Commercial

From start-ups to established businesses, we help you make sound legal decisions and keep your business protected, without slowing down the commercial side of the deal.

How we can help

• Buying and selling businesses, including due diligence
• Commercial leases for landlords and tenants
• Business structures: companies, partnerships and trusts
• Commercial contracts, terms and conditions and supply agreements
• Shareholder agreements and governance
• Dispute resolution and debt recovery

Choosing a business structure

The structure you choose in the first week of trading shapes your tax, your personal exposure and your options on exit. It is also much harder to change later.

• Sole trader. Simple and cheap, but you and the business are the same legal person, so your personal assets are exposed to business debts.
• Partnership. Partners share profits and, importantly, liability. Without a written partnership agreement the Partnership Law Act 2019 default rules apply, and they rarely match what the partners expected.
• Company. A separate legal person with limited liability for shareholders. A company brings director duties under the Companies Act 1993, and lenders will often ask for personal guarantees anyway.
• Look-through company and limited partnership. Specialist structures with particular tax and liability outcomes, suited to some property, investment and professional businesses.
• Trust-owned structures. Often used for asset protection and succession, but they need careful advice on trustee duties and tax.

A situation we see often

Two friends start a business together on a handshake and share the profits equally. After two years one wants to leave and the other thinks the business is worth little. Neither knows who owns the brand, how the departing partner is paid, or whether a restraint applies.

The legal point: a short, clear agreement at the start would have answered every one of those questions. Fixing it after the relationship has soured is far more expensive.

Directors' duties and personal exposure

Directors owe duties to the company, and in some situations personal liability can follow. The Companies Act 1993 requires directors to act in good faith and in the best interests of the company, to exercise reasonable care and skill, not to trade recklessly and not to incur obligations the company cannot meet. Insolvent trading is one of the most serious risks and, for small-company directors, a common one.

We advise directors on conflicts of interest, related-party transactions, loans from shareholders, the signs of insolvency and the steps that can reduce personal risk. Early advice often means more options.

Shareholder agreements: the document you hope never to use

A shareholders' agreement sets out how the business is run and how owners enter, leave and resolve disagreement. A good agreement addresses:

• decision-making and what needs unanimous consent;
• capital calls and what happens if one shareholder cannot contribute;
• pre-emptive rights, drag-along and tag-along clauses;
• how shares are valued on exit, death, divorce or bankruptcy;
• deadlock between equal shareholders; and
• restraints, confidentiality and protection of intellectual property.

A situation we see often

A 50/50 company has two equal directors who stop agreeing on strategy. One refuses to approve any spending. There is no deadlock clause and no exit mechanism.

The legal point: without an agreement, the options are negotiation, a costly buy-out dispute or an application to the High Court. A deadlock mechanism, drafted in advance, resolves the problem in weeks rather than years.

Buying or selling a business

A business sale is not a larger version of a house sale. It involves valuations, warranties, employees, customers and often years of historical risk.

Asset sale or share sale?

In an asset sale the buyer chooses what to take, but contracts, leases and licences must be assigned and employees transferred. In a share sale the buyer takes the company, including its history and liabilities. The choice affects price, tax and risk.

Due diligence

Buyers should investigate finances, contracts, leases, employment arrangements, regulatory compliance, intellectual property and litigation, and verify that the business's assets are free of security interests on the Personal Property Securities Register. Sellers benefit too: preparing the documents in advance supports a better price and a smoother settlement.

Warranties, restraints and price adjustments

The agreement allocates risk through warranties about the business, indemnities, price adjustments for stock and working capital, and a restraint of trade to stop the seller competing. A restraint must be reasonable in scope, area and duration to be enforceable.

A situation we see often

A buyer purchases a café business on the strength of three months of figures supplied by the seller. After settlement the accounts show unpaid GST, and the landlord refuses to consent to an assignment of the lease.

The legal point: conditions for due diligence, landlord consent and tax clearances should be in the agreement before it becomes unconditional. Warranties are only as good as the seller's ability to pay if they are breached.

Commercial leases

A commercial lease is a long-term financial commitment and, usually, the biggest fixed cost in a small business. Unlike residential tenancies, there is little statutory protection, so the lease document is everything.

