Bitcoin exchange business embroiled in non-payment scandal

8:00PM | Wednesday, 13 August

A number of users of an online forum, LawAnswers, claim to have paid over $10,000 to Queensland-based crypto-currency exchange bitXoin for bitcoins they never received.   bitXoin’s online shop is now closed.   One user Jamesq, who says he lost “2500” of an unspecified currency (which StartupSmart assumes to be AUD), posted a letter that appears to be from the owners of the exchange acknowledging that there was a problem, and offering equity provided by an obscure Hong Kong company in an unspecified “business”. It did not indicate that requesting a refund was possible.   The email explained that the exchange had just been acquired by Aureus Prime Factor Limited (APF), a company “established as a cryptocurrency investment manager and business incubator”. It said that Aureus Prime Factor Limited was owned by Hong Kong-based Roosevelt Group International Limited.   It says that as the company did not wish to see “counterparties” suffer financial losses, APF would “make it up to them” through issuing “crypto-securities in the revamped business to disaffected customers”.   “Effectively, this means you will gain equity in the business in the form of saleable crypto-securities,” the email says.   “The units issued to you will be split out to disaffected small customers in proportion to their loss and they will be pegged at a valuation lower than subsequent issues.”   The email is apparently signed by David Collinson, who is identified in the email as the Managing Director of RGI and related Australian entity Roosevelt Group Pty Ltd (RG).   StartupSmart contacted David Collinson via email, however he declined to comment on the state of bitXoin for this article.   StartupSmart can find no web presence for APF, although it does appear on a Hong Kong government document, ‘List of Newly Incorporated Registered/Companies and Companies which have changed names’, and the Hong Kong Companies Registry.   The Hong Kong Companies Registry says APF was incorporated on December 13, 2013. Roosevelt Group International Limited also appears on the registry and was incorporated two days earlier on December 11, 2013.   According to ASIC, RG was registered in Queensland on July 19, 2013.   A user under the name DavidC, claiming to be David Collinson, says the forum thread “lead to several large volume orders not being completed”.   “To be precise, orders for $70,000/week, $108,000, $50,000/week and 134 bitcoin were made or enquired about and none completed,” the user says.   “A couple of these would have made the difference needed to guarantee solvency and allow me to continue allowing the Company to trade.   “Had I been able to keep trading the company. Necessarily, all the orders would have been filled.”   The user says the company has ceased trading, according to government records, BITXOIN PTY LTD’s ABN status is “active”. A status of cancelled would mean the business had ceased trading.   In a later post that same user says there is little to salvage of bitXoin because of various reasons.   The user alleges embezzlement by a former business partner, bank error, international wire problems, missing wire transfer amounts, coding error resulting in trading at a loss, timing losses resultant of missed orders and interim movement in market prices and failure of large orders to complete.   In addition to being “set against the backdrop of regulatory and taxation ambiguity, the decision to cease trading the entity became unavoidable”.   It states that APF will “conduct activities in Australia via licence agreement with XOIN PTY LTD and a revamped version of the site will launch as soon as a capital is secured to fund working capital needs”.   One user, Norm, who claims to have lost almost $7000, says that David Collinson requested he sign a confidentiality agreement, which he plans to do.   StartupSmart reached out to a number of the users on the forum claiming to have lost money, including Norm. None were willing to comment on record.

New Australian equity crowdfunding platform set to launch as federal government considers reforms

7:33PM | Monday, 7 July

A new Australian equity crowdfunding platform called Equitise is gearing up for launch, as the federal government considers the recommendations handed down in the recent CAMAC report.   Currently, crowdfunding through platforms such as Kickstarter, Indiegogo and Pozible remain a popular way for startups and new ventures to raise capital.   Under current regulations startups are only allowed to offer equity to “sophisticated” wholesale investors with more than $2.5 million in investable assets or annual earnings of around $250,000.   A recent review conducted by Corporations and Markets Advisory Committee (CAMAC) on behalf of the federal government, released early last month, recommended opening up investment to anyone over 18, with a cap for “unsophisticated” investors of $2500 per company, to a total of $10,000 each year.   The federal government is currently considering the recommendations, and is expected to announce its official position in October or November, alongside its official position on employee share schemes.   As the government prepares its announcement, former Deloitte senior analyst and Search Party operation manager Chris Gilbert, along with his business partner Jonny Wilkinson, are preparing to launch their new platform.   Gilbert told StartupSmart he hopes Equitise will help address the issues of funding and finance for innovative Australian startups.   “Equitise is an equity crowdfunding platform. When I was at Deloitte and other businesses, I came to realise there was a huge problem with corporate funding in Australia,” Gilbert says.   “Initially we’re using a pure equity crowdfunding model with funding upon completion of projects…. So if projects don’t get finished, funds get returned.”   Gilbert says the new venture has already received funding from listed investment firm AWI.   “We’re going to help educate investors and entrepreneurs to make early stage capital markets more efficient. We’re going to help educate investors and entrepreneurs to make early stage capital markets more efficient,” he says.   In terms of the federal government, Gilbert says it’s essential that legislation based on the CAMAC recommendations is passed.   “The Government needs to take what CAMAC have said and quickly pass the legislation and encourage ASIC to move fast so Australia doesn’t fall behind the rest of the world,” he says.   Image credit: Flickr/torbakhopper

