Trademarking a Business with a Geographical Place Name

May 16, 2022 | Business Law

Many businesses choose to include a geographical place in their business name. Using a suburb or location communicates to customers where a business is located or from where their products originate. This is effective in helping to build a local client base and enhancing a business’ reputation.

The inclusion of a geographical place in your business name, however, may make it difficult to register that name or logo for a trademark.

Trademarking a business name or logo

In order to trademark a business name with IP Australia, you must satisfy the distinctiveness test. The ability to register a trademark is determined by whether the business name or logo is new and distinctive from any other names or designs that have been registered through IP Australia or that may be registered in the future.

To have a valid trademark, therefore, it is essential that your business name and design is distinguishable from other businesses. A business may be prevented from registering their trademark if their name or logo is identified as being too similar to that of another business.

Registering a geographical place name

For this reason, it is difficult to trademark a business name with a geographical term because this prohibits any other businesses that are operating in the same location to promote their goods or services. IP Australia considers this to be an unfair monopolisation of a geographical term.

It is particularly difficult to register a trademark with a geographical place name if the location features a range of goods and/or is a location name found commonly across Australia.

To circumvent these location hindrances, there are two ways that a business can trademark a geographical place name:

1. Stylised Logo
2. Ongoing Use and Community Recognition

Stylised logo

According to IP Australia, if a logo depicts a “highly stylised” or “unusual representation” of particular goods, services, or locations, it may be sufficient to satisfy the distinctiveness test.

If a logo portrays a conventional depiction of goods, or includes a map or national symbol, it is not likely that the trademark will be validated. This means that if a business were to use a common geographical place name, they would need to make sure their logo design is highly distinguishable so it is able to be registered as a trademark.

Ongoing use and community recognition

As an alternative to creating a distinctive name or logo, if your business is able to demonstrate that you have used a geographical place name extensively over time, IP Australia may accept the trademark based on ongoing use and community recognition.

This involves submitting evidence to prove you have continuously used the geographical place name in the market for a period of at least three years, and that customers distinguish your goods and services from others in the area on the basis of that geographical name. For more information on the benefits of registering a trademark for building brand awareness and strengthening your business reputation, please see our blog.

How Etheringtons Solicitors can help

A solicitor at Etheringtons Solicitors can provide clarification of the relevant law and its relation to your individual circumstances. If you need further advice or assistance with IP law matters, please contact one of our experienced solicitors on (02) 9963 9800 or via our contact form.

Review your Shareholder’s Agreement Regularly

May 12, 2022 | Business Law

What is a Shareholder’s Agreement?

A shareholder’s agreement is essentially a corporate pre-nuptial agreement. It sets out the rights and obligations of shareholders or members in their ownership of a company. It is not compulsory but it is prudent to have one before you start a company with another person, in order to avoid disputes which could cost you significant amounts of money.

Common Clauses

At a minimum, your shareholder’s agreement should contain clauses regarding what will happen if one or more shareholders leave the business. These include options such as share buybacks, restraint of trade, dispute resolution processes and tag along and drag along rights.

Review your SHA Regularly

Many shareholder’s agreements, drafted between the owners in the initial excitement of the start of a new venture, lie at the bottom of the drawer gathering dust, while the business grows and develops around it. Typically, most businesses progress differently to how the owners originally envisaged and the shareholder’s agreement is only ever dusted off in the event of a dispute.

However, if a business is expanding rapidly or economic conditions change, there may be provisions in the shareholder’s agreement which will ultimately become a hurdle for the future growth of the business, its eventual sale or even its very survival.

For example, while a requirement for unanimous agreement between all the shareholders to raise capital may seem logical and sensible at the start, 10 years down the track, now with a number of loyal employees also owning small parcels of shares in the company, such a provision could potentially be very disruptive.

The same equally applies with Partnership Agreements.

It is therefore prudent to revisit your shareholder’s agreement every few years to ensure that it is still relevant and effective for managing and expanding your business.

