Category Archives: FRANCHISING LAW

Legal Duties & Responsibilities of an Employer

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Under NSW law, the Duties of an Employer (provided a contract of employment is established) includes

  • the provision of workers’ entitlements under various laws and awards (both state and federal), and
  • compliance with taxation/superannuation laws.

To comply with these duties (and avoid running foul of inspectors from the Department of Industrial Relations and civil litigation), the employer should (in law they must), inter alia:

  • Obtain their own Australian Business Number (ABN).
  • Obtain a policy of Workers compensation insurance. (It is recommended, but not compulsory, that employers obtain Public liability insurance against vicarious liability for the torts of employees.) Employers should display the policy of insurance, and maintain a record of any injuries or related incidents in the workplace.
  • Obtain a Tax File Number (TFN) number and a TFN declaration from the worker, and supply the declaration to the Australian Taxation Office.
  • Pay wages and other financial entitlements to the worker/emplyee as set out in the applicable award, Enterprise Bargaining Agreement (EBA), or Australian Workplace Agreement (AWA), or New Modern Award (NMA’s came into effect on 1/1/2010, replacing most State and Federal Awards, or National Employment Standards (NES now apply and provide minimum terms of employment for most employees in Australia.)
  • Comply with all other requirements (as to loadings, allowances, conditions, union entitlements, etc), imposed by any industrial instrument, or award, or EB, AWA, NMA that applies to the contract of employment.
  • Make provision for Superannuation for employees (except for employees who are aged over 70, or under 18 & working less than 30 hours/week or earning under $450/month). This first became compulsory in the result of a 1980’s national wage case, and has since been written into statute law. This is known as the Superannuation guarantee. Employers must contribute 9% of wages to a superannuation fund, but according to recent (2010) government announcements, this percentage will rise to 12%. From 2005 employees have a choice of fund.
  • Make Leave provision (in compliance with the Annual Holidays Act NSW and the Long Service Leave Act). That is, set money aside to pay a worker during the worker’s paid holidays. (Note that the contract of employment has terms inserted into it by statute that prescribe: employer pays for annual holidays, and public holidays.
  • Maintain Wage records. Most newsagencies sell a Zions Systems “Hours and Wages Record Book”, which is suitable for that purpose. Different size books are available for different sized workforces.
  • Provide wage slips to employees, to accompany regular payments of wages, as required by the NSW Industrial Relations Act 1996.
  • Make Pay As You Go (“PAYG”) tax deductions from wages. The ATO will supply blank PAYG Payment Summaries and also “PAYG Tables” to calculate the amount of the deduction. After the end of the financial year, the employer must supply a PAYG payment summary annual report to the ATO by 14 August.
  • Forward the accumulated PAYG tax deductions to the Tax Office, together with the quarterly (?) BAS.
  • Supply annual Payment Summaries to employees by 14 July, each year. Before PAYG Payment Summaries became the rule, employers supplied “group certificates” their employees. That terminology still persists and is commonly applied to the PAYG Payment Summaries. The employer also supplies a copy of the PAYG Payment Summary to the Tax Office.
  • Keep records such as PAYG payment summary annual reports, and PAYG Payment Summaries, for 5 years.
  • Give Reasonable notice prior to dismissal (see Dyer v Peverill (1979)2NTR1 below), or pay in lieu of notice.
  • Provide a Separation Certificate to the worker, upon dismissal of the worker.
  • Provide procedural fairness prior to any summary dismissal for “misconduct”.
  • In order to comply with various obligations, an employers’ letter of dismissal [or final payment] could say: “Enclosed herewith is (a) final payslip, and (b) a cheque in the sum of XX being for pay due from XX To XX less PAYG. Accrued LSL, AL up to XX, XX days $20. Enclosed herewith is Certificate of Service. Enclose herewith is Employment separation certificate (saying: This is to certify that fred bloggs was an employee of ?? from ?? to XX.)”.
  • Note: Regardless of what any award or written contract says, an employer is vulnerable to unfair dismissal claims (See Part 6 of the Industrial Relations Act 1996), and possibly claims under s.106 of the Industrial Relations Act 1996. (An employer is g generally vulnerable to intervention by the Industrial Relations Commission.)
  • (Note that the Howard government amended Federal laws affecting unfair dismissals, and I think these laws don’t apply with workplaces with fewer than 15 employees.)
  • Make provision for possible redundancy payments under s.119 of the Fair Work Act (Commonwealth).

Changing A SMSF Trustee to a Corporate Trustee

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SMSF


Benefits of a Corporate Trustee

1. Changing Members


If an SMSF is set up with a corporate trustee structure you can add a member (e.g. a spouse or child) or remove a member (e.g. if a member dies or can no longer act as trustee) with much less hassle than an individual trustee structure. If there is a change of fund members, it’s not necessary to change the name on the ownership documents for each fund asset as the trustee of the fund remains the same.

On the other hand, a fund with an individual trustee structure will be required to re-register all assets held in the SMSF (with relevant authorities and registries) each time a member is added or removed. If you have a number of different investments in your fund, this can result in a lot of administration, paperwork, time, and potentially cost, to manage this change. For corporate trustees, the only change is notification to both ASIC and the ATO of the change of directors and members as the name on the assets will be the name of the corporate trustee.

2. Estate planning


An SMSF set up with a corporate trustee can have a single member and director. So, if one member of a two member fund leaves (for example, where either a husband or wife member passes away) and a corporate trustee structure is in place, the fund will continue to satisfy the trustee structure rules. In the case of a two member SMSF with an individual trustee structure, if one member dies, another individual will need to be appointed as a trustee of the fund.

3. Borrowing to purchase property


If you are looking to borrow to purchase property in your SMSF most banks require a corporate trustee arrangement. Banks generally prefer that a separately recognised legal entity is identified as trustee of the fund.

4. Reduced liability


A corporate trustee structure can also provide greater peace of mind around liability. Your personal liability, as a director of a corporate trustee, is generally limited to the assets held within the SMSF. An individual trustee arrangement does not provide this security and members’ personal assets may be subject to liability claims. This could be particularly important for you if you are considering holding property in your SMSF as public liability claims can be substantial.

5. Clarity


Having a corporate trustee makes the separation of assets and income for individuals clearer. This makes it easier to satisfy the regulator that superannuation assets are being separately maintained from the member’s personal assets.

When changing to a corporate trustee, the provisions of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SISA’), which impose an additional regulatory framework in relation to corporate trustees of SMSF’S, must be considered. Relevant provisions are:

  • Under as 17A(1) SISA, all members of an SMSF with a corporate trustee must be directors of the corporate trustee of the fund, and vice versa, each director of a corporate trustee must be a member of the SMSF;
  • Under s188 SISA, an individual is not eligible for appointment as a director of a corporate trustee unless they have consented to the appointment in writing; and
  • Under s104A SISA, all individuals becoming directors of a corporate trustee of an SMSF must sign a declaration in the approved form confirming that they understand their duties as directors of thee corporate trustee within 21 days after their appointment. The approved form is the ATO ‘Trustee Declaration’ (NAT 71089). This declaration must be retained by the corporate trustee for as long as it is relevant, and in any case for at least 10 years.

Some other relevant considerations that should be borne in mind include:

  • A corporate trustee must not be paid for their services as trustee, and no director of the corporate trustee can be paid for their duties or services as a director of the trustee;
  • The assets of the fund need to be registered in the name of the company that has been set up to act as corporate trustee; and
  • A company established as the corporate trustee will require a company constitution and certificate of registration.


What is required when transferring from a individual trustee to a corporate trustee?


The following steps will have to be taken if you choose to switch to a corporate trustee:

  • A company must be established to act as corporate trustee;
  • A constitution must be drafted for this company;
  • The current trustees must provide the incoming corporate trustee an instrument in writing stating they will be retiring as trustees and the corporate trustee will be assuming duties as trustee at a given date and this instrument being signed by all relevant parties;
  • The company must provide a signed consent stating it consents to acting as corporate trustee;
  • The directors of the corporate trustee must provide a signed consent stating they consent to being appointed as directors of the corporate trustee;
  • The directors must provide the corporate trustee with a signed ‘Trustee Declaration’;
  • All assets of the fund must be transferred to the name of the corporate trustee.


Contact us for a Free Consultation


If you have any questions regarding your SMSF, call the experienced lawyers at GMH Legal for a FREE consultation:

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

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Post by GMH LEGAL – Solicitors & Barristers.

Our Legal Fees & Services

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Family Law, Criminal Law, Immigration, Traffic Law

At GMH Legal we believe that client relationships matter more than time sheets which is why we offer a range of alternative fee arrangements to best suit your needs.

Our focus is on client service and establishing mutually rewarding relationships with our clients. We think that billing by the hour does not encourage the most efficient and effective delivery of legal services.

