees to also obtain insurance; and
how to structure your training programs and maintain a consistent standard of teaching across your yoga studio franchise.

If you have any questions or need advice about setting up a yoga studio franchise, contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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Intellectual Property (IP) is a vital asset for any business, but it is especially important if you are a franchisee. In a franchise model business, an IP licence permits you to use the franchisor’s IP. The use of this IP is what makes the franchise valuable.
IP includes a business’:

branding;
trade secrets;
patents; and
unique products or techniques.

As a prospective franchisee, you should consider IP when conducting your due diligence on the franchise. It is important to find out:

what IP the franchisor owns; and
how the IP licence arrangement will work.

This article will outline the key considerations you should have about IP licensing as a potential franchisee.
What Rights Do I Have As a Franchisee Under My IP Licence?
Generally, under a franchise IP licence, you will have a conditional licence to use the business’ IP. This means that you have no ownership rights to the franchisor’s IP. Your IP licence will be:

non-exclusive (meaning that the owner of the IP can grant more than one licence and use the IP themselves);
revocable (meaning that the franchisor can terminate the licence during the term of the licence); and
non-assignable (meaning that you cannot transfer your licence to someone else).

Typically, you will pay set fees to use the licensed IP under the agreed terms. Your franchise disclosure document will include these fees.
How Can I Use the IP?
Your IP licence will set out exactly how you can use the franchise’s IP. These details will also usually be set out in the operations manual you receive at the start of your franchise term. Most IP licences and operations manuals will allow you to use the IP as needed to run the business. This usually means using it to:

produce marketing products;
distribute goods or services under the franchisor’s brand; and
operate the franchisor’s business model.

Any new or proposed use of the IP will require separate approval from the franchisor. This could include new marketing material that features the IP:

in photos;
on flyers; or
on social media.

In most cases, this means that franchisees may not set up separate social media accounts for their franchise business without express permission from the franchisor.

Restrictions
The licence agreement will set out other conditions specifying how you can use the IP. These might include restrictions on:

where you can use the IP; and
when or for how long you can use the IP.

Generally, you may only use the IP within your franchise territory and during the franchise arrangement.
As a franchisee, you will also need to comply with rules intended to protect the reputation of the business. These rules may set high standards for how you use the IP.
Another important condition of the licence agreement will require that some IP, such as trade secrets, is kept confidential.

For example, if you are a KFC franchisee, you will be licensed to use KFC’s recipes with strict confidentiality requirements around how you can use the IP. Your use of the recipes will be limited to use within normal business operations at your restaurant.

Will I Have Rights to Any IP I Modify or Create Under My Licence?
Usually, the creator of IP owns the rights to that IP. However, in a franchise business, you are unlikely to own rights to any IP that you:

create;
modify;
adapt; or
improve upon.

Your IP licence agreement is likely to state that the franchisor will automatically own any changes or improvements to IP. In most cases, this means that the franchisor will be the owner of the franchise’s IP regardless of who created it.
What Happens When the Franchise Agreement Ends?
When your franchise agreement ends, all rights to use the franchise’s IP also end. This means that you will need to return all IP to the franchisor and stop using it immediately. The licence agreement should set out:

your termination rights; and
the consequences of failing to comply with your licence agreement.

Any unauthorised use of the IP after the franchise agreement ends will be considered an infringement of the franchisor’s IP.
Key Takeaways
An IP licence arrangement gives you access to the IP needed to run and grow your franchise business. IP licence arrangements between franchisors and franchisees undoubtedly favour the interests of the franchisor and there can be consequences for misusing the IP. When conducting your due diligence, make sure you understand:

how you are allowed to use the IP throughout the course of your franchise arrangement; and
what happens when your franchise agreement ends.

If you have any questions, contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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Selling your online business is a major financial and commercial decision. You may wonder how to find a buyer and negotiate the commercial terms. Once you have negotiated the commercial terms of the sale, you will need to complete the legal process. This article will explain some of the key considerations you should have when the time comes to sell your online business.
Due Diligence
As the seller of an online business, you should expect your prospective purchasers to make enquiries about business operations when conducting their due diligence. As part of this process, buyers will want to look at the business’:

financial information;
business performance;
legal compliance;
major contracts; and
assets that will be  included in the sale.

As the seller, you should be prepared for the purchaser to request this information and be able to assist them.
If there are any contracts which are vital to the business’ operations and performance, you should check if you can assign these to the purchaser. You will need to seek the consent of any third parties that you have engaged, such as suppliers or software developers, before you can assign these contracts to the purchaser.
Sale of Business Process
The key differences between selling online and physical businesses are that:

it is unlikely that an online business will be leasing a shopfront or office space; and
there are generally less physical assets to be transferred for an online business.

However, in terms of the legal documentation and process, the process for selling either type of business is relatively similar. After you have negotiated the key commercial terms, there are usually three stages involved in selling an online business:

preparing the sale of business contract;
negotiating, finalising and signing the sale of business contract; and
settling the purchase of the business.

What Assets Does The Sale Include?
The assets included in the sale will likely vary depending on the nature of the online business that you own.
Intellectual Property (IP)
IP is crucial to any business. For online businesses, it generally consists of the business’:

name;
domain name;
social media handles;
trade marks; and
website content.

For example, if Sally wants to transfer the trade mark for her online sock store ‘Sally’s Socks’ to Jane, then she should refer to that trade mark in the sale agreement. If the website has a logo, she should include a picture of it.

An important aspect of selling your online business is confirming that you are the legal owner of any IP assets you are proposing to sell to the purchaser.

For example, if there are photos on your website, you should check whether you own the IP rights to the images or the photographer who took them does. The same goes for any website content. If you previously engaged a website developer, they may own the IP and may have assigned or licenced IP rights to you.

You will need to check your agreements with the relevant service providers to determine what IP arrangements exist. You can then advise the purchaser on how the sale will affect any IP.
E-Commerce Business
For most e-commerce businesses, a supplier manufactures and provides the stock that you display on your website. In some cases, the stock price will be an additional cost to the purchase price. A purchaser may wish to complete a stock take before settlement to ensure that they are satisfied with the quantity and quality of stock.
The sale contract should specify that the supply agreements you have in place regarding stock are to be transferred to the purchaser as part of the sale. Depending on the terms of the supply agreements, you will most likely need to obtain the consent of the supplier before you can transfer the contracts to the purchaser.
Software Business
If you are selling a software business, the main assets of the business are the software and apps that your development team and product team have created. Many software businesses use software which was created by third-party developers.

An important consideration in the sale of a software business is ownership of the code and IP licences. You will need to confirm who owns the software and how you can assign it.

In some instances, your business may have a licence agreement in place with developers to use their code, but the business does not have ownership of that code. If this is the case, you will need to assign the agreement you have in place with the developer to the purchaser. The developer will likely have to consent to any assignment before it can take place.
Client Information
Existing customers are important to any business. If your online or e-commerce business has a customer list or database, the sale should include this list.
Privacy Considerations
A small business that is transferring its customer database will need to comply with the Australian Privacy Principles (APP). There are specific requirements that apply to the transfer of personal information during a business sale. Ensure that you comply with these requirements during the sale so you can effectively transfer the customer database to the purchaser.
Generally, a seller will not need to seek consent from the customers of the business to transfer their personal information if:

the purchaser is an APP entity (or about to become one as a result of the purchase);
you are selling the business as a going concern; and
the purchaser plans to use the information in the same way and for the same purpose as you.

However, in certain circumstances, you may have to obtain customer consent. This is often the case where the purchaser could use customer information in a new way after the sale.
Key Takeaways
Legally, selling an online business is similar to selling a physical business. The primary difference is that most of the transferable assets are made up of the intellectual property of the business. This IP can include branding, content, social media and software.
When selling an online business, key considerations to keep in mind include:

what assets the sale includes;
what important contracts the business has (such as supplier contracts, terms & conditions with customers, privacy policy, website terms of use);
who owns the IP of the business; and
whether you need your customers’ consent to transfer their information to the purchaser.

If you have any questions about selling your online business, contact LegalVision’s business purchase lawyers on 1300 544 755 or fill out the form on this page.

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Are you considering transitioning your franchise network to a company owned structure? If so, you may be about to embark on a complicated and lengthy process. It is essential to understand your legal obligations and rights throughout the process to ensure that the transition is as smooth as possible. In this article, we will first explain why moving to a company owned model may be a good idea for your business before outlining the transition process.
Why Is a Company Owned Model A Good Idea?
Profit
If your business is highly profitable, one reason to revert to a company owned model is that you get to keep all of this profit.

In a franchise model, you typically take 6% of each franchisee’s gross revenue as franchisee fees, and 1-2% as contributions to the marketing fund. This means that you may not make much money until you grow to a franchise of more than about ten stores. Running a franchise network with fewer stores than this can be a lot of work without much reward.

If you own all aspects of the business, all the profit is yours. This also means that all the losses will be as well.
Staffing Capability
Changing your business model may be a good idea if you trust your staff and their ability to run more outlets. Many businesses form franchises because they are unable to expand outside a small geographic region. However, if you can grow your staff without sacrificing the quality of your workers or management, you may be able to move to a company owned model.
Better Control of The Business
The franchise model can make it hard to have direct control of your business. Regaining company ownership of your business and assets can give you that control. As long as you meet your other financial and legal obligations, important business decisions are yours to make under the company owned model. These decisions might include:

selling sites or expanding your business;
taking the business in a different direction;
merging with another business; or
streamlining your product and services.

