Week 3. Document everything
There are a number of important documents that a business and start-up should have in place before beginning operation. The following is an overview of common documents generally used when starting a business.
A shareholders agreement is an agreement between the shareholders of a company setting out their rights and responsibilities.
Some key terms in a shareholders agreement include the roles and duties of directors, the rights of the shareholders, who has the right to appoint a director, the procedure if there is a deadlock in voting, the procedure if shares are to be transferred and the termination of the agreement.
A confidentiality deed should be entered into where one party/business provides confidential information (for example, designs, client information) to another party. The deed affirms the confidential nature of the information that is passed from one party to another party, and specifies that they cannot disclose the confidential information and the consequences of a breach of the deed.
Often a confidentiality deed will include clauses dealing with who owns any intellectual property developed by a party to the deed as a result of the use of the other person’s confidential information. They can also include non-compete provisions.
Confidentiality deeds can be mutual (meaning both parties have obligations of confidentiality) or in favour of a single party.
Contract for Services
A contract for services outlines the terms on which one party is providing services to another party. For example, if a builder is building a house for someone, they will get the purchaser to enter into a contract which sets out the terms of thee builder’s engagement.
The contract contains clauses relating to the duration of the contract, the nature of the services to be provided, any reporting requirements that one party must adhere to, the requirement of insurance and how the contract may be terminated. Most importantly, it also specifies the payment terms.
A distribution agreement is used where a supplier of goods appoints a person to distribute those goods. The agreement generally gives the distributor a sole and exclusive right to distribute the goods in a particular region. The agreement also outlines the duration of the agreement, whether it is exclusive or whether other people can distribute the same products in the same area, the costs of the right to distribute and the method for accounting for the revenue generated from the sale of the goods by the distributor.
Whether you hire a part-time, full-time or casual employee, an employment contract is essential in outlining the terms of the employment relationship. Generally an employment contract will specify the location of the workplace, the duration of the employment, the duration of any probationary period, the expectations upon the employee to perform his or her duties, the hours of work, the employee’s salary, leave entitlements, confidentiality, and how the employment contract can be terminated. It will also specify whether the employee’s salary includes remuneration for all hours worked, or whether TOIL or overtime payments will be made.
It is more common than ever for businesses to engage contractors to perform jobs which may have previously been performed only by employees. Similar to employees, businesses need to document your agreement with a contractor. Clauses dealing with the services to be provided, due dates, payment, intellectual property and confidentiality will all need to be included.
In certain cases contractors can be deemed to be employees, which means that you need to pay their superannuation contribution, collect PAYG tax, and ensure the terms of their employment are compliant with any applicable awards.
If you are using someone else’s intellectual property (such as their business name, logo or processes), you should enter into an agreement with them which gives you the right to use that intellectual property. The agreement should specify whether you have the exclusive rights to use that intellectual property and for how long.
If you are operating your business on someone else’s land, you should secure your right to use that land by putting a lease in place. A lease gives you the exclusive right to use land for a certain period of time in exchange for payment of rent.
If your business obtains funds, whether from a bank or private source, a loan agreement confirming the terms of repayment will generally be put in place.
Most businesses will receive a loan from shareholders or directors when starting out, and these loans should be documented (even though they are between related parties).
These are just some of the documents that your business may need. Merton Lawyers have extensive experience in creating tailored documents for every type of business or start-up that reflect how you intend to operate your business. We can also confirm which documents you need and which you can skip.
*Please note this is a general guide only and should not be used in place of obtaining our advice.