Get Legal Advice

We would be happy to review your shareholder’s agreement or partnership agreement with you to ensure that it provides your business with the best framework for management and growth. If you would like more information on how we can assist you with your matter, do not hesitate to contact us on 9963 9800 or via our contact form.

Does Your Privacy Policy Comply With Privacy Laws?

May 10, 2022 | Business Law

Privacy laws in Australia are governed by the Privacy Act 1988 (Cth) (the ‘Act’) and the Australian Privacy Principles.

The principles were introduced in 2014 to bring Australia’s privacy laws (first introduced in 2001) in line with advancing technology trends and to provide more transparency around the capture and use of personal information. They make it difficult for businesses to collect information about consumers without their knowledge, and prescribes how businesses can handle, use and store personal information.

These principles have been further strengthened by the Privacy Amendment (Notifiable Data Breaches) Act 2017 (Cth) which imposes mandatory reporting requirements on entities subject to existing obligations under the Act, for an ‘eligible data breach’.

If your business is affected, you may need to update your privacy policies and your procedures and systems to comply with the law.

Which businesses are affected by the privacy laws?

The Act applies to Australian Government agencies, businesses with an annual turnover of $3 million or greater, credit reporting bodies, and smaller entities ‘trading in personal information’.

What does ‘trading in personal information’ mean?

Personal information is information that identifies, or could reasonably identify, an individual. This includes names, addresses, date of birth and bank account details.

Trading in personal information includes collecting or providing personal information to a third party for a benefit, service or advantage. If you collect personal information and then provide it to a business to manage your direct marketing, you may be trading in personal information.

What are the key obligations?

Businesses subject to the Act must:

• Ensure they have a privacy policy that addresses specific topics;
• Have procedures and systems in place to ensure they comply with the Act and the privacy principles;
• Understand what an ‘eligible data breach’ is and implement policies to deal with such breaches.

Entities affected by the Act may face significant fines for serious or repeated breaches.

How do I ensure my business complies?

Businesses affected by the Act should review and identify how they deal with personal information. The following elements need to be addressed:

Privacy Notice

When you collect personal information, inform individuals of your organisation’s name, contact details, the purpose of collection and to whom it will be disclosed.

Privacy Policy

Your privacy policy must address the required topics. These include:

• What personal information you collect,
• How you collect the personal information,
• The purposes for which you use and disclose it,
• If you provide personal information to parties overseas you need to disclose that and, if practicable, specify the countries where those parties are located, and
• Set out how you secure and store personal information.

Systems

Establish a system to ensure that:

• Staff who handle personal information comply with the new privacy laws.
• Individuals can access their personal information and correct out of date or incorrect information.
• You have a process to deal with complaints about your compliance with the laws.
• Enables recipients of direct marketing material to unsubscribe.

Understanding eligible data breaches

An eligible data breach happens if:

• There is unauthorised access to, unauthorised disclosure of, or loss of, personal information held by an entity; and
• The access, disclosure or loss is likely to result in serious harm to any of the individuals to whom the information relates.

An entity must give notification of an eligible data breach:

• If it has reasonable grounds to believe that a breach has occurred; or
• If information has been lost and unauthorised access or disclosure of that information is likely to occur; and, in either case,
• The breach would likely result in serious harm to the individuals to whom the information relates.

Dealing with eligible data breaches

If a breach occurs, an entity must notify any affected individual and the Office of the Australian Information Commissioner (OAIC).

If an entity suspects a breach has occurred, it must investigate the circumstances of the possible breach within 30 days of becoming aware of it, to determine whether it is an eligible data breach.

Notification must include:

• The entity’s identity;
• Details of the data breach – i.e. how the breach occurred;
• What information is the subject of the breach; and
• The recommended actions that individuals should take in response to the breach.

Notification is not required if an entity is able to quickly remedy a data breach so that it is unlikely to result in serious harm.

