Franchise law frequently asked questions

I am in a partnership and my partner has withdrawn all the funds from the business account – Can they do that?

According to LAC lawyers , yes they can, provided joint signatories are not required it then becomes a question of on what basis they were taken and to obtain the services of a lawyer to assist as soon as possible.

Are companies superior to partnerships?

Yes, on almost every level as they are regulated by the Corporations Law which is a comprehensive code covering the operation of the company and the responsibilities of the directors. With partnerships there is the Partnership Act or Partnership Agreement which governs the relationship but it is not an all-embracing code as with the Corporations Law. Shareholders Agreements are a superior way in which to regulate the interests of directors.

I am a director of a company and I have just found out that another director has taken money from the company’s accounts set aside for tax purposes – what should I do?

Simply, you need to retain a lawyer to advise you of your obligations and responsibilities under the Corporations Law and any failure to do so may involve you in personal liability. Penalties are severe both under the Corporations Law and under the Income Tax Assessment Act.

I have gone to my accountant as I am thinking of buying a franchise and although he has given me some accounting advice he has indicated that he can fully advise me about the full scope of the transaction including the legal ramifications of the documents I have to sign. Can he do this?

No. An accountant is an accountant and it doesn't matter whether he be, for example, a chartered accountant or a CPA he is not entitled to provide you with legal advice and should he make a mistake and you need to sue him his insurer will refuse to pay the claim as a result. Your accountant is only entitled to give you accounting advice and where he purports to give you legal advice he is not entitled to charge you for it as he is committing a criminal offence.

Sale and Purchase of Business

I want to purchase my friend’s business – can I use the same accountant or lawyer to save on costs?

No. In ever business transaction independent legal advice needs to be obtained from your lawyer who acts for you at the very least to avoid a conflict of interest.

I want to purchase a franchise for a new business – is this a complicated process which requires a lawyer?

Yes – as you need to ensure you get full value for the money you have paid as often promises are made and not kept.