It is common practice, especially if a company is entering into a contract, for an individual, possibly a director or shareholder of the company, to provide a guarantee.  This guarantee may be called upon if the company cannot pay its debts.

It is important that a guarantee is properly drafted and executed.  This includes ensuring that the guarantor signs the guarantee.  If the guarantee is not signed, or if it is not properly drafted, the guarantee may be unenforceable.

These examples demonstrate that it is essential to ensure that guarantees are correctly completed and signed.  Often guarantees are not signed or filled out correctly because staff are not aware of the significance of this paperwork.  Businesses need to ensure that staff have appropriate training in the importance of guarantees and how to fill the forms out correctly.

We are able to assist you with guarantees and can ensure that they are correctly drafted and appropriate for your situation.  If you want help drafting or reviewing a guarantee, or if you would like advice on how to ensure your paperwork is completed properly, feel free to call us on 0800 733 424.  We are also happy to organise training for your team members.

Let’s take Sarah – she’s the Wellington Representative of a national organisation set up to assist small business owners around New Zealand. Sarah runs a small business in Wellington. At a meeting of the organisation, a proposal is tabled that will significantly benefit small businesses in Wellington. Does Sarah have a conflict of interest in this situation and is she able to participate in the discussion and vote on the matter?

First of all, it is necessary to consider what the organisation’s rules say.

Check to see how “conflict of interest” is defined. Often, the rules include a provision that a Representative will not have a conflict where that Representative’s interest is not different in kind from the interests of other members of that region. If Sarah’s organisation has a similar provision, she would not have a conflict of interest provided her interest is no different to other small business owners in Wellington. However, if there was no such provision in the rules, it is likely that she does have a conflict of interest.

It is best practice for the rules of an organisation to require Representatives to disclose their interest and the extent of the interest to the Board. It is also common to prohibit any Representative from participating in the discussion concerning, or voting on, a matter in which they are interested. Depending on how the rules are drafted a Representative may be:

1. Able to participate in the discussion about the matter in which they are interested and able to vote;
2. Able to participate in the discussion about the matter but unable to vote; or
3. Required to leave the meeting while the matter is discussed and unable to vote.

What’s best for your organisation will depend on its individual circumstances. Get advice from your lawyer if you’re not sure what conflict of interest provisions are best to include in the rules of your organisation.

If you’re uncertain if a conflict of interest has arisen – it’s best to take a conservative approach and err on the side of caution. In that situation, make sure the conflict (or possible conflict) is disclosed to the Board and follow the procedure set out in your rules.

Scott and Marie have been thinking about buying a business for a while.  The idea of being the boss, having control over their work, and the possibility of financial gain has finally prompted them to start seriously looking into what kind of business is right for them to buy.  Unfortunately, Scott and Marie have so many questions and don’t know where to start!

Before you rush into a major decision like buying a business, there are some things you need to know about.  At our FREE Rainey Collins seminar we will cover the following:

• What is ‘Due Diligence’ and what do you need to do?
• Do you own the business in your own name?  Should you set up a company?  Do you buy an existing company?
• What is a franchise and is it the right business model for you?
• The legal aspects of the Agreement to Buy and Sell a Business.
• How to deal with leasing issues.
• What to do about existing employees.
• Getting finance and what you need to think about.
• Protecting yourself and your family if entering into a business.
• Dealing with business partners.

There will also be plenty of time for you to ask our lawyers questions.

This seminar is a must for anyone who is thinking about buying a business.

Unfortunately this seminar scheduled for 16 November 2011 is now full … 

so we are also holding this seminar on 24 November 2011 at 5:30pm!

To register your attendance for the seminar on 24 November 2011, enter your details below and submit, or contact Kay Johnston on (04) 473 6850.

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1. Company Name

The first step to incorporate a company is to reserve a company name.  You can check whether the proposed name of your company is available on the Companies Office website.

It is also a good idea to check whether there is a trademark using the proposed name of your company (or words very similar).  We also recommend that you find out what domain names are available using the words of your company.  This will give you an idea of whether others are using similar names or whether you may be breaching intellectual property laws by using the proposed name of your company.

2. Directors

Each company must have at least one director. The Companies Act sets out who can be a director, including:

• Being over 18 years of age.
• Not having been convicted of a crime of dishonesty in the last five years.
• Not being an undischarged bankrupt.

Directors manage the company’s day-to-day business and owe duties to the company, to its shareholders, and to others dealing with the company.  There are harsh penalties for breaching director’s duties, so make sure you are fully aware of your duties as a director.

