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  • #983569
    swolf
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    Hi,

    I’m not sure if this is in the right place so feel free to move it if it’s not. I’m interested in investing into businesses as a silent partner in that I want a certain % return after an agreed term rather than a percentage of the business profit. I don’t have any experience into silent investing, mostly a share and real estate investor so my questions relate to the nuts and bolts of the agreement.

    I’m guessing I would need a contract lawyer to draw up the contract to make it legally binding after the terms are agreed to? If so can someone recommend a firm preferrably in the Adelaide or Melbourne area who specialise in this kind of thing?

    And as the investor and wanting to protect my investment, am I able to put in place an agreement that the initial investment and the return must be paid out in full should the business fail and the other party files for bankruptcy or do poorly for whatever reason and the other party balks at paying?

    Thanks for any assistance

    #1143097
    Kennethti
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    swolf, post: 163666 wrote:
    Hi,

    I’m not sure if this is in the right place so feel free to move it if it’s not. I’m interested in investing into businesses as a silent partner in that I want a certain % return after an agreed term rather than a percentage of the business profit. I don’t have any experience into silent investing, mostly a share and real estate investor so my questions relate to the nuts and bolts of the agreement.

    I’m guessing I would need a contract lawyer to draw up the contract to make it legally binding after the terms are agreed to? If so can someone recommend a firm preferrably in the Adelaide or Melbourne area who specialise in this kind of thing?

    And as the investor and wanting to protect my investment, am I able to put in place an agreement that the initial investment and the return must be paid out in full should the business fail and the other party files for bankruptcy or do poorly for whatever reason and the other party balks at paying?

    Thanks for any assistance

    Well unfortunately it’s difficult to answer your questions without knowing more about what you plan to do and how you plan to be a “partner” in the business.

    Whatever the case is it’s best to seek legal advice in relation to this matter. Certainly it would be best to look for someone local. There are also a few Melbourne solicitors who hang out on these forums.

    Some questions to ask are:

    1. What is the nature of the business you intend to invest in?
    2. What is the structure of the business you intend to invest in?
    3. If the business is a partnership or sole trader, will you then become a partner, take on the liabilities of the business, but not be able to make any business decisions?
    4. If the business is a family trust, can you even be added into the business as a partner? The trust deeds need to be changed.
    5. If the business is a Pty Limited company, will you be buying shares in the business of a class that does not allow you to make business decisions?
    6. Perhaps instead you might consider making a loan to the business, and to secure the loan by way of personal guarantee or a charge on the shares of the business?
    7. Perhaps you might combine both – become a shareholder of the business, and then make a loan to the business that is secured to assets of the business, the shares, or a personal guarantee? Whatever the case, you may need to talk to an accountant about how this may affect the business and perhaps how it affects you.
    8. Generally speaking if you invest in a pty limited business by way of obtaining shares in the business, if the business goes down, the first people to get paid are, in general order, (cough) the liquidators (cough), secured creditors, unsecured creditors, and if there are any leftovers, the balance to the shareholders. This could mean that you lose your investment.

    Then again, isn’t the whole point of an investment one that you risk losing your investment?

    #1143098
    Alex (LegalVision)
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    Hi Sworf

    Agree with all Kenneth’s points, but bear in mind you don’t need a solicitor in a certain location. There are plenty of solicitors who work online, and you can have meetings etc… through Skype. The legal industry is still a bit behind the whole online revolution, but things are changing!

    Lachlan

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