Areas of Law Rural and Agribusiness Litigation and Court Disputes Building and Construction Commercial and Business Mediation Employment Family Law Wills and Powers of Attorney Mining and Resumption Property Estates Banking and Finance

GETTING INVESTMENT READY A LEGAL FRAMEWORK TYPES OF STRUCTURES USED BRAD BEASLEY PRINCIPAL SOUTH GELDARD LAWYERS

What type of investment structure do you need Answer will depend on -  What strategy have you got or are going to put in place  What sort of investment do you want to attract  The size of your agricultural operation  What are the operational objectives and requirements for your agribusiness

Other considerations What –  Are you seeking to grow PRODUCTIVITY EARNINGS ASSET BASE  Asset Protection  Improvement in succession planning  Proprietor -v- Employee  Ability to attract finance  Compliance costs and disclosure of results  Achieving tax effective change Capital Gains Tax Rollover Relief Commercial Reasons for Change Anti-Avoidance Provisions Stamp Duty – are concessions available

What legal structures are available? 1.Sole Trader 2.Partnership Mum and Dad Partnership Family Partnership Agribusiness Partnership 3.Trust Family Discretionary Trust Unit Trust Hybrid Trust 4.Company Trading Company Proprietary Limited Company Unlisted Public Company Listed Public Company 5.Some Other Alternatives Trading Co-operative Managed Investment Scheme Joint Venture

Sole Trader  What is it – An individual trading in their own right  Advantages Least expensive/minimal compliance costs Full control CGT concessions (50%) All profits to single owner  Disadvantages Unlimited liability Lack of asset protection Profits subject to individual’s marginal tax rate No potential to split income

Partnership  What is it – Two or more parties conducting a business with a view to profit  Advantages Not expensive to set up Partners – additional source of funding Additional skills brought to the business Flexibility to split income Partners can dispose of their % interest  Disadvantages Unlimited liability No flexibility for retention of profits Disagreements between partners Partnership may cease on death Generally limited to maximum of 20 partners

Trust  What is it – Property or Business is held by a Trustee for the benefit of others  Advantages Splitting and streaming of income 50% CGT discount generally available Some asset protection provided Beneficiaries safeguarded from creditors Continuity of business if a beneficiary dies  Disadvantages Expensive to set up and maintain Legal ownership with Trustee (not beneficiaries) Limits on powers in Trust Deed Political uncertainty surrounding tax treatment Complicated rules for carry forward losses 80 year life generally

Company  What is it – A group of people who own shares in an entity controlled by themselves or others  Advantages Limited liability if no personal guarantees Ability to retain profits Flat rate of tax Potential for income splitting Ability to access capital Governance through a Board of Directors Perpetual existence  Disadvantages Expensive to set up and maintain Subject to greater government regulation Control of the business with directors – not owners Employee on costs Director risks if insolvent trading 50% CGT discount not available Different rules for different company types

Trading Co-operative  What is it – A mutual business owned by customers and/or employees  Advantages Share capital and allows for distributions No limit on number of members Democratic control – one member – one vote Governed by agreed set of rules Perpetual existence  Disadvantages Expensive to set up and maintain Longer time needed for registration Initial disclosure required of personal financial involvement Budget to be lodged with Office of Fair Trading Disclosure of contract information Usual Director’s duties

Managed Investment Scheme  What is it – Investments by a responsible entity of funds raised  Advantages Pooled contributions to invest for profits Allows for more than 20 members Ability to raise significant capital Able to avoid public disclosure of profits (unlisted)  Disadvantages Members do not have day to day control Expensive to set up and register Heavily regulated May need a Financial Services Licence Promotion may need a Product Disclosure Statement (or Information Memorandum) Significant reporting and ongoing costs Withdrawals may be frozen

Joint Venture  What is it – A strategic alliance of 2 or more parties to engage in a specific project or undertaking  Advantages Opportunity to grow quickly Access to additional resources and markets Risk sharing between JV parties Specific to a particular project or opportunity Limited governance required Generally no registration or statutory obligations  Disadvantages Time needed to find and trust JV partner Detailed JV Agreement to set rules and objectives Imbalance or difference in objectives or cultures Difficulty to capitalise or debt fund

Over complicating it Mrs B Smith Sole Director/Secretary 100 A Class 1 Ord Ms C Smith 100 G Class Members and Officers – Group 2 Mr A Smith Sole Director/Secretary 100 A Class 1 Ord Mrs B Smith 100 B Class 1 Ord Members and Officers – Group 3 Mr A Smith 100 A Class 1 Ord Mrs B Smith Sole Director 100 B Class/1 Ord Ms C Smith 100 G Class Mr D Smith 100 C Class Smith Equipment Pty Ltd New trustee company Smith Operations Pty Ltd New trustee company Smith Agribusiness Pty Ltd New trustee company Smith Equipment Trust (SET) Wet hires equipment to Smith Pty Ltd Pays dry hire charge to SFT Smith No 2 Pty Ltd (Smith 2) Holds business name, licences, lease Conducts agri business Pays staff hire charge Newco Corporate beneficiary Bucket Company Family members Other trusts Smith Staff Hire Pty Ltd Employs all staff Provides training Smith Family Trust (SFT) Equipment assets Finance liabilities Hires equipment to SET Smith Rural Hire Pty Ltd Hires external contractors Potential corporate beneficiary Contractor Sub-Hire Equipment Dry Hire Wet Hire LivestockFreight Dry Hire SMALL AGRIBUSINESS OPERATION Members and Officers – Group 1

What investors want BUSINESS  Financial Performance – Strong Returns  Industry Experience  Strong Management/Governance  Effective Business Model/Strategy  Significant Growth/Target Markets LEGAL  Full Disclosure  Effective Documentation  Intellectual Property Protection  Exclusive Licences  Confidentiality Agreements