 |
|
| |
Effective legal advice & services
produce an all-encompassing benefit...
What's the major benefit to a business that develops with truly effective legal advice and service?
Each step that is taken in development; each day of operation; each transaction with clients, suppliers
and staff can be based on increased certainty.
Langley Twigg Lawyers provides advice and services that enable clients to be more certain that their businesses not only comply with statutory requirements, but that relationships and opportunities are maximised with clearly worded agreements, great attention to detail, innovative approaches and an eye on the big picture.
"Langley Twigg has looked after our family and businesses for 3 generations. We have had
confidence in their ability to advise us historically and we are confident they will continue to advise
us well for the future." Bruce Beaton, Beaton Holdings Ltd.
|
|
| |
Each month Langley Twigg Partner Stuart McLauchlan contributes to the Hawke's Bay Chamber of Commerce publication 'The Chamber Pulse' with an article (as below) that focuses on area of significant commercial importance.
ANTI-SPAM LAW COMES INTO FORCE
Businesses will need to think twice before sending that next email or text message to a New Zealand based recipient. On 5th September 2007 the Unsolicited Electronic Messages Act 2007 comes into force. Offending businesses and individuals can be fined up to $200,000.00 for sending a text message, email or instant message that is commercial and unsolicited ... [more]
INSURING YOURSELF AGAINST NATURAL DISASTER
While there is no absolute protection from such ‘Acts of God’ we can and should insure as fully as possible so that we can get back on our feet quickly. It’s worth taking some time to understand what you are currently covered for under your existing insurance policy and what the Earthquake Commission (EQC) offers ... [more]
AGREEMENTS TO LEASE… GET ADVICE BEFORE SIGNING
Many parties fail to appreciate that negotiating the agreement to lease is the crucial stage as it is the point at which the lease contract is made and the parties become bound ... [more]
DANGER! DIRECTORS BEWARE
Directors must take reasonable steps to put themselves in a position not only to guide but to monitor the management of the company. In the recent case of Mason & Anor v Lewis & Anor (2006), the Court of Appeal issued an important reminder that company directors must take steps to understand their duties and carry them out in accordance with the law or otherwise run the risk of personal liability ... [more]
DEBT COLLECTION: INCREASING YOUR ODDS.
WHAT ARE YOUR TERMS OF TRADE?
Putting the Customer on Notice of Your Terms of Trade. It is surprising how many suppliers fail to draw this important requirement to the attention of their customers ... [more]
DEBT COLLECTION: INCREASING YOUR ODDS.
WHAT ARE YOUR TERMS OF TRADE?
As published in the Chamber Pulse, March & April 2007
Debt collection is something many businesses tend to think about only after a debtor refuses to pay or cannot pay its debts. This is too late. Suppliers need to be pro-active before providing goods or services on credit in order to protect their own business interests. There are several matters that should be addressed:
• Determining the identity of the debtor
• Obtaining guarantees
• Binding the customer to the supplier’s terms of trade
• Obtaining security
• Controlling the amount of debt.
Addressing these matters before allowing a customer credit will simplify the debt collection process and give you a better chance of recovering the debt. Overlooking or ignoring these matters not only complicates the recovery of the debt but may also make potentially recoverable debts irrecoverable.
IDENTIFYING THE DEBTOR
It is not uncommon to find that a supplier has limited information about the customer. Sometimes a customer is known only by a mere trade name rather that the people or company behind that trading name. This makes debt recovery difficult. The customer is usually an actual person or a limited liability company that can be sued and any resulting judgment be enforced. Make sure you get as much information as possible about a customer. On the flipside, if the supplier is operating a limited liability company then the Companies Act requires the supplier to draw that fact to the customer’s attention by clearly displaying the company’s name and the words "Limited" or "Ltd" on every written communication sent by or on behalf of the company which includes invoices and other correspondence. Unless a supplier does this the supplier could be held personally liable for the company’s obligations which undermines the whole purpose of setting up and using a company.
If someone wants to operate a business under a different trading name from their company name, then they should refer to their organisation as "[ company name ] trading as [ trading name ]". When a customer gives an address, it is important that the supplier not only obtains a postal address but also a physical address. The supplier should know where its customer/future debtor is located and where its business is being operated from. A physical address is particularly important if legal action has to be taken and documents have to be served on the customer. Obtaining a credit check on the customer prior to establishing any credit is also a good idea.
OBTAINING GUARANTEES
One means that can be used by a supplier for protection is to take a personal guarantee. It is particularly important to consider obtaining guarantees from shareholders or directors of a company customer. This is because if the company is put into liquidation, general creditors do not usually get their debts paid. Obtaining a guarantee from the company’s directors or shareholders would commit them to personally pay the debt. Therefore it is useful and practical to include the guarantee in terms of trade which can then be signed by both the customer and the guarantor. In this way, the guarantor is made aware of the terms of trade to which the customer has agreed. If the customer does not pay its debts, the supplier can sue both the customer and any guarantor. However it should be noted that personal guarantees are only as good as the assets held by the guarantor. Again a credit check may be warranted.