We strive to be innovative and eliminating the inherent inefficiencies of the billable hour means that we can focus on achieving the best possible result for our clients.

However, we do recognise that not all matters lend themselves to an alternative fee arrangement. That is why we offer a range of alternative fee arrangements, including straight time based billing if that is what works best for you.

We will work in collaboration with you to determine your specific legal requirements and then develop the most effective strategy and fee arrangement for your needs.

What we offer

GMH Legal can offer you the following fee arrangements, or a combination of these, as an alternative to time based billing. These options can be customised to suit your needs. No matter what fee arrangement you prefer, providing you with certainty by scoping and pricing our work upfront is our priority.

Fixed and value pricing

GMH Legal can charge you a fixed price for any matter. We will quote you a price and stick to it. If there is a change in the agreed scope of work, we will send you a variation detailing the new scope and the price for that change.

Value pricing is a fixed price that we agree up front with you that reflects your legal requirements and the service we provide. With value pricing you don’t pay for our time – you pay for the work we do and the value you receive.

This ensures you receive more value for your legal spend. Value pricing can also include fee incentives to achieve your goals and for results that exceed expectations. These incentives align our interests with yours, making your success our success.

Flexible retainers

With a retainer agreement, GMH Legal will charge you a fixed periodic fee for the provision of legal services. A retainer provides the budgetary control and certainty that hourly billing can’t.

We determine the periodic fee by calculating the average value of our services over the time taken to conduct the matter. A retainer means you know exactly what you will pay for the result you desire.

We will regularly review the terms of the retainer with you to ensure it remains fair to both parties.

Event-based pricing

GMH Legal can charge you a fixed price for each stage of a matter. We work with you to properly scope the matter, determine the stages involved and then agree a fixed fee with you for each stage.

Want to know more? Contact us to discuss how we can tailor a fee arrangement to best suit your needs.

George Hanna
Director Solicitor

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

Innovation Patent – Sliding Door & Window Lock

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GMH Legal would like to congratulate our client Mr Ghassan Haddad of Walco Aluminium on his grant of an Innovation Patent for his invention of an innovative Sliding Door and Window Lock.

Mr Haddad has been a major operater in the glass and aluminium doors and windows industry for over four decades, and is the managing director of one of the largest suppliers of aluminium doors and windows for industrial and residential applications in New South Wales.

You can read more about Mr Haddad’s patent in the attached Specifications Document. Sliding Window Lock – GMH LEGAL

Should you have any Intellectual Property queries, please do not hesitate to ocntact one of GMH Legal’s principal partner, George Hanna on (02) 9587 0458.

What does a Franchising Lawyer do for Franchisors?

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When acting for a new franchisor the solicitors at GMH Legal provide advice about franchising, structuring, business matters, leasing and other legal matters. We also work with the Franchisor to prepare the franchising suite of documents which will be used by the franchisor in granting franchises to franchisees and will govern the relationship moving forward.

The franchising suite of documents prepared will vary, however, the franchisor will generally be provided with the following documentation:

      • 1. Disclosure Document;
      • 2. Franchise Agreement;
      • 3. Prior Representations Deed;
      • 4. Acknowledgement by Franchisee;
      • 5. Acknowledgement by Guarantor;
      • 6. Authority to complete; and
      • 7. Deed of Confidentiality.

Disclosure Document

The disclosure document must be prepared in accordance with the requirements of the Franchising Code of Conduct. It must be provided to the franchisee at least 14 days before the franchisee signs the franchise agreement.

When disclosure is given to the franchisee it must be provided with the documents the franchisor requires the franchisee to sign.

Once the franchise agreement has been signed the franchisee has 7 days within which to cancel the franchise agreement. If the franchisee chooses to cancel the franchise agreement within that 7 day “cooling off period” the franchisor must return the funds paid by the franchisee less any monies the franchisor disclosed would be retained by the franchisor in such a case.

Franchise Agreement

No franchise agreement can be a “one size fits all”. Franchise businesses vary too greatly for one franchise agreement to fit all kinds of franchised businesses. Franchised businesses can be for retail stores and mobile businesses. The retail stores can be restaurants, takeaways, in store dining, clothing, pet products and the list is endless. The mobile franchised businesses can be, for example, car care and maintenance and pet care. The franchisor’s requirements in relation to the franchised business vary greatly from franchisor to franchisor. Therefore, the franchise agreement has to be tailor made to the business type and the franchisor requirements.