Australian software helps track down Myer’s con man

7:59PM | Thursday, 3 July

Australian software was the key to uncovering the backstory behind a man who was fired by Myer over a misleading CV.   Andrew Flanagan misled a recruitment agency in order to obtain a role as a Myer executive and subsequently lost his job. It was later revealed he had lied about previous experience for other positions.   Using visualisations software Encompass, journalists were able to see the connections between Flanagan, former roles at other companies and failed businesses.   Investigative journalism was an unexpected but welcome use of the technology, says Encompass chief executive Wayne Johnson.   “It’s a software solution which allows lawyers, bankers and accountants to rapidly gather the information they need to do their job,” he says. “It came about because the cost and timing of putting together the full picture of what you need to know about a person can be really quite costly and very time consuming – even if you have access to that information.”   Johnson says Encompass collates information from a variety of sources, including ASIC, land titles and bankruptcy records. Users can research a company, person or property.   “The strength of the product is that it brings together the things you’d otherwise miss going through a 25-page report,” he says. “It really changes the dynamic of how that sort of corporate, legal information is brought together and is used. Things which are visual are so much more effective for people to understand.”   Encompass launched in Australia two years ago, and now plans to expand in the US and UK.   “Our product was designed from the beginning to solve an international problem,” he says. “We pivoted a few times and now the product has really matured out by staying close to what our customers say they need.”   Johnson’s advice to Australian businesses thinking of expanding overseas is to be innovative and flexible.   “You have to keep thinking like a startup and that means you have to test, review, and get that balance of creativity and innovation. It’s a great space to be in.”

Building an eBay-style marketplace for bitcoins and litecoins

7:38AM | Tuesday, 1 July

Australian bitcoin and litecoin marketplace Cryptothrift, wants to become eBay for crypto-currencies and is trying to create an economy for anonymous currencies.   The company, which runs an eBay-style online auction site where users can buy and sell items with bitcoins and litecoins, was founded last year by Sydney-based crypto-currency enthusiasts Ahmad Aoun and Paul Screen.   Cryptothrift sells everything from computer game download codes, to fishing hats, laptops, tablets and YouTube video views.   Sellers pay a 2.5% flat rate or a transaction fee, whichever is higher. Buying items is free, but the company charges a 1% fee if escrow is selected at the checkout.   Screen told Private Media the company was accepting a number of other crypto-currencies for a brief period, but it just wasn’t worthwhile.   “In practice there just wasn’t the volume in sales to advocate supporting them,” Screen says.   “What we’re seeing is people are only interested in bitcoin.”   Screen says the company’s sales are continually growing month on month, 90% of which are in bitcoin, with litecoin making up the other 10%.   Dealing with scammers attracted by the anonymity of bitcoin has been Cryptothrift’s biggest challenge.   In response, Screen says the company has implemented an escrow payment system.   “Bitcoin and crypto-currency has this tag that it’s anonymous and therefore it tends to attract a lot of the wrong types of people,” he says.   “We’re trying to approach things from the opposite way, we want our system and business to be as transparent as it can, we’ve registered with ASIC here in Australia and we’re not hiding from the ATO (Australian Tax Office).”   Trust has been a problem for the site, it’s been accused by some users of being a scam. They’re accusations Screen says are inevitable, but unjustified.   “I can’t hide away from that, it’s going to happen,” he says.   “It’s why we’ve introduced the escrow system that allows buyers 30 days to determine if they’re happy with their purchase and release the funds.”   He says there have been cases of scammers operating on the site and “it’s generally pretty clear cut what’s happened”, but the company provides arbitration services and refunds.   A large number of the products available on Cryptothrift are digital, which Screen says can lead to stolen items being sold, something the company is constantly on the lookout for and doesn’t tolerate.   Screen says in the coming months, Cryptothrift is looking at introducing a verification process, to ensure transparency amongst sellers and in order to comply with know your customer regulations and anti-money laundering laws.   “We’ve been in talks for the last few weeks, we’re looking to outsource the verification process for simplicity, but the cost is holding us back, we need to justify that expenditure,” he says.   “We’re toying with the idea of doing it in house.”   The company has been funded entirely by its founders so far, and while they’re not actively searching for investment, Screen says they’re not opposed to external funding.   “It’s something we’re considering,” he says.   “We know we want to expand, and we have a lot of good plans for sure, there’s a lot we want to do, but we’re going to need some kind of capital investment.”