If you expect your business to face significant future changes, changing your business model might prepare you to meet those changes. A company owned model might mean that you face fewer obstacles from individual franchise agreements.
More Flexible Corporate Strategy and Processes
A company owned business model also gives you greater flexibility in day-to-day management. Maintaining a franchise network means that you must spend time and money training new franchisees and updating your operations manual.
As individual franchisees run their franchises separately, small but necessary business changes can be challenging and time-consuming to make. Making these changes may cause tension in your relationships with your franchisees. Some changes may even require approval by a majority of the franchisees, and disagreements between your franchisees can prevent these changes from happening.

In a company owned structure, management staff all work under your direction. Your decisions should flow through the business better and faster.

Clearer Consequences of Failing Businesses
You may think that if a franchisee fails, only the franchisee’s business suffers. To an extent, this is true. On the other hand, the failure of a company owned site can have a significant impact on the entire business.
However, as the franchisor, you can still be held responsible for the failure of a franchise in your franchise network. Franchisees sometimes sue their franchisor for misleading and deceptive conduct. Individuals, such as company directors or your employees, might be personally liable as well as the company.

This means that the franchise model does not give you complete protection from franchisees’ losses. Under a company structure, however, the consequences of business success and failure are very clear.

Easier to Sell
Generally, it is easier to sell a company owned business than a franchised business. Investors often see franchise model businesses as a more complicated purchase than company owned businesses. However, this is not always the case.
Better Compliance With Laws
Generally, individual franchisees are responsible for their franchise businesses. This responsibility includes acting as an employer towards their workers, as you do not directly employ the staff as the franchisor.
When franchisees do not pay their staff correct wages, however, the law can punish both the franchisee and franchisor. There have been many cases of individual franchisees facing legal proceedings and fines due to this issue. In some cases, franchisors have also paid hundreds of millions of dollars in compensation to franchisee employees where there have been major breaches of employment obligations.
As the franchisor, you may face punishment for things that your franchisees do wrong. Identifying and correcting wrongdoing early is much easier in a company owned structure.

An increase to the penalty for breaching the Franchising Code of Conduct was recently recommended to parliament. This means that this risk is now even more important to consider.

How Do I Transition My Franchise to a Company Owned Structure?
Assemble Your Team
You will require senior members of the business to handle the commercial negotiations and legal specialists to advise you on the legal aspects of the transition.
You might also want to consult with experts such as:

communication specialists;
local franchisee support bodies;
in-house legal counsel;
external financial analysts; and
strategy or technology consultants.

Building a dedicated team will make your business more responsive and flexible during the transition process. You might have to be very patient when transitioning to a company owned structure. Waiting for each franchise agreement to expire before taking over and negotiating buy backs can take years, rather than months, to fully implement.
Build Your Resources
You may need to compensate franchisees for the buy back of their franchises. At the very least, if you plan to take over franchises at the end of each term, you will need to budget for buying back their equipment and fit outs.
This process will require money and patience. If you do not wish to wait, you will need more money to speed up the process.
Plan Your Approach and Ideal Outcome
The size of your franchise will determine how complex the transition process is. Generally, the transition to a company owned model is only possible in smaller networks where negotiations to take over each franchise can still practically take place. A transition may be achievable in a network of five or six franchisees, but a franchise network composed of hundreds of franchisees is probably too large.
End Franchisee Relationships Early
There are two ways to end franchisee relationships early. You can:

terminate franchisees if they breach their franchise agreements; or
negotiate with franchisees to mutually and voluntarily terminate the franchise relationship.

You may be tempted to ‘clean up’ your franchise network by claiming that multiple franchisees have breached their agreements. However, this course of action is not advisable. Your underlying motives will quickly become clear to the network, and then even genuine breaches may be viewed as motivated by the desire to terminate franchisees.
Instead, you should negotiate with some franchisees to voluntarily terminate their franchise relationships. You could allow the ex-franchisee to re-brand, and any restraint of trade could be waived to encourage them to leave. Even though you will lose a site by doing so, this may be preferable to waiting years (or even decades in some cases) for the franchise agreement to come to an end.
Assess Your Buy Back Options
Your buy back options will likely depend on whether there is a buy back clause in your franchise agreements. Franchise agreements:

with buy back clauses allow you to buy back at a set price or multiple of earnings. A multiple of earnings is calculated by multiplying the business’ annual revenue by a set amount. You must have the financial and practical capability to trigger the buy backs in these agreements; and
without buy back clauses must be sold or terminated before you can act. There should be a first right of refusal in the agreement which allows you to buy the business when it comes on the market for sale. Alternatively, you should be able to buy back the assets of the business when the franchise agreement comes to an end. If the franchise agreement contains an option to renew the franchise term, it might be a long time before you can become a fully company owned network.

Balance Confidentiality With Informing Relevant Stakeholders
You should handle the transition process carefully. You will need to maintain confidentiality, but also provide sufficient information to relevant people and organisations.
For example, your internal discussions will involve confidential conversations with legal or other specialists. From those discussions, you may decide what, how and when to communicate to your franchisees directly. You may wish to communicate through a:

confidential meeting;
formal letter; or
phone call.

If franchisees find out about your plans earlier than planned, they may attempt to sell their franchises back to you at an unrealistic cost. This can complicate the buy back process. You should conduct individual, strictly confidential negotiations with key franchisees at the first opportunity.
The information will become public so it is important to be clear with franchisees internally on when you plan to announce the transition. This will help you to maintain control over the situation.

Moving away from a franchise model may attract close monitoring by the Australian Competition and Consumer Commission (ACCC). The Franchising Code of Conduct requires your procedures to be fair. Seek advice from your legal team on how to communicate appropriately with the industry watchdog.

Manage the Transition Process
The internal review you conducted in earlier stages should have helped to identify a strategy for transitioning your franchisees. Complications to this process might include differences between:

agreement end dates;
agreement structures; and
the wishes of franchisees.

It is essential to plan for all potential outcomes of the transition process. For example, if:

any franchise agreements need to be extended, varied or terminated, make sure you have the correct legal documents required and store these safely;
you are negotiating with franchisees for a commercial outcome, ensure the ongoing process is clear and complies with the franchise agreement and relevant laws. Any offers you make should be appropriately valued in the circumstances; and
you are employing any franchisees, finalise the terms of their employment and any other details before the transition occurs.

Preparation will allow you to pre-empt and deal with any complications. However, it is still important to create and follow effective dispute resolution procedures.
Run Your Company Owned Business
Transitioning your business may take a few months or even years, but you should still prepare to run your business in its new form.
You may need to:

hire new management personnel;
implement new company-wide procedures; and
invest resources into retraining staff, especially if they are former franchisees.

You may want to arrange for a separate team to work on this later stage in collaboration with the transition team to ensure a smooth start.
Key Takeaways
Franchising is still a popular option for many businesses. However, changing to a company owned model might benefit your business by providing:

increased control over your business direction;
better flexibility in making strategic changes to your business;
improved damage control for business losses; and
more effective compliance with regulations, reducing your risk of liability and reputational damage.

Transitioning your franchised business requires patience and collaboration, but it can be done. The most important steps to take are to:

assemble your transition team;
build your resources;
plan your approach;
if possible, end franchisee relationships early;
assess your buy back options;
manage public information;
prepare for complications; and
prepare to run your company owned business.

If you would like to speak to our team about transitioning your franchise to a company owned structure, you can contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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Selling your franchise is a major commercial and financial decision. There are many reasons you might decide to sell your franchise. You may:

be looking to move on or retire;
have people interested in purchasing the business for more than you paid; or
be looking to recover your investment or prevent further debt if things are not going well.

Whatever the reason, the sale must be executed in a certain way. This article explains how the process works.
Obligations Under the Franchise Agreement
The franchise agreement, disclosure document and operations manual explain how the sale will take place. When selling your franchise, you are transferring the rights and obligations you hold under the franchise agreement to the purchaser.
Before you sell your franchise, the proposed purchaser will be vetted by the franchisor. The vetting process will evaluate their financial position and make sure that they will be able to operate the business successfully. The franchisor must agree to the purchaser before the sale takes place. Under the Franchising Code of Conduct (the code), a franchisor cannot stop you from selling your franchise to someone without good reason.
However, the franchisor may be able to stop you from selling your franchise to someone if:

the purchaser cannot meet their financial obligations under the franchise agreement;
the purchaser does not meet any other reasonable requirements under the franchise agreement;
you owe the franchisor money;
the purchaser does not meet the franchisor’s selection criteria;
the purchaser does not agree to follow the franchise agreement;
you have not followed the franchise agreement; or
the purchaser has not had the chance to read and understand the franchise agreement and the code.

When you decide to sell your franchise, try to maintain a good working relationship with your franchisor. Remember that the purchaser will be working with the franchisor for the remainder of the agreement.
First Right of Refusal
Your franchise agreement gives your franchisor the first right of refusal. Having first right of refusal means that your franchisor can buy the franchise from you themselves, either when you decide to sell or once you have found a purchaser. The franchisor is allowed to buy your franchise on similar terms to the deal you have agreed with the purchaser. First right of refusal is unlikely to affect your sale, but you should keep it in mind if you plan to sell the franchise at a reduced price to a friend or business partner.
Which Documents Are Required?
Every franchise is different. However, the sale of every franchise must follow the correct process. You will need several legal documents to complete the sale of your franchise. These include:
1. Sale of Business Agreement
The sale of business agreement explains the terms of the franchise agreement and officially makes the purchaser the new owner of the franchise. It also means that you are not held responsible for anything that the purchaser might do after the sale takes place. Make sure that the terms of the agreement are very clear to avoid disputes.
2. Deed of Surrender and Release
The deed of surrender and release allows you to leave the franchise agreement that you signed when you took on the franchise. To avoid having any debts or responsibilities after the sale, make sure you carefully review this document.
3. Lease Assignment
If you run your franchise at a particular location, such as a shop or building, you may have signed onto a lease for these premises. Depending on who signed the lease, a lease assignment may be necessary to transfer the lease to the purchaser. If you did not sign the lease yourself, the franchisor may have signed a ‘head lease’. This is the primary lease for the premises. In this case, you may have signed a sub-lease or licence under the primary lease.
There are two common scenarios for assigning leases. The process depends on whether:

you hold the lease yourself, in which case your landlord will need to assign the lease to the purchaser and sign the lease themselves as well as obtain a signature from you and the purchaser; or
you signed a sub-lease or licence, in which case the franchisor can release you from your sub-lease or licence through a deed of assignment and surrender.

