Property Law Update – Torrens Assurance Fund Levy Abolished

Posted on June 9, 2011 by mattd

The Torrens Assurance Levy upon property transactions will not be imposed after 1 July 2011 owing to recent assent given to the Real Property Amendment (Torrens Assurance Levy Repeal) Act 2011.

The levy originally came into effect on1 July 2010 and was imposed on all real property transfers concerning property valued between $500,000 and $1,000,000 at a rate of 0.2%.  The levy was also imposed at a rate of 0.25% on properties valued at over $1,000,000.

You should seek expert conveyancing and real property law advice if you are in the process of buying or selling a property.  The Act abolishing the levy does not apply in circumstances where a transfer has been executed to give effect to a contract for the sale of land entered into after 1 July 2010 but before 1 July 2011 and that transfer is lodged with the Registrar-General on or after 1 July 2011.

If exchange of contracts for the sale of land is delayed until after 1 July 2011, the levy will not be payable and the costs associated with the purchase of a property will be a lot less.

If you would like further information about the recent change in the law relating to real property or require expert conveyancing and property law advice, go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your real property and conveyancing law needs.

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Obtaining a Grant of Probate in NSW

Posted on May 31, 2011 by mattd

What is Probate?

Probate is the process of proving and registering a last will and testament with the Supreme Court of NSW or a Supreme Court of one of the States or Territories.  An application for a grant of probate is usually made by a person named by the deceased as an executor of his or her last will.

Why should I apply for a grant of probate?

There is no formal requirement to obtain probate in respect all wills and testaments.  A grant of probate is usually required when the executor proposes to administer the deceased estate.  If you are an executor of a will in circumstances where the deceased person owned property as a tenant in common, you will need a grant of probate before you can transfer or deal with the property.  Probate is usually required if you are dealing with third parties such as banks, superannuation or insurance companies and other financial institutions.  Those companies insist on executors obtaining a grant of probate in order to protect themselves from liability for releasing assets to unauthorised persons.

What documents will my lawyer need to apply for probate in NSW?

The minimum requirements to apply for a grant of probate in NSW are an original last will and testament, an original death certificate and a list of assets and liabilities of the deceased estate.  A notice of intention to apply for probate is usually published at least 14 days before approaching the Court for a grant of probate.  The documents are then used to prepare the necessary application and affidavits which are filed in the Supreme Court.  If the Court is satisfied with the application for probate, the grant will usually be made 6 business days after filing.

If you need assistance in applying for a grant of probate or you are an executor of a will and need legal advice, go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your estate planning and inheritance law needs.

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Bankruptcy and company directors

Posted on May 26, 2011 by mattd

A question we are regularly asked is whether a person can remain a compny director after they enter into bankruptcy.

One of the consequences of bankruptcy in Australia is that you are automatically disqualified as a company director if you are made bankrupt or if you enter into a personal insolvency agreement.  The Corporations Act also says that the disqualification applies even if you are bankrupt or subject to a personal insolvency agreement in a country other than Australia.

In very limited circumstances, a company director who becomes bankrupt may be able to apply to the Supreme Court of the Federal Court for permission to continue in the office of director.  It is an offence for a person who has been automatically disqualified from being a company director due to bankruptcy to continue acting as a director.  The penalty imposed by the Corporations Act is a fine of $5,500, 1 year imprisonment or both.

Upon entering into a personal insolvency agreement or bankruptcy, the trustee in bankruptcy will usually inform the Australian Securities and Investments Commission by lodging a form notifying ASIC that the bankrupt director is disqualified.  ASIC and the Insolvency Trustee Service Australia also share data in order to monitor the actions of bankrupts and their companies.  If you are a director who has entered into bankruptcy or a personal insolvency agreement, ASIC suggests that you should lodge a notice informing them of your disqualification.

If a bankrupt is discharged from bankruptcy or the terms of a personal insolvency agreement are fully complied with, the automatic disqualification usually ends.  From that point, companies can appoint directors who have been discharged from bankruptcy or have fully complied with their obligations under a personal insolvency agreement.

If you have been made bankrupt or executed a personal insolvency agreement and are concerned about your duties as a company director, you need expert insolvency advice.  Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your personal insolvency and bankruptcy needs.

