Due diligence is your friend

May 30 2018

In legal matters, doing your homework is the safest way to protect you from an unpleasant surprise. Here are three briefs proving the point.


Are you infringing existing intellectual property rights?

More than being a marketing tool, a trade mark is a valuable business asset. It shows your business has a reputation in the marketplace and distinguishes your products or services from your competitors. From a legal point of view, there’s significant risk for failing to consider existing third party intellectual property rights before you start to trade.

A lot of work goes into setting up a business. Imagine finding the ideal location, deciding on a name and starting to trade, only to receive a letter saying your business is infringing existing third party intellectual property rights and demanding you stop using it immediately. In most cases, the only option is to rebrand, which can undermine your goodwill and market presence.

To avoid the costs, delays and the damage this could do to your reputation, we recommend you complete a ‘freedom to operate’ search at the outset. You can search for existing registered and unregistered intellectual property rights, such as trade marks, on the Intellectual Property Office of New Zealand (IPONZ) website registers. Google (or another search engine) can also help you to identify existing unregistered intellectual property rights.

Once you have established that your intended business name, logo or tagline haven’t been used as registered trade marks, you can register them under the Trade Marks Act 2002. Registering your name and brand assets will protect your ownership and give you exclusive use of those assets in New Zealand. 


What’s the process for terminating employment on medical grounds?

It’s unfortunate when an employee has a serious accident, injury or illness with long-term effects. It takes a toll on them personally and their family. Secondary to that, it can have a big impact on business continuity, especially if that employee holds a key position.

There’s no clear cut answer for how long you have to wait for your employee to return to work. Each situation has unique circumstances and the disruption to normal operations may be immediate or take a long time to put stress on your business.

As much as you may not want to, if your employee is going to be away for a period that will compromise your business, you may need to consider terminating their employment. Naturally, before you take action, you need to do your due diligence and undertake a fair and reasonable enquiry into the matter both legally and as a good employer.

The first step is to write to your employee explaining the reasons for your enquiry, the potential outcomes, such as reduced duties or termination, asking for relevant medical information and offering an independent assessment by another medical professional. You must also provide an opportunity for your employee to respond.

Once they have responded and you have all the requisite information, you should be able to determine if your employee will be returning to work, whether they will need reduced hours or different duties, or if you believe there is no alternative other than to terminate their employment. Obviously, if this is your decision, you need to follow proper termination processes.

You should have the entire process, from the first sick day to notice of termination, documented in your employment agreements. If you have any doubts, you should speak to an employment lawyer immediately.


What does the bright-line test mean for your residential rental property if purchased to run your business?

Last month we released an article about the extension of the bright-line test from two to five years.

If you’re the owner of residential rental properties or a holiday home, this extension of the bright-line test may mean you have to pay more tax. The law that took effect in October 2015 states that if these types of property are sold within two years of purchase, you’ll have to pay tax on any profit you make. Obviously, with the period increasing to five years, your potential tax liability follows. You can read more about the bright-line test on the IRD website.

This is where business owners need to do due diligence with bright-line rules if you use a former residential property for the purposes of running a business. You may be exempt from the tax liability if your premises are no longer considered to be a residential property. However, if you purchase and convert a residential property into a business premises within the bright-line period, it may be seen that you have sold the property to your business, making you liable for tax.

The bright-line rules shouldn’t be taken lightly. If you have doubts, questions or are finding the rules too complex, speak to our business lawyers before you do anything.

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