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  • Issue 38, Spring 2014 Commercial eSpeaking-Commercial eSpeaking-Newsletters
    an organisation that accounts and balance sheets dont provide Most small businesses rely heavily on key personnel and you need to know who those key people are and if necessary incorporate a provision in the Agreement to cover their continued employment situation Enthusiastic and experienced employees can make or break a business If staff members leave soon after you purchase the business ensure that you factor into your purchase price recruitment and training costs required to get new staff members up to speed Getting employment clauses right in a business sale and purchase agreement will also help you avoid difficult problems if there are any employees involved Come and see us if this might apply to the business you are purchasing Buying the company v buying the business You should consider establishing a new entity to run the business to minimise the risk of inheriting company debts contracts and liabilities that may not have been disclosed to you This also separates out your business venture from any existing companies that you own The cost of incorporating a company is relatively small and enables you to tailor the constitution and ownership to your own needs If the company name is the business name you want to retain you should negotiate for the vendor to change their company name and free up that name for your use Restraint of trade clauses will bind the vendor company but not the vendors directors shareholders or employees unless they enter into a separate deed As with key personnel make sure that you are tying in the commitment of those who can help you set up the business for success Shareholders agreements A well drafted shareholders agreement can save you many headaches in unforeseen or unwanted scenarios if you are going into business with a partner This will set out what will happen if one of you wants to get out of the business dies suddenly or is unable to continue working Having such an agreement can help avoid being left in business with someone who inherits from your business partner It can ease the tension give certainty and provide a clear process if one party wants to depart the business Premises Buying a successful business is only part of the equation in most cases you need a place to do business If you lease premises this is often the biggest cost and the longest commitment involved in the business Make sure that you are comfortable with the terms and length of the lease the outgoings and all the fine print Be aware that it may be possible to negotiate a variation of lease or further rights of renewal as a condition of the purchase Depending on the nature of your business this can be the best investment that you make If location is important check that you have sufficient rights of renewal The Sale and Purchase Agreement The wording of the Agreement is important for your protection Minor errors in an Agreement can lead to

    Original URL path: http://www.dglaw.co.nz/newsletters/commercial-espeaking/issue-38-spring-2014-commercial-espeaking (2016-04-27)
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  • Issue 37, Winter 2014 Commercial eSpeaking-Commercial eSpeaking-Newsletters
    may not be treated in the same way as would another employees wages If you pay yourself more than a market salary or take more drawings than the actual business profit you could be liable to repay the difference A liquidator is required to realise the assets of the company and anything owed by you as a director is immediately payable Any payments in excess of a reasonable and properly authorised salary are likely to be classified as advances under your shareholder current account and will be payable to the liquidator Be familiar with your companys constitution If you pay yourself a salary without passing the relevant resolutions and certificates 1 you may be in breach of the companys constitution ignorance is no excuse Your companys constitution could be more stringent than the minimum requirements set out in the Companies Act 1993 so it pays to check Protection To safeguard yourself you should consider waiting until your companys annual accounts have been prepared before setting your salary This allows you to record in your directors resolutions that you have assessed the companys financial status and can set a salary for the coming year thats in line with both market rates for your position and the company profits You could then instruct your lawyer to prepare the necessary company resolutions for you to sign 2 If the payment is to a director the Companies Act requires you as director to sign a certificate stating that in your opinion the payment is fair to the company and the grounds for that opinion If you dont bother you risk becoming personally liable to repay the money that you receive to a liquidator The risk is even higher if you take drawings over your pre approved salary for the year In that instance you should reassess the companys financial standing and pass resolutions that encapsulate the special circumstances for authorising a salary increase That way you can avoid the trap of payments above your pre approved salary being classified as shareholder advances or as unauthorised payments If the companys profitability is marginal you should consult your company lawyer and accountant before going ahead with any payments to yourself Ambiguity drawings or expenses At times company expenses may be difficult to distinguish from drawings You should document every purchase and expense very carefully For example entertainment expenses may be reclassified as drawings if you have not recorded the expense properly Ambiguity is not helpful in a liquidation setting It can be surprisingly difficult to prove that items or costs relate to the company if you have not bothered to keep clear records If theres any doubt a liquidator will take the view that costs are personal Conclusion Its important to ensure that your shareholder current account is not overdrawn and that all salary or dividend payments have been properly authorised Ensure at all times that you keep good records of not only transactions but also the reasons behind them Business Briefs Business sales and earnouts

