A term sheet is sitting in your inbox. Or an investor wants to fund the next stage on the strength of a personal guarantee. Or a lender is asking for security over assets you assumed were out of reach. These are the moments when business finance stops being a numbers exercise and becomes a legal one. What you sign, when you sign it and the order you register things in can decide how much of the business you still control a year from now, and whether your own assets end up exposed.
There are really three ways to handle those moments. The first is to work from templates and online registries, which holds up fine while the amounts are small and the other side is not represented. The second is to wait until a deal stalls, a default notice lands or a priority dispute breaks out, and treat a lawyer as a firefighter. The third is to brief a finance lawyer at the decision point itself, while the documents can still be negotiated and the registrations can still be lodged in the right order.
The option most people assume they have, but usually do not, is deciding to get legal advice later. Loan documents get signed, guarantees get executed and security registrations are stamped with the time they were lodged. A priority position lost to an earlier registration is not recovered by a better lawyer later, it is simply gone. So the real question is not whether your business will ever need a finance lawyer. It is which moments justify the fee, and the answer turns on six decision points.
Six decision points that justify a finance lawyer
Finance law in Australia is not a single statute. It is the collection of rules that apply when a business raises, lends, invests or manages money, spread across the Corporations Act, the Personal Property Securities Act, consumer credit law and the tax system. Each of the moments below engages at least one of those regimes.
Raising capital from outside investors
Issuing shares is a regulated act, not just a paperwork one. Under s 706 of the Corporations Act 2001 (Cth) (the Act), an offer of securities for issue needs disclosure to investors unless an exemption applies. The exemption most startups rely on is the small-scale personal offers carve-out in s 708: no disclosure is needed if no more than 20 investors are offered securities in any 12-month period and no more than $2 million is raised in that period. The offers must be genuinely personal, which means they can only be accepted by the person they are made to, and they cannot be advertised to the wider public.
The structure of the company itself constrains the raise. A proprietary company is capped at 50 non-employee shareholders under s 113, and it must not engage in any fundraising activity that would require disclosure under Chapter 6D, apart from raising from its own employees or shareholders or through crowd-sourced funding. Crowd-sourced funding has its own separate regime in Part 6D.3A, with its own disclosure documents and licensed intermediaries.
Two paths are worth comparing:
- Option A, fit an exemption: Stay under the small-scale limits and raise quickly with light documentation. The trade-off is that you are capped on who you can approach and how much you can raise.
- Option B, prepare a disclosure document: A full offer document under Chapter 6D removes those caps but brings drafting, verification and liability considerations that usually demand professional input.
Convertible notes sit in the middle. They start as debt and convert to equity on agreed triggers, so the same disclosure rules apply to the conversion right being offered. Valuation caps, discounts, interest and events of default all need to be drafted so the instrument behaves the way the founders and the investors expect.
Signing a loan or granting security over assets
Borrowing from a bank, a director or a related entity is common, but the document trail matters. A loan agreement sets the amount, interest, repayment schedule, covenants and default events. Security documents record the lender's rights over collateral, and in Australia those rights over personal property are governed by the Personal Property Securities Act 2009 (Cth) (the PPSA) and registered on the Personal Property Securities Register (the PPSR).
Priority is the point most borrowers underestimate. Under s 55 of the PPSA, a perfected security interest beats an unperfected one, and between two perfected interests priority generally follows the order in which each was perfected, which for registered interests means the order of registration. That has a practical consequence: the first lender to register usually stands ahead of everyone else, including lenders who advanced money earlier but registered later. Registration can even be lodged before the security agreement is signed, because s 161 allows registration before the agreement is made or the interest attaches.
Beyond priority, the drafting points that commonly need a lawyer's eye are:
- Covenants and events of default: These determine when the lender can call the loan, accelerate repayment or appoint a receiver. Aggressive cross-defaults can turn one missed payment to another lender into a default under every facility.
- Intercreditor and priority deeds: When more than one lender is involved, these documents set who gets paid first and who can enforce when things go wrong.
- Release on repayment: A security interest that is not discharged after the loan is repaid can blight later refinancing or a sale of the business.
Being asked for a personal guarantee
A director's guarantee converts a company debt into personal exposure. If the company cannot pay, the lender can pursue the director's house, savings and other assets without first exhausting the company's. The commercial reality is that banks routinely ask directors of small companies for guarantees, and the question is rarely whether to sign. It is what the guarantee says. Advice at this point focuses on the scope of the guarantee, whether it can be capped or limited, when it releases and how it sequences against other security. A guarantee signed without advice can outlive the loan it secured, because variations to the underlying facility can extend the guarantor's exposure.