Move over Turnbull, Bowen has startups covered

5:26AM | Tuesday, 27 May

In his budget reply speech to the National Press Club on Wednesday, shadow treasurer Chris Bowen dedicated significant time to outlining a Labor Party agenda that aims to foster innovation and entrepreneurship, with an emphasis on supporting high growth companies.   Calling on Australia to find its own niche and not be a carbon copy of Silicon Valley, he said that high growth companies currently generate less than 0.2% of Australia’s GDP but that it could account for 4% of our GDP, according to PwC, generating more than half a million jobs by as early as 2033.   “The potential is huge, but we have a lot of catching up to do,” he said in his speech.   “Our venture capital industry starts off a low base and is not growing as fast as that of comparable countries. We do badly when it comes to the important ‘angel funding’, with only one dollar invested for every Australian each year.   “In New Zealand, the comparable figure is $6, $15 for the United Kingdom and $85 for the United States.”   He said the tax system is one of the most powerful levers a government has to influence investor behaviour.   “Other governments around the world, including conservative governments get the importance of a supportive government environment for the high-tech, startup sector, making it more frustrating that our government does not,” Bowen said.   “In the land of the free, the United States, every dollar of government money investment in high-tech incubators generates an additional thirty dollars of tax revenue. Perhaps the Treasurer might have thought about this before he engaged in his ridiculously short-sighted cost-cutting regime.”   He called for changes to current crowdsourced funding laws and flagged a visa specifically for entrepreneurs as Labor-backed policies that could encourage Australian innovation and startups.   “Around the world, it is estimated that crowdsourced funding will generate $65 billion in funding and finance the creation of 270,000 jobs this year,” Bowen said.   “There is one small problem, however. Crowdsourced funding is, in effect, illegal in Australia. ASIC regards crowdsourced funding as a financial services undertaking, requiring a licence, making its operation of crowdsourced funding highly problematic.”   He said that he and Opposition Leader Bill Shorten had instructed the opposition treasury parliamentary secretary, Ed Husic, who has a passionate interest in the potential of high technology, to consult with the sector to provide a regulatory framework for crowdsourced funding “in the absence of action from the government”.   Bowen also mentioned the opposition’s interest in establishing an entrepreneur’s visa, saying that “we should not only encourage Australians to start innovative companies here, but also invite entrepreneurs from around the world to come and create jobs here.”   “New Zealand, the United Kingdom, Ireland and Singapore among other nations that have introduced specific entrepreneur visas, and Australia needs to consider doing so as well,” he said.   He said it was an idea that he and the opposition spokesman for Immigration, Richard Marles, will be pursuing in consultation with the venture capital sector.   Bowen said the two ideas outlined were just the beginning of Labor’s process to foster innovation.   “There is more work to do in this space, including policy development in relation to incubators, employee share schemes, building the skills we need, high-tech scholarships and other matters,” he said.   “Again, Bill Shorten and I have asked my parliamentary secretary, Ed Husic, to consult the high-tech sector about policy details and work with our colleagues such as Kim Carr and Jason Clare, who both share our passion, to develop more details. And we’ll have more to say on this.”   Image credit: Andrew Heslop.

Copyright infringement is on the rise: How to protect your IP assets

3:09AM | Thursday, 13 March

Copyright infringement is a difficult but growing area. Unfortunately it seems that there is very little someone needs to change in your work to call it their own.   There are more and more cases making headlines in the news. Take these recent examples:   Website design and content   One of the latest cases in the news is and Mr Shirts is a recent Sydney online start-up selling business shirts. Mr Porter is an established international online shop also selling business shirts.   Mr Shirts’ owner received a letter from the Mr Porter group alleging copyright infringement but claim that they did not ‘deliberately’ copy any elements of the website and that the style similarities are present in many website designs, particularly where off-the-shelf website design packages are involved.   On review, the sites do look remarkably similar. The similarity is not just in the design but also the distinctive signature at the bottom of the website pages. Even the order of the terms and conditions clauses and wording of some of the actual sentences seems identical. But is it enough to claim copyright infringement?   We will have to continue to follow this one as it’s ongoing….   Fashion design   And then there is a copyright infringement allegation in the news against Lara Bingle for copying US swimwear designer Lisa Fernandez in Bingle’s Cotton On collection. Bingle admits she was ‘inspired’ by Fernandez’ collection. Fernandez is claiming not only design copyright infringement but also a right to all neoprene material used in swimwear as she was one of the first to use it. But is being the first to use a material enough to protect the US designer?   Fernandez’ claim is highly dependent on whether she has registered her designs in Australia. The Copyright Act 1968 protects 2D images and the Designs Act 2003 protects visual appearance of designs that are new, distinctive and registered. However, neither Act would categorically protect the use of the particular material. As for the designs, it’s very difficult to argue copyright infringement unless you can show, for example, a design feature that was ‘distinctive’ and special to your particular design piece.   So what can you do to protect your copyright designs?   1. Register your IP   Trademark your name and logo to prevent other businesses from registering and using your name. Unfortunately when it comes to trademark registration, it’s the first trademark registration that is able to use the business name for a similar business, and not dependent on whether you have been running the business for years or registered with ASIC. Patent your idea if it is unique. If it’s an App, software idea or process, design or other unique work, you can register the design for patent protection against others copying it or something similar. However, if you have already disclosed your design, be aware it may no longer be registrable.   2. Keep all your notes and design ideas   No matter what you have invented or designed and even if you have not registered it, evidence of your idea, how you evolved and developed the idea, any drawings or sketches you made along the way and any other notes, etc, go a long way toward evidencing your process for development of the work. If you are designing a website, these notes and drawings will be very strong elements to show your idea is unique even if it proves to be similar to another site design.   3. Contractor agreement confidentiality and warranty   If you are using a website developer, designer, or any other type of contractor to assist you, ensure you have an agreement in place that includes a strong confidentiality clause. Your agreement should also include a warranty that any design or content they develop is either unique or not infringing any third party copyright. Don’t rely on their word for it!