    Original URL path: http://www.dglaw.co.nz/newsletters/commercial-espeaking/issue-37-winter-2014-commercial-espeaking (2016-04-27)
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  • Issue 36, Summer 2014 Commercial eSpeaking-Commercial eSpeaking-Newsletters
    of cases also undesirable The exclusion that will be available under the new regime is less restrictive than the current rules and will enable employers to offer these schemes with more flexibility and on a more cost effective basis Officials have acknowledged that its important to facilitate these schemes whilst at the same time also ensuring that employees receive basic information about the investment decision theyre making So certain disclosures will need to be made to participating employees including the companys latest annual report and financial statements to the extent available information about how the shares can be sold and prescribed statements about the risks of employee share schemes The new exclusion should be able to be used from 1 April this year Capital raising In terms of general capital raising currently there are a range of exclusions from the need for full compliance with the Securities Act 1978 when sourcing capital from investors Theres a lot of uncertainty and subjectivity associated with the current exclusions which has meant that theyre not as helpful as they should be The new Act carries over a number of the current exclusions but makes them clearer with the introduction of more objective tests A significant change will be the introduction of a small offer exclusion This will allow companies to raise up to 2 million from up to 20 investors in any 12 month period through personal offers The rationale here is that compliance with the full disclosure requirements would outweigh the benefits of making the offer Its expected that companies that want to use the small offer exclusion will need to provide a prescribed warning statement to investors and notify the Financial Markets Authority FMA that theyre using it The purpose of this is twofold Firstly to ensure investors are aware of their regulatory position and secondly to help the FMA monitor the level of activity taking place in this area This exclusion is also expected to come into force from 1 April this year Looking ahead If youre interested in other aspects of the new regime the next step in its implementation will be the development of the draft regulations which is currently underway These will provide a lot of the detail for the framework established under the Act including the content of the new disclosure documents as well as on the new licensing frameworks and other key operational changes Theres plenty to plan ahead for but if youre looking at setting up an employee share scheme or raising capital in the next few months its business as usual and you still need to comply with the current rules under the Securities Act If youre thinking of offering your employees some shares in your company or youre undertaking some capital raising do talk with us early on Despite the new legislation these are still complex activities and youll need advice from us and also your accountant Business Briefs New Zealand company business numbers All companies currently registered in New Zealand have

    Original URL path: http://www.dglaw.co.nz/newsletters/commercial-espeaking/issue-36-summer-2014-commercial-espeaking (2016-04-27)
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  • Issue 33, Summer 2013 Commercial eSpeaking-Commercial eSpeaking-Newsletters
    global bank HSBC has been under investigation over allegedly allowing clients to transfer potentially illicit funds from countries such as Mexico Iran and Syria Late last year the bank agreed to pay US 1 92 billion in nes to US authorities as a result of those investigations and as part of its settlement will be subject to independent monitoring and assessment against various measures directed at improving the banks structure controls and procedures New Zealands regime International audits have revealed signi cant de ciencies in New Zealands AML CFT regime The Act is intended to address a number of these de ciencies If we dont get it right credit ratings and trade relationships with other countries could be negatively affected which will ultimately hurt us all directly or indirectly So who does the Act apply to The Act applies to reporting entities a term which includes banks life insurers nance companies building societies credit unions issuers of securities trustee companies futures dealers brokers certain nancial advisers casinos money service businesses those involved in nancial leasing safe deposit businesses the list goes on There are a range of exclusions and exemptions for businesses that might otherwise be caught such as accommodation providers that provide guests with safety deposit boxes accountants real estate agents pawn brokers and lawyers Reporting entities will need A written risk assessment of the money laundering and nancing of terrorism that could be expected in their business An AML CFT programme that includes procedures to detect deter manage and mitigate money laundering and the nancing of terrorism A compliance of cer appointed to administer and maintain the AML CFT programme Customer due diligence processes based on their risk assessment including customer identi cation and veri cation of identity and Suspicious transaction reporting record keeping auditing and annual reporting systems and processes Guidelines have been issued The regulatory bodies that are responsible for supervising the new regime the Reserve Bank of New Zealand the Financial Markets Authority and the Department of Internal Affairs have issued guidelines on various topics to assist businesses to comply with the new regime The topics covered so far include points of interpretation in determining whether a business is a reporting entity and therefore caught by the Act the required risk assessment and AML CFT programme as well as the territorial scope of the Act including the extent to which it applies to overseas entities For customers of reporting entities the impact of the Act will largely be felt through the customer due diligence that will need to be done on them This will generally involve customers having to provide more information which in some cases will include needing to provide information on the source of funds and wealth Trusts in particular will come under close scrutiny as they can be an easy way to hide the bene cial ownership of funds For reporting entities that dont comply with the Act the consequences can be signi cant The Act provides for a range of sanctions

    Original URL path: http://www.dglaw.co.nz/newsletters/commercial-espeaking/issue-33-summer-2013-commercial-espeaking (2016-04-27)
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  • Issue 32, Spring 2012 Commercial eSpeaking-Commercial eSpeaking-Newsletters
    understand what is going on and know they can get support or assistance from a third party such as a friend lawyer or relative Failing to discipline properly may also give rise to a PG from another employee such as the victim of bullying for failing to provide a healthy workplace What process should be followed You need to follow a carefully managed procedure when going through a disciplinary situation Often employers want to talk with their lawyers early to make sure they dont inadvertently mess it up In general you should be open clear allow breaks allow time for responses consider all responses thoroughly and provide clear reasons for any decisions that are made This applies to verbal warnings right through to a set of meetings for a dismissal Its always important that if your employees job is on the line that that is made clear to them and they have time to respond to any accusations Encouraging them to have a support person is commonplace and telling them they can have one is an absolute must If youre handling your disciplinary procedures in house make sure you dont expect a dismissal to be all over in a day You cannot pre judge an issue or an outcome of any procedure That would be seen as predetermination which clearly shows there was no fair procedure in place You need to ensure that you not only get the process right but also the actual decision correct For example is this misconduct actually serious misconduct It is worthwhile checking whether their employment contract allows for suspensions or requires any other specific process while you investigate an issue What if I dont the most I need to pay out is three months wages right No If you just sack your employee then you risk serious orders against you if they raise a PG The Employment Relations Authority may make compensation awards against you for hurt and humiliation If youre particularly callous in your processes then this should be expected You can also have your employees legal costs awarded against you Some employers think that employees on low wages cannot afford to hire a lawyer and often they would be right However to raise a PG they dont actually need one Employees often hire one of the many non lawyer employment advocates many of whom offer a no win no fee arrangement which attracts cash strapped employees Aside from the financial costs if you value your other employees you may find that your reputation as an employer is tarnished by a successful PG claim Employers gain poor reputations quickly and it may take years to regain that reputation Be wise and go by the book when you have to go through a disciplinary procedure Business Briefs Changes to collective property ownership Those involved in offering proportionate ownership schemes for property should be aware of a significant move recently taken by the Financial Markets Authority FMA Until now an exemption notice the Securities Act

    Original URL path: http://www.dglaw.co.nz/newsletters/commercial-espeaking/issue-32-spring-2012-commercial-espeaking (2016-04-27)
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  • Issue 30, Summer 2012 Commercial eSpeaking-Commercial eSpeaking-Newsletters
    them to prove that when they received the payments they had acted in good faith they provided value for the payment and that a reasonable person in their position would not have suspected and did not have reasonable grounds to suspect the customer was or would become insolvent This defence is demanding due to the difficultly in satisfying the good faith and reasonable person elements The good faith element requires the creditor to show it honestly believed the payments would not put them in a better position than other creditors They will fail if they knew the customer was experiencing financial difficulties and if there were signs they were paid before other creditors The reasonable person element is difficult because it doesnt consider the creditors actual belief at the time payments were received Rather the focus is whether another person in the position of the creditor would having regard to all the circumstances have an actual fear that the customer was insolvent Relevant factors include the age of the debt whether cheques had been dishonoured or enforcement action taken and whether a creditor had knowledge about the businesses poor cash flow Courses of action The better course of action is to try and avoid the sting of s292 in the first place This is difficult as many businesses accept payment plans from time to time and need to continue doing so to obtain payment in order to maintain acceptable cash flow The following courses of action can help if your business finds itself in this situation Always be aware that payments received for an outstanding debt could be vulnerable to attack Make sure you have registered your security interest on the Personal Property Securities Register http www ppsr govt nz If possible obtain a personal guarantee from the directors shareholders of the customer and Try to get payments up front or implement a debt collection policy that encourages fast payments and stick to it Finally always keep watch for signs indicating a business is in trouble and if concerns do arise talk with us immediately for guidance on how to manage the situation Clearing up Confusion About Criminalising Cartels Proposed amendments to the Commerce Act are intended to assist businesses by deterring hard core cartel conduct Such conduct raises prices above the competitive level and in turn affects the competitiveness of those selling into domestic and international markets The amendments also clarify the law in relation to cartels to ensure that genuine pro competitive arrangements are not deterred The article Criminalising Cartels which appeared in the October issue suggested that the reforms would capture a large number of commercial arrangements put commercial players involved in genuine commercial arrangements through the criminal courts and make commercial decisions more costly due to the increase need for legal advice and compliance It was based on an early exposure draft of the Commerce Cartels and Other Matters Bill not the Bill introduced to Parliament in October 2011 The Bill is currently awaiting its first

    Original URL path: http://www.dglaw.co.nz/newsletters/commercial-espeaking/issue-30-summer-2012-commercial-espeaking (2016-04-27)
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  • Issue 31, Winter 2012 Commercial eSpeaking-Commercial eSpeaking-Newsletters
    mortgage payments can also be collected and shared Implications for you The sharing of this type of information may be an issue for you if you have a poor history with repayments Credit providers such as banks or trade suppliers are likely to use this information to decide whether to lend money to you or to grant you a trade account For example a car financier can request a credit report about your repayment history when deciding whether to give you a loan to buy a car If your credit report is poor and shows a history of say frequent late payments and careless account management the car financier is less likely to give you that loan What are your rights Credit providers must make you aware of the changes to any of their credit reporting practices before they start sharing information about your credit accounts and repayment history with credit reporters To do this credit providers must obtain your consent to permit disclosure of your information Further the government has also imposed controls and accountabilities to protect you as a consumer Only credit providers can share information This excludes prospective employers and landlords Credit reporters are prohibited from listing small defaults of less than 100 and are required to send annual compliance reviews to the Privacy Commissioner Why give consent You may be asking yourself why you would give consent to the collection and disclosure of your repayment history information There are some advantages in allowing this sharing of information Up until now New Zealand has had what is termed a negative credit reporting system that only recorded defaults bankruptcies and court judgments As a result of the amendments New Zealand now has a positive reporting regime enabling credit providers and credit reporters to also share positive information about you including records showing that you or your business have a good payment history Most significantly this positive reporting regime may open up new opportunities to obtain credit to those who may have otherwise been excluded due to a lack of information about them This could be an extremely important benefit for small businesses that were previously ineligible for credit Also its likely you will have to consent to the disclosure of your information by your bank or credit provider in order to obtain a loan or a trade account What should you do All credit providers in New Zealand can now access your repayment information As such you should check the content of your personal credit report amend any errors and take steps to improve any bad repayment history To request your free personal credit report contact Dun Bradstreet at http www dnbcreditreport co nz Most importantly pay your bills on time and manage your debt For businesses do your housekeeping and make sure you have a robust accounting system Business Briefs Consumer Law Reform Bill update The Consumer Law Reform Bill 2011 had its first reading in Parliament on 9 February 2012 The Bill repeals a number of

    Original URL path: http://www.dglaw.co.nz/newsletters/commercial-espeaking/issue-31-winter-2012-commercial-espeaking (2016-04-27)
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  • Issue 29, October 2011 Commercial eSpeaking-Commercial eSpeaking-Newsletter
    Key aspects of the Bill include changes to the offers of securities that are exempted from compliance with the disclosure requirements of our securities laws a product disclosure statement and securities register to replace the prospectus and investment statement a regime for the regulation of collective investment schemes a licensing framework for certain financial market participants and a modified liability regime The Bill is of particular relevance to those who have raised or are looking to raise funds whether from public or private sources those who have authority to manage others investments those involved in the operation of collective investment schemes and derivatives dealers It is expected that the Bill will go through the Select Committee process through the first part of 2012 with the regulations being developed though the year and the legislation enacted in late 2012 Copyright law an update on s92A After a false start with the infamous s92A the regime to discourage copyright infringement over peer to peer networks has finally been implemented in the Copyright Infringing File Sharing Amendment Act 2011 and associated regulations The jury is out as to how effective the law will be we have however already found that it is prompting useful discussions within client businesses about how staff and contractors use the business internet connection since the business is typically liable for whatever they do with it Combine this with the explosive growth in the use of smartphones in the workplace and we are finding many businesses using the s92A situation as an opportunity to discuss just what the parameters are Can I use Facebook or Twitter at work If so what can I share with others What if I comment unfavourably on the service provided by someone who happens to be a major customer of the business I work for Well keep you informed on discussion around copyright infringement issues The IRDs powers to search premises A recent High Court decision confirms the wide reach of the IRDs powers to search premises and seize documents including searches of private dwellings The case involved search warrants executed on three private homes and other premises in an investigation concerning possible tax avoidance and or evasion The background including a history of non compliance with document production notices issued by the IRD and a series of black letter law arguments raised by the taxpayers may have informed the courts reluctance to interfere Justice Venning held that it was for the court to monitor the manner in which the Commissioner exercised his powers not the decision to exercise such powers our italics The case demonstrates that the courts will not lightly interfere with the IRDs search powers which are arguably wider than most government entities unless those powers were exercised in breach of the Bill of Rights Act 1990 Employment Law Update Parental leave and annual leave how its calculated Theres been some recent publicity about some new mums whove taken parental leave being surprised that their employer has paid their subsequent annual

    Original URL path: http://www.dglaw.co.nz/newsletters/commercial-espeaking/issue-29-october-2011-commercial-espeaking (2016-04-27)
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