Buying or selling a business
Purchasing or selling a business combines the finance side, including funding, vendor finance and earn-outs, with due diligence and completion mechanics. For a buyer, the value of the deal depends on what the target actually owns and owes, including any registered security interests over its assets. Lenders and investors commonly make due diligence a condition of funding. For a seller, clean corporate records, a clear repayment plan for outstanding debt and releases of security at completion prevent delays and post-settlement disputes.
The practical checklist for each side runs like this:
- For buyers: Review contracts, liabilities and PPSR registrations; identify security interests that need consent or release; check the conditions precedent in the funding.
- For sellers: Prepare records and repayment mechanics so security can be discharged at settlement; if the buyer's funding includes vendor finance, document the rate, security and enforcement rights clearly.
Struggling to pay debts as they fall due
Financial pressure is the moment the law starts attaching personal consequences to directors. Under s 588G of the Act, a director can be personally liable for debts the company incurs while insolvent, if there were reasonable grounds to suspect at the time that the company was insolvent or would become so by incurring the debt. That liability is not limited to the company's assets.
The Act provides a safe harbour. Under s 588GA, a director is protected from insolvent trading liability while developing and implementing a course of action reasonably likely to lead to a better outcome for the company than immediate administration or liquidation. Importantly for this decision, the safe harbour expressly contemplates the director obtaining advice from an appropriately qualified entity. It is not open-ended: to rely on it, the company must be paying employee entitlements as they fall due and staying current with tax lodgements.
The options available fall into two groups:
- Early options: Renegotiating facilities, amending payment terms, restructuring the balance sheet or operations, refinancing.
- Formal processes: Voluntary administration under Part 5.3A, deeds of company arrangement and liquidation each have different consequences for control, creditor dealings and director liability.
The point of the safe harbour is that advice is part of the strategy, not an admission of failure. Directors who wait until a default is unavoidable have usually given away the room to manoeuvre that the safe harbour was designed to protect.
Lending money or providing financial services
If the business itself lends, advises on or deals in financial products, licensing questions arise before the first contract is signed. Under s 911A of the Act, a person who carries on a financial services business in Australia must hold an Australian Financial Services Licence covering the services provided, subject to exemptions.
Consumer credit is separately regulated. Under s 29 of the National Consumer Credit Protection Act 2009 (Cth), engaging in credit activities without an Australian Credit Licence is prohibited, with a civil penalty of 5,000 penalty units and criminal exposure of up to two years imprisonment. The National Credit Code, which is Schedule 1 to that Act, applies when credit is provided to a natural person or strata corporation wholly or predominantly for personal, domestic or household purposes, or to buy or renovate residential investment property. Lending to a company for business purposes generally sits outside the Code, but the boundary has exceptions and extensions, so the characterisation deserves a check before you rely on it.
The questions to settle before you begin are:
- AFSL questions: Whether what you do counts as a financial service, whether an exemption applies, and what conduct and disclosure obligations attach.
- Credit licence questions: Whether your activities are credit activities, and whether the Code applies to the contracts you write.
Getting finance advice from Artificer Legal
The common thread across these six points is that the cost of the advice is small compared with the downside of the decision made without it. An Artificer Legal finance lawyer works through the decision with you, stress-tests the assumptions the deal is built on, models what happens in the downside scenarios such as a default, an insolvency or a priority contest, and then drafts or negotiates the documents the chosen path needs.
That includes reviewing and negotiating facility documents and guarantees, structuring capital raises so they fit a disclosure exemption or a crowd-sourced funding offer, checking PPSR registrations and priority positions, advising on safe harbour strategy when the business is under pressure, and mapping the licensing position before the business starts lending or giving financial advice. Where the answer is that you do not need a lawyer at all, you will be told that too.
Advice before the documents are signed
The threshold worth remembering is this: advice is only cheap before the documents are signed. After a guarantee is executed, a facility is accepted or a security registration is lodged in the wrong order, the room to improve the position is mostly gone, and the work shifts from structuring to damage control. The moment a draft document arrives, or a lender asks for a signature or a registration, is the moment to get the review done.
To pull it together: capital raising is governed by disclosure rules and company structure, so check the small-scale limits and the proprietary company caps before issuing shares. Lending and security turn on the PPSR, where priority generally follows the order of registration. Personal guarantees deserve scrutiny before signature because they expose personal assets. Buying and selling depend on due diligence and clean security releases. Directors facing insolvency should act early, because the safe harbour protects a course of action that includes taking advice, not a course of delay. And a business that lends or deals in financial products needs its licensing position settled before it starts. Each of those is a decision point where a finance lawyer earns the fee.