Looking to start a fashion label, attract investors or a buyer? K&L Gates’ Caroline Carnegie and Lauren Blecher offer advice.

Whether your organisation is a new fashion label, preparing for a sale or seeking to attract investment, there are some important factors which can help protect your business and minimise risk.

1. Corporate structure

Determining the appropriate corporate structure from the outset is crucial to effective business and cost minimisation when looking to increase capital or divest.

A key consideration is the ownership model. This includes determining the shareholder or partnership arrangements and ensuring that all parties involved in the ownership and/or strategic management of the business understand and document their rights and obligations from the outset.

Engaging a lawyer to prepare legal documents at the early stages is an extremely important tool in negotiating the ownership split, the level of involvement and responsibilities of the parties.

This helps to protect minority and majority interests in the business venture (no matter how sophisticated the parties are) and is effectively a business pre-nup.

Whether your business is a start-up or well established, having corporate documentation in place which reflects the ownership and the process for (as well as the rights around management, shareholder and board decisions) is invaluable to governing the relationship between stakeholders, ensuring business continuity and seeking to attract investment or divestment opportunities.

2. Brand protection

Intellectual property protection for trade marks, designs and patents, and licensing arrangements can be crucial to protecting brand value and preventing misuse by third parties.

Applying for registration and knowing when to take steps to enforce your intellectual property rights are key to a successful fashion enterprise and legal advice should be obtained to determine the appropriate course of action for your circumstances.

3. Employee arrangements/OH&S

Ensuring that employment agreements and appropriate occupational health and safety policies are in place is vital to operating a successful business. This may include consideration around structuring performance incentives such as bonuses and employee share schemes.

4. Property

Premises may be an important aspect of a fashion business - whether it is head office space, a retail outlet or warehousing. A lease or freehold agreement which adequately protects and caters to the needs of your business operations (both at the time of entry into the arrangement and which also allows for future growth or divestment) should help facilitate a productive business environment.

5. Suppliers/customers

Formalising arrangements with customers and suppliers through written contracts with clear and comprehensive terms is important when fostering business relationships. These arrangements may prove valuable assets to your business should you choose to divest or seek funding from a third party financier. Golden handshakes can prove shaky promises. Having clear arrangements in place at the early stages of negotiations and prior to commencing formal supply or manufacture can also help avoid costly litigation down the line.

6. Financing and investment

There are various ways to seek investment opportunities including debt financing with a reputable financial institution as well as private equity. Banking institutions and private equity firms are generally sophisticated investors and will ascertain swiftly whether your business is in good financial health. In addition to profitability, the more robust your business is from a corporate governance and risk management perspective, the more attractive it will appear to investors.

7. Tax and accounting

Taxation issues can present costly and unpleasant surprises if not adequately addressed. You should always seek tax advice before undertaking any financial or investment decision. Importantly, such advice should be sought simultaneously when establishing the legal framework for your start-up or restructure. Working with a team of advisors should also enable ease of registration with regulatory bodies such as the ATO and ASIC as well as ensuring applications for ABN, GST, PAYG and FBT (as appropriate to your business) are established and maintained.

The content is intended only to provide a summary and general overview on matters of interest. It is not intended to be comprehensive nor does it constitute legal advice. For information regarding a particular area of advice please contact a legal advisor. Our lawyers at K&L Gates have experience in a broad range of commercial law issues and would be happy to assist. and

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