You will need to give some consideration to a dynamic price formula. The pricing mechanism has to work for now, and also into the future as you sell more shares. The price formula is the most critical part of the equation, and ideally it shouldn’t be too complicated. From the seller’s perspective, it is important to get a fair return. From the purchaser’s perspective, the opportunity must stack up, and it must be financially viable. And from the company’s perspective, the formula must be right so that the business continues to do well. It is important to identify the true stakeholders.   Ensure that your employee’s spouse or partner is on board. We often find it is useful to arrange an informal meeting with a purchasing ‘couple’ early in the process. This helps identify all their expectations and it allows an opportunity to talk through ‘fears’. Early meetings can build trust and help purchasers get their heads around the basic ‘give and take’ of what is on offer. Often financial risk is a part of the deal that they don’t like, but need help accepting. Talking about the risks helps. Another potential stakeholder is the purchaser’s bank, especially if it is expected that the last tranche of shares will be sold for cash. Mostly the bank will not confirm  in advance exactly what it will finance in the future. However, a good discussion with a commercial banker will clarify the kinds of parameters that are likely to apply. When the parties start to agree in principle, it is a good idea to write the deal up. We will often use a ‘Memorandum of Understanding’. This is a simplified non-binding record of where the parties have got to and what they envisage agreeing  to. No legal commitment is usually expected until the purchaser signs a detailed agreement, and until they have a chance to consider the final agreement with their lawyer. Having a non-binding record in the meantime means that if a party wants to change their mind down the track, then they at least have to be transparent about it. These early write ups help bed in expectations. They also help contain costs. It’s better to identify issues at an early stage, than to wait till a prospective deal has been fully documented. Consider dipping a toe in the water before you make a fully-fledged commitment. A provisional sale of shares may be able to be unwound for a time, at the same price, if the arrangement does not work out. Probationary arrangements allow the vendor to wait and see how the purchaser is adapting to a new set of expectations. The Shareholders’ Agreement must be dynamic. As more shares are sold, the vendor will lose some degree of voting influence. The tipping point has to be managed carefully, so that the outgoing shareholder does not give up too much influence too soon. When you offer shares to an employee, look at the total package. You will need to work out how the new arrangement will affect the employment agreement. What more will you expect from this person? What will they expect? If you are going to agree to ‘market remuneration’, always research and discuss what that means.

Lucas and Lucas advise all our clients that a Will is one of the most important legal documents you can have, especially if you have assets such as a house, or KiwiSaver. If you don't have a Will the law will determine how your estate is divided, and this could be very different to what you want to happen - read more . Your Will stipulates what you want to happen to your property and possessions after you’re gone. Having a Will ensures that the people and things that matter most to you are taken care of later on. For further information contact us or call (03) 477 8080

The key requirement for transactions affected by the lockdown right now is to ‘make things work’. This is a time when the practical solution must often trump theoretical rights. As the Law Society acknowledges that ‘the vast majority of transactions due to settle over the next four weeks of Level 4 lockdown will most likely have parties that are not in a position to settle. Even if the prerequisite documentation has been attended to, moving companies will not be operating so vendors will be unable to give vacant possession; equally purchasers will have no means of moving their own furniture. Any such relocation will likely be a breach of the Level 4 lockdown requirements.’ For these and other reasons, the Property Law Section of the Society recommends using the following clause to amend existing Agreements for Sale and Purchase or Auction Agreements due to settle during the Level 4 lockdown: “The parties agree that settlement is hereby deferred to the 10th working day after the Government reduces the Covid-19 Level to Level 2 or below, or to such other date as may be mutually agreed. For the sake of clarity neither party shall have any claim against the other in relation to this deferral.” If you have an issue with a settlement or for further information contact us or call (03) 477 8080