Entities that fail to carry out the investigation and notification processes prescribed by the reforms will breach their obligations under the Act and may face civil penalties.

Conclusion

Business entities that handle personal information must understand and comply with privacy laws. Staff should be trained, and policies implemented on how to collect, store and manage personal information. Policies should identify systemic problems when collecting and handling information and set out appropriate solutions.

Staying one step ahead of your privacy obligations, and minimising the potential for data breaches to occur, is essential to safeguard against fines and loss of reputation.

If you need more information or if you need assistance or advice on how to proceed please call us on (02) 9963 9800 or via our contact form, here.

Self-Managed Super Funds with Only One Member

Apr 25, 2022 | Business Law

A self-managed super fund (SMSF) is a private superannuation fund where the members are also the trustees. Members of the SMSF run it for their benefit and are responsible for complying with the relevant laws.

A SMSF can have up to four members but it is quite common to have just one. But what happens if the sole member loses legal capacity, dies or leaves the country? In this blog, we review common issues that arise in relation to SMSFs when legal advice is not sought prior to the establishment of the SMSF.

Who is a Self Managed Super Fund trustee?

A SMSF trustee is the person responsible for ensuring a SMSF is maintained for the purpose of providing retirement benefits. The trustee can be a company or an individual. For a single member SMSF, the member must either be the sole director or there may be two directors. This other director is either related to the member or another person who is not an employer of the member.

For a single member SMSF, there must be two individual trustees. The second trustee must either be related to the member or another person who is not an employer of the member.

What are some complications in relation to SMSFs?

Loss of Legal Capacity

If the sole member loses legal capacity, then the person who holds an enduring power of attorney for the member may act as trustee of the fund in their place.

If the sole member was also the sole director of a trustee company, then the shareholder of the company will need to appoint a replacement director. If the member was the only shareholder, then the probate of the member’s will needs to be granted before a new shareholder is appointed.

Death of a Sole Member

If the sole member dies, then the other trustee will be left with total control of the fund.

If the sole member was also the sole director of a trustee company, then the same consequences from the loss of legal capacity will follow.

Moving Overseas

The SMSF must remain an Australian superannuation fund in order to retain its complying status. Whether the super fund is Australian predicates on satisfying three tests:

1. Be established in Australia
2. Have its central management and control ordinarily in Australia
3. Satisfy the active member. The fund must have either at least 50% of the fund’s assets linked to active members who are residents in Australia or not have any active members.

Seek legal advice

If you are a single member of a SMSF, you should ensure that you have a valid enduring power of attorney. If you are moving overseas, you should speak to a solicitor about whether your SMSF would still comply with the three tests. Please contact Etheringtons Solicitors if you have any questions about your SMSF by using the contact form or calling us on (02) 9963 9800.

Important Things to Consider When Buying a Business

Apr 19, 2022 | Business Law

If you are considering buying a business there are many steps involved and getting the right advice from the start is important. The structure of and issues involved in the sale are quite different if you are buying the business assets only, compared with the shares in the company that owns the business.

Making sure you follow the right process before signing any documents is a key component of a successful business purchase.

The most important things to do before signing a contract are:

• Research
• Get professional advice
• Review & understand all documentation

In this article we will highlight some of the key issues to be considered.

Research

Proper research involves checking the records of the business and other information to ensure:

• Sales are as good as the owner says they are
• The business systems are sound and documented
• The business does not have any problematic legal obligations or liabilities
• All necessary information, rights and assets will be included in the sale
• Cash flow is sustainable
• Employees will be happy with a new owner
• Customers will remain loyal once you take over
• You understand the operation of and opportunities in the market/industry

Research should, where possible, be carried out before you sign any contracts.

Professional advice

You should always consider briefing and engaging legal and accounting advisers to assist you in conducting due diligence and documenting the transaction, to avoid legal and financial (including tax-related) “surprises” and arguments down the track.

You might also consider whether there are any industry specific experts that may be useful.

Review and understand the documentation

 When purchasing a business there is a lot of documentation to be gathered, read and understood.

The seller may require you to sign a confidentiality agreement to stop you from using confidential information for any purpose other than buying the business. You should make sure you fully understand the agreement before you sign it.

Some of the information you should gather and review is outlined below.

Financial statements

It is sensible to obtain current and historical financial records for the business, including:

• Profit & loss statements
• Balance sheets to identify assets and liabilities
• Lists of debtors and creditors
• Copies of any BASs lodged by the business

List of plant, equipment, assets and stock

You should obtain a list of all plant, equipment, assets (including fixtures and fittings) being sold along with current valuations, proof of ownership and information on applicable warranties and guarantees.

Details of any stock sold with the business and how it will be counted and valued at settlement should be discussed and agreed with the seller.

You should also undertake thorough searches of the Personal Property Securities Register to, for example, ensure that security interests necessary for the business have been registered (such as over sale equipment leased to third parties) and to check whether any relevant security interests are held by third parties.

Lists of customers and suppliers

Customer and supplier relationships form part of the goodwill of the business and a list of all available contact details should be supplied so that you can make contact and ensure an ongoing relationship.

Employees

If the buyer is assuming liabilities for employees then a list should be provided setting out the employees, their job descriptions, salaries, years of service, any disciplinary issues and accrued entitlements like holidays and long service leave.

Important Contracts

Any major contracts necessary for the operation of the business should be provided and reviewed, including copies of the lease of the premises and any plant & equipment leases. Term, assignment, change of control and termination provisions in particular should be checked.

If any sale assets are financed the financier’s consent will be necessary.

If the business is a franchise the seller is required to provide a franchisor’s disclosure statement.

Documenting the transaction

After completing your due diligence you will need to have the transaction documented with a legally binding contract. There are many issues to consider.

Structure

You will need to decide on the structure of the transaction. It is crucial to get advice on the legal, financial and taxation consequences of the structure you adopt.

The types of things that need to be considered include:

• Whether you are buying the assets of the business or the shares in the company that owns the assets.
• The price to be paid and when it is to be paid.
• Who will the buyer be – an individual, company, trust or partnership?

Deciding on whether to buy the assets or the company is a critical issue when buying a business. There is no simple or right or wrong answer to this question as it will usually depend on the business being purchased and the individual circumstances of both the buyer and the seller.

Things to consider when making a decision include:

• The amount of flexibility and control you want over what you are buying.
• Do you require all of the assets of the business, or all of the employees?
• Do you want to be responsible for past liabilities (known and unknown) of the business which might relate to employees, suppliers or customers?

Price and Terms of Payment

Once the price is agreed you will need to determine how and when the price will be paid.

For additional protection you may want a portion of the price to be held back for a certain period to ensure that information given by the seller is accurate or that profit projections are achieved. You may not want to pay the price in a lump sum and may be able to negotiate to pay in monthly or annual instalments.

You will need to take into account that the business will probably be continuing right up to the sale date, which means stock, accounts receivable and other items will need to be finalised at a certain time and in an agreed manner.

Legal Contract

The main legal document is a contract for sale of business. The sale contract sets out the various terms agreed to by the parties, including for example:

• The rights of the parties if things go wrong;
• The seller’s representations and warranties, which are designed to ensure that:
  • The seller remains responsible for the information given to you about the business; and
  • You get what you pay for;
• A non-competition provision which prevents the seller from creating a competing business after the sale; and
• (If a lease or franchise is involved) the consent of the landlord or franchisor.

Download Your Guide to Selling a Business

Conclusion

Buying a business can be a complex transaction. You need to make sure you have done adequate research, understand the risks and have received the right advice.

If you are considering buying a business and would like some help please contact us on (02) 9963 9800 or get in touch via our contact form.