McKillop Legal

Deed of Company Arrangement

A Deed of Company Arrangement (DOCA) is a proposal put forward by stakeholders, usually the directors, whilst the company is in administration so as to give a return to creditors better than they may receive in a winding up.

Importantly, a DOCA avoids the need to place the company into liquidation and allows the company to continue to trade with control of the company ultimately going back to the directors.

DOCA arrangements are flexible in that they can provide for may forms of payment from a lump sum or a payment by instalments of a fixed amount of based on net profit.

A Deed of Company Arrangement and must be signed within 15 business days of the 2nd creditors meeting (unless this time is extended by the Court), otherwise the company must be placed into liquidation, with the administrator becoming the liquidator.

Prior to execution, a DOCA must be approved by at least 50% of creditors by number and in value of amounts owed. Once signed, DOCAs are binding agreements between the company and its creditors and the administrator is in control of the company.

If entered into, a DOCA subsists for as long as its terms provide, until the obligations in the DOCA have all been met or until Court order.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / Insolvency & Bankruptcy / Litigation  by 01 Apr 2022 0 comments

Voluntary Administration

Voluntary Administration (VA) is a process that enables insolvent companies to satisfy their debts. Once an administrator is appointed, the administrator can assist the company to trade its way into a healthier financial position with a view to either the company:

(a)    being placed back into the director’ control,

(b)    entering into a Deed of Company Arrangement (DOCA) or

(c)     being placed into liquidation.

Administration begins generally when the company directors (not the shareholders) resolve that the company is or is expected to become insolvent (but it can commence when a liquidator believes that that a proposed DOCA may give creditors a better return that liquidator or if a secured creditor has a right under their finance arrangements to appoint an administrator).

During a Voluntary Administration, the directors lose all control of the company and the administrator assumes sole responsibility the assets and affairs of the company.

There are 2 creditors meetings in a Voluntary Administration, the first within 8 business days of the administrator being appointed and the second, within 30 business days of that date. At this second meeting, the creditors determine the company’s fate – choosing either to enter into a DOCA if one is proposed or liquidation.

Secured creditors can exercise their security in a VA but must do so within 13 business days of the administration commencing. Unsecured creditors are unable to enforce their claims during the moratorium period that exists during the administration.

During the administration period, any guarantee of company debts cannot be enforced against a director etc.

VA ends on the entry into of a DOCA, if the creditors so resolve, if the company is placed into liquidation or if the Court orders it to end.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / Insolvency & Bankruptcy / Risk management  by 01 Mar 2022 0 comments

Forged cheques

Cheque use in Australia has dropped by 83% over the last 10 years and is dropping by around 20% per annum. Although the use of cheques in Australia is declining rapidly with the alternative (and quicker and easier) payment methods such as EFT, debit and credit cards, PayWave, ApplePay, Stripe etc, Australians still use around 60 million cheques per year, so it is important to know what duties you may owe to your bank in relation to forged cheques.

There are 2 principal duties owed by a customer to a paying bank in relation to cheques:

  1. a duty to take reasonable care when drawing cheques so as not to mislead the bank or facilitate a forgery; and
  2. a duty to notify the bank promptly after becoming aware of a forged cheque.

If a customer becomes aware of a forgery but takes no steps to inform the bank and the bank acts to its detriment in paying the cheque, then the customer cannot later deny that the cheque was genuine.

There is no obligation on a customer to examine bank statements to detect forgeries and notify the bank of discrepancies. The customer’s obligations are limited to the above duties. Subject to those duties, the bank bears liability for payment of a cheque drawn without the customer’s authority.

The relationship between a bank and its customers in relation to cheques is a contractual one and the above duties are terms implied into that contract but banks can insert provisions into their terms of service to place the burden of losses from forged cheques on their customers if they so choose, so check the T&Cs of your bank or building society.

Steps to help prevent or detect forged cheques

Not all cheque forgeries can be prevented however, to attempt to prevent forgeries:

  • check for watermarks, ‘void’ pantographs, microprinting or other security measures
  • check the cheque looks ‘authentic’ – high quality printing, paper, correct spelling, even spacing, no smudges
  • don’t pre-sign “blank” cheques or leave cheques partially completed
  • cross cheques or mark them as “not negotiable” or “account payee only” so they are unable to be cashed or negotiated and have to be paid to an account
  • insert the dollar amount in numbers as close as possible to the ‘$’ sign and cross out any blank space to attempt to prevent other numbers from being inserted
  • state the full amount in words without leaving any spaces between or after the words – cross out any blank space
  • promptly alert your bank or the police to any suspicious, unexpected or unauthorised account transactions (cheques cant be ‘stopped’ once presented).