On 26 March 2020, the government shut down large sectors of the New Zealand economy in response to the coronavirus. The full ramifications of the lockdown are not yet clear, but the effect on businesses will be severe. Most will struggle through, some will not and many more will have to reduce staff in order to survive. Sacrificing employees to rescue a business can be a highly emotional experience for an employer. The impact of redundancy on families and the predicament of older employees forced to seek alternative employment in a depressed economy through no fault of their own is obvious. No employer wants to be responsible for this and it can affect them deeply. The fact that it was forced upon them by factors beyond their control is little solace. Most employers will go to great lengths to avoid laying off staff, but sometimes it is the only option. If redundancies are unavoidable as a consequence of the coronavirus, here are some factors that need to be taken into account. The first thing to note is the government’s Wage Subsidy Scheme. Check the conditions you agreed, as these changed from time to time. In general, no employee can be made redundant while the business that employs them is taking the subsidy, but the moratorium ends with the cessation of the Scheme, currently scheduled for June 9. Businesses will then regain their legal rights, including the power of dismissal on economic grounds. Businesses that did not enter the Scheme can act immediately. Justification At one time, reduction of staff on non-disciplinary grounds was only justifiable if it was necessary to avoid insolvency. That is no longer the position and staff can be made redundant to regain the profitability or efficiency of the business. The redundancy decision must, however, be reasonable. The statutory test is “ what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred”. A business seriously damaged by the shutdown and forced to lay off staff is unlikely to be held to have acted unreasonably. A business that emerges relatively unscathed but which then attempts to exploit the economic downturn to shed inconvenient staff might be regarded in a different light. Procedural Fairness Even if a dismissal is economically justified, it must still be carried out in a procedurally fair manner. Section 4 of the Employment (Relations) Act 2000 requires the employer to act in good faith and to provide – access to information, relevant to the continuation of the employees’ employment, about the decision; and an opportunity to comment on the information to their employer before the decision is made. It is not sufficient, therefore, to inform the employee that they have been made redundant and to state the reasons for the decision. The matter must be discussed and the employee must be provided with enough information to develop and present alternative proposals. The most important information in the current context may be the firm’s revised operating budget. This could lead to discussions about paid or unpaid leave or temporary wage reductions. Only if there is no viable alternative should notice of redundancy be given. Redundancies necessitated by factors other than personal misconduct must always be handled with care, but the suddenness and severity of the current crisis has placed employers in a very difficult position. If the candidates for redundancy have similar functions, productivity and length of service, selecting between them on objective grounds could be all but impossible. If the employer then resorts to personal factors to break the deadlock, it could lay them open to claims of irrelevant considerations, inappropriate assumptions or even damage to the employee’s reputation and consequent worth in the labour market. An employer who attempts to avoid this by glossing over or misrepresenting the reasons for the redundancy would breach his or her statutory duty of good faith, again with adverse consequences. It’s a delicate balance. For further information call us on 03 477 8080.

It is easy to put off one of the most important documents that you will make in your lifetime – your Will. You may already have a Will in place but when was the last time you reviewed it? Does it still benefit the correct people in your life, or have your wishes or financial position simply changed over time? This may be the time to revisit your existing Will and think about any changes that may be required. We suggest that Wills are reviewed every 5-10 years, and particularly following a birth, marriage, death or dissolution of marriage. If your Will no longer reflects your wishes we will help you to amend your Will or to create a new Will when the existing one is not up to date. We are happy to talk through your requirements and supply you with our Wills questionnaire that you can prepare in advance of any conversation that we have with you. This will help you think about the various requirements of making a Will. It doesn’t need to be a complicated document but there are certain things that you should think carefully about. Some laws allow your family (de facto partners, partners (civil union) or spouse (married), children and others) to bring a claim against your Estate. These include: the Property (Relationships) Act 1976 which governs relationship property; the Family Protection Act 1955 which allows claims to be brought when it is believed that adequate provision has not been made; and the Law Reform (Testamentary Promises) Act 1949 which enables someone to seek provision from an estate if a deceased promised to reward them for a service undertaken while they were alive, but failed to record this in their Will). Whilst a Family Trust is not as common as they once were, special consideration needs to be given to ensure the longevity of a Family Trust (if this is what is intended). We will discuss this further with you. This is a good time to cross off something that may have been on your mind for some time, giving you a little peace of mind. For further information contact us or call (03) 477 8080

There is a lot of discussion going on at the moment about what a ‘fair’ proportion means. When the Government declared a state of emergency and ordered all non-essential businesses to close their doors and vacate their premises, this raised numerous legal issues, but the most pressing for commercial tenants is whether it has released them from their obligation to pay rent for the duration of the lockdown. Much (but not everything) turns on the terms of the lease. Leases with a “No Access” clause Commercial leases in New Zealand are not standardised, but most are based on the Auckland District Law Society (“ADLS”) Deed of Lease precedent. This precedent underwent a significant change in 2012 with the introduction of clause 27.5, which relevantly reads: If there is an emergency and the Tenant is unable to gain access to the premises to fully conduct the Tenant’s business from the premises because of reasons of safety of the public or property or the need to prevent reduce or overcome any hazard, harm or loss that may be associated with the emergency including … (c) restriction on occupation of the premises by any competent authority, then a fair proportion of the rent and outgoings shall cease to be payable for the period commencing on the date when the Tenant became unable to gain access to the premises to fully conduct the Tenant’s business from the premises until the inability ceases.” “Emergency” is defined in clause 47.1 as – … a situation that … is a result of any event, whether natural or otherwise, including … plague, epidemic … and causes or may cause loss of life or serious injury, illness or in any way seriously endangers the safety of the public …; and the event is not caused by any act or omission of the Landlord or Tenant. Every edition of the ADLS lease since 2012 contains this clause and it does appear to apply to the covid-19 lockdown, which: is an “emergency” within the terms of the lease; was imposed “to reduce or overcome a hazard or hazard associated with the emergency”, and which has resulted in most commercial tenants being currently “unable to gain access to the premises” as a consequence of a “a restriction on occupation by a competent authority”. Opinion is divided, however, on two critical issues: What constitutes “a fair proportion of rent and outgoings”, and Does the phrase “to fully conduct the Tenant’s business” exclude the providers of essential services who have retained partial access to their premises. Leases without a “No Access” clause Tenants should not assume that they are obliged to continue to pay full rent and outgoings just because their lease does not contain clause 27.5. Other lease terms can have much the same effect. These include “change in law” clauses, clauses that allows an extension of deadlines in certain circumstances and clauses which excuse breaches caused by events outside the reasonable control of the parties. Another important consideration is this: The legal structure of most commercial leases extends beyond the immediate parties. Guarantors and banks are also generally involved and all must agree to the terms of any compromise arrangement between landlord and tenant. It is vital therefore that any compromise be recorded in writing and only signed after legal advice has been taken. If you want help reviewing your lease agreement and/or with determining how to strike the right balance between a ‘kind’ and fair proportion of your rent, please call us on 03 477 8080.