PUTTING THE CUSTOMER ON NOTICE OF YOUR TERMS OF TRADE
It is important to have customers sign terms of trade containing provisions that the customer will pay interest at a certain rate on all overdue accounts and to pay ALL of the supplier’s costs, including legal costs incurred in recovering or attempting to recover overdue amounts. It is surprising how many suppliers fail to draw this important requirement to the attention of their customers. By omitting to do this, they then find out that they have no right to require the customer to pay interest on overdue amounts or debt recovery costs. A customer may be held to have impliedly agreed to pay costs and interest. An example is where a supplier chooses to insert some terms of trade at the bottom of their invoices stating, e.g. that “interest will be charged on overdue accounts at 2.5% per month”.
Where the supplier can establish a history of sending accounts with such an interest clause to a customer, that may support a claim for interest but does not apply if it is the first time that an account has been sent to the customer. However, the recommended practice is to have the customer actually sign the terms of trade.
If face to face customer contact is not possible or practical then the terms of trade can be faxed for customer signature. Where a supplier cannot prove that a customer has either expressly or impliedly agreed to pay interest and costs, then the supplier’s only recourse is to sue the customer. The Court will then decide whether the supplier’s claim will be admitted or declined and if it does award interest, the rate is only 7.5% per annum. If costs are awarded, they usually only cover a portion of the actual legal expenses incurred.
THE PERSONAL PROPERTY SECURITIES ACT 1999
This Act is important for suppliers of goods on credit. This gives suppliers the means to take a security over goods supplied on credit in support of the debt. The terms of trade must create what is known as a purchase money security interest or a PMSI. This can be publicly registered under the registry created by the Act which will give protection in the liquidation of a company and in other circumstances. This Act has replaced the old romalpa or retention of title regime that many old terms of trade contained and which can no longer be relied upon.
MANAGING THE AMOUNT OF DEBT
A supplier can control how much debt a customer incurs. The supplier needs to monitor customer debts and try not to let customers incur more debt that the supplier believes they can service. It is useful to consider the customer’s assets, its other creditors and the amount of the debt as well as its previous trading history. So the time to act is now! If you don’t have terms of trade get some, if you do, make sure they are up to date.
[back to top]
DANGER! DIRECTORS BEWARE
As published in the Chamber Pulse Newsletter May 2007
In the recent case of Mason & Anor v Lewis & Anor (2006), the Court of Appeal issued an important reminder that company directors must take steps to understand their duties and carry them out in accordance with the law or otherwise run the risk of personal liability.
In the above case the manager of the company was dishonest and was convicted of fraud. There was evidence that the company was in financial trouble but the directors’ allowed the company to continue to trade. The directors were found to have little or no appreciation of their duties as directors or of the operation of the company. The internal workings of the company were never regularised or recorded and board meetings were ad hoc and minutes of meetings were not taken or distributed. The directors of the company were held to be personally liable for its debts.
Directors must take reasonable steps to put themselves in a position not only to guide but to monitor the management of the company. The duties a director owes to the company are:
Duty to act in good faith and in the best interest of the company. Subject to the constitution of the company, the interests of the company must be placed first. This rule places the integrity of directors’ acts under scrutiny.
Duty to avoid reckless trading. Directors must not allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.
Duty to exercise powers for a proper purpose. Directors must exercise their powers for a proper purpose only. An example of abuse would be to issue shares to particular shareholders for the purpose of diluting another shareholder’s proportionate shareholding.
Duty not to agree to the company incurring certain obligations. Directors must not agree to the company incurring an obligation that the company will not be able to perform.
Duty of care. Directors must exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances. Other responsibilities owed by directors include the obligation not to disclose or make use of or act on company information (other than for the purposes of the company) and the duty to comply with the Companies Act 1993 and the company’s constitution. Being a company director is not a position to be taken lightly.
[back to top]
AGREEMENTS TO LEASE… GET ADVICE BEFORE SIGNING
As published in the Chamber Pulse, June 2007
Consider this common scenario: A landlord has an empty space and instructs an agent to find a tenant. The tenant sees the agent’s advertising, inspects the premises and negotiates on what appears to be the most important aspect, the annual rent. This is agreed between the parties at which stage the agent produces a two page agreement to lease which both parties give a cursory glance and then sign.
Many parties fail to appreciate that negotiating the agreement to lease is the crucial stage as it is the point at which the lease contract is made and the parties become bound. Typically an agreement to lease will contain an innocent looking clause providing that the parties are to enter into a deed of lease in the Auckland District Law Society (ADLS) form. The tenant when signing the agreement to lease will not usually know what the terms of the ADLS lease are. The tenant has effectively agreed to be bound to a 40 plus clause deed of lease, without reading it.