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Risk management  by 01 Feb 2022 0 comments

What is the difference between Deeds and Agreements?

You may have noticed that some documents you have signed have been expressed to be a Deed and others as an Agreement (or a Contract). You may wonder – is there a difference?

At law, the essential ingredients to have a binding agreement are:

  • Offer – what is being sold and purchased
  • Consideration – the ‘price’ paid
  • Intention to be legally bound by the arrangement
  • Acceptance of the Offer

The main difference between a deed and an agreement is that there is no requirement for consideration for the deed to be binding. The fact that something is executed as a “deed” means that it is a most solemn promise that you mean and intend to do what you promise to do.

Obviously, contracts can be written or verbal, but a deed must be in writing.

Often the choice of executing as a deed is due to there possibly being no actual consideration passing or a difficulty in quantifying it (such as the mutual exchange of promises do do or refrain from doing something, rather than a payment of money).

Common examples of deeds include:

  • Deed of Guarantee
  • Deeds of Release & Indemnity
  • Deeds of Settlement
  • Trust Deeds or Superannuation Deeds
  • Confidentiality Deeds

Some documents must be in the form of or to take effect as a Deed to be valid, such as for the transfer of real property in NSW.

Signed, Sealed & Delivered

Traditionally, to be a valid deed, the arrangement had to be “signed, sealed and delivered” and therefore:

  • on paper or parchment,
  • signed by the parties and their seal applied; and
  • it had to be physically delivered to the other party,

however now, there is no requirement for a seal and the parties are presumed to have ‘delivered‘ it on execution.

It must also still be witnessed for individuals signing however in modern times, the law in NSW (since 22 November 2018) allows for electronic execution. Further, the Regulations made during the COVID-19 Pandemic were updated to allow remote witnessing by audio-visual link* (although we always prefer “wet ink” signatures as the lowest risk option for execution of deeds).

Subject to the terms of the document (which may allow or prohibit it, and whether or not execution in counterparts is provided for), a deed may be binding on a party, irrespective of whether the other party or parties to the deed have also signed it.

As with all documents, the correct “attestation clause” should be used depending on whether the party is an individual, company, trustee or a partnership.

As Deeds do not require consideration, often it can be sensible to include a nominal item as consideration just in case the document isn’t valid as a deed – as it can then be relied on as a contract.

Also, limitation periods for enforcing obligations in deeds are longer than for agreements.

*Note – changes to company signing arrangements took effect on 01 April 2022 with the Corporations Amendment (Meetings and Documents) Act 2022.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Dispute Resolution / General / Risk management  by 02 Jan 2022 0 comments

Merry Christmas from McKillop Legal

Our office will be closed from 4pm on 23 December 2021 and will re-open on Monday, 17 January 2022.

We wish our clients, referrers, friends and family a very merry Christmas and a happy and prosperous New Year ahead in 2022.

in Uncategorized  by 21 Dec 2021 0 comments

Limitation periods

There are limitation periods that apply to various legal cause of action.

The effect of a limitation period in relation to a legal cause of action is that claims become time-barred, and therefore unable to proceed, where the relevant period of time has elapsed without a claim being brought through the relevant Court or Tribunal.

There is no “Statute of Limitations” in New South Wales as such but there is the Limitations Act 1969 (NSW) which has a default limitation period regime where there is no specific timeframe set out in the relevant Act (such as the Succession Act 2006 (NSW), Home Building Act 1989 (NSW), Defamation Act 2005 (NSW), Fair Trading Act 1987 (NSW), Fair Work Act 2009 (Cth), Criminal Procedure Act 1986 (NSW) etc).

The Limitation Act (or the relevant specific Act) describe the types of legal actions and the limitation periods that apply to them such as the following civil claims:

Cause of action Limitation period
Contractual claims 6 years from the date on which the cause of action accrued
Negligence 6 years from the date on which the cause of action accrued
Family provision 12 months from date of death
Cause of action founded on a deed 12 years from the date on which the cause of action first accrues
Enforcing a judgment 12 years from the date on which the judgment first becomes enforceable
Defamation 1 year from date of publication
Unfair dismissal 21 days from the date of dismissal of employee

NOTE – this is a general guide only – you should get specific advice as to the limitation periods that apply to your specific circumstances

Different limitation periods apply to causes of action in different jurisdictions, such as the Commonwealth or those of each State and Territory. Limitation periods can also apply to some criminal matters but serious crimes generally do not have such limitation periods.