3. Shareholders

Again, each company must have at least one shareholder, who can be (but does not have to be) one of the directors.

Shareholders are the owners of a company.  Shareholders have voting rights and have the right to a share in any dividend.   Generally, they have no right to participate in the management of a company’s day-to-day business.

4. Shares

A company can have any number of shares.  When choosing the number of shares for you company, make sure it’s an easily divisible number.  Think about whether you will have more shareholders in the future and how many shares each shareholder will have.

In the future, you can create more shares if need be, but it’s simpler to get it right in the first place.

5. Constitution

A constitution governs how your company is run. It is not compulsory to have a constitution, and if you don’t, the terms of the Companies Act apply.

If there are some parts of the Companies Act that you don’t want to apply, or that you want to amend, then it’s a good idea to have a constitution.  For example, how voting is conducted at shareholders’ meetings and whether the chairperson has a casting vote.

You can adopt a constitution at the time of incorporation or at any time afterwards.

6. IRD and GST registration

At the time of incorporating your new company, you can choose to apply for an IRD and GST number.  This is a good idea if you will be trading immediately.

You should obtain accounting advice before establishing a company to ensure you are choosing the most appropriate structure for your business.

7. Share Register

All companies are required to keep a share register recording the details of current and past shareholders.  Therefore, you should make sure you have a share register as soon as you incorporate as a company.

8. Opening Minutes

After incorporation, the company should hold a meeting of the board of directors and take “opening minutes”.  Alternatively, the necessary resolutions could be passed by directors in writing, rather than at a meeting.  The main matters to attend to include:

• Resolving who shall act as chairperson of the board, auditor, lawyer, managing director and secretary (as applicable).
• Confirming that all matters in connection with the registration of the company had been attended to and the date of incorporation, and tabling a copy of the certificate of incorporation together with (if applicable) the constitution.
• Recording who has consented to act as directors and shareholders and resolving that the shares were issued for the agreed price and that the details have been recorded in the share register.
• Recording the registered office and address of the company.
• Resolving to establish a bank account, and who is authorised to sign cheques.
• Resolving (if applicable) to ratify any pre-incorporation contracts.

If you have any questions or want to discuss starting a company or business, give our Business Team a call for a confidential initial chat.

Let’s take the recent Court decision involving the company that owns the trademark for Havaianas jandals.  The company recently took another company that was seeking to trademark the Cubanas brand to Court because it thought the brand Cubanas was too similar to the Havaianas brand.  This was because of the common use of the last four letters “anas”, the tropical theme and the use of similar font in the logo of both brands.

The High Court found that Cubanas was not at fault for the following reasons:

1. Although there are similarities between the two brands, the look and sounds of the two marks … are sufficiently distinct and therefore will not cause confusion to consumers.
2. It is unlikely that consumers would think that there is a connection between to the two brands.
3. The Cubanas brand is unlikely to dilute or blur the distinctiveness of the Havaianas brand.
4. The differences in the two brands will enable Havaianas to preserve its identity.

This case shows that the threshold for preventing another trademark from being registered is high. If you have a question about registering a trademark, or about a competitor’s trademark that infringes on your brand, feel free to give us a call on (04) 473 6850.

A FREE seminar not to be missed if you hope to benefit from the World of Rugby without breaching the many rules that protect a number of words, phrases and logos.

The penalties are harsh, so allocating one hour of your time to ensure success is an excellent investment.

To register your attendance, enter your details below and submit or call Kay Johnston on (04) 473 6850.

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A FREE seminar not to be missed if you hope to benefit from the World of Rugby without breaching the many rules that protect a number of words, phrases and logos.

The penalties are harsh, so allocating one hour of your time to ensure success is an excellent investment.

To register your attendance, enter your details below and submit or contact Kay Johnston on (04) 473 6850.

cforms contact form by delicious:days

Succession – you’ve probably heard of it before and have possibly been told by your accountant or other professional advisor about planning for it, but have you actually done it?  For many busy business people the answer is usually “NO”.

The Meaning

There’s no hiding the word “success” in “succession”.  Why is this significant?  Put simply, succession is “the successful exit from your business”.  What does “success” mean in this context?  We think of it in terms of being able to exit on your own terms.  This is incredibly important after you’ve expended huge amounts of time and energy, and no doubt money, on the development of your business.