For couples contemplating a separation, most people understand the starting point for a division of relationship property is a 50/50 equal split. The Property (Relationships) Act 1976 details how the property of spouses, de facto and civil union partners, is divided at the end of a relationship. The Act recognises the equal contributions of both partners to a relationship, and the general presumption is that property is divided equally. However, there are often exceptions, special circumstances, allowances, or departures from the legislation which individuals may be eligible for, or decide they wish to depart from the standard entitlements agreement about. Something people are often unaware of, is that for an Agreement to be valid and binding between couples, both parties must obtain legal advice independent of the other from separate lawyers to ensure the effects and implications of the Agreement were explained to them. The respective lawyers must also then witness signatures and certify they have explained the effects and implications of the Agreement to each party. If you are considering a separation, require independent advice, or have any questions about the next steps to formalise an arrangement, call us on 03 477 8080.

I am a business owner who wants to sell my business. I am not sure how to find a buyer. What should I do? Work out what kind of person will buy your business. Do they need a specialist skill? What attributes are required to make a go of it? Assess whether the business is too dependent on you. Make sure your shoes are not too big to fill.  The more a business depends on your special talents, the less desirable it will be. Look at things from a purchaser’s point of view. What would you worry about if you were a purchaser? Is there anything that you can do to strengthen the relationship with your customers? How strong is your lease? Get help to identify all the risk areas. Be able to say clearly how the business works. In most cases a few key factors will drive a business’s profit and explain why it is successful. What are the factors that drive your sales? What makes your product or service attractive? What is it that you do differently from others? Is the formula proven?  What would your strategy be, if you were staying on? How would you take the business to the next level? What knowledge do you need to hand over to the buyer? Can you do this easily? Pay attention to the numbers, and be realistic about pricing. Many business owners overestimate the value of their business due to emotional factors. Of course you want your life’s work be worth a lot! However it is best to use objective information to price your business realistically. If you over-price your business, you may put off the best prospects. If the business is on the market too long, potential buyer may start to think there is something wrong with it. Another more subtle risk is that while waiting for a sale, the business owners can take their eyes off the ball, resulting in things going downhill. Even when you can get a purchaser excited about your business, there is no guarantee that they will seal the deal. The purchaser will be surrounded by advisors who will err on the side of caution, and who can potentially hold the deal up, or kill it. How can you mitigate ‘advisor risk’? Well, it is best to go in well prepared. It’s a great idea for example to have a sale and purchase agreement written up in advance, so that you know how you will approach the details. Also, this is an opportunity to shape the deal even before the purchaser’s professionals get involved. Being prepared for questions helps to streamline the process. Think about what the purchaser’s lawyer will be looking for. Work out carefully what you (and your agents) can and cannot say about your business with integrity. When you sell a business, you will naturally want to present it in its best light. But if you go too far, the purchaser may hold you responsible for not meeting their expectations. Non-disclosures can result in deal-killing loss of trust issues. Or you might be sued. Engage the best people you can to help you, and make sure that your strategy is realistic and cost-effective.