The type of lease you have entered will also affect how a lease can be assigned. For example:

A retail lease cannot be refused assignment to the purchaser without good reason. However, the landlord will require documents from the purchaser such as financial statements, business history and professional references before the lease is assigned; and
A commercial lease may not allow assignment. It is best to speak with your landlord early about assigning a commercial lease.

4. Equipment Leases
If you use rented or leased equipment, you will have to transfer or assign the use of this equipment to the purchaser.
You can do this:

through a deed of assignment; or
by surrendering the lease.

If you surrender the lease, the purchaser can apply for the lease themselves.
Post-Sale Considerations
You should also think about your plans once the sale takes place. Your agreement may contain a restraint of trade clause, which stops you from working in a similar business to the one you have left within a set time period after the sale. Restraint clauses must be reasonable. For example, they cannot extend for an unreasonable length of time or restrict you from trading far away from the business. If a clause is unreasonable or unfair, you may be released from it.
Key Takeaways
Selling your franchise is an important financial and commercial decision. If you are ready to sell, you will need to prepare several documents. There are agreements to be released from and assigned. These include:

a franchise agreement;
your lease; and
any equipment rental agreements.

Follow all the correct procedures to avoid having any ongoing obligations after the sale. You should also check that any restraints in your agreements will not affect your plans for the future.
If you have any questions about selling your franchise, you can contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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Your business’ intellectual property (IP) portfolio is a valuable asset. It includes:

your brand;
any artistic or written work; and
any unique features of your product or service.

Your brand is key to growing your business, as it allows customers to identify your products and refer them to others. Failing to protect this part of your business can become an expensive problem down the track. This article outlines five ways you can protect your intellectual property.
Conduct a Trade Mark Audit
Firstly, it is important to make sure that your business’ branding is protected. You may want to check this by conducting a trade mark audit. Start by making a list of all the different branding you use in your business. Your branding might include logos, taglines and your brand name.

For example, McDonald’s would include the following in their list:

Brand name: McDonald’s
Tagline: I’m Lovin’ It
Product names: Big Mac, Quarter Pounder

Once you have a list of all the branding elements you use to promote your business, look at which of them are already protected by a trade mark. You should consider how your branding promotes your goods or services. Finally, check which parts of your brand are not yet protected by a trade mark and decide if they need to be. If you plan to start selling internationally within the next 18 months, think about protecting your brand overseas.
Consider Whether You Have Other Intellectual Property to Protect
Your business may also use less obvious types of IP to define your brand.

For example, the McDonald’s golden arches, the Burberry check pattern and the Cadbury shade of purple have all been trade marked.

Look into what your business can or should be protecting. Perhaps your business:

uses an innovative new process;
sells products with unique design elements;
has recently developed a new and innovative product; or
shares confidential information with third parties.

Copyright, design registration and patents are all different ways to protect your products. You should think about these options before you release a new product onto the market.
Generally, copyright automatically protects all content created by your business. If you are dealing with confidential client information, check whether a non-disclosure agreement or client agreement protects that information.
Review Your Business’ Online Presence
You should secure any relevant social media handles and domain names. Start by googling your business. The search results show you how your business will look to new customers. This first impression of your brand may be your only chance to secure their business.
Keep track of your online footprint. Try to use consistent handles across each platform. Consistency online gives your business credibility and makes your business easier to find. Check your business’:

Facebook page;
Instagram;
Twitter; and
any other online platforms you use.

In addition to your social media handles, check which domain names your business owns and keep track of your URLs. Holding several URLs (such as the .com, com.au and .net versions of your domain name) prevents domain squatting. Domain squatting, or cybersquatting, refers to the practice of registering unclaimed domain names in the hope of selling them for profit. By registering all your URLs, you can prevent others from registering them and attempting to sell them to you later.

Domain names expire and need to be renewed. Make sure you know when you need to do this, as businesses often lose their domain names by failing to renew them on time.

Audit Your Enforcement
Protecting your intellectual property takes more than registering a trade mark or a design. Look out for activity outside your business that might cause confusion or weaken your brand. Regularly check IP Australia’s trade marks register, social media and Google search results for any businesses that use similar branding to your own. You can also look for businesses with products or services like yours.
If you think somebody is infringing on your intellectual property, you can bring an action against them in court or lodge a complaint to protect your brand.
Protect Confidential Information
Make sure that your business’ confidential information is protected. You should always have appropriate contracts in place with employees and contractors that protect any shared sensitive business information. The type of contract you need depends on whether it binds an employee or a contractor.
Employment Agreements
These are signed by employees and should include confidentiality clauses that bind your employees and set out the consequences for breaching the clause.
Independent Contractor Agreements
These are signed by contractors and should include what happens to any IP used or created by the contractor.
Key Takeaways
It can be easy to forget about to protect your business’ IP. However, maintaining a strong brand is key to growing your business. You can protect your IP by:

conducting a trade mark audit;
considering whether you have other IP to protect;
reviewing your online presence;
auditing your enforcement practices; and
protecting confidential information.

If you would like to have a discussion about your business’ IP or have any legal questions, contact LegalVision’s IP lawyers on 1300 544 755 or fill out the form on this page.

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Are you considering purchasing a business? Before you commit, it is essential to have a thorough understanding of the company’s commercial viability. You should check that its operations, financial information, contracts and legals are sound. This process is called due diligence. This article will outline the commercial considerations you should make before purchasing a business.
When Should I Do My Due Diligence?
Generally, you should do your due diligence after you and the seller have agreed to the deal, but before a binding sale of business agreement is signed. You may have decided on a price and other key commercial details, such as when the business will be handed over, but this should all be subject to due diligence. Understanding the business’ operations, the industry and the seller’s reasons for selling should all form part of your decision to go ahead with the purchase.
Business Operations
It is also important to consider whether the type and size of the business is compatible with your interests, experience, personality and capital.
You also need to understand any restrictions on the business. You should consider whether the business:

is part of a franchise (if it is part of a franchise, you will need to follow the franchisor’s operations manual and franchise agreement);
has to comply with any regulations (for example, if the business is a bar, does it have a liquor licence and can this be transferred to you?); and
has the required permissions to perform the business functions (for example, if you are looking to purchase a pizza restaurant, make sure that this business activity is permitted under the lease).

The Seller
Understanding the seller’s motivations for selling the business and their role within it should also inform your decision. You should consider:

why the seller is selling the business (for example, an elderly couple selling because they want to retire is very different to the owner selling because the business is not doing well);
what the seller’s role is in the business (if the current owner’s role is critical to the business, you should consider whether you have the skills and experience to take on their role); and
whether the seller is likely to become your competition. Many purchasers prohibit the seller from setting up a competing business or poaching clients for a set time after the sale. You should address this concern in the sale of business agreement.

Before committing to the purchase, you can ask to observe how the current owner manages the business. This trial period could give you a better idea of how the business runs. You could also ask the seller to stay on and provide training after they sell the business. This request can form part of the sale of business agreement.

Industry and Competition
Understanding the state of the industry you are entering into is critical for the longevity of the business. Find out whether it is expanding or declining.

For example, it would be pointless to buy a video store now that most people use Netflix or another online provider to watch movies at home.

You should consider:

how strong any competition is (for example, a major competing franchise next door compared to a run-down coffee shop);
whether you will face online competition; and
whether the business has an edge (for example, a unique product or location).

For example, if the business you want to buy is the most expensive cafe on a street with two other cafes nearby, it may not be a wise investment.

The type of industry the business operates in, and your experience in that industry, are also factors you should consider when deciding if the business is right for you and your goals.
Suppliers
Continuing to use existing suppliers will give you some quality guarantee and continuity within the business. You should carefully review whether any supplier contracts can be transferred to you, or whether the supplier requires you to enter into a new arrangement. It is also important that you understand:

the length of any contracts;
any fees involved;
whether there are any minimum purchase requirements; and
how you can deal with incorrect or unsuitable stock.

You should also find out if the business has any unwritten agreements with suppliers that you would like recorded in writing and transferred to you.
Location
You should consider the location of the business before you purchase. Find out if it is a quiet area or if there is consistent foot traffic. An unhelpful location may the reason the business is for sale. You should also see if there are any impending:

developments;
town planning changes;
road developments;
rezoning plans; or
public works.

These could affect the ongoing success of the business.
Staff
If you plan to take on the existing staff, you should investigate their current arrangements. You should consider whether staff members:

have valid contracts;
are qualified for their job;
have a visa and, if so, have work rights;
are being paid the correct wage and entitlements according to the relevant modern awards; and
have accrued entitlements to annual leave, long service leave, holiday pay, sick leave, superannuation and other employee benefits.

You can check the Australian Business Licence and Information Service (ABLIS) website to see what licences business operators and workers must have in different industries.

Lease
If the business currently operates out of physical premises, ensure you can take over the lease. The sale of business agreement may have a clause stating that the sale is subject to either the transfer of an existing lease or a new lease being entered into.
You should review the lease to make sure you are happy with its terms. It is essential to understand:

what the rent and outgoings are;
how the rent increases each year;
what the insurance and security deposit or bank guarantee requirements are; and
what your obligations are in maintaining the premises during the lease and when it ends.

Leases are often lengthy documents that span years, so understanding your rights and obligations should be a priority at this early stage.
Key Takeaways
Before you decide to purchase a business, you should do everything you can to make sure that the business checks out. This due diligence involves a thorough investigation of the business and its operations to understand:

how it works;
why it is being sold; and
its commercial viability going forward.

If you have any questions about purchasing a business, you can contact LegalVision’s business purchase lawyers on 1300 544 755 or fill out the form on this page.

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You have been chasing a debt, and now you have discovered that the person who owes you money is bankrupt. What does that mean, and will your debt ever be paid? This article will explain what happens when the person who owes you money is bankrupt and the steps you should take to make sure your debt gets paid.
What is Bankruptcy?
A person is bankrupt when a court orders they are unable to pay their debts. Bankruptcy can be either:

voluntary, meaning the person applies for bankruptcy themselves; or
involuntary, meaning a creditor (or another person owed money) applies for the bankruptcy.

Once a person is deemed bankrupt, they are released from paying their debts, and a trustee is appointed to control the bankrupt person’s affairs. The trustee will investigate the bankrupt person’s financial situation and sell any property to pay creditors. Bankruptcy usually lasts for three years and one day. However, the bankruptcy trustee may extend this period if they need to make further investigations or the bankrupt person does not follow the necessary rules. An example of one of these rules is that the bankrupt person must assist the trustee with all their investigations.
What Type of Creditor Am I?
There are generally two types of creditors:
1. Secured Creditors
Secured creditors hold a security interest, such as a mortgage, in some of the company’s assets. Any security interests over personal property will be registered on the Personal Property Securities Register (PPSR);
2. Unsecured Creditors
Unsecured creditors have no security interest in the company’s assets and include customers, trading partners and employees.
You are most likely an unsecured creditor. If this is the case, you will only be paid after the bankrupt person makes payments to secured creditors.
What Do I Need to Do?
You may not continue any legal action against a person once they are bankrupt if you are an unsecured creditor. If you have started any legal proceedings, you will need to discontinue these. It is essential to let the bankruptcy trustee know you are a creditor and provide them with details of your debt. You should:

contact the trustee and advise them that the bankrupt person owes you a debt;
give them full details of the debt owed. They will provide you with a formal proof of debt form to complete and ask you to provide copies of any relevant documents that show the debt. These documents might include invoices, statements and any agreements or credit applications. This process is called proving your debt; and
ask the bankruptcy trustee for the status of their investigations to date. They may be able to give you an idea of whether creditors are likely to receive any dividends.

When Will I Get Paid?
The bad news is that there is no guarantee you will be able to recover the debt. You will only get paid if there are funds left over after making any other required payments, such as payments to secured creditors. If there are insufficient funds to pay all unsecured creditors, then creditors receive a share of the remaining funds on a pro rata basis. This means that you may receive only a portion of the debt owed. If there are no funds available, you may receive nothing.
Key Takeaways
Discovering a person who owes you money is bankrupt does not mean that you will never get paid. You may get paid from available funds in the bankrupt person’s estate, but you need to make sure the bankruptcy trustee is aware of your debt. To increase your chances of recovering the debt, you should:

contact the trustee as soon as possible;
give them full details of your debt; and
keep in touch with them to find out the likelihood that you will get paid.

If you have any questions about the bankruptcy process or recovering a debt, you can contact LegalVision’s bankruptcy lawyers on 1300 544 755 or fill out the form on this page.

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If you are a successful business owner or can demonstrate a history of successful investment activity, you may be eligible for a visa to migrate to Australia. There are two types of business visas that are available to business owners and investors:

business innovation and investment visa; and
business talent visa.

Each of these visas can grant you the right to stay in Australia either temporarily or permanently. They also allow you to establish a business or conduct investments within Australia. This article will explain the legal requirements for acquiring an Australian visa as a business owner.
The Business Innovation and Investment Visa
If you are a skilled business owner, you might wish to establish, develop and manage a business in Australia. When selecting the right visa, the provisional business innovation and investment visa (subclass 188) may be best for you. It allows you to migrate to Australia and conduct business activity for four years and three months.
There are five streams under this visa. However, the requirements for the three most common streams are discussed below.
1. The Business Innovation Stream
The business innovation stream requires you to prove that you are providing valuable input to the Australian economy. You must be a substantial owner in an Australian business and participate, at a senior level, in the day-to-day management and decision making of that business. For instance, you must do at least one of the following in the business:

develop business links with international markets;
create or maintain employment in Australia;
export Australian goods;
produce goods or services that would otherwise be imported;
introduce new or improved technology; or
add to commercial activity and competitiveness within the Australian economy.

Under certain circumstances, you might also be eligible to apply for an extension of the visa under this stream for another two years.
2. The Investor Stream
The investor stream is appropriate if you are a highly experienced business owner or investor who is prepared to make an investment of AUD $1.5 million within an Australian state or territory. You must also:

score at least 65 on the points test;
have at least three years’ experience of direct involvement in managing one or more qualifying types of businesses; and
have net assets, or combined net assets with your partner, of at least AUD $2.25 million.

3. Significant Investor Stream
This stream is ideal if you have at least AUD $5 million that you are willing to invest in complying investment funds.
You must invest at least AUD $500,000 (10% of your total investment) in venture capital funds or growth private equity funds that invest in startups and small private companies. Furthermore, you must invest at least AUD $1.5 million (30% of your total investment) in eligible managed funds or Listed Investment Companies that invest in emerging companies listed on the Australian Securities Exchange.
What Will The Business Innovation and Investment Visa Allow You to Do?
Once obtained, any of these three streams will allow you to travel in and out of Australia for the period of your visa. This period is four years and three months. You may also be able to bring your family with you.
Upon the expiry of this visa, you will also be eligible to apply for the permanent business innovation and investment visa (subclass 888). Under this visa, you will become a permanent resident of Australia.
The Business Talent Visa
The business talent (permanent) visa (subclass 132) is an alternative visa that will allow you to establish a new or develop an existing business in Australia. Unlike the business innovation and investment visa, which requires you first to obtain a provisional visa and then convert to a permanent visa after four years, this visa grants you permanent residency rights in Australia straight away.
There are two streams under this visa.
1. The Significant Business History Stream
The significant business history stream is appropriate if you are a high calibre business owner wanting to do business in Australia. To be eligible for this stream, you need to have:

net business and personal assets of at least AUD $1.5 million;
personal or combined (with your partner) net assets of at least AUD $400 000 in one or more qualifying businesses; and
an annual business turnover of AUD $3 million in one or more of your main businesses.

2. The Venture Capital Entrepreneur Stream
The venture capital entrepreneur stream will be appropriate for you if you have obtained at least AUD $1 million of venture capital funding from a member of the Australian Venture Capital Association Limited (AVCAL) for your business. You need to be a substantial owner of the business and must be involved in its day-to-day management. Furthermore, the government must be satisfied that you have sufficient assets to allow you to settle in Australia.
What Will the Business Talent Visa Allow You to Do?
Once you have obtained this visa, it allows you and any nominated member of your family to stay in Australia indefinitely. As a permanent resident of Australia, you will also be able to enrol in Australia’s scheme for health care called Medicare. You might also qualify for other special benefits from Centrelink. You can also sponsor eligible relatives for permanent residency and may be eligible to apply for citizenship.
How Can I Apply?
Generally, to apply for the two visas, you will need to:

submit an expression of interest through the Department of Home Affairs SkillSelect online service;
be nominated by an Australian state or territory government; and
be invited to apply for the visa.

You will also need to meet certain health requirements and the additional requirements for the stream in which you apply for each visa.
Key Takeaways
If you are a business owner, there are certain pathways for you to move to Australia permanently and conduct business here. Under the business innovation and investment visa, you will need to first apply for a provisional visa that is valid for up to four years. Then, you can convert to a permanent visa. The business talent visa, on the other hand, grants you permanent residency rights in Australia straight away. If you are a business owner and need assistance with obtaining an Australian visa, contact LegalVision’s immigration lawyers on 1300 544 755 or fill out the form on this page.

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If you wish to take out a loan, you will need to take out some form of loan collateral. Loan collateral is often a valuable asset that you can secure against a loan. If you run a startup, you need to decide between securing a loan or seeking investment. Often, there are reasons why seeking investment may not be the most appropriate option for facilitating cash flow. However, startups inherently face hurdles when attempting to secure loans. Intellectual property (IP) assets carry great potential to be used as collateral if you don’t have other appropriate assets. This article will discuss how you may be able to utilise IP assets as a new form of loan collateral in your startup.
Typical Loan Collateral
To take out a loan, lenders will often require collateral to minimise the risk of providing a loan to you, the borrower. This could be difficult for your startup if your business does not have the revenue to guarantee that you can repay the loan. Seeking to supply collateral to secure a loan tends to increase the chances of a lender approving your loan. However, if you cannot pay the loan, there is a real risk that a lender will repossess your collateral.
The value of the collateral that you must provide will depend on the total amount that you intend to borrow. Many lenders will require you to secure your loan with collateral that is worth at least as much as the loan that you wish to secure.
Providing tangible assets as collateral is favoured by lenders as they are generally easier and more cost effective to liquidate if you cannot make your repayments. Typical tangible assets which businesses use as collateral include:

residential and commercial property;
commercial equipment;
inventory; and
personal assets. e.g. your home, car or investments.

IP as Loan Collateral
Your startup may require capital to be able to grow. Although lenders generally only accept tangible collateral, there are alternative financing opportunities if your business has valuable intangible assets. One of these intangible assets may be your IP.
A loan that is backed by IP allows you to borrow to the value of your specific IP assets. Offering IP as collateral may be more commercially sustainable in the long term as businesses who monetise their IP have more potential for growth. IP assets that generate ongoing revenue for your business and, therefore, positive cash flow, are well placed for you to use as collateral.
IP as collateral can be beneficial as it:

provides you with the option to access financing that might otherwise not be available;
can provide financing that does not dilute existing equity; and
can potentially be more cost-effective than other methods of securing finance.

Valuable IP Suite
If your startup has a defined suite of IP, you are more likely to be able to use it as financial collateral. There are four key IP rights which will add value to an IP suite:

copyright;
registered designs;
trade marks; and
patents.

A suite of IP assets that has multiple registered rights is more valuable than unregistered rights.

For example, an innovative patent which targets a growing need across markets will be significantly valuable for a business.

However, for digital businesses, copyright protection and registered trade marks might be their most valuable IP assets.
Your business will be more valuable to lenders if you have licensed IP rights with consistent cash flow that is directly attributable to the right. However, non-licensed IP rights still contain significant value and are a good option that you can use as loan collateral. The most valuable forms of IP:

are high-quality assets;
don’t overcrowd an industry; and
can be used across many industries or businesses.

Typically, smaller businesses are less likely to register IP rights as registering them may be too expensive. However, if your startup does not have the appropriate legal ownership of the IP rights, this form of lending will not be available. Therefore, protecting the IP of your startup is vital if you would like to secure an IP-backed loan in the future.

Although IP collateralisation is an emerging area of financing, using IP assets to secure a loan is not uncommon within the music industry. David Bowie famously raised $55 million through asset-backed bonds for future royalties for over 20 albums.

Valuation
As IP is an intangible asset, it will not usually be recognised on internal accounts or reflected appropriately in cash flow. To determine the accurate value of your IP, an independent and objective valuation should be performed. Valuation of IP assets is incredibly complex, especially in the case of patents.
Valuation of IP assets also requires the consideration of the lifecycle of the IP. Lenders will need to consider the value of your technology in light of the potential lifespan of your business. This will differ from industry to industry.

For example, IT products inherently face a shorter lifespan than pharmaceutical products.

Valuations also need to consider the market need for the IP right. This will be especially important if a lender ever needs to liquidate your assets.

For example, a patent which meets a significant need within the market is more likely to be highly valued. Whereas, a patent which meets only a niche need is likely to be valued less favourably.

As a startup, it is vital that your IP ownership rights are clear. You should do this regardless of whether you intend to use IP as loan collateral in the future or not. A valuer of IP will also assess the current IP risks that your startup might be facing, including whether you:

have IP ownership clauses in your contracts; and
are protected from your confidential IP information being revealed by other parties.

The Ultimate Guide for Startup Founders

The LegalVision Startup Manual provides guidance on a number of common challenges faced by startup founders including structuring, raising capital, building a team, dealing with customers and suppliers, and protecting intellectual property.
The guide includes 10 case studies featuring Australia’s top VC fund partners and leading Australian startups.

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Ongoing International Development
In 2016, the British government announced a review of how they could support and facilitate access to long term finance for startups. Following this review, it became a priority for the Government and the British Business Bank to assist IP rich high growth startups in using their IP to access loans. The review recognised the obstacles that the financial industry faced when considering intangible assets for loan collateral. It also explored the reforms necessary to make effectively evaluating IP assets a reality. The review suggested that by stimulating demand for this type of lending, the use of IP as collateral will grow.
The government of Singapore supports the recognition of IP as a valuable asset for many of its startups. To increase the recognition of IP as valuable assets, they commenced trialling an IP financing scheme with three participating local banks and three independent valuation firms. This trial has now commenced a learning process to better understand how to value IP and support the growth of startups who lack other financing options.
In an international context, the United Nations Commission on International Trade Law (UNCITRAL) created a legal guide exploring this issue. This guide noted that national jurisdictions had moved rather slowly in reforming their financial industries. The guide recommended a uniform legal regime regarding secured financing. This will lead to more transparency and legal certainty for lenders globally.
Obstacles You May Face
If you want to use IP as collateral to secure funding, you may face some obstacles. Lenders prefer conventional asset-backed loans as they can rely on a return for the risks that they take on. IP does not necessarily meet the traditional criteria of capital benefits. Therefore, using IP as collateral does not actively reduce the lender’s risks. This low confidence from lenders in using IP as collateral is a significant obstacle that you will face if you want to take on this non-traditional form of financing.
Therefore, the popularity of using IP as loan collateral will require policy action surrounding:

banking regulations, especially regarding the capital that banks are required to hold;
legal enforceability and the difficulty of enforcing IP ownership rights;
valuation and the uncertainty of the methodology of valuation; and
liquidity and the challenges in asset disposal due to an inability to access relevant IP markets.

Until these critical barriers are resolved, it is unlikely there will be a significant change in startups having the ability to use their IP as loan collateral in Australia.
You will also need to consider the disadvantages of using IP as collateral. If this is the only valuable asset for your business and you are unable to make loan repayments, the loss of your IP rights might be detrimental for your business’ longevity.
Key Takeaways
Using IP as loan collateral might be a great option if your startup has little traditional assets to provide. However, this unconventional form of collateral comes with many systemic obstacles. Having access to a broader range of collateral for funding will benefit innovative startups, SMEs, lenders and the wider economy.
Creating long term confidence in the IP financing system will lead to market innovation and the overall expansion and monetisation of IP. If you have any questions about securing funding for your startup, contact LegalVision’s capital raising lawyers on 1300 544 755 or fill out the form on this page.

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If you have started a business, you may have heard of the importance of protecting your intellectual property (IP). It is crucial to understand which types of IP you can legally protect so that you can safeguard your business’ brand. This article will explain what IP is and the steps you should take to uphold your IP rights while working with other businesses.
What is Intellectual Property?
Intellectual property captures the creations, processes, inventions, designs or any other intangible idea that comes from your mind.

For example, a company’s IP may be its:

logos;
business name; and
branding.

Using an artist as an example, a physical piece of artwork is something that the artist can sell. However, the artists’ IP lies in the:

concepts;
designs;
themes; and
colours that they used to create the artwork.

The purchaser of the artwork becomes the owner of the physical artwork. However, they may not necessarily become the owner of the IP in the artwork. The artist, as the owner of the IP, can continue to use the same concepts and designs to create other pieces of art.
Using another example, you might purchase a particular piece of software and own the physical disk containing the software. However, this does not mean that you own the right to distribute the software or the source code behind the software itself.
What are Intellectual Property Rights?
Different types of IP have certain rights attached to them. IP rights are the rights that a creator has over their IP. These include the rights of creators to:

alter their work;
commercialise it;
copyright protection;
apply to register their work as a trade mark; and
patent the IP.

These rights might also include moral rights in the IP. Moral rights are the rights of a creator for their work:

to be credited to them if someone else uses it;
not to be falsely credited to someone else; and
to be safeguarded from derogatory treatment.

There may be instances where you can come together with another party and share your IP for a common purpose. However, you should always detail these agreements in a formal contract that specifies the ways that each party’s IP can be used. The contract should also outline who owns the new IP rights that result from combining each party’s IP.
IP Rights in Action
If you wish to form an agreement between yourself and another business to share your IP rights, you will need to consider a number of different legal factors. We have detailed these factors below by using the example of sharing IP within the marketing industry.
In this example, Smith Data Solutions (SDS) is in the business of providing data and market research analysis services. Their new client, Milson’s Marketing, wishes to engage SDS to provide these services. However, to provide the services to Milson’s Marketing, SDS needs to access Milson’s Marketing’s data and resources. This may mean accessing their IP. At the conclusion of the services, SDS will provide Milson’s Marketing with analysis and ideas which may contain SDS’s IP.
Looking from each party’s perspective, there are a number of different IP concerns that they will need to protect in their contract.
SDS’ IP Rights
To provide their analytical services, SDS may have developed certain types of IP.
For example, they may have created a unique way to compile and evaluate data.
SDS will need to provide certain solutions and reports to Milson’s Marketing which incorporate SDS’ IP. However, while doing so, they must make sure that their IP is protected. This will ensure that they can continue to use this IP for other clients in the future.
Therefore, SDS will need to grant Milson’s Marketing an irrevocable and perpetual licence to use their IP. This will not only ensure that SDS retains ownership of their IP, but will also allow Milson’s Marketing to use the reports and solutions. However, SDS should ensure that Milson’s Marketing should not breach any IP rights by clearly outlining that they are not allowed to:

alter the reports;
commercialise them; or
allow third parties to use them.

Milson’s Marketing’s IP Rights
For SDS to provide their services, Milson’s Marketing needs to provide them with:

certain data;
business information; and
internal business methodologies.

While Milson’s Marketing is happy for SDS to use this material to provide the services, they should ensure that SDS doesn’t use the materials for any other purpose. Therefore, they will need to grant SDS a limited, revocable license to their IP for the term of the contract. This will ensure that:

Milson’s Marketing retains ownership of the IP;
SDS can use Milson’s Marketing’s IP to provide the services; and
SDS’s rights to use the IP will end when the contract ends.

Milson’s Marketing will also need to state that SDS cannot breach any IP rights that they have in the provided materials.
Key Takeaways
Your IP is the ideas and creations that come from your mind. As the holder of IP, you have to right to use it and commercialise it for your business exclusively. However, if you need to licence the use of your IP to others, you must ensure that your contract protects your IP rights from being taken. When considering what is best for your business, you should consider what you:

want the other party to do with your IP; and
need to be able to do with theirs.

If you have any questions about your IP, contact LegalVision’s IP lawyers on 1300 544 755 or fill out the form on this page.

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A significant number of finance, sales and marketing professionals move to Australia each year. If you’re looking to move to Australia, a business will need to sponsor you under the temporary skills shortage (TSS) visa. However, many sponsors and applicants are unaware of what limitations can apply to them under each occupation. This article will look at the specific visa requirements for finance managers, sales and marketing managers and marketing specialists.
Finance Managers
As a finance manager, your job must include controlling and coordinating the financial and accounting activities within an organisation to meet visa standards and move to Australia.
You must hold a Bachelor’s degree or higher qualification in a related field. Alternatively, you must have at least five years of relevant working experience. However, in some situations, relevant work experience, and on-the-job training may also be required in addition to the formal qualification.
To meet Australian visa standards, your job title may be:

Chief Financial Officer;
Finance Director;
Financial Controller; or
Financial Administrator.

If you hold one of the above job titles, your daily tasks must include:

implementing and maintaining budgeting and accounting plans;
using financial information to determine implications for the business;
coordinating the development and implementation of accounting systems;
directing the preparation of financial reports;
assessing the financial status of operational projects;
advising on investment strategies, sources of funds and the distribution of earnings;
delivering long-range profit forecasts; and
ensuring compliance with appropriate financial laws and standards.

Sales and Marketing Managers
To meet the requirements to move to Australia, you must have a Bachelor’s degree or higher to qualify as a sales and marketing manager. Alternatively, if you have completed at least five years of relevant work experience, you may not need a formal qualification. In some circumstances, relevant experience and on-the-job training may be required in addition to the formal qualification.
Generally, the duties and responsibilities for the nominated occupation include:

directing the development of sales strategies;
setting sales targets;
directing the development of strategies to promote an organisation’s goods and services; and
leading the implementation and maintenance of the business’ branding to create a reputation with customers, investors and the wider public.

However, this visa excludes positions that:

have annual earnings of less than AUD $65,000;
are based in a front-line retail setting;
predominantly involve direct client transactional interaction;
are in a business which has an annual turnover of less than AUD $1 million; and
involve an internal company transfer where an international trade obligation applies.

This occupation is prevalent in large corporations, and you typically must be responsible for managing a team of staff to be able to move to Australia under this visa.
Marketing Specialists
Generally, you are considered an advertising and marketing professional if your job involves:

planning and implementing advertising campaigns;
coordinating the production of advertising campaigns;
advising executives and clients on advertising strategies;
analysing consumer data and predicting trends;
conducting market research for potential demand;
preparing and executing marketing objectives to aid in business growth;
researching to identify market opportunities; and
advising on all elements of marketing.

If you are applying for a visa as an advertising and marketing professional, you will need to hold a Bachelor’s degree or higher qualification in a related field. Alternatively, you may substitute this requirement with five years of relevant experience. In some instances, relevant experience or on-the-job training may also be required.
As an advertising and marketing professional, you may hold one of these job titles:

Marketing Consultant;
Brand Manager;
Marketing Coordinator;
Marketing Officer;
Category Manager;
Product Manager; or
Sales Promotion Officer.

However, this visa excludes positions that:

Have annual earnings of less than AUD $65,000;
are based in a front-line retail setting;
predominantly involve direct client transactional interaction; and
are in a business that has an annual turnover of less than AUD $1 million.

LegalVision Guide to Australian Business Visas

This guide sets out the key business innovation and investor visas available to individuals and businesses looking to start or manage a business or make a significant financial investment in Australia.
The publication also includes a list of frequently asked questions about business migration pathways in Australia.

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Can I Become a Permanent Resident?
These occupations are on the short term list (STSOL) and do not offer permanent residency options. If you are seeking to become a permanent resident of Australia, you will need to look at other pathways.
For example, two visas which do lead to permanent residency include the:

skilled independent visa (subclass 189); and
skilled nominated visa (subclass 190).

However, only some of these occupations will qualify for these permanent visas.

For example, in NSW, none of the above occupations is identified as a priority occupation. Therefore, you are not able to apply for a skilled independent visa or a skilled nominated visa with NSW state nomination.
However, in Queensland, only sales and marketing managers can access the skilled nomination visa with Queensland state nomination if they currently work and reside in Queensland.

It is important that you review each state’s priority occupation list to determine if your occupation is in demand. Please note, these occupation lists are reviewed each year and occupations can be added or deleted at any time.
Key Takeaways
If you work in finance, sales or marketing, you may able to move to Australia. However, there are extensive requirements that you must meet to be eligible for a TSS visa. Job titles can be very specific, and TSS visas are usually only granted for senior positions within companies. Furthermore, a TSS visa does not lead to permanent residency, so you will need to explore other options if that is what you are looking for. If you have any questions about migrating to Australia for work, contact LegalVision’s immigration lawyers on 1300 544 755 or fill out the form on this page.

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In our modern world, social media is becoming increasingly important to market businesses and sell products and services. One of the most popular social media platforms is the photo-sharing app Instagram. By uploading creative and popular content on Instagram, your business has the potential to reach millions of people worldwide. Many businesses generate almost all of their revenue from marketing on Instagram. However, using Instagram to market your brand may involve issues surrounding;

privacy;
data collection; and
ownership of the content.  

This article will explore the key legal issues surrounding Instagram’s policies and explains how they could affect your business’ future.
Instagram Can (Technically) Exploit Your Content
While Instagram doesn’t own the content that you post, they have a very broad licence over your work. Specifically, this licence gives them the right to:

house;
use;
distribute;
modify;
run;
copy;
publicly display;
translate; and
create derivative works of your content.

Additionally, Instagram has a legal licence to:

transfer their licence over your work to anyone else; and
grant a sublicense of your work to anyone else.

They can do this anywhere in the world and do not have to pay you for your work.
In practical terms, this means that Instagram can take any content that you post about your business and potentially develop and market those products themselves. Instagram can also use your brand for advertising and marketing purposes, all without paying you anything. Furthermore, Instagram does not have to credit any of your content if it uses it.
In reality, it isn’t very likely that Instagram is going to steal your company’s logo or sweatshirt design. However, it is important to know that it does technically have the right to do so. Instagram’s terms state that you can end the licence by deleting your content or account. However, the licence will continue to apply on any content that you may have shared with others.
In addition to the above, Instagram:

can change your username;
does not guarantee that your content is going to be secure; and
isn’t responsible for any financial loss that you might suffer as a result of their actions.

Running Giveaways Legally
You should be mindful about potential legal issues when running competitions or giveaways on Instagram. While they are very popular, you may need to do a bit more homework before you launch a promotion. This is because you are legally responsible for enforcing the competition rules that may apply in your business’ industry.

For example, you own a winery and want to run a competition to win a bottle of your latest prestige vintage. If so, you’re going to have to make sure that anyone who enters the competition is of legal drinking age in the area that they are from.

If you are unsure about what rules will apply to your business’ giveaway or competition, make sure to check Instagram’s terms of use and do some research online.
Restrictions of Your Business’ Branding
There are certain restrictions on how you can promote your Instagram profile and business. Some of these restrictions include:
1. ‘Instagram’ Labelling
You cannot combine or use the words ‘Insta’ or ‘gram’ with your brand.
For example, if you exclusively run your business on Instagram, you might want your potential customers to associate your company with being on Instagram. If so, you cannot use ‘insta’ or ‘gram’ within your:

company name;
branding; and
promotional materials.

Instead, you can only advertise that your brand is ‘on Instagram’.
2. Mentioning Other Social Media Platforms
You can’t mention other social media platforms or networks (other than those also affiliated with Facebook) in the same spot as where you advertise your Instagram. This is other than in a general “follow us on…” section within your branding material.
This means that it is okay to include Instagram if you have a website banner which outlines your different social media links. However, you cannot mention other social network platforms together with Instagram in, for example, a blog post.
3. Hashtags
You cannot hashtag ‘insta’ or ‘gram’ on any other social networks, even if you intend it to be a general hashtag that isn’t related to Instagram.

For example, you can’t use hashtags like ‘Instameal’, ‘Instachef’ or ‘foodgram’ on your business’ Twitter profile.

4. Approval for Using Screenshots
You will need to obtain approval if you wish to use a screenshot of Instagram while, for example, advertising your Instagram profile. This advertisement might be in a:

commercial;
television show;
web series;
weekly show; or
film.

For example, you will need to get Instagram’s approval if you want to create a short promotional video for your business’ website and part of that video contains a snapshot of your Instagram account.

5. Buying Likes and Followers
The number of followers or likes in your business’ social media can greatly influence the growth of your brand. The more followers you have, the more revenue you are potentially going to earn. As a result, many apps have opened that claim to collect likes or followers for your Instagram profile.
However, you should be wary before deciding to use one of these apps. Instagram does not permit artificially collecting likes and followers or using bots to post repetitive comments and content. As Instagram is managing your usage of the app, if the rates that you are liking, commenting or following other users is not consistent with normal human usage patterns (even if it is a human doing this), then Instagram may temporarily block your account. If they suspect that a bot is behind your account, they might even delete it.
How Instagram Collects Your Data
Instagram collects your data when you:

sign up;
post content;
share content; and
privately message someone.

This includes collecting the metadata that attaches to your content, like the:

location that you took a photo; and
date that you posted something.

Instagram also collects your transaction information such as your credit card numbers and shipping details. They also collect information from the particular device that you use to access Instagram.

Therefore, if your employee is in charge of your business’ Instagram profile and uses their personal phone to manage it, Instagram will be collecting information from the employee’s personal phone.

Instagram’s data policy goes into great detail about how they use your data. We have summarised some key points below:

phone information: Instagram collects data about your phone’s hardware, software, storage space, app names, signal strength and even its battery life. In other words, Instagram can access pretty much any files that you may have and all of your settings;
operations: Instagram can also monitor how you are using your phone. For example, they can see when you open an app, when you send it to the background or when you select or click on anything;
identifiers: Instagram also uses cookies to collect your data from other applications, like the games you play or any other apps associated with Facebook. This is how you might see an ad for something on Facebook that you had only searched for on Instagram;
data from device settings: Instagram also monitors your GPS location on your phone and where you take certain photos that you have uploaded. This is how it can suggest certain location tags for you when you post a picture;
network and connections: Instagram also collects information about your mobile operator, timezone, mobile number and even your internet connection speed.

The Ultimate Guide to Starting an Online Business

It’s now easier than ever to start a business online. But growing and sustaining an online business requires a great deal of attention and planning.
This How to Start an Online Business Manual covers all the essential topics you need to know about starting your online business.
The publication also includes eight case studies featuring leading Australian businesses and online influencers.

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Key Takeaways
Understanding Instagram’s legal policies are crucial if you plan on running an Instagram account for your business. Instagram can use your content without your permission and without paying you. Additionally, they restrict how you’re able to use their app or make references to their brand. Once you download Instagram, they begin to collect your data and use it for advertising purposes. If you have any questions about your business’ online profile, contact LegalVision’s e-commerce lawyers or fill out the form on this page.

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Transferring shares is when a shareholder in the company sells their shares to an existing shareholder or third party. Shareholders transfer shares for three reasons, such as:

if they no longer want to own shares in the company;
reduce the percentage of shares; or
earn income from the sale.

If you are a shareholder, this article will explain when and how to transfer shares.
Is A Share Transfer Different From Share Issue?
There is a difference between a share transfer and a share issue. A share transfer involves exchange of shares between shareholders.
A share issue is where a company issues new shares to increase its amount of cash. Investors buy the new shares for a price based on the company’s value. The new shareholder’s money goes directly into the company. The other shareholders now own a smaller percentage of the company, but the company is worth more money.
However, share transfers occur between shareholders. There are no new shares. The shareholder could sell all their shares, or some of them. The purchaser buys the shares on a purchase price based on what they are willing to pay as well as the current share value. The company’s current revenue, cashflow and future revenue are influential factors that determine the value.
How Do You Transfer Shares?
1. The Decision
You decide you want to sell your shares in a company as you are not happy with the company’s direction or you want to make some money. You can sell all or some of your shares. There may be a company that has offered to buy the company, so you will join the other shareholders to sell shares to the same buyer.
2. Offer Shares to Existing Shareholders
The standard share transfer process for your company depends on your company’s shareholders agreement and constitution. You must consult these agreements so that you follow company protocol. Offer the shares for sale to the existing shareholders.
3. Offer Shares to Third Parties
If the existing shareholders choose not to buy all the shares, offer the remaining shares to third parties based on the same terms as the existing shareholders. Alternatively, sell all the shares to a third party rather than find someone who will only buy a select percentage. A shareholders agreement may clarify this approach.
4. The Shareholders Agreement and Constitution
The purchaser of the shares agrees to abide by the company’s shareholders agreement (if it has one) and the company constitution. The company provides those documents for review. Both documents govern the relationship between the purchaser, the existing shareholders and the company.
5. Legal Documents
A share transfer requires a few key legal documents:
Share Sale Agreement: The agreement outlines the terms of sale and forms a written record of the parties’ intentions. The agreement contains details about the purchase price, how the sale will take place and may include purchaser and/or seller warranties and obligations.
Share Transfer Form: You will need a Share Transfer form. The form contains sale details, but the terms and conditions are not as detailed. Sometimes, that form is an alternative to the Share Sale Agreement. You will need to update ASIC that a change has been made to the company’s member register. This can be done online through the ASIC portal.
Shareholders Agreement: Any new shareholders must agree to the company’s shareholders agreement, if there is one in place. Some companies will sign a new shareholders agreement that is entered into by all shareholders when the share sale is complete. For others, the new shareholder can sign a deed of accession to the existing shareholders agreement of the company so they are also bound by its terms.
Governance: Refer to the company constitution and shareholders agreement for the approval process. You may have the board will agree to the share sale through a resolution. Once the sale is over, the company must cancel the seller’s share certificate and issue a new share certificate to the purchaser. They can issue a replacement share certificate to the seller if they are only sell some of their shares. The company must update its members register to record the new shareholder and the change in the share ownership.You must notify ASIC of the change to the share structure within 28 days of the sale to avoid a late fee.
Drag Along and Tag Along Provisions
Depending how much percentage of the company you are selling as part of the share transfer, you may trigger certain provisions called drag along and tag along provisions. A shareholders agreement contains both clauses to balance minority and majority shareholder rights. 
A drag along clause allows shareholders who hold the majority of shares (75%) to force the remaining shareholder(s) to sell their shares at the time they sell their shares. The clause allows a majority shareholder (often the founder) to offer a potential buyer to buy the whole company. The drag along clause will ensure the potential sale won’t be frustrated by a minority shareholder who disagree with the sale.
Tag along clauses have the opposite effect. They allow minority shareholders to ‘tag along’ if the majority shareholder is selling to a third party. Minority shareholders may wish to ‘tag along’ so they are not shareholders in a company controlled by people who did not want to be controlled in the company.
Key Takeaways
Existing shareholders transfer shares to end their share ownership within a company. The shareholders agreement and company constitution usually has a process for transferring shares. Once you have found a buyer, you should:
 

Draft the share sale agreement;
Ensure the company approves the sale; and
Issue updated share certificates and update records.  

If you have any questions, get in touch with LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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In every contract you sign, you will usually find a reference to “indemnities”. In basic terms, they are promises from one party to compensate the other party for certain losses or damage. Indemnities contain important obligations that you cannot waive if you have to indemnify someone. Alternatively, you may have additional rights to recover compensation if you receive an indemnity from the other party. This article is an introductory guide to how indemnities affect your business and you should look for in a contract. 
What is an Indemnity?
An indemnity is a promise by one party to compensate the other party for loss or damage suffered by the other party during the performance of the contract.
An indemnity is also known as a ‘hold harmless’ clause as one party agrees to hold the other party harmless. Alternatively, they are ‘make good’ clauses where the other party is put back in their original position before the claim. 
When there is an indemnity clause, the person who provides the indemnity is known as the indemnifier. The person who is covered by the indemnity is known as the indemnified party.
An indemnity comes in various forms. For ease of explanation, a goods supplier is the indemnifier, a customer is the indemnified party.
 

Name 
Explanation

Bare indemnity
The supplier indemnifies the customer for losses caused by a set of circumstances under the contract. The indemnity does not specify other events such as losses caused by the customer. 

Reverse indemnity
The supplier indemnifies the customer for any customer acts or omissions during the contract. 

Proportionate Indemnity
The supplier indemnifies the customer only for losses that flow from the supplier’s acts or omissions during the contract.

Third-party Indemnity
The supplier agrees to be responsible for any losses because of a claim against the customer by a third-party related to the contract.

Party/Party Indemnity
The supplier indemnifies the customer where the supplier breaches the contract. It also requires the customer to indemnify the supplier where the customer breaches the contract.

How to Limit The Scope of an Indemnity
You can introduce limits to the scope of an indemnity to apply only to certain situations or types of claims.

For example, you have a software supplier who sells software to a customer. The contract says the supplier gives the customer an indemnity where a third party makes an intellectual property (IP) claim against them. The supplier has promised the customer that if a stranger outside the contract sues the customer for IP infringement (such as a breach of copyright), the supplier will accept responsibility for the customer’s loss or damage resulting from the claim. 

A clause in the contract could look like the following paragraph below.

Despite anything to the contrary, the Supplier shall indemnify the Customer against any loss, cost, damage, expense, liability or claim (Claim) suffered or incurred by the Customer which relates to or arises out of any third party claim that the Software, or the Customer’s use of the Software, infringes the Intellectual Property Rights of any third party.

The clause demonstrates how an indemnity can limit: 

the types of claims allowed; and
the types of loss and damage that a supplier will cover under the contract.

For example, in the software supplier case study, the clause limits claims to third party IP claims over the software supplied to the customer under the contract. The supplier will cover losses related to the claim. However, the clause will not cover legal fees from the customer. Therefore, the clause means that while you will provide an indemnity, you will not extend its scope to cover every type of loss.

Why Should You Limit Indemnities?
An indemnity clause differs from a standard contractual term because of its broad scope. A standard clause will refer to a supplier indemnifying the customer against all kinds of loss. If you do not add limits to that indemnity clause, you could be unfairly held responsible for losses that are out of your control. A standard indemnity, without any amendments, does not:

exclude liability for remote losses or damage that are not linked to the original contract breach (for example, requiring medical expenses for stress over software failure is a remote loss);
require the other party to limit the extent of their loss (for example, delaying the report of a software virus until the documents are destroyed);
usually limit the time period for the affected party to take legal action (for example, the customer may sue you ten years after buying the software).
limit your liability to any liability directly caused or contributed to by yourself or the customer, otherwise known as proportionate liability (for example, you may be liable for the customer destroying the software by accident); and
has no limits on where and when you can recover compensation (for example, having to compensate medical expenses for stress over software failure).

 
How to Avoid Standard Indemnities
If you see a standard indemnity clause, you should always ensure that the indemnity is reworded to include limits on the responsibilities you are prepared to accept.
You can amend the broad scope of a standard indemnity by:

specifying carve-outs to the indemnity, where certain events are excluded such as the acts or omissions of the other party;
stating that proportionate liability will apply; or
placing obligations on the other party to mitigate their loss.

How Do Indemnities Affect You?
When you receive a contract with an indemnity clause, you should look at the indemnity from both sides. You may be promising to indemnify the other party (the indemnifier) or the other party may be promising to indemnify you (the indemnified party). 
Indemnifier
If you are the indemnifier, you should ask yourself questions, such as:

what are the types of responsibilities that apply to you?; 
what is the potential cost to your business if you have to indemnify the customer? 
can you afford to meet these costs?; and
if you cannot afford these costs, do you have insurance to cover this type of indemnity?.

Most insurance policies will not cover you for liability assumed under an indemnity. You may need tailored insurance that covers your specific liabilities under the contract. Check with your insurance broker if your existing insurance will cover these risks.
Indemnified
If you are the indemnified party, you have a lower threshold to demand compensation for any loss or damages that you suffer. Under many indemnities, you do not have to prove that the other party was at fault for causing the loss or damage to receive compensation. You only need to show evidence of expenses related to the claim under the indemnity.
Therefore, an indemnity is similar to recovering a debt. You want an indemnity for the biggest risks that may occur under your contract. You can still sue for a breach of contract and receive money through awarded damages. However, your business is less likely to struggle financially if you can receive compensation more quickly without having to prove fault.
How to Negotiate Indemnities in Contracts
An indemnity can significantly affect the rights of suppliers and customers if there is a breach of contract. Therefore, indemnity clauses are often the focus during contract negotiations. The meaning of indemnity clauses differs depending on individual situations and the contract itself. 
However, regardless of your industry or contract type, you should ask yourself questions such as:

who is giving the indemnity and who is receiving it?;
What are the types of liability covered under the indemnity?; and
What kind of limitations will you expressly include in the indemnity?.

For example, if you are receiving the indemnity, you may request that the indemnity covers your actions and omissions as well as covering all legal costs. If you are giving the indemnity, you may want a requirement that the indemnified party must mitigate their loss for events within your control.

Key Takeaways
Indemnities are broad promises that you give the other party to compensate for losses or damages. Alternatively, the other party can give you an indemnity. When you receive a commercial contract with an indemnity clause, you should understand:

the types of indemnities you can have in a contract;
how to limit the scope of an indemnity clause;
the obligations you have under an indemnity clause; and
how to negotiate an indemnity clause to limit your liability.

If you have any questions or need assistance in reviewing an indemnity, get in touch with LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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If you have ever been to a large event like a concert or soccer match, you may have noticed signposted notices in small fonts called conditions of entry. You may have seen similar signs at your local shops posted at the door as you walk in. If you are a retail business or organise events, you may need conditions of entry to protect your business. This article explains how ‘conditions of entry’ should operate for your business. 
What Do Conditions of Entry Include? 
Conditions of entry are a set of contract terms that a person accepts by entering your premises. Business owners normally display conditions of entry on a sign in situations where it would be impractical for the person to sign a contract.

For example, you run a business where clients, customers or spectators visit your premises, such as:

car parks;
live event venues;
night clubs; and
sports centres.

You will probably need conditions of entry that your customers must agree to before entering the premises.

What can Conditions of Entry Include?
Some examples of typical conditions include:

making the customer consent to their bag searches they leave a retail store;
excluding any responsibility for any valuables stolen from cars in a car park; and
banning the filming or recording of a performance on your mobile phone at a music concert. 

The unfair contract terms regime under the Australian Consumer Law (ACL) will apply to conditions of entry. Conditions of entry should not contain terms that:

are one-sided and greatly favours the business over the consumer;
have no satisfactory commercial reason why the business needs such a term; and
cause the consumer to suffer financial loss, inconvenience or other disadvantaged if the term is enforced.

For example, an unfair term in a conditions of entry is where stadiums can confiscate cameras for a time without the need to return them to the original owner or otherwise compensate for the confiscation of the camera. 

Your conditions of entry should be concise and only include terms that are necessary to protect your legitimate business interests. 

For example, if you are a concert organiser that wants to ban people from filming the concert, the term helps other people enjoy the concert and influences their decision to return and pay for more concerts. However, it would be an unfair term if you said you would confiscate any video cameras without telling the original owners.

Are Conditions of Entry Enforceable? 
As conditions of entry operate like a contract, the document should be able to apply to anyone who enters your premises. This is known as whether the contract is enforceable.
If you plan to display your conditions of entry on a sign, you should make those terms obvious to anyone who enters the premises. As a retail shop owner, you can put the sign near the door. If you are organising a sports event at a stadium, you can put the sign next to the ticket barriers to the stadium. Those positions allow people to read and consider them. Conditions of entry are only binding if you can prove people had the chance to read and accept the terms before entry.
How to Handle a Breach
If customers breach any of the conditions of entry, your main solution is to eject them from the premises.

For example, one of your conditions of entry to a nightclub is where partygoers must behave appropriately at all times without disrupting others. If you have a customer that is being disruptive at an music event at a nightclub, you would get a bouncer to remove them from the nightclub.

You usually cannot require a customer to pay compensation if they breach the terms of conditions. That is because of the one-sided nature of the conditions of entry. Enforcing financial penalties may look like an unfair contract term under the Australian Consumer Law.  However, if you can show you have suffered financially because of the customer’s breach of terms, you could claim compensation through legal action.

For example, the customer is so disruptive at the event that he becomes violent to other customers. The bad press and negative feedback from other customers means you get fewer customers over the next few weeks. You could consider taking legal action against the disruptive customer for the loss of income.

Key Takeaways
Conditions of Entry can be a useful tool for businesses that have certain requirements of customers entering their premises. However, you must ensure the conditions of entry are:

displayed properly on a sign;
have enforceable terms; and
necessary to protect your business.

Otherwise, your conditions of entry (or one of the conditions) may be an unfair term that falls foul of the ACL. If you have any questions or you need assistance on drafting your conditions of entry, get in touch with LegalVision’s contracts lawyers on 1300 544 755 or fill out the form on this page. 

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Managing a special event such as a client function can be stressful for many business owners. As an event organiser, you can help business owners book venues, confirm guest lists, create marketing for the event and arrange catering. Business owners can then focus on entertaining their clients. However, you may want to enter into an event organiser agreement to protect your interests in case of a dispute. This article explains what you should include in an event organiser agreement.
Who needs an Event Organiser Agreement?
An event organiser agreement protects the interests of the business and the event organiser. From your perspective, you want to:

clarify your payment process;
handle any intellectual property (IP) appropriately; and
limit the extent of your responsibility if there is damage or injury at the event.

Business owners, on the other hand, will want you to:

carry out the services properly as outlined in the agreed scope of work under the contract;
know that you are legally responsible for any damage or injury caused by your actions; and
understand that all intellectual property (IP) created under the agreement belongs to them, not you.

For example, if the business owner allows you to create banners using their logo (which has a trade mark), they are granting you a licence you the right to use the logo for making the banners. You do not have permission to use the logo for other reasons.

What are the Key Clauses in an Event Organiser Agreement?
A properly drafted event organiser agreement sets out clear terms and conditions on what to expect when you provide your services. Important clauses include:

the term of engagement: when do you start or end your obligations under the agreement? Do you have to meet any milestones?;
the scope of services: what is the scope of your client’s services. Are you willing to provide any type of services or are you only responsible for a defined set of responsibilities?; 
deliverables: are there any specific artwork, plans or advertising material to create? Do you have certain targets to meet?; 
IP: will you have a licence to use the client’s trade mark to market your event to potential customers?;
payment process: how much are the services and when do you have to pay the event organiser? 
liability: who is responsible if there is damage or injury? What situations is someone within their control? Are there external factors that may affect the event’s success?; and 
disputes: if there is a dispute over the contract, do you go to mediation or go straight to court? 

Payment Structures
Event organisers have different payment structures depending on the event type. If the event has no tickets, you can base the payment on the agreed process in the contract. 

For example, the client must pay 25% of the total fee at least six months before the event. They pay an extra 50% of the fee at least one week before the event. The client pays the final 25% after the event.

If the event has tickets, you will need to decide the appropriate fee for service based on the size and profitability of the event.

For example, you want to manage your expenses, boost profit and analyse your revenue in all the events that you host. You can have a process where you review total revenue from the event and calculate profit after deducting expenses.

Unfortunately, event organisers struggle to recover outstanding fees if there is a dispute over the terms of the agreement. Sometimes, you may want to include contractual clauses to limit any risk that you will not get paid on time. 

For example, you may want to:

maintain control and transparency over event funds stored in your bank account;
require evidence (by collecting receipts) for event expenses, where you are paid based on the net profits; and
audit any accounts to ensure you are receiving the appropriate fee. A third party auditor may also be allowed to review the information.

Key Takeaways
An event organiser agreement will ensure you get paid for your services. More importantly, both you and the client will know your rights and obligations to ensure the event is a success. Although you may be tempted to run with a ‘handshake agreement’, a proper contract ensures you can take action against the client if your event does not go to plan. If you need assistance drafting an event organiser agreement, get in touch with LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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