The Reluctance

It is an exit strategy, and so it is the next logical step after successfully navigating the business through the various stages of its life-cycle including start-up, development and growth.  However despite planning for all of the front-end business steps, more often than not, business owners do not consider succession.  This is probably for a number of reasons:  

• A natural reluctance to think about planning for retirement, death, etc;
• An inbuilt reluctance to let go of something you have built up and nurtured by handing it over to someone else;
• A failure to recognise the true value locked up in the business and how to realise that value, focusing instead on annual cash flow;
• Insufficient time to look at what succession really means and how to go about planning for it.

Despite these reasons, it is inevitable that there will come a time when you will want or need to leave your business for good.  Circumstances can change quickly and something might force you to exit the business, for example burn-out, financial difficulties, ill-health, or even death.

Planning succession early allows even a forced exit to be on your own terms.

The Plan

There is no perfect template or model for a succession plan, because each plan will vary.  Having said this, there are three basic steps to creating a succession plan: 

• Step 1:  evaluate the business assets;
• Step 2:  evaluate the management of the business; and
• Step 3:  collate the information from Steps 1 and 2 into a written plan.

The Review

A crucial part of ensuring the “success” of your succession plan is to subject it to constant review.  This is so you can update it, if necessary, to reflect both the currency of the forecast assumptions and also changes in the wider market.

Your plan should also be reviewed if something unexpected happens, such as relationship upheaval (personal or business) or the loss of a key customer or supplier, or if your own succession objectives change.

The End

Succession is generally all about ending your involvement in your business.  As a result it is very focused on what you are going to end up with.  It makes sense then to think, as early as possible in the life of your business, about what you want out of your business.

Take, by way of example, Dave.

Dave is a painter who wanted to jazz up his branding.   He had been trading for a number of years as “Steadfastly” and wanted to change to the more modern “Paint It.”   He rebranded his vehicle, office material and website.   Only then did he decide to register his new brand as a trademark.  

Not all marks are registrable

Unfortunately, upon lodging a trademark application for “Paint It”, Dave found his mark was unregistrable.

Dave didn’t realise that not all marks are ‘registrable’.   To be eligible for registration a mark must be distinctive.   Therefore, generally speaking, words, phrases or images that are descriptive of the type of business which they relate to will be declined.

Dave’s new brand was assessed as being too descriptive of the services he offered and so registration of his new mark was not possible.   Ironically, “Steadfastly” would likely have been more easily registered.

What does it matter?

In some ways it doesn’t matter.   Dave can still treat “Paint It” as a trademark.   He can use the trademark symbol (^TM) after it, as that symbol is available for use without formal registration.   (It is worth remembering however that ® is reserved for use with registered marks only.)

Having said that, non-registration may matter to Dave in the future if he decides to sell or otherwise commercialise his business, for example franchise or license his business systems and intellectual property.

This is because trademark registration provides real evidence of ownership, which is all important if you are expecting someone to pay top dollar or extra for it.   Without registration there is no guarantee of ownership and therefore no guarantee against someone else using it or legally challenging your use following purchase.  Why pay top dollar or a premium for that degree of uncertainty? 

Misappropriation and enforcement

Non-registration may also impact Dave’s back-pocket if he needs to enforce his trademark against misuse.

This is because enforcing a breach of a registered mark is relatively straightforward.  Registered marks are recognised as being personal property.   This means that as soon as misuse occurs, enforcement is possible through simple infringement proceedings.   The law is clearer, the processes are more straight-forward and so enforcement is considerably less costly.   Importantly, you do not have to wait until you can prove damage has occurred to your business.

However, if your mark is unregistered you have two options for enforcement.   The first is a common law cause of action called Passing Off.    (This is a legal action or option created by the courts rather than Parliament.) 

The second enforcement option is to file a complaint under the Fair Trading Act 1986. 

Both options are complicated and address factual situations that overlap with the laws addressing infringements of registered trademarks.   The key difference is that neither Passing Off nor the Fair Trading Act recognise trademarks as personal property.   This means that these enforcement options do not exist to protect an owner from infringement.   They are instead aimed at protecting consumers from being misled. 

So what does that mean?   As a result, a successful action doesn’t point simply to infringement of the mark.   Instead, it points to evidence of consumers being misled and of damage arising from the deception of the consumer.   Court action is therefore usually more lengthy, and costly, and regrettably for a business owner, actual damage must be shown to your business before being able to enforce your rights. 

So what’s the moral of the story?

Although “Paint It” may be a catchier brand, “Steadfastly” may have been better for Dave’s wallet on a number of levels.   What could he have done to avoid this situation?   He could have first obtained professional advice in relation to trademark registrability before rebranding.   At the end of the day, Dave may still have re-branded, but at least he would have done so knowing the full implications of his choice.