THE NEWS WRAP: SPC Ardmona signs $70 million deal with Woolworths

3:21PM | Monday, 10 March

Troubled food processor SPC Ardmona has signed a key deal with Woolworths worth $70 million, which will see it supply an additional 24,000 tonnes of product to the supermarket giant over five years.   The landmark deal comes after the company, owned by Coca-Cola Amatil, received $22 million from the Victorian government, after Prime Minister Tony Abbott turned down a request for assistance.   “There is no question that the fact of the government being prepared to support the package with SPC has been the determining factor in this [deal],” Victorian Deputy Premier Peter Ryan says.   “The company could well have been lost. But with the $22 million coupled with the $78 million being contributed by the company, that $100 million investment is now literally going to bear fruit.”   Iron ore price tumbles as concerns grow about China’s economic outlook   The price of iron ore has dropped below $105 per tonne, in its biggest single-day fall in five years, over mounting concerns about the outlook for the Chinese economy.   The fall saw the benchmark iron ore price for Tianjin in China drop by 8.3% to $US104.70 a tonne, down 22% for the year.   It comes after a string of official figures, showing exports plunged 18.1% in February, along with weaker than expected credit figures and a larger than expected fall in producer prices.   Hochtief looks to boost stake in Leighton, ASIC to investigate share price rice   Spanish-controlled German firm Hochtief is looking to increase its stake in Leighton, announcing an offer to buy three out of every eight shares owned by other shareholders at $22.15 each.   The offer represents an 18.8% premium over the construction giant’s adjusted average share price of $18.65.   However, ASIC is set to investigate a spike in Leighton’s share price last week, ahead of the announcement.   “As part of our normal market surveillance, ASIC of course will look at the latest movements in Leighton share price, ahead of this announcement from Hochtief,” an ASIC spokesperson told the ABC.   Overnight   The Dow Jones Industrial Average is down to 16418.7. The US dollar is down to US90.23 cents.

Thinking of setting up a start-up business? Here’s what you need to do first

3:27AM | Friday, 7 March

You want to get started quickly, without spending too much money until you see if your idea is credible and takes off. So you decide to set up as a business rather than a company. What do you need to know before you do this?   What is the difference between a business and a company?   You may think that because you have registered your business name with ASIC then you are done, protected and set up. What you may not realise is that there is a large difference both financially and legally, in the way a business and a company are structured.   The good news   Set up costs are less: A business costs less to set up, so many start-ups choose this option often with intention of seeing if their idea will make money before spending money on setting up a company.   National registration: The really good news is that the business name registration system is now a national system. Previously you were required to register in each of the states where you planned to do business, which was costly and time consuming. Now you only need to register once to be registered in all states and territories of Australia.   You can register your business name online.   The less-good news No exclusive rights to the name: When you register a business name with ASIC, it is simply that: ‘a name or title under which a person or other legal entity trades’. It just means that it may be registered but you do not get ‘exclusive’ rights to use that name. For example, someone else could come along, use the name and, if they have trademarked the name before you have, they may have the right to use the name and require you to change it if you are conducting a similar business.   Personal assets at risk: An incorporated company may cost more but it is structured so that, legally, it can be seen to be separate from the owner to ensure the owner’s personal assets are protected. This is important if things go wrong.   However, this is not the case with a business. With a business setup, your personal assets are fair game for creditors. If you are set up under a business structure and if there are issues with debt, legal claims or other financial problems, creditors would be able to access your personal assets and belongings.   If you have set up as a company, the debt collection is restricted to the assets of the company. This means your house is safe (unless you have posted it as a guarantee for a company loan). You can still be liable and accountable as a director for such things as breach of the law, but generally speaking, your personal assets are protected.   So how can you protect your business better?   1. Protect your name: it’s often your most valuable asset, so it’s important to protect it.   You may believe that because you have registered your company name or business name with ASIC, you are protected against others using it for similar businesses. This is not the case. To get proper protection, you need to register the name as a trademark with IP Australia.   2. Protect your business with strong terms and conditions.   You can get protection from good legals on your website. Terms and Conditions with a good limitation of liability clause will at least provide some protection for your business and will limit your liability. This may be your best source of protection for your business, so don’t take the chance by copying them or writing them yourself. There are lots of online templates that for very little cost, will provide good protection.

Five tips to start up a business in 2014

1:30AM | Monday, 20 January

So you’ve ditched the job you hate or put your hand up for redundancy and you’ve decided you’re going to be your own boss in 2014. Congratulations. It’s a big step and not one to be taken lightly. The bad news is that the percentage of small businesses collapsing is on the rise, according to ASIC figures.   How can you ensure you’re not one of the 44 businesses closing their doors in Australia every day? Below are five tips to ensure you focus on the right things in the early days.   1. Don’t sweat the small stuff   It’s easy to spend too much time thinking about a name and logo for your business. Similarly, money can be poured into cool looking websites and fancy business cards. This is a waste of your precious time and money when setting up a business.   Even if you’re in an ‘image conscious’ industry like ours (PR), it really doesn’t matter as much as you think it does. Of course if you’re going to be selling products online you need to invest in your website, but otherwise, get a basic one set up so people can find you online. This is very important – choose functionality over how it looks.   A website isn’t something you can set up and forget, we’ve had four different websites in five years as we’ve grown out of each one, but in the set-up phase choose a basic one and concentrate on getting money through the door.   2. Spread your risk   Many businesses start with a customer the founder may have worked with before. It’s important to use your contacts and industry knowledge as much as possible. That first customer is very important as they provide you with a potential reference for future work.   However, be careful not to rely on one customer – this is a very risky strategy. If you only work for one customer, you haven’t really established a business; you’ve bought yourself a job. Of course you have a little more control than you would if you were employed by someone else, but ultimately this is all you’ve got. So you need to find time to do some business development and quickly.   3. Start selling   You can spend so much time developing business plans, marketing strategies, attending various events and reading all of the excellent online resources that are available to small businesses today, but ultimately you need to start selling.   Your family and friends may have told you your product is great and they will have every faith in your skills and business idea, but you need to start making money.   This could involve contacting prospective companies, launching a google ad campaign or attending relevant events. You need to be able to explain what you do concisely and sell your business and the services you offer. The more practice you get at this the better.   4. Know your numbers   Maths might not have been your favourite subject at school, but you’re going to have to understand what revenue is coming in, what costs are going out and how to read a profit and loss statement. Cash flow (along with bad management) is still the main reason why so many businesses fail in Australia. On average it takes a small business 55 days to get paid in Australia.   Don’t wait until the end of the year, or even the end of the quarter for your accountant to tell you how your business is performing financially. There are some excellent cloud based accounting packages which can tell you in real time just how financially healthy your business is. You can also send and reconcile invoices from your mobile phone and send customers online payment options, making it easier for you to invoice and easier for customers to pay.   5. Do what you do best, outsource the rest   In the first 12 months it’s important for you to understand every facet of your business. This will make it easier to outsource and delegate tasks in future, but you can’t do everything. Business owners can struggle with this, they do have ‘control freak’ tendencies, believe me I know, but you have to do it to grow your business. The early days of setting up a business are the hardest, but they can also be the most rewarding.   Jocelyn Hunter is the managing director of Bench PR. 

