Legal practitioners should note that the Victorian government has removed existing restrictions on conveyancers undertaking some legal work in relation to sales of business. The amendments to the Conveyancers Act 2006 came into effect on 1 July 2012.
The LIV has been opposed to the changes for some time. We did make submissions to government over the last few years – but the legislative changes came without warning. I have written to the Minister for Consumer Affairs, Michael O’Brien, expressing my concern about the amendment, and pointing out that the move may expose vendors to litigation and not protect those looking to purchase businesses.
The effect of the legislative amendment is to extend the definition of conveyancing work. Under section 4(2A) of the Act conveyancing work now includes “legal work connected with the Sale of Business including the sale of goodwill, stock in trade and the transfer of any business licence”.
This section allowing conveyancers to act in relation to sale of business shows a total lack of appreciation of the number of complex legal areas and issues that are involved in the sale of business.
What practitioners can do:
Lawyers acting for clients in the sale of business should draw clients’ attention to the many complex areas of law that could be involved. These may include:
general contract law
understanding of business structures including partnerships, companies, discretionary trusts, unit trusts
restraints of trade
occupational health and safety law
securities law, particularly the Personal Properties Securities Act
Sale of business may also include liquor licensing, gaming issues and business licensing issues.
Lawyers acting in these transactions should advise their clients that these are complex areas of law and require specialist knowledge and expertise to execute.
The use of conveyancers may introduce risk
We submit that conveyancers, who undertake a 12-month training period, will not have sufficient competencies. We are also unaware of any move to audit their competencies or continuing professional development.
Lawyers should advise their clients that they risk exposure to litigation when selling their businesses if they do not seek legal advice on their disclosure and ongoing obligations.
There is also the risk that any improperly executed sale will fail to transfer titles.
What the LIV is doing:
The LIV has raised the issue several times with government since the amendment was initially proposed in April 2011. At that time, the LIV rejected the proposal, and the suggestion that it would help reduce costs.
In our submission, we said that unlike conveyancing, which generally required a detailed knowledge of property law and related legislation, sale of business matters encompass a much broader area. We also submitted that a 12-month training period was unlikely to be sufficient and may result in unqualified or under-qualified people performing legal work for which they have little competency.
The government failed to respond to our concerns and introduced the amendments without further consultation.
We are now seeking a meeting with Minister O’Brien.
We will continue to advocate and lobby for the appropriate consumer protection and recognition of legal professionals’ superior training, experience and ongoing CPD requirements.
The profession needs to work together to inform the public of the benefits of using qualified lawyers in business transactions.
What do you think of the change?