Prior Representations Deed

This can be a separate deed or included in the Franchise Agreement.

The franchisee is required to complete a questionnaire or simply disclose any representations which it has relied upon in deciding to enter into the franchise agreement.

If the franchisee specifies it has relied upon some representations made by the franchisor or its representatives in deciding to enter into the franchise agreement the franchisor will need to clarify if that representation has been made.

If a representation has been made at the beginning of the franchise process and that representation has been made without basis and is untrue then the franchisee may have a claim against the franchisor for misleading and deceptive conduct.

It is so important for the franchisor to be able to ascertain this before going further with the franchise relationship.

Acknowledgement of Franchisee and Guarantor

This is effectively a requirement under the Franchising Code of Conduct whereby the franchisee and guarantor acknowledge they have received the documents and had a chance to read and understand them. It will also state the franchisee has been told to receive legal, accounting and business advice and whether or not they have chosen to receive that advice.

Authority to Complete

This allows the franchisor to complete any blanks which have necessarily been left in the franchise or other documents. For example if the franchise agreement is signed before a start date for the business this date can be completed once the franchised business is ready to commence.

Deed of Confidentiality

This is generally signed when the franchisor and franchisee commence negotiations or prior to giving the franchisee information about the franchise system and business.

The Franchise Procedure

The franchising lawyer will generally be engaged to issue disclosure and the franchise documents to the franchisee on behalf of the franchisor. This is usually done at the cost of the franchisee.

The procedure which is generally followed is as follows:

      • 1. The franchisor will provide an instruction sheet to the franchise lawyer;
      • 2. The franchise lawyer may conduct some searches of the franchisee entity. If the franchisee entity is a trust the lawyer will want to cite the trust deed;
      • 3. The franchise lawyer will prepare the franchise documents to be issued to the franchisee together with the disclosure document;
      • 4. The franchisee will need to sign and return the item 23 certificate to the franchise lawyer. The item 23 certificate will be signed by the franchisee and the date the franchisee received disclosure;
      • 5. It may be necessary to undertake some negotiations with the franchisee about the terms of the franchise and other agreements;
      • 6. If negotiations have been undertaken and the agreements are changed as a result it may be necessary to re-disclose;
      • 7. After the 14 day disclosure period has lapsed the franchise agreement and other documents can be signed, the franchise lawyer will send the documents to each of the parties to have them signed and dated;and
      • 8. The business name registration form (allowing the franchisee to use the business name) will be lodged for registration.

Other steps may be undertaken in the process depending upon the requirements of the specific transaction.

At GMH Legal, we have assisted our clients in establishing and growing their franchises businesses. Should you have any Franchise related queries, please do not hesitate to contact our Principal Partner, Mr George Hanna on (02) 9587 0458.

FCA Encouraging Government Guaranteed Loans

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The Franchise Council of Australia (FCA) is actively encouraging the Federal Government to implement a small business loan program to assist those setting up a new small business that might otherwise not be able to secure a loan.

Government-guaranteed loans of this nature have been highly successful in the United States (US) and the United Kingdom (UK). The US Small Business Administration (SBA), which has operated since 1953, has helped nearly 20 million businesses and has a portfolio of roughly 219,000 loans worth more than $84 billion. Like the SBA, the UK Government-guaranteed lending scheme – the Enterprise Finance Guarantee (EFG) – also helps small viable businesses that may be struggling to secure finance by providing loan guarantees of up to $1.5 million.

The Australian economy is missing out big time. The FCA estimates that every franchise system in Australia would have at least five worthy candidates that cannot secure finance, not because of a lack of viable proposition, but because of lack of collateral or guarantee. One thousand franchise systems x 5 x $200,000 in average borrowings = $1,000,000,000. As this is a conservative estimate – the franchise industry turnover is $128 billion – it could easily be $10 billion in missed opportunity.

What the FCA is asking from government is that it makes use of an unused bank wholesale funding guarantee to provide a guarantee to business start-ups which lack the collateral to secure a loan but otherwise meet all lending and business ownership criteria.

In a franchise sense, it means getting over the line a new franchisee that meets approval criteria but is unable to raise necessary collateral.

It is not just new businesses missing out on funds; it is also existing businesses according to a recent report by Dun & Bradstreet, ‘Giving Small Business Credit – Finding New Opportunities in Australia’s Most Dynamic Credit Market’.