Five tips for choosing your start-up name

10:40AM | Friday, 18 October

Choosing your business name is one of the first and most important things you will do when you start your business. It’s an important decision and you don’t want to get it wrong – it can be a costly mistake.   When you finally choose the clever name that you took quite some time to decide on, canvassed friends and family to ensure it was engaging, witty, understandable and memorable, thought of design and logo ideas etc….make sure you have an alternate name. Just in case.   Here’s why:   Many businesses start by registering their name with ASIC as either a business name or company. A good start. You buy your domain name, start up your business, build your website, market your product or services.   Then, after establishing and conducting your business for a few months (or years) using your great business name, you receive a notice from another person claiming that you are breaching their registered trademark. They have registered the trademark name for a similar business. How can this happen, especially if you have registered the business with ASIC?   It can and does happen. Registering a business name does not give you exclusive rights over use of the name. Only when you register your trademark with IP Australia (and are accepted) do you get those rights.   With ASIC, you register your business or company name, not what type of business activity you conduct and it does not give you any proprietary rights, particularly in relation to goods or services/activity using that name.   When you register your trademark for your business, you are able to register business activity with a name and/or logo associated. In other words, IP Australia is protecting the business activity that is associated with the name and logo. ASIC does not.   Unfortunately, ASIC does not have systems that link to IP Australia and, provided that the business name is not already registered with ASIC, will happily register the name for you, irrespective of whether it has been registered as a trademark already with IP Australia.   If it is already a registered trademark, the owner has a right to do business under that name, mark and may prevent you from doing so. You need to make your own enquiries before you register your business name with ASIC.   To ensure you do not waste valuable time on setting up a business with a name you may not be able to use, follow these essential steps first:   Search the ASIC website for your preferred business name. Search the IP Australia website for your business name. Check the domain name is available, plus all derivations such as .net, .com, .org and any overseas countries you might expand into. Register the name with ASIC and the business name as a trademark with IP Australia. Lastly, register all the similar domain names and hold onto the ones you won’t use to protect your name from copycat businesses.   Registering a business name together with the trademark and domain name should be a priority. Don’t get caught out – check your options beforehand … and have a backup name ready just in case!

The company you keep: Seven tips to keep you out of trouble as a company director

9:11AM | Sunday, 1 September

Earlier this year, the team at LegalVision gave us some helpful tips on the legal basics of starting a new business.   Over the coming weeks, we’ll look at legal matters that can arise for a new business once it’s up and running.   Here, Ursula Hogben, managing director of Hogben Group: Business Law & Consulting, and a member of the LegalVision network, considers what directors of start-ups need to keep in mind when it comes to their duties to the company.   Many founders of start-ups become directors of the company without fully understanding the responsibilities and requirements of the role.   As a director, your primary duty is to the company shareholders. You have duties under common law and the Corporations Act. Penalties for breaching these duties include a fine of up to $200,000 or five years in jail.   This article briefly summarises seven key issues to help you understand your duties and have a successful career as a company director:   1. First, do no harm   You must not use your powers for an improper purpose or to the detriment of the company.   Right: Vote in the interests of the company. Help the company take advantage of commercially favourable opportunities.   Wrong: Vote to give yourself an advantage, or (if you’re in the majority), vote to favour the majority over the minority.   Example: If you’re a director who is remunerated on the basis of annual revenue, it is improper to approve a transaction that influences annual revenue to boost your director’s fee, but is not good for the company in the medium to long term.   2. Act in good faith   You must exercise your powers and duties in good faith in the best interests of the company. You must use business judgement, which includes informing yourself about the topic and making decisions in the best interests of the company.   Failing to inform yourself about the issue being voted on, not giving proper consideration to the company’s interests and acting dishonestly or in bad faith would be grounds for improper behaviour as a director.   Example: Rodney Adler, director of HIH, was found to have breached this duty by lending money from one company to buy shares, without board approval, in another company (ASIC v Adler and Ors).   3. Care and diligence   You must be informed about the financial affairs of the company, including whether it is solvent. You must review and discuss financial information and question whether it really represents the company’s position.   You cannot simply accept the information provided to you by company staff, without question, review or analysis.   Story continues on page 2. Please click below. 4. Avoid conflicts of interest   You have a ‘fiduciary duty’ to the company. This means you must put the interests of the company ahead of your own. You must fully disclose any personal interest in a contract with the company. You must either vote on behalf of the company, or abstain from voting.   Generally you cannot have a personal interest in a transaction with the company, unless the interest is fully disclosed, and you do not vote on it.   5. It’s all about the company – not all about you   You have a duty to avoid conflicts of interest and not to make improper use of your position.   You must not use your position with the purpose of gaining an advantage for yourself or someone else, or causing detriment to the company.   6. Top secret information – handle with care   You have a duty not to make improper use of information (as outlined in Section 183 of the Corporations Act).   It would be wrong if, as a director, you were to hear about a business opportunity for the company and, instead, pursue it yourself.    Example: Steve Vizard, a director of Telstra, was convicted in 2005 of using confidential information about Telstra to buy and sell Telstra shares on his own behalf. He was fined and disqualified from being a director for some time.   7. Keep the books – don’t cook them   You must be properly informed about the financial position of the company and ensure the company doesn’t trade if insolvent. You have a positive duty to prevent this.   It would be wrong to:   Agree to incur a debt if you have reasonable grounds to suspect that the company is insolvent or will become insolvent as a result of incurring the debt. Only reviewing the company accounts to sign off once a year.   Your company must keep adequate financial records to correctly record and explain transactions and the company’s financial position and performance. You need to be constantly aware of your company’s financial position.   In summary, there are consistent messages about how to fulfil your duties as a director, particularly informing yourself about the company’s affairs and acting in good faith in the company’s interests. If you want to speak to a lawyer about your duties as a director click here.   Ursula Hogben, Managing Director of Hogben Group: Business Law & Consulting is a lawyer in the LegalVision network. Please contact LegalVision with any questions on 1300 544 755.   Important: This information is a summary and an overview.  It is not intended to be comprehensive and it is not legal advice.  Your use of this information is not intended to create and does not create a solicitor-client relationship between you and Hogben Group Pty Ltd. © Hogben Group Pty Ltd 2013.