The first stage at which difficulties may become obvious is when the tenant receives the 20 plus page lease document from the landlord’s solicitor. Quite often it is only at this stage that the tenant seeks legal advice. This may be too late as changes can only be made by agreement by both parties.
The standard ADLS lease includes extensive obligations for both parties including tenant maintenance and repair obligations that may not have been considered or that the tenant may have assumed where the landlord’s responsibilities. In addition there are various outgoings which the tenant must pay. The ADLS form also provides that the tenant must pay the landlords solicitor’s costs of and incidental to the preparation of the deed of lease. The above matters can mean a significant extra cost to the tenant on top of the annual rent.
Nasty surprises are not a problem solely for the tenant either.
When acting for a landlord or a tenant, where we have the opportunity we will invariably amend the standard terms of the ADLS lease. The legal costs of resolving issues when they arise out of an agreement to lease will be significantly more than the cost that would have been occurred if advice was sought prior to entering the agreement.
[back to top]
INSURING YOURSELF AGAINST NATURAL DISASTER
As published in the Chamber Pulse, August 2007
Some of you may know someone affected by the recent floods in the North Island including the Hawke’s Bay. For many of those who were hit, the disaster has been made worse because they don’t have adequate home and contents insurance. While there is no absolute protection from such ‘Acts of God’ we can and should insure as fully as possible so that we can get back on our feet quickly.
It’s worth taking some time to understand what you are currently covered for under your existing insurance policy and what the Earthquake Commission (EQC) offers. The EQC is New Zealand’s primary provider of natural disaster insurance to residential property owners. It insures against earthquake, natural landslip, volcanic eruption, hydro-thermal activity, tsunami and storms as well as flooding or fires caused by any of these.
The EQC covers homes (including flats and holiday homes) personal belongings and the land the homes are on. They will pay up to $100,000 for houses and $20,000 for contents damaged by a natural disaster. Also covered is the land under the house, under the driveway, and land up to 8 metres from external walls.
It is important to note that each EQC cover only applies to residential homes that are privately insured against fire. There is quite a long list of things that the EQC does not provide cover, including bare land, commercial, industrial or rural land, swimming pools, seal or paving, tennis courts, jetties, cars, boats, works of art and jewellery. This is not the full list so it’s best to check exactly where you stand with your insurance company.
If you would like more extensive natural disaster cover it is important to let your insurance know and ask them to provide you with a top up. This is automatic in some replacement policies but not all. You may wish to sit down with your own insurance company and work out where gaps, if any exist in your cover.
[back to top]
ANTI-SPAM LAW COMES INTO FORCE
As published in the Chamber Pulse, September 2007
Businesses will need to think twice before sending that next email or text message to a New Zealand based recipient. On 5th September 2007 the Unsolicited Electronic Messages Act 2007 comes into force. Offending businesses and individuals can be fined up to $200,000.00 for sending a text message, email or instant message that is commercial and unsolicited. This will include messages that market or promote goods or services, investment opportunities, or advertise sales or promotions.
The prohibition is likely include the more general electronic newsletters that may be sent to customers updating them on issues as these newsletters are by their nature designed to promote the business of the sender.
Commercial electronic messages will only be able to be sent to recipients that have given consent to receive such messages. Consent can be gained in one of three ways:
1. Express consent – the recipient has given express permission eg. signed up for sale notifications or monthly newsletters.
2. Inferred consent – where there is an existing relationship with the recipient whereby consent to receiving electronic messages can be reasonably inferred.
3. Deemed consent – consent deemed to have been given where an electronic address has been conspicuously published by a person or a business and the publication is not accompanied by a statement restricting the use of that address.
However, even if the sender relies on deemed consent, the message sent must be relevant to the business or activity of the recipient. Individuals and businesses should check their publications of electronic addresses (particularly on websites) and consider whether they should add some restrictions.
Commercial electronic messages must also contain:
1. Accurate contact information of the sender.
2. A clear subject line if it is an email.
3. An opt-out facility that can be activated at no cost to the recipient.
The safest way to ensure compliance with the law will be to receive express consent from existing suppliers and customers and new prospects. Proof of receiving such consent should be retained.
The Act’s purpose is to contribute to the world wide effort to reduce spam. Whether this is achieved remains to be seen. However, the Act will be a challenge for businesses that rely on email and text marketing.
[back to top]
|
|
Langley Twigg Lawyers
PO Box 446, Napier
New Zealand
Phone: (06) 835 8939
Fax: (06) 835 3712
Click here to email
Langley Twigg
www.LangleyTwigg.co.nz
To add your email address
to (or remove it from) our
mailing list, please use the
buttons below.
Being able to trace its Napier origins back to 1864, Langley Twigg Lawyers is the longest-established law firm in Hawke's Bay.
Today it is also the largest, representing many hundreds of personal and business clients in Hawke's Bay and throughout New Zealand.
|
|
| |
|
|