After attending a recent agribusiness forum, held by Agribusiness Australia and Cowell Clark Lawyers, I bought a book, by lawyers from Cowell Clarke, on the topic of legal issues for agribusiness.

There were lots of topics covered in the publication, with it not full of technical language and very much targeted towards agribusiness advisors and accountants.

I have summarised some of the points that caught my interest.

Corporate rather than individual trustees are preferable for entities. These incur extra costs, but have ongoing benefits. Any agreements between entities need to be documented correctly, and be clear with the intention.

Multiple trusts for various assets will probably make succession planning easier. If assets are held in one trust, the business may incur significant costs if any assets were to be transferred to another entity.

Self-managed superannuation funds are effective structures to hold land, as they are concessionally taxed, but as with any strategy, there are potential downsides. Rent paid to the SMSF has to be on commercial terms. The operating entity needs to ensure it has sufficient cash flow to physically pay rent due.

Unit Trusts are a popular vehicle for agricultural investment. Another entity used in shared ownership of agri assets can be the unlisted public company. Among other things, this structure can make it easier to raise funds. A shareholders agreement should be drawn up for any pooled resources for an agri investment. Best to set the rules of the game beforehand, rather than arguing later.

Due diligence is a big part of any purchase. It pays to understand what you are actually buying. Are there any covenants or rights of way, access to property by third parties? Are the boundaries aligned correctly and are there any outstanding issues with the neighbours?

Business succession agreements are a much underappreciated document. There can be many trigger points for these types of documents, including, death, a trauma event, relationship breakdown or the exiting of a partner from a business.

It’s much easier if the rules are known from the beginning. It’s much more difficult to make rational decisions in the heat of the moment, when emotions are high.

A key part of any succession planning process is ensuring estate planning is in place. In a farming context, this definitely means professional advice should be sought.

It’s not uncommon for an agribusiness to go through a restructure – this is particularly the case when a younger generation becomes involved in the business. 

Again, professional advice should be sought.

Agribusinesses have many moving parts, and given the value of the assets can be quite large, it definitely pays to obtain quality advice. This is worth the investment and may well avoid potential consequences down the track.