Small Perth store takes on UK's Topshop in name battle

8:35PM | Thursday, 8 August

A fashion retailer in Perth is battling it out with UK retail giant Arcadia Group, ahead of the expected launch of the UK Topshop brand in the city, Fairfax reports.   The retailer, Robyn Swayn, owns a business called Topshop Fashions, and reportedly has an application against the fast-fashion empire to prevent them from trademarking the name in Perth.   "I've got a valid application against them at the moment because I actually run Topshop Fashions, which is a retail ladies clothing store, and it's been trading in Perth for 36 years under Topshop Fashions," she told Fairfax.   Swayn is reportedly seeking compensation for the impact the name similarity will have on her business. She wants compensation to facilitate a name change, such as new signage and advertising, as well as compensation for the goodwill to change her business name.   The issue of name trademarks is common, but one which SMEs can caution against or fight if necessary. Patent attorney John Carroll of Callinans told SmartCompany this morning that if you are establishing a new business, you should check the trademark registrations and applications in the jurisdiction.   “Check ASIC for records of companies and business names…but remember that the existence of a name does not create the right to own it, it is about how it is used,” he says.   Carroll says geography plays a huge part in trademark cases, particularly if a business is coming into your area with a similar name.   “If the company comes into your jurisdiction, you will need at least some reputation (to fight it)”, he says.   Carroll says in the case of Topshop Fashions, the fact that the business name has existed for 36 years will play a key part in demonstrating reputation.   “The issue is now even more complicated by the internet, as companies in the UK may wish to sell to Australia, and in doing so, may sell products or a brand that is trademarked in Australia.”   He says if a company does come into your area, and wants you to change your name, you can seek compensation for the act of goodwill in changing it.   Other notable trademark battles include the young Sydney fashion designer Katie Perry, who faced a battle from pop star Katy Perry over the use of the similar name, while a small business won the right to apply for a trademark containing the letter “i” against technology giant Apple, which fiercely protects its trademark.   This story first appeared on SmartCompany.

THE NEWS WRAP: Billabong strikes $395 million private equity deal

7:19AM | Wednesday, 17 July

Billabong has struck a deal worth $395 million in total with US private equity firms Altamont and Blackstone, with Launa Inman set to be replaced by former Oakley chairman Scott Olivet.   The complicated deal will see Altamont and Blackstone group lend $325 million as part of a bridging loan and five-year debt facility, with Altamont paying an additional $70 million for adventure sports brand Dakine.   The deal will see Billabong repay its $289 million syndicated debt facility in full and gain an additional $106 million in working capital.   In return, Billabong will pay Altamont 12% interest on the loan along with 42 million share options, which if exercised will see the private equity firm own between 36.3% and 40.5% of the surfwear company.   Etihad increases stake in Virgin Australia   Etihad Airways chief executive James Hogan has revealed his airline has been buying shares in Virgin Australia, after receiving permission from the Foreign Investment Review Board to lift its stake from 10% to 19.9%.   Aside from the 13% stake held by Richard Branson’s Virgin Group, other key shareholders include Air New Zealand at 23% and Singapore Airlines at 19.9%.   “We fully support [Virgin Australia chief executive] John Borghetti and his management. We have a great relationship with Air New Zealand and we have an amicable relationship with Singapore. While we don't code-share on passenger routes, we code-share on cargo. This is about our options and we continue to work through that,” Hogan says.   ASIC forces Commonwealth Bank and HSBC to change “potentially misleading” ads   The Australian Securities and Investments Commission has forced the Commonwealth Bank and HSBC Australia to change “potentially misleading” advertising presenting complex protected loan and structured financial products as being simpler and less risky than they actually are.   “HSBC claimed that its structured products were suitable for 'traditional deposit investors looking for a way to enhance their returns through exposure to financial markets, but are unwilling to put their capital at risk should the market not perform as expected',” ASIC says.   “[But] this statement was inappropriate and potentially misleading due to the risk of capital loss with certain [of the] HSBC structured products being promoted.”   Overnight   The Dow Jones Industrial Average is down .21% to 15451.85. The Aussie dollar is down to US92.43 cents.