Separating is difficult. The process involved in reaching an agreement about the division of your relationship property can then take some time to work through, depending on the circumstances of your situation. At Lucas and Lucas, we can help you with the formal process of dividing your relationship property. Firstly, think about all of the items (assets & liabilities/debts) which you and your partner have accumulated during your time together. The starting point from a statutory framework, and legal basis, is that relationship property is divided on a 50/50 split, unless the parties reach an agreement otherwise. Different assets and/or debts can be set off against one-another on a valuation basis to achieve the equal division on a dollar basis. This may involve one party making a lump-sum “adjustment” payment to the other at the conclusion, or settlement, of an Agreement. A written agreement about how your relationship property is divided provides certainty going forward, and defines those assets which will be your separate property. The agreement will also set how debts may be repaid and/or a compensatory adjustment payment. The following list is a general example of the main items couples may own together: Family Home (valuation or ‘agreed property value’) Mortgage/loan amount still owing on property A business which one or both parties may own and/or operate – this may involve i. Limited liability company – ii. Shares owned by partners iii. Partnership iv. Sole trader business Valuation for family vehicles Personal chattels & household items Other ‘vehicles’ – boats, caravan, motorbikes, etc. Kiwisaver amounts Investments (i.e shares) Other lump sum cash pay-outs Personal savings Joint bank accounts and/or separate bank accounts Credit cards i. Personal names and/or ii. Joint CC Other debts e.g higher purchase, laybuys etc. Generally speaking, a schedule of your assets and the values given to these are balanced against a deduction for the debts owed. The difference between the two is your ‘Equity’ and the statutory entitlement is for to this to be equally divided. However, there can be exceptions to this and there may be special circumstances which permit entitlements or compensatory payments for eligible parties. If you are considering a separation, require independent advice, or have any questions about the next steps to formalise an arrangement, call us on 03 477 8080.

For some trustees the new disclosure obligations from 30 January 2021 will not be a surprise. Others may need to consider if they are comfortable as trustees with the new obligations. Each duty is personal to each trustee, whether the beneficiaries are your own children or not. Your personal obligations include looking after trust property, insurance, accounting, knowing who the beneficiaries are, and considering their needs. As a trustee, you are required to know what the trust is up to, and everything your co-trustees are doing. If its your own family it’s not about checking that the trust still fits your original purpose – it’s about whether it serves the interests of all the beneficiaries. New Zealanders traditionally settled trusts to protect their families and lifestyles that their property supported; business people to limit risk to business assets, families to protect a home against expensive rest home costs, and others to stop assets being sold to meet demands perhaps of an adult child’s partner. Some legal and family changes argue compellingly for having or retaining a trust. But, ominously, it is growing area of law. The Courts are scrutinising trusts as never before, and judges comments in cases we have presented disclose a willingness to make highly intrusive rulings on trustees. It is not too soon to call us if your trust has not been reviewed in the last 10 years, or your circumstances have changed in that time. Call us and we can talk through these things including what the new Act may mean for you. For further information contact us or call (03) 477 8080

I ** In submission period – closing 4 March 2021 ** The Dunedin City Council is currently considering a variation to the Second Generation Dunedin City District Plan (“2GP”) with a view to making possible the construction of additional residential housing. See the Variation 2 – Summary of Changes here . It is estimated that the proposed rule changes could facilitate the construction of approximately 2,500 additional homes across Dunedin. This would be over and above the 3,400 new homes that the district plan already anticipates will be constructed over the next 10 years. The changes being proposed are, broadly speaking, as follows: 1. Zoning changes for some sites, which will give rise to: New greenfield sites (i.e. new building sites) for development in areas that were previously zoned rural or rural residential; and More areas of medium-density zoning (where the density of housing can be increased). 2. Rule changes for most of suburban Dunedin that are intended to: Make better provision for social housing by defining it as a standard residential activity; Remove the restrictions on who can live in family flats, and introducing a maximum gross floor area of 80m2; Allow smaller site sizes and provide for duplexes (or two units) to be housed within a single building (in some zones); Create more flexibility for development, through changes such as making the number of sites that can be undersized unlimited provided the other conditions are met, rather than the current limit of one undersized site. Improve the manner in which 2GP manages the development of areas rezoned for new houses to encourage good urban design and well-managed infrastructure. If you concerned about what these changes might mean for your property, or alternatively are in favour of the proposed variations, the link for writing a submission is here .

The Trusts Act 2019 came into force on 30 January 2021. These legal changes mean that the reasons for retaining a trust may now be marginal. For these clients it would be right to be thinking has my Trust become obsolete? While the return on capital is less, the administrative and compliance costs of trusts has grown. It may be time to ask if your trust has served its purpose and should be dissolved. By the disclosure rules of the Trusts Act 2019 and other laws we know that in the future there will be more focus on trustees’ performance. Anti-Money Laundering procedures flag family trusts for extra attention. Professional trustees demand more paper reporting and more communication with clients’ families. Cases indicate that family members who live on or work on trust property may have rights never before dreamed of. Families by definition, change in the generation since their trusts were settled. Everywhere there is more administrative cost, more record keeping, and more compliance. If you have a trust, ask yourself: Do you absolutely know that the trust settlement you made will do the job for your family now and into the future? Who will run the trust and will they do this properly? For further information contact us or call (03) 477 8080