• Term and renewal. The right of renewal must be drafted precisely. If it is conditional on a notice, miss the date and the right is lost.
• Rent reviews. Market, fixed or CPI-based reviews produce very different outcomes. Ratchet clauses can prevent rent falling.
• Outgoings. The tenant often pays rates, insurance and building operating costs. Check what is included and whether there is a cap.
• Make-good and reinstatement. What must be removed or restored at the end of the lease can be a six-figure obligation.
• Assignment, subletting and sale of the business. Landlord consent will usually be required, and the original tenant may stay liable.
• Personal guarantees. Directors are frequently asked to guarantee a company lease. We negotiate the scope, duration and release.

If a tenant falls behind with rent, landlords have remedies including a formal notice under section 245 of the Property Law Act 2007, followed by cancellation or recovery of arrears. For tenants, understanding these steps early can be the difference between a negotiated plan and an eviction.

A situation we see often

A retailer signs a five-year lease with a right of renewal "by notice in writing". She forgets to give notice in the window specified in the lease, and the landlord offers new terms at a significantly higher rent.

The legal point: renewal clauses are enforced strictly. We record the key dates, and where something has been missed we assess whether there is any basis to rely on the renewal.

Contracts, terms and conditions

Most commercial disputes come down to the contract. We draft and review supply agreements, services agreements, distribution and agency agreements, contractor agreements and standard terms of trade. Good contracts record who does what, by when and for how much, and what happens when something goes wrong, including limits on liability, payment terms, termination rights and dispute resolution.

Consumer law still applies to businesses

If you sell to consumers, the Fair Trading Act 1986 and the Consumer Guarantees Act 1993 apply however your terms are written. The Fair Trading Act also prohibits unfair terms in standard-form consumer contracts, and misleading conduct in trade. Business-to-business contracts are not free of risk either: statements made during negotiation can give rise to claims for misrepresentation under the Contract and Commercial Law Act 2017.

Protecting what makes your business valuable

• Brand. A registered trade mark gives you exclusive rights and is much easier to enforce than unregistered rights. Check availability before you invest in signage and websites.
• Copyright and content. Copyright arises automatically, but ownership of commissioned work (a logo, a website, software) depends on the contract. Make sure your contractor assigns it.
• Confidential information. Non-disclosure agreements, employment terms and restraints protect your know-how and customer relationships.
• Privacy. The Privacy Act 2020 requires businesses to protect personal information and to notify serious privacy breaches.

Getting paid: debt recovery

Late payment is the quiet killer of small businesses. The right escalation depends on the amount and the debtor.

1. Reminders and a letter of demand: a clear letter from a lawyer often resolves the matter without further steps.
2. Statutory demand: against a company, a formal demand under the Companies Act 1993 requires payment within 15 working days, and the company has a short window to apply to set it aside. Failure to comply can lead to liquidation proceedings.
3. Court or tribunal: the Disputes Tribunal handles claims up to $30,000, the District Court generally up to $350,000 and the High Court above that.
4. Security: a registered security interest on the PPSR can put you ahead of other creditors.

A situation we see often

A supplier delivers goods on 30-day terms to a customer who later goes into liquidation. The supplier's standard terms had no retention-of-title clause and it never registered a security interest.

The legal point: an unsecured supplier ranks behind secured creditors and may recover little. A retention-of-title clause and a PPSR registration, in place before supply, change the outcome completely.

When a dispute arises

Disputes are expensive in time and money, and most are best resolved early. We assess the strength of your position, preserve evidence, communicate with the other side and, where it makes sense, use negotiation, mediation or arbitration. If proceedings are needed we guide you through them and advise honestly on the cost and prospects. Time limits apply: most civil claims must be brought within six years under the Limitation Act 2010, and shorter periods apply to some claims.

Business succession and exit

Every owner leaves eventually. Whether you are planning to sell, pass the business to family or bring in a successor, the earlier you plan the more options you have. We coordinate with your accountant on structuring the exit, and with our trusts team so that the ownership of the business fits with your will and family arrangements.

Questions we are often asked

Do I need a lawyer to set up a company?

Registration is simple, but the decisions behind it (shareholdings, director roles, the constitution and a shareholders' agreement) are legal decisions that are hard to undo.

Can I use template contracts from the internet?

You can, and many businesses do, until a dispute arises. Templates are rarely tailored to New Zealand law or to your risks. A once-off investment in good terms of trade usually pays for itself.

Should I give a personal guarantee?

Sometimes it is unavoidable, but the scope, cap and duration can often be negotiated. We explain the exposure before you sign.

When should I call a lawyer about a dispute?

Before you send an angry email or a formal threat. How the first communications are worded can strengthen or weaken your position later.