The report says nearly 400,000 small businesses are missing out on access to mainstream finance largely because credit providers are unable to adequately assess and price small business risk. It goes on to say that of the more than one million unincorporated businesses in Australia, more than 650,000 have no major financial obligation and nearly 400,000 would immediately qualify for finance with a risk profile ranging from minimal to low.

KFC franchisee and Yum! Restaurants in legal showdown

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Australia’s best known franchisee, Jack Cowin, plans to take legal action against his KFC franchisor, Yum! Restaurants Australia for what he considers unconscionable conduct.

Cowin’s company Competitive Foods has been in a battle with Yum! since the franchisor gave notice in 2003 that his longstanding franchise agreements in WA and NT would not be renewed and the Rockingham store closed in 2007.

Over the last two years extensions to the agreements were granted by Yum to allow the businesses to be sold to new franchisees.

However Cowin has questioned the franchisor’s actions in effectively terminating a successful franchise business and is now taking the issue to court.

Cowin has accused Yum! of unconscionable conduct, saying it thwarted his attempts to sell the franchise rights to 46 KFC outlets in Western Australia and the actions of Yum! could lead to the closure of his stores.

Yum! has rejected Cowin’s allegations, describing them as “baseless and without merit”.

Competitive Foods now has 15 out of 46 stores out of licence and according to the spokesperson, the stores have been granted extensions on a monthly basis.

Issue of regulation

The issue of whether or not good faith should be encased in franchising legislation has been ongoing; the Federal Government has rejected the idea and this was subsequently take up in various state parliaments including WA and SA.

The spokesperson for Competitive Foods said the franchisor has been emboldened by the provision of good faith not getting up. We have the resources to take this on but lots of franchisees would have packed up and left.

The case is worth noting for a couple of reasons.

First, it’s unusual that Cowin is both franchisor and franchisee. Cowin’s Competitive Foods is the biggest restaurant franchisor in Australia, operating KFC restaurants in WA under franchising agreements with Yum!, plus hundreds of Hungry Jacks stores.

Second, there’s the fact that the businessman has been valued at $618 million – meaning he’s not only an atypical franchisee, but he’s a powerful figure in the Australian economy.

Competitive Foods operates a number of businesses including Hungry Jacks stores, and KFC restaurants in WA and NT. Cowin has been a vocal supporter of state-based legislation and the inclusion of a good faith clause in franchising regulation.

At GMH Legal, we have assisted our clients in establishing and growing their franchises businesses. Should you have any Franchise related queries, please do not hesitate to contact our Principal Partner, Mr George Hanna on (02) 9587 0458.

Fear Factor for potential franchisees

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Anyone starting out as a first time franchisee in any business steps right out of their comfort zone and has to learn a host of new skills.  However when buying into a proven franchise system much of this fear can be alleviated. Franchisees get the back-up of a brand, a franchisor who has tried and tested the model, and a support team to help with training and establishing the business.

THE THREE COMMON FEARS OF FRANCHISEES

1. Fear of the customer

A good franchise training system will help address the issues of not just deaing with customers but sourcing customers. Many people are experienced in dealing with other people, but most don’t have the experience of being in the spotlight all day, every day.

Many people have a fear of finding their customer, and do not wish to “knock on doors”. Once again the franchise development manager should do most of this for the new franchise partners and train then on how to go about it for the future.

2. Fear of not delivering quality every time

Franchising is founded on the principle of replication and consistency.  Customers choose a franchised product or service because there is a reputation attached to the brand, and they understand what the service or product will deliver.

Support can take many forms in a franchise, from a personal business coach to head office staff that a franchisee can have access to, and of course other franchisees in the network that experience the same challenges and can share their solutions.

3. Fear of not reaching business goals

A major concern people have is wondering how they are going to make a living while they are building their business. In most new ventures working capital is essential to provide that financial fall-back. Some franchisors though are finding additional ways to help franchisees get through this crucial business-building period.

One solution is an income guarantee. This relieves the franchisee of some of the pressure around making sales and allows the focus to be on building the customer base and getting to know the customers.

But the challenge for franchisees is to use this as a bridge to better sales through their own initiative; it’s never intended as a replacement for effort and self-generated income.

For any franchisee the key to overcoming the fear is having confidence that the tools and support provided in the system will meet their needs and help them prosper.

At GMH Legal, we have assisted our clients in establishing and growing their franchises businesses. Should you have any Franchise related queries, please do not hesitate to contact our Principal Partner, Mr George Hanna on (02) 9587 0458.