- A Broker By Any Other Name
In mid-2015, the Australian dental profession and the public-at-large were rightly outraged at the news that an unlicensed backyard dental practice had operated in Meadow Heights, Victoria for more than a decade.
The dentist claimed to be registered in another country and had decades of experience…
What could be the downside?
Most qualified AHPRA registered dentists would be able to tell you that most countries have different standards for quality control, sterilisation and record keeping - different countries allow different materials and even count teeth differently. Reports regarding the dentist in Meadow Heights speak of him smoking during treatment, not wearing gloves and tools being dropped on the floor, only to be picked up and used without being cleaned. Patients of this “dentist” made complaints of substandard dentistry, long-lasting pain, aesthetic compromises and risks of exposure to dangerous infectious diseases.
Australians are rightly outraged by compromises to their reasonable standards of health care, and stories like the one from Meadow Heights are fortunately rare. Unfortunately, the activity of unlicensed professionals is less rare when we look at other professions in Australia. Stories of unlicensed builders, electricians and mechanics are often covered in the media, which leads to a growing awareness of this issue. Less well-known is the mistake that many business owners make, when (unknowingly) letting an unlicensed professional sell their business… an asset that they have spent their entire professional career building.
Business Brokers, like many other professions, need a license in order to operate legally. They must sit exams, pass courses and keep up-to-date with their CPD requirements, in order to renew their licence every year. Once a broker has their licence, they are not automatically eligible to operate in every state either; they need separate licences for each one, and are covered under each individual state’s real estate legislation, in much the same way as a real estate agent. Different legislation applies in each state regarding how transactions need to take place, and there are differences in the procedures and documentation required, depending upon which state the transaction is in. As such, brokers need to have a license specific to each state that they operate in, if they are operating legally.
But if they can get the desired outcome…
What could be the possible downside?
Firstly, let’s start with the fact that it is illegal for an unlicensed person to act as your agent when selling your business. While they could possibly get a desired outcome, the same way an unlicensed builder might, you are more likely to get suboptimal results from someone who isn’t qualified, than someone who is.
Let’s say their work resulted in suboptimal results or reputational damage, or a necessary disclosure wasn’t made, and you, as the vendor or purchaser, sought to take legal action for damages - the broker wouldn’t have Professional Indemnity Insurance to cover such a claim, leaving you potentially out-of-pocket in a big way.
If you’ve spent your professional career building an asset that you are selling, the stakes should be too high to simply leave this in the hands of someone who isn’t licensed.
If you are selling your business and engaging a broker, I urge you to think about the stakes, do your due diligence and ask to see the relevant licence or registration for their activities in your state. To be properly licensed they should have both:
-A licence or registration to act as a broker in your state and
-A separate licence or registration for their business to act as a brokerage in your state.
As much as someone operating without a licence might like you to believe it:
- A business broker isn’t the same thing as a ‘consultant’;
- A business broker can’t work under someone else’s licence;
- Having a licence or registration from one state doesn’t mean they can work as a broker in the other states and territories;
- Having experience, references and a good network to draw from is an advantage, but it isn’t enough to be certified as a licensed business broker in Australia.
Australia has very reasonable standards when it comes to qualifications, licensing and ongoing CPD necessary to provide services to the public as a doctor, dentist, builder… and business broker. We rely on these standards to protect us when it comes to safely driving on the road, finding a professional to advise us on our health or building our house. The time to ignore these standards is not when selling one of your biggest assets, which you have spent a lifetime building.
If youd like to read more articles about brokerage please click on one of the links below: