Investing in a Business (entity or structure)

Investment in a business occurs in a wide variety of ways and can:

• involve the acquisition of an ownership interest in
• an entity that conducts the business (business entity)
• an entity that holds and ownership interest in a business entity (upstream entity); or
• the assets of the business itself (business assets); and
• give rise to many and varied legal issues – corporate, commercial, taxation, stamp duties law as well as, in some instances, specific statutory or regulatory requirements (licensing)

 

Practice area overview

What is required in a particular case:

• depends on whether the acquisition will result in the acquisition of 100% or less of the business or entity; and
• is influenced by the existing ownership structure of the business and the nature of the interest to be acquired and in particular whether the interest is to be acquired in a business entity, an upstream entity or business assets.

 

What we do:

The acquisition of an interest in a business (entity) (acquired interest) requires consideration of many issues:

• The existing ownership structure used to conduct the business.
• Identification of the acquired interest.
• Choice of business entity to hold the acquired interest.
• The structure to be used for the acquisition of the acquired interest.
• Whether the method of acquisition of the acquired interest should be in the business entity, an upstream entity or the business assets.
• The financing structure related to the acquisition.
• Applicable regulatory constraints due to the status of the business (entity) and the method of investment
• Foreign investment restrictions if the acquirer is a foreign person/entity.
• Licensing requirements applicable to the business (entity) and acquirer of the acquired interest.
• How the purchase price for the acquired interest is to be determined?
• The structure of the payment(s) of the acquisition price?
• Whether the acquisition price is to be determined over an earn-out period by future performance of the business (entity)?
• Whether security is to be provided for any unpaid balance of the acquisition price?
• How the liabilities of the business (entity) to be taken over and taken into account in the calculation of the acquisition price or indemnified?
• The protection of the goodwill of the business (entity) by existing and new restraints on key personnel.
• What warranties should be obtained in relation to the business (entity).
• Who should give those warranties?
• Should the giving of the warranties be guaranteed by a third party.

• What are the taxation implications for the acquirer/seller and business (entity)?
• Capital gains tax
• Goods & services tax
• Withholding tax
• Thin capitalisation rules
• Dividend imputation
• Payroll tax
• Stamp duty