Areas of Law Rural and Agribusiness Litigation and Court Disputes Building and Construction...
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Transcript of Areas of Law Rural and Agribusiness Litigation and Court Disputes Building and Construction...
Areas of Law • Rural and
Agribusiness• Litigation and Court
Disputes• Building and
Construction
• Commercial and Business
• Mediation • Employment
• Family Law • Wills and Powers of Attorney
• Mining and Resumption
• Property • Estates • Banking and Finance
GETTING INVESTMENT READY
A LEGAL FRAMEWORK
TYPES OF STRUCTURES USED
BRAD BEASLEYPRINCIPAL
SOUTH GELDARD LAWYERS
What type of investment structure do you need
Answer will depend on -
What strategy have you got or are going to put in place
What sort of investment do you want to attract
The size of your agricultural operation
What are the operational objectives and requirements for your agribusiness
Other considerationsWhat – Are you seeking to grow
• PRODUCTIVITY• EARNINGS• ASSET BASE
Asset Protection Improvement in succession planning Proprietor -v- Employee Ability to attract finance Compliance costs and disclosure of results Achieving tax effective change
• Capital Gains Tax• Rollover Relief • Commercial Reasons for Change• Anti-Avoidance Provisions• Stamp Duty – are concessions available
What legal structures are available?
1. Sole Trader
2. Partnership• Mum and Dad Partnership• Family Partnership• Agribusiness Partnership
3. Trust• Family Discretionary Trust• Unit Trust • Hybrid Trust
4. Company• Trading Company• Proprietary Limited Company• Unlisted Public Company• Listed Public Company
5. Some Other Alternatives• Trading Co-operative• Managed Investment Scheme• Joint Venture
Sole Trader What is it – An individual trading in their own right
Advantages• Least expensive/minimal compliance costs• Full control• CGT concessions (50%)• All profits to single owner
Disadvantages• Unlimited liability• Lack of asset protection• Profits subject to individual’s marginal tax rate• No potential to split income
Partnership What is it – Two or more parties conducting a business with a view to profit Advantages
• Not expensive to set up• Partners – additional source of funding• Additional skills brought to the business• Flexibility to split income• Partners can dispose of their % interest
Disadvantages• Unlimited liability• No flexibility for retention of profits• Disagreements between partners• Partnership may cease on death• Generally limited to maximum of 20 partners
Trust What is it – Property or Business is held by a Trustee for the benefit of others
Advantages• Splitting and streaming of income• 50% CGT discount generally available• Some asset protection provided• Beneficiaries safeguarded from creditors• Continuity of business if a beneficiary dies
Disadvantages• Expensive to set up and maintain• Legal ownership with Trustee (not beneficiaries)• Limits on powers in Trust Deed• Political uncertainty surrounding tax treatment• Complicated rules for carry forward losses• 80 year life generally
Company What is it – A group of people who own shares in an entity controlled by themselves or
others
Advantages• Limited liability if no personal guarantees• Ability to retain profits• Flat rate of tax• Potential for income splitting• Ability to access capital• Governance through a Board of Directors • Perpetual existence
Disadvantages• Expensive to set up and maintain • Subject to greater government regulation• Control of the business with directors – not owners• Employee on costs• Director risks if insolvent trading• 50% CGT discount not available• Different rules for different company types
Trading Co-operative What is it – A mutual business owned by customers and/or employees
Advantages• Share capital and allows for distributions• No limit on number of members• Democratic control – one member – one vote• Governed by agreed set of rules• Perpetual existence
Disadvantages• Expensive to set up and maintain• Longer time needed for registration• Initial disclosure required of personal financial involvement• Budget to be lodged with Office of Fair Trading• Disclosure of contract information• Usual Director’s duties
Managed Investment Scheme What is it – Investments by a responsible entity of funds raised
Advantages• Pooled contributions to invest for profits• Allows for more than 20 members• Ability to raise significant capital• Able to avoid public disclosure of profits (unlisted)
Disadvantages• Members do not have day to day control• Expensive to set up and register• Heavily regulated• May need a Financial Services Licence• Promotion may need a Product Disclosure Statement (or Information Memorandum)• Significant reporting and ongoing costs• Withdrawals may be frozen
Joint Venture What is it – A strategic alliance of 2 or more parties to engage in a specific project
or undertaking
Advantages• Opportunity to grow quickly • Access to additional resources and markets• Risk sharing between JV parties• Specific to a particular project or opportunity• Limited governance required• Generally no registration or statutory obligations
Disadvantages• Time needed to find and trust JV partner• Detailed JV Agreement to set rules and objectives• Imbalance or difference in objectives or cultures• Difficulty to capitalise or debt fund
Over complicating it
Mrs B Smith Sole Director/Secretary100 A Class1 Ord
Ms C Smith 100 G Class
Members and Officers – Group 2
Mr A Smith Sole Director/Secretary100 A Class1 Ord
Mrs B Smith 100 B Class1 Ord
Members and Officers – Group 3
Mr A Smith 100 A Class1 Ord
Mrs B Smith Sole Director100 B Class/1 Ord
Ms C Smith 100 G ClassMr D Smith 100 C Class
Smith Equipment Pty LtdNew trustee company
Smith Operations Pty LtdNew trustee company
Smith Agribusiness Pty LtdNew trustee company
Smith Equipment Trust (SET)Wet hires equipment to Smith Pty LtdPays dry hire charge to SFT
Smith No 2 Pty Ltd (Smith 2)Holds business name, licences, leaseConducts agri businessPays staff hire charge
NewcoCorporate beneficiary Bucket Company
Family membersOther trusts
Smith Staff Hire Pty LtdEmploys all staffProvides training
Smith Family Trust (SFT)Equipment assetsFinance liabilitiesHires equipment to SET
Smith Rural Hire Pty Ltd Hires external contractorsPotential corporate beneficiary
Contractor Sub-Hire
Equipment Dry Hire
Wet Hire
LivestockFreight
Dry Hire
SMALL AGRIBUSINESS OPERATION
Members and Officers – Group 1
What investors wantBUSINESS Financial Performance – Strong Returns Industry Experience Strong Management/Governance Effective Business Model/Strategy Significant Growth/Target Markets
LEGAL Full Disclosure Effective Documentation Intellectual Property Protection Exclusive Licences Confidentiality Agreements