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Joint and separate bankruptcies – order of payment

Posted on May 19, 2011 by mattd

Joint and separate bankrupt estates occur usually when business partners or domestic partners jointly incur a debt and are made bankrupt by their joint creditor.  The bankruptcy trustee for the joint bankrupt estates will make an investigation into what assets are held by the bankrupts jointly and what assets are held separately.  The bankruptcy trustee will then investigate the creditors of the bankrupts in order to work out what debts are owed jointly and what debts are owed separately.

The bankruptcy will usually realise the assets of both bankrupts and use the money obtained from the realisation to pay the joint debts and the separate debts of the bankrupts.  There are rules relating to the process of paying out debts of a joint and separate bankrupt estate.  The usual course of events is:

1. The bankruptcy trustee uses the assets and money of the joint bankrupt estate to pay the debts for which both bankrupts are personally liable (the joint debts).

2. The bankruptcy trustee uses the assets and money of the separate bankrupt estates to pay the debts for which the bankrupts are separately liable (i.e. the debts that only one bankrupt owes, not debts both bankrupts owe).

3. If there is a surplus of funds after the joint debts have been paid by the joint assets, the surplus is then distributed equally in proportion to the right and interest of each joint debtor in the joint estate and used to discharge the debts that are owed separately.

4. If there is a surplus of funds after the separate debts have been paid out of the separate assets, the surplus is used to pay any further unpaid debts in the joint bankrupt estate.

When the trustee in bankruptcy pays his or her final dividend in accordance with the above, the joint and separate bankruptcies are usually annulled.

If the bankruptcies are annulled and the bankruptcy trustee still has funds left over after the payment of the joint and separate debts in accordance with the above, that surplus is usually returned to the bankrupts.

If you are interested in having your bankruptcy annulled or if you have any queries about the duties or responsibilities of bankruptcy trustees, you need expert insolvency advice.  Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your personal insolvency and bankruptcy needs.

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Possible changes to Director Penalty Notice regime

Posted on May 13, 2011 by mattd

In the recent budget, the Commonwealth government addressed the issue of fraudulent phoenix activity and proposed a number of law changes to strengthen the ability of regulators, particularly the Australian Taxation Office, to deal with such activity.

Phoenix activity involves a director causing a company to incur debts, typically tax debt and employee entitlements.  When the debts of that company become unmanageable, the director then transfers the assets of the original company to a new company (usually with a similar name) and continues to trade the business through that new entity.  The original company is then placed into liquidation without any assets and creditors of that company receive nothing.

One area the government intends to address is unpaid superannuation.  The government intends to pass law extending the operation of Director Penalty Notices.  At the moment, Director Penalty Notices relate only to unpaid PAYG tax.  The ATO will usually serve a notice on a director requiring payment of a company’s PAYG tax debt.  That gives the director 21 days from the date of the notice to pay the debt or put the company administration or liquidation.  If that action is not taken within 21 days, the director becomes personally liable for the PAYG tax debt.

If the proposed law is passed, from 1 July 2011 the ATO will be able to issue Director Penalty Notices in relation to unpaid superannuation guarantee charges.  If the law is passed, the notice will be in virtually identical terms to the current Director Penalty Notice and if the superannuation guarantee charge is not paid or the company is not placed into administration or liquidation, the director will be personally liable for the company’s failure to pay employee superannuation.

If you are concerned about phoenix activity or if you have received a Director Penalty Notice from the ATO, you need urgent expert insolvency advice.  Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your insolvency law needs.

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Shareholder Disputes: How can a Court resolve them?

Posted on May 9, 2011 by mattd

In our last post, we discussed a number of different circumstances where a minority shareholder might be able to bring proceedings against a company and other shareholders.  The type of case we discussed is usually referred to as an “oppression suit”.  In this post, we’ll discuss what a Court can do in order to resolve a shareholder dispute in the context of oppression proceedings.

Share buy out orders

An order that is regularly made in oppression proceedings is a share buy out order.  The Court will usually compel the oppressor to purchase the oppressed’s shares at a fair price. 

In order to ascertain a “fair price”, the Court will usually require a valuation of the shares.  The date at which the shares are valued can vary based on what would be fair in the particular case.  Ordinarily, the Court will require an expert report to consider the value of the shares on the date the proceedings were commenced.  The report is usually based upon what the shares would have been worth if there had been no oppression.

In the context of oppression proceedings, a Court is always concerned to make orders that are fair in all the circumstances.  The valuation method that is applied by Courts changes from case to case.  Previous cases in the area have seen the application of the following valuation methods: net asset; capitalisation of future maintainable earnings; liquidation or fire sale; and, fair market value.

Orders relating to Court proceedings

Under the Corporations Act, the Court has the power to direct a company to commence proceedings or authorise a member to commence proceedings in the name of the company.  The Court may make such directions where majority directors have caused the company to enter into an agreement that is in breach of their directors duties or if the company has a cause of action against the directors.  Orders of this nature can assist minority shareholders in circumstances where the nature and constitution of the board would prevent a resolution of the company to commence proceedings from being passed.

Orders regulating future affairs

Where the appointment of an external administrator would do damage to the company and its members and when the management of a company can be regulated by the Court without the need for ongoing supervision, the Court can make orders regulating the ongoing conduct of the company’s affairs in many different ways.  As the Court is concerned with overall fairness, the orders can take many different forms.

In the past, the Courts have made orders preventing companies from entering into certain transactions, orders for investigation of transactions and orders preventing meetings being held.  The powers in this area are wide ranging.

The Court can also make orders against individuals by granting injunctions or orders restraining shareholders from acting in certain ways.  Alternatively, orders can be made compelling a person to do an act or thing.  Again, the circumstances in which the Court can grant relief are varied and depend on a number of competing factors.

External administration

Further remedies available to the Court in the context of proceedings commenced by minority shareholders include orders for external administration.  Usually a Court will be reluctant to wind up a solvent and successful company or interfere with the day to day management of a company; however, in instances of serious or complicated disputes, the Court might make an order for external administration.

The Court can make an order for the winding up of the company and the appointment of a liquidator.  That will usually occur when parties have been unable to reach agreement as to the value of shares or unwilling to make an offer for the purchase of shares.  The role of the liquidator will usually be to sell the assets of the company to one of the shareholders or on the open market, pay the outstanding debts and divide the surplus between the shareholders.

The Court may also appoint a receiver and manager to the company.  The appointment will usually take place to preserve the status quo and ensure the property of the company is not destroyed.  The receiver and manager can provide independent management of the company in cases where there are serious disputes.  The process can also be used to investigate transactions of the company and commence proceedings where a right of recovery is available to the company.

Shareholder disputes and litigation can be costly if you don’t make the right decisions, you need expert business law and litigation law advice.  Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your dispute resolution needs.

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Shareholder Disputes: What are my options?

Posted on May 5, 2011 by mattd

In our last post we discussed a number of ways that might help avoid a shareholder dispute.  In some circumstances, the relationship between shareholders can break down so severely that mediation or negotiation will not solve the underlying dispute.  In those cases, shareholders may need to approach the Federal Court of Australia or the Supreme Court of New South Wales for relief.

Generally speaking, you can approach the Court for relief if you are a shareholder of a company and:

1. the conduct of the company’s affairs; or,

2. an actual or proposed act or omission by or on behalf of the company; or,

3. a resolution, or a proposed resolution, of shareholders or a class of shareholders of the company;

is either contrary to the interests of the shareholders as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against a shareholder or shareholders.

Applications of this nature are usually commenced in the context of shareholder disputes in order to protect minority shareholder rights.

The section that relates to these sorts of proceedings (which are usually referred to as oppression or shareholder oppression proceedings) is wide in nature and applies to many different factual scenarios.  It is impossible to give a comprehensive description of all situations where a shareholder might have a right to go to Court but a review of the most common cases shows that the most common grounds are as follows:

1. oppressive boardroom tactics where majority shareholders employ their majority to constantly deprive the minority shareholders of their right to participate in board meetings;

2. conduct by directors or shareholders that excludes a shareholder from management of the company;

3. directors preferring the interests of the shareholder who nominated them to the board over other shareholders;

4. excessive payments made to directors;

5. issuing of shares to decrease minority shareholding;

6. breach of directors duties or breach of fiduciary duties where directors act in their own interests or in the interests of other parties to the detriment of the company or the minority shareholders;

7. inadequate payment of dividends;

8. improper appropriation of business opportunities;

9. misappropriation of company funds;

10. refusal to grant access to information or books and records;

11. inability to sell shares in a private company.

The oppression remedy is a very powerful tool afforded to minority shareholders.  It allows shareholders to control and the Court to resolve abuses of power by majority shareholders and management.

If you are a shareholder of a company and you are being treated in a way that falls under the above headings, you need expert business law and litigation law advice.  Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your dispute resolution needs.

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Shareholder disputes and how to avoid them

Posted on May 4, 2011 by mattd

Disputes between shareholders can occur in any type of company and can arise in many different ways.  Shareholder disputes are usually caused by a number of factors that have built up over time.  The most common disagreements occur when shareholders have different ideas about the direction a business should take, when minority shareholders aren’t being listened to or when one shareholder perceives that they are doing the lion’s share of the work.

One of the best ways to ensure a shareholder dispute does not turn into costly litigation is to ensure that a shareholder agreement is established as soon as your company is incorporated.

Entering into a shareholder agreement from the outset is one of the best ways to avoid disagreements and disputes.  A properly drafted shareholder agreement will set out the rights and responsibilities of shareholders when it comes to the important corporate governance issues.  The matters that shareholder agreements deal with can include:

1. how the board of directors is to be made up, scope of directors duties, who can nominate directors, management structure of the company;

2. how profits are to be distributed, what capital each shareholder will invest, what funding will be required from the shareholders in the future;

3. how decisions are to be made, whether different decisions will need different types of majority (i.e. unanimous, special or simple majority);

4. restraints on shareholders such as prohibition on running a competing business, prohibition on poaching clients or staff;

5. issuing shares to current members, issuing shares to new members, capital raising;

6. restraints on transfer of shares without prior approval, granting first right of refusal to other shareholders, share transfer and sale process;

7. independent valuation of shares prior to transfer, arrangements as to what valuation methods to apply, agreement as to valuer;

8. dispute resolution clauses.

The benefit of having a clear and properly drafted shareholders agreement is that all parties know where they stand and what they are required to do.  The clarity that a shareholders agreement brings can often help resolves disputes early and without the need for litigation.

An agreement provides further protection to shareholders as it requires all shareholders to agree to any amendment or change to the nature of the agreement.  The requirement for a unanimous decision provides better protection in that a company governed by a constitution or the replaceable rules will usually only require a 75% majority of shareholders to change that company’s constitution.

The dispute resolution clause of your shareholder agreement is crucial to saving costs and avoiding damage to your company’s good name.  A dispute resolution clause can compel the shareholders to enter into mediation or arbitration before commencing proceedings, it can provide for neutral evaluation of disputes or referral of the dispute to an independent third party to break a deadlock.  If a dispute resolution process is put in place in the shareholders agreement, members of a company have a process by which they can air grievances and resolve matters without going to Court and risking personal and business reputations.

Like every company, every shareholder agreement is different and you need expert advice to ensure you get a properly drafted shareholders agreement which addresses your particular company and shareholders’ individual circumstances.

If you are starting a company, looking for a properly drafted shareholders agreement or involved in a shareholder dispute, you need expert business law and corporate law advice.  Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your business law needs.

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Employment Law Reminder – Employers covered by national workplace relations system must provide Fair Work Information Statement to new employees

Posted on April 21, 2011 by mattd

If you are an employer covered by the national workplace relations system, you are required by law to provide all new employees with a Fair Work Statement.  The provision of the Fair Work Act 2009 concerning Fair Work Statements came in to force on 1 January 2011.

Am I a National System Employer?

There are a number of entities that are defined as National System Employers.  The most common is the “constitutional corporation”.  If you employ workers by way of an entity incorporated under the Corporations Act 2001 (Cth) (i.e. a Pty Ltd or Limited company) or by way of a not-for-profit association incorporated under the State incorporated associations legislation and trading activities are a substantial or significant part of its corporate activities – the entity that employs those workers is probably a constitutional corporation and therefore bound by the Fair Work Act.

