Articles by Christopher Tsiknas

Within the last 6 months there have been a number of changes to laws that are relevant to small businesses. Whether you’re an owner looking to sell or a prospective buyer, it’s important to understand how these changes can affect you. As the new year has rolled in, most business owners will be in the early stages of carrying out their strategic plans with hopes of a successful start to the new decade. As an owner, it’s natural to keep an eye out for anything that may get in the way of achieving your goals. Ever changing laws and regulations can often catch business owners off guard and halt long term plans and ambitions.  Within the last 6 months there have been a number of changes to laws that are relevant to small businesses. Whether you’re an owner looking to sell or a prospective buyer, it’s important to understand how these changes can affect you. Below is a summary of some of the legal and regulatory changes to be aware of.  Updates to Employee Awards The most significant area of change arrives in the impending alterations to employee awards. The Fairwork Commission, as a result of a review, has decided that it will alter the provisions of 22 employee awards from March 1. The changes are primarily focused on the annualised salaries component of each award. Under the existing legislation of the Fair Work Act, businesses are required to pay full time employees an amount that reflects what they would receive under their award, inclusive of overtime and extra allowances. However, the grey area has always centred around the recording of hours worked. Given that it is rare for full time salaried employees to note their hours and days worked, it is difficult to determine entitlements owed. With high profile corporations being exposed and scrutinised for long hours and potential wage theft, the government has responded with strict requirements. As the awards involved range from hospitality to finance and manufacturing, it is likely that you will be affected as a small business owner.    • Recording and Tracking Hours The key takeaway from the changes to annualised salary provisions, is that you now must track and record the hours of salaried full-time employees. This means you will have to implement a system for the employees to submit all the hours they’ve worked and their breaks. Where an employee records hours outside of the limits under the awards, it is best to pay them for this at the relevant overtime or penalty rate.   • Notice of Annual Salary and Ordinary Hours In addition to recording and tracking hours worked, employers must now provide written notice outlining an employee’s annual salary and the maximum hours they can work outside the 38-hour week. As an employer, you will be obliged to ensure that employees are paid at least the minimum wage for any hours worked after the 38-hour threshold.  Employee Superannuation Changes As part of the changes to annualised salary provisions, there has been an effect on superannuation regulations. As of January 1, this year, salary sacrifices cannot be included as part of an employer’s mandatory superannuation contribution. Employers are now required to pay the 9.5% superannuation contribution on an employee’s gross pay including any salary sacrifice that has occurred. As an employer, you should also be aware of the Superannuation Guarantee Amnesty bill which has just passed through parliament. This will essentially provide employers with a 6-month window of opportunity to correct any non-compliance with regards to superannuation payments. If an employer chooses not to act and is exposed after the amnesty period, significant penalties will apply.  Unfair Dismissal Threshold Although this change did occur halfway through 2019, it is extremely relevant given the substantial reform to employment legislation that is currently occurring. The high-income threshold that excludes an individual from claims unfair dismissal was increased to $148,700 per year. Provided the other necessary provisions are satisfied, an employee under this threshold can apply for unfair dismissal after termination. This is likely to influence an increase in applications and is something you should keep in mind when terminating someone’s employment. Conclusion As stories of wage theft and mass underpayment continue to appear, it is clear that a crackdown has begun in 2020. With significant changes to employment awards and legislation, the Fair Work Commission has taken a stance to ensure the correct payment of employees. Significant penalties will be imposed for those who breach these new amendments. As a result, there is substantial risk for small business owners across the country, with non-compliance now a fatal move. Given that these updates can be complex and difficult to keep up with, the advice of an employment lawyer may be of use. For more information, contact Christopher Tsiknas at Lawpath [email protected]://www.lawpath.com.au

Selling a business is often an emotionally taxing experience as an owner. You have to balance handling all the administrative matters correctly with preparing for life away from your business. As a result, it is really easy to overlook certain parts of the process, which unfortunately can create headaches down the track. This is particularly relevant to the legal aspect of selling your business. To help you avoid any complications, we’ve come up with a list of legal factors for you to consider before signing off on a sale Terms of Sale When presenting your business for sale to prospective buyers, it’s important to be very clear and specific about what exactly you want to sell. The goodwill of your business can be spread throughout your tangible and intangible assets. This can range from land and equipment to your business name and customer data. You will want to establish the elements of your business that you wish to sell or retain, prior to entering into a Business Sale Agreement. Business Name Transfer If you do agree for the new owners to take on your business name as part of the sale, you will be responsible for the transfer process. ASIC provides a simple to use service to transfer a business name to a new owner. This process is done completely online and is accessible here. It is important you are aware of this obligation prior to agreeing for your business name to be sold. Employees When selling your business, the future of your current employees will be one of the more pressing matters to deal with. This is something you don't want to neglect, as there can be legal consequences if you do not act appropriately. During the process of a business sale, there are essentially two outcomes that can occur with regards to your employees The new owners may want to keep your existing employees when they take over the business. In this instance, it is wise to provide as much information to the new owners in order to avoid any confusion or complication. As a starting point, you should transfer your employee’s most recent records over to their new employers. In addition, you will want to make them aware of any existing obligations you have with your employees.  These could include contractual, financial, legal or leave related agreements. Despite the fact that your employees will still have work, you will need to provide notice of their employment ending. Inform them that they will have to enter into a new contract with the new owners, which comes into effect when the business is officially sold. Alternatively, if the new owners have no intention of employing your staff then you should notify them as early as possible. This can be a delicate situation to deal with, and as a result, honesty and transparency during this process is vital. Being clear with your employees about their future will not only benefit you as the employer but will also give them the best opportunity to find other employment. It’s best practice to refer to and follow the requirements of the Fair Work Act 2009. Leases and Licenses During the negotiation process with a potential new owner, it’s vital to identify any existing leases, licenses or permits that concern the operation of your business. An existing lease may require a transfer to be arranged with the vendor to the buyer. With regards to licences, councils tend to be the authority that will manage the transfer process when a business is sold. Liquor and food licences are examples of this. Failing to disclose any of these factors, can lead to legal consequences, especially if they are noticed after a sale has been completed.  The key theme to remember throughout the entire process of selling your business is transparency. Disclosing relevant information about your business to a prospective buyer will ensure you don’t encounter any complications after the sale. If you are uncertain about any aspects of the selling process, the advice of a business sale lawyer be of use. For more information, contact Christopher Tsiknas at Lawpath [email protected]://www.lawpath.com.au

It’s inevitable that some businesses will fall into insolvency in their lifespan. This means the business is in a position where they are unable to pay their debts. Despites efforts to turn the situation around, most insolvent businesses won’t be able to avoid liquidation. One option in this scenario is to try and sell your business before entering into administration. Selling an insolvent business is a delicate process that can very easily end up as illegal activity, if the wrong steps are taken. Here are some factors to consider when attempting to sell up.  Why Sell?  Before you try and sell your insolvent business, it’s important to understand what you will gain from doing so. From a financial perspective, selling can save you the costs associated with entering voluntary administration and/or liquidation. You will also have control over the sale of assets, which can ensure you get the most value as possible. Typically, a sale which occurs prior to administration/liquidation will attract a greater amount. In terms of non-monetary positives, the sale of your business can help maintain your image. Your business can also continue to trade under new management, which keeps it alive instead of disbanding. This may also provide the opportunity for your employees to stay on.  Selling to a Related Party  When looking to sell your insolvent business, it is acceptable to have a related party purchase it. The idea behind this is that a related party will provide a higher price for the business in comparison to an unknown entity. However, there are a number of legal provisions that must you must satisfy in order to sell to a related party. The following requirements stem from sections within the Corporations Act. Related Party Definition A related party, for the purpose of purchasing an insolvent business, includes: The directors of the company Director’s spouses Relatives of directors and spouses  An entity controlled by a related party (e.g. any of the parties above) Arm’s Length Terms In order to conduct a sale with a related party, the transaction must include arm’s length terms. Arm’s length refers to a transaction were neither party bears a special duty or obligation. They should act under no influence and for their own interests. In order to determine whether a related party transaction is at arm’s length, the following factors will be considered: Are the terms similar to an unrelated party transaction with comparable circumstances Is there another legitimate alternative available instead of a related transaction Nature of the negotiations Implications of this transaction both now and long term In addition, all related party transactions should be for fair value and in the best interests of the business. Staying within range of market price and having the process independently reviewed is also recommended.  Illegal Activity With so many rules and regulations surrounding the sale of a business, it can be very easy to fall foul of the law. Illegal phoenix activity is a common offence amongst those selling insolvent businesses. This is when a new company is created in order to continue the business of an insolvent company. The insolvent company is then intentionally folded to avoid paying outstanding debts.  If you engage in illegal phoenix activity as a director, you will be in breach of your company duties. The duties require you to act in good faith and make proper use of your position. Punishment can range from fines to imprisonment.  Conclusion There can be a number of benefits to selling off your insolvent business. However, it is important to be aware of the complex legal web which guides the process. The advice of a company lawyer will be helpful in breaking down these legal factors and verifying your sale.     About LawPath LawPath is Australia’s leading provider of online legal services for businesses and individuals, providing technology powered legal solutions at a fraction of the time, cost and complexity of the traditional system.