Top reasons for small business failure: Study

4:05AM | Wednesday, 17 April

Small and medium-size businesses are most likely to fail because of an inability to manage costs or anticipate rising costs, according to a survey of more than 1000 Australian owners of SMEs.   The survey, published yesterday by accounting software provider CCH and global information services group Wolters Kluwer, revealed SMEs see inexperienced management, a bad business model and lack of access to capital as other key reasons for small business failure.   Of those surveyed, 61% of SME operators said small businesses failed because of an inability to manage costs, 50% said inexperienced management, 50% said poorly designed business models or no business plan, 49% said insufficient capital, 37% said poor or insufficient marketing, and 35% said insufficient time managing the books.   Respondents were able to pick multiple reasons for failure and only 26% identified failure to seek professional advice as a key reason for failure, while 70% trusted their "gut instinct" over any professional advice.   But the chief executive of Wolters Kluwer Asia-Pacific, Russell Evans, told SmartCompany the majority of SMEs which shun professional advice were doing so possibly at their peril.   Evans points to a separate CCH survey of more than 210 accountants servicing small businesses which ranked bad business models as the main reason SMEs fail.   This view is backed up by ASIC data on 5600 business failures in 2011-12, which cited poor strategic management as the most common cause of failure, attributed to 19% of SME failures, with another 15% of failures attributed to poor financial control.   "It's a contrast, as if you look at the reasons why an SME owner feels an SME has failed it is inability to manage costs, while the accountants say it is a poorly designed business model," Evans says.   "A lot of SME owners are fixated on their craft and what they do and they tend to chase revenue, they may send out lots of invoices and not understand the cost drivers."   A typical problem for SME owners is buying lots of inventory of the wrong sort of product because they feel revenue means success, according to Evans.   He warns a lot of small businesses are failing to identify they are introducing costs into their businesses which are eroding their margins.   "SME owners are incredibly busy until the day they go broke, but accountants say because they have seen this before they can provide advice not just about revenue drivers but profit drivers," he says.   Evans says the first couple of years of an SME's operation is often identified by SME owners as a make or break period.   "If that is the make or break period they should be reaching out to professional advisers for more than just doing tax returns," he says.   CCH's survey found SME owners typically open up to the advice of their accountant as their businesses grow.   SME owners with a higher turnover of $1 million plus were more likely to consider their accountant as their most trusted adviser, not only for transactional accounts but for advice on business growth, than owners of businesses with turnover under $1 million.   Peter Strong, executive director of the Council of Small Business Australia, told SmartCompany relying on gut instinct rather than professional advice is common in small business because it works.   "If you don't use gut instinct then you become very slow at responding and that is not the nature of small business," he says.   Strong says there are areas for small business where professional advice is needed."I wouldn't employ gut instinct in filling out a form or around financial management and anything to do with cashflow, marketing and long-term planning, we all need assistance with that," he says.   But Strong warns the survey results are problematic as they do not split SMEs by industry.   "It's a continuing problem of putting all SMEs in the same bucket; if you went to different industry sectors you would find some talk a lot to professional advisers, for example, real estate agents use a lot of professional advice," he says.   This story first appeared on SmartCompany.

THE NEWS WRAP: Gillard opens door to compromise as media reforms falter

3:28PM | Monday, 18 March

Prime Minister Julia Gillard is fighting to keep proposed media reforms alive, following an interview on the ABC’s Lateline program where independent Tony Windsor expressed concerns about the package.   "I don't think the numbers are there for a great portion of this to get through," Windsor said.   Meanwhile, Fairfax media reports that the Minister for Mental Health and Ageing, Mark Butler, and Foreign Affairs Minister Bob Carr have shifted their support away from Prime Minister Julia Gillard towards leadership rival Kevin Rudd.   Cyprus crisis shakes Australian markets   The government of Cyprus has postponed a vote on a controversial tax on savings, which forms part of its austerity package, leading to more than 2% being wiped off the value of Australian shares.   The vote would have ratified a deal struck between Cyprus, the IMF, the European Central Bank and other lenders to levy a once-off tax on all bank deposits of 6.75% for amounts up to €100,000 ($A124,000) and 9.9% for deposits above €100,000 as part of a bailout package.   ASIC report says high speed trading risk is overstated   The Australian Securities and Investments Commission has released its report into computerised high speed trading.   While the report from the corporate regulator recommends some reforms, it also finds that the impact of the practice in Australia has largely been overstated.   “There is a belief by some that high-frequency trading is manipulative in a legal sense, or at least predatory in nature, and there is a perception that high-frequency traders uniformly have less regard for market integrity. That perception is not supported by our study,” the report states.   Overnight   In New York, the S&P500 is down 0.64% to 1550.65. The Aussie dollar is up to US1.0391 cents.

Start-up legal basics: Getting the right structure

4:24AM | Monday, 15 April

Over the coming weeks, StartupSmart will be running a five-part series that covers the legal basics involved in starting a business.   This first instalment, by Lachlan McKnight, CEO of LegalVision, looks at the crucial decision of choosing a legal structure for your venture.   Launching a new business is all-consuming. Unfortunately, in the rush to develop a viable product and sales strategy, many entrepreneurs forget to complete a crucial task: choosing an appropriate legal structure.   As with anything in life, choosing a legal structure requires trade-offs. The simpler structures (sole trader or partnership) are cheaper and easier to set up but less flexible in the long term.   Setting up a company, and potentially a family trust to hold your shares in it, is more complicated and expensive, but if your start-up does turn into the next Instagram you will benefit from your foresight.   This article will give you a brief rundown on the benefits and drawbacks of the three most popular structures in Australia – sole trader, partnership and company. We will then discuss the benefits of using a family/discretionary trust structure to hold the shares in your company.   Small and simple – sole trader   A sole trader is an individual who operates a business in their own name.   There are very few legal or taxation requirements to setting yourself up as a sole trader. A sole trader controls and manages the business. Any profits made during the operation of the business, as well as on its sale, are counted as the income of the individual who is the sole trader.   Setting yourself up as a sole trader can make sense if you’re launching a business that will generate limited revenue, you don’t plan on taking on many liabilities and you are operating in an industry where the risk of being sued is low. A good example would be a PR consultant who works by herself.   The key downside to being a sole trader is the fact that you, as an individual, take on all the risk of the business. This means that, for instance, you personally owe suppliers and lenders any unpaid amounts. Additionally, if you have a great year and generate over $180,000 in profit, a portion of your earnings will be taxed at the top marginal rate. If you’re more successful than expected you could end up with a huge tax bill!   All together now – partnership   A partnership is a group of individuals and/or entities that run a business together as partners. Although a partnership is not a separate legal entity (and as a consequence each partner pays tax on their proportion of the partnership income in a financial year), it must have a TFN and an ABN and it must lodge a tax return.   Setting up a business as a partnership is cheap and easy, but only a limited number of businesses should consider this structure.   The key downside to a partnership is the fact that each partner is legally responsible for all the liabilities and losses of the business (including taxation obligations and superannuation contributions), even if another partner incurs those liabilities. This means that each partner’s assets are at risk.   When launching your business with a partner you will probably think nothing will ever go wrong – but this is rarely the case!   If businesses start to fail it is not unusual for entrepreneurs to take on risks, hide these from their partners, and end up saddling the partnership with huge liabilities. Unfortunately, if you’re in a partnership, the debts your partner incurs become yours.   Story continues on page 2. Please click below. From SME to behemoth – company   A company is a legal entity that is separate from its shareholders or members. The shareholders are therefore not liable for the liabilities and losses of the company. This protects the assets of the shareholders.   A company is a more complex, and consequently more expensive, way of structuring your business compared to a sole trader or partnership structure. There are initial establishment costs, regulatory costs (e.g. annual fees payable to ASIC) and compliance costs (e.g. accounting and other expenses relating to tax reporting).   Incorporating is, however, the best way to go if you’re building a business that is going to take on liabilities, employees or investors. A company is a flexible structure which allows you to raise capital easily and ensures you are not personally liable for your businesses debts.   The additional costs and complexity of setting up and running a company are heavily outweighed by its benefits.   Reduce taxes and protect yourself – family/discretionary trust   When launching a start-up which you’re aiming to build into a multimillion dollar company, it’s also a great idea to set up a discretionary or family trust.   A discretionary trust is a trust in which the trust fund is held by a trustee and administered in accordance with the terms of a trust deed. In each financial year, the trustee determines which beneficiaries (if any) will receive distributions of income and/or capital from the trust, and in what proportions.   Using a trust to hold shares in your company is a great option for a few reasons. The first relates to tax.   If you end up selling your start-up to Google for $10m you will receive an extremely large windfall over one or two financial years.   If you hold shares in your company personally, your tax bill will be immense given the top marginal rate in Australia is 45%. Holding your shares through a trust structure allows your clever accountant to significantly reduce your tax liability.   Secondly, using a trust structure will reduce the risks associated with being a director of a company.   Although it is unusual for a company director to be sued, it is not unheard of. If you set up a family trust and transfer all of your assets into it (including your shares in your company), suing you becomes a thankless task; you are penniless!   Future-proofing   Before you get into the details of product and marketing strategies it is crucial that you think about your company structure. Choose the structure that will work for you now, but more importantly, make sure it will work in the years to come.   Lachlan McKnight is the chief executive of LegalVision, a start-up that provides SMEs with access to online legal services, including customised legal documents.

Tech start-up stays Nimble with $1.5 million cash boost

3:58AM | Friday, 15 March

Queensland-based tech start-up Nimble will ramp up development of its credit assessment and fraud prevention platform, after raising $1.5 million from a number of high-profile investors.

Four changes that would help home-based businesses

3:33AM | Thursday, 14 March

They are a vital, but often invisible part of the Australian economy – soloists who work from home, often in a spare room, contributing innovation and wealth well away from the top end of town.

THE NEWS WRAP: Costco announces first Australian profit, major expansion plans

3:04AM | Friday, 15 March

The Australian arm of discount warehouse chain Costco has declared its first profit, along with $50 million from its US parent to finance an aggressive expansion plan.

THE NEWS WRAP: ASIC to investigate Whitehaven hoax after $314 million went up in smoke

3:09AM | Monday, 11 March

Corporate regulator ASIC and Nathan Tinkler’s Whitehaven Coal have announced they intend to investigate a media hoax that temporarily wiped $314 million off the market capitalisation of the coal miner.