Where do I find the Fair Work Statement?

The Fair Work Statement can be obtained from the Fair Work Ombudsman website by clicking here.

When should I provide the Fair Work Statement to my employees?

You must give the Fair Work Statement to your employee before, or as soon as practicable after, the employee starts employment.  You can provide the Fair Work Statement by hand, post, email or fax.  The statement needs to be provided to all new employees that have commenced employment after 1 January 2011.

What happens if I don’t provide the Fair Work Statement to my employees?

The Fair Work Act contains severe penalties for employers who do not provide their employees with the Fair Work Statement.  Those penalties can be up to a $6,600 fine for an individual and a $33,000 fine for a corporation.

Do you need advice as to whether you are a National System Employer? Would you like to know about the obligations that arise from the national workplace relations system? Are you being prosecuted by the Fair Work Ombudsman? Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your employment law and Fair Work Act prosecution needs.

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Cross Border Insolvency: Access to Australian Courts under the Corporations Act

Posted on April 18, 2011 by mattd

The Supreme Court of New South Wales recently considered an application by a Singaporean liquidator for recognition under the Australian Corporations Act.

Section 581 of the Corporations Act relevantly provides that the Federal Court of Australia and the Supreme Courts of the various States of Australia, in all external administration matters, must act in aid of and be auxiliary to the Courts of the following countries that have jurisdiction in external administration matters:

1. the Bailiwick of Jersey;

2. Canada;

3. the Independent State of Papua New Guinea;

4. Malaysia;

5. New Zealand;

6. the Republic of Singapore;

7. Switzerland;

8. the United Kingdom; and,

9. the United States of America.

In this case, the Court was concerned with the operation of the above section in the context of Australian cross border insolvency laws.  It found that to “act in aid” means “to assist” and to “be auxiliary” is to “provide support”.  The nature of the section makes it mandatory for an Australian Court to deploy its own general jurisdiction in order to ensure the orders of the foreign Court have effect and their objectives are achieved.

The next matter considered was whether the Australian Court’s duty to cooperate with the Singaporean Court and the Singaporean liquidator under the Cross Border Insolvency Act 2008 prevailed over the duty to act in aid and be auxiliary to the Singaporean Court and, if it did, whether that duty required the Court to enforce the Singaporean judgment at the request of the Singaporean liquidator.

The Court held that the duty to cooperate with the Singaporean Court under the Cross Border Insolvency Act 2008 (which is based on the UNCITRAL Model Law on Cross Border Insolvency) did not arise as the Singaporean Court did not request assistance and apparently may not have had knowledge of the liquidator’s application.  It was determined that a Court could not cooperate with another without that other being aware.

The Court then found that the principal avenue open to foreign insolvency practitioners was firstly recognition of foreign proceedings under the Model Law and the use of that recognition to access relief as set out within the Model Law.  The deployment of the Australian Court’s jurisdiction to further the objectives of the Singaporean administration was found to fall within the ambit of Article 21 of the Model Law and the duty to cooperate with foreign insolvency practitioners and foreign Courts was not held to be a means of circumventing the usual recognition/access method.  Indeed, the Court suggested the proposition that cooperation with litigants involved granting them relief or even hearing and determining their cases “mischaracterised the judicial process”.

In finding that there was no inconsistency between the Model Law and the Corporations Act in this instance and that section 581 was not deprived of its effect by the Cross Border Insolvency Act, the Court determined the section 581 case on its merits.  The Court gave some guidance to foreign insolvency practitioners as to the circumstances in which section 581 should be used.  Ordinarily, the Court will require some sort of controversy as to the nature of the proceedings or orders made in the foreign jurisdiction or impediment to access to Australian assets.  In the instant case, the impediment to the Singaporean liquidator was an Australian bank refusing to recognise the winding up and appointment orders of the High Court of Singapore for the purposes of allowing him to operate bank accounts held in Australia by the company to which he was appointed.

The liquidator’s application under section 581 was successful.

If you are an insolvency practitioner and you need expert cross border insolvency advice about a matter arising in Australia or overseas, go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your insolvency law needs.

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