Under the Franchising Code of Conduct, parties who enter, or propose to enter, into a franchise agreement must act in good faith towards one another. This duty extends to: pre-contractual negotiations, performance of the contract, dispute resolution and the end (including termination) of an agreement.
When considering whether your conduct is in good faith, potential questions to ask include:
- Have you been honest with the other party?
- Have you considered the other party’s interests?
- Have you made timely decisions?
- Have you consulted with the other party regarding issues/proposed changes?
- Do you have a contractual right to act in that way?
- Are you imposing any conditions on the other party? Are those conditions necessary to protect your interests?
- Where a dispute has arisen, have you attempted to resolve the dispute (either directly with the other party, or through mediation)?
- Are you acting for some ulterior purpose?
Heavy penalties apply to franchises who breach this code.
2. Directors Duties
Failure by directors to closely observe their directors duties under the Corporations Act can result in consequences of personal liability against them. This includes duty to ensure you are properly informed about the financial position of the company, ensuring the company doesn’t trade if it’s insolvent, duty to keep books and records, duty not to improperly use information, and the duty to exercise your powers in good faith and in the best interests of the company.
Your obligations as a director may continue even after the company has ceased trading and has been deregistered. Under certain circumstances, you may be personally liable as a director for the company’s debts and other losses.
3. Unfair Contracts
New laws coming into effect this year regarding unfair contracts will affect small businesses, providing them with more protection against varied contracts.
The unfair contract term protections will apply to standard form small business contracts entered into, or renewed, on or after 12 November 2016, where:
- the contract is for the supply of financial goods or services
- at least one of the parties is a ‘small business’ (i.e. a business employing fewer than 20 people, including casual staff employed on a regular and systematic basis), and
- the upfront price payable under the contract does not exceed $300,000, or $1million if the contract is for more than 12 months.
The Australian Privacy Principles (APPs), which are contained in schedule 1 of the Privacy Act 1988 outline how all private health service providers and some small businesses must handle, use and manage personal information.
10 Tips for Handling Your Clients Personal Information:
1. Familiarise yourself with internal privacy policies, processes and procedures
2. Know who is responsible for privacy
3. Consider privacy during project planning
4. Only collect the personal information you need
5. Use and disclose personal information for its primary purpose only
6. Ensure overseas disclosure complies with the APPs
7. Take care when handling sensitive information
8. Access personal information on a need-to-know basis
9. Keep personal information secure
10. Familiarise yourself with your data breach response plan
5. Business Succession
What would happen to your business if you suddenly and unexpectedly lost a key person due to trauma, permanent disability or death?
Key Person insurance protects the business from the unexpected loss of a key person due to death, disability or trauma.
Buy Sell insurance, together with a legal agreement outlining the transfer of control and ownership of the business, can protect all business owners by providing the necessary funds to buy out an owner’s share of the business should they suffer a disability, specified trauma or death.
Guarantor insurance, also known as Business Loan Protection insurance, offers protection for the guarantor and their estate by providing the funds to repay the debt, releasing the guarantor or their estate from the lender’s security over personal assets.
If you have any further questions relating to succession, please refer to our summary on what is business succession planning.
6. Personal Property and Security & PMSIs
The Personal Property Securities (PPS) Act is a law about security interests in personal property. Personal property is generally property other than real estate. A security interest is an interest in personal property that in substance secures payment of a debt or other obligation.
A Purchase Money Security Interest (PMSI) is a particular type of security interest. A PMSI is distinguished from a standard security interest in two main ways: its manner of creation and the priority it receives relative to other security interests in the same collateral.
PPS reform may affect you and your business in a number of different ways. Seeking professional advice in relation to the specific issues affecting your business is recommended.
7. Intellectual Property
The “Raising the Bar Act” introduced a number of changes to the Australian patent legislation with the intent of raising the standard required to support the grant of a patent and to bring Australia’s patent laws into line with those of its major trading partners.
Of particular note is the reduction of the 21 month acceptance period to 12 months, and to reduce the period for requesting examination following the issuance of a Direction to Request examination from 6 months to 2 months.