In some very limited circumstances, the relevant limitation period may be able to be extended.

FURTHER INFORMATION

For further information on litigation and dispute resolution, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Debt Recovery / Dispute Resolution / Employment / General / Litigation / Risk management  by 01 Dec 2021 0 comments

Director Identification Number (DIN)

From 01 November 2021, all directors of Australian companies must obtain a Director Identification Number (DIN). This includes foreign directors of Australian companies or other Australian registered bodies who do not reside in Australia.

Directors must register for their DIN personally. You cannot ask any other person to register on your behalf, including your accountant or tax agent. It is free to apply.

The Australian Business Registry Services (ABRS) will maintain the DIN register.

A DIN is a 15 digit code unique to you. It will start with 036 (which is the 3-digit country code for Australia under International Standard ISO 3166) and have a further 11 digits plus one further ‘check’ digit for error detection.

Once you have a DIN, you have it for life, even if you are no longer a director, change your name or move.

ASIC will soon require directors to identify themselves by their DIN when registering a company or being added as a director.

DINs cannot be yet searched by the public, but they may become searchable in the future.

Why have DINs?

The key objectives of the DIN regime are to promote good corporate conduct by:

  • enabling tracking of directors and their relationships across companies
  • ensuring the corporate history of directors is easily accessible to regulators and external administrators
  • verifying the identity of directors to help reduce fraud, and
  • limiting opportunities for illegal activities like “phoenixing”

When do you need to get a DIN?

The timing of the need to register yourself for a DIN depends on when you became or intend to become a director:

Date you became a director (under Corporations Act) Deadline for obtaining a DIN
Before 01 November 2021 By 30 November 2022
Between 01 November 2021 and 04 April 2022 Within 28 days of appointment
On or after 5 April 2022 Prior to your appointment

ASIC is responsible for enforcing DIN offences set out in the Corporations Act 2001 (Cth). It is a criminal offence if you do not apply on time, to apply for multiple DINs or misrepresent a DIN.

Who doesn’t need a DIN?

Registration for a DIN is not needed for:

  • a company secretary that is not also a director
  • a person acting as an external administrator of a company
  • a person running their business as a sole trader or partnership (as they don’t have a company structure)
  • an officer of an unincorporated association, cooperative or incorporated association established under State or Territory legislation, unless the organisation also has an Australian Registered Business Number or ARBN.

How do you get a DIN?

To register for a DIN, you will need to gather the necessary details to verify yourself (Tax File Number, passport, drivers license, Medicare card, PAYG payment summary, bank details, superannuation statement etc), register a “myGovID” account (note that this is different to a “myGov” account), and then apply for the DIN on the ABRS website.

Once you get a DIN, you should provide it to the company or companies of which you are currently a director and those you intend to become a director of (to the company secretary, another director or authorised agent of the company)

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to Corporations Act, directors duties or corporate governance issues or any business or commercial law matter, contact us on (02) 9521 2455 or email help@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / General / Insolvency & Bankruptcy / Risk management  by 01 Nov 2021 0 comments

Why your SMSF should have a corporate trustee

The Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) has strict rules as to who must act as a trustee of a self-managed superannuation fund (SMSF), but basically this means:

  • if you are individual trustees of a SMSF, all members must be trustees of the SMSF
  • If you have a corporate trustee of a SMSF, then all members must be directors of it.

The SIS Act also provides that those trusteeship rules will continue to be satisfied if a member’s attorney (under an enduring power of attorney) is appointed as trustee/director in place of the member. This can also assist if you will be overseas and unable to tend to the management of the SMSF for a prolonged period.

Where there is no enduring power of attorney, the member may need to be rolled out of the SMSF or an administrator may need to be appointed by the Court. One consequence of breaking these trusteeship rules can be the ATO removing the SMSF’s complying status and triggering tax at the top marginal tax rate.

There are several important reasons as to why your SMSF should have a corporate trustee. So how can having a company as trustee be of benefit?

Individual trustee dies or becomes incapacitated

When a member who is a SMSF trustee becomes incapacitated or dies, the trustee/s will need to change.

On the death or incapacity of a member, typically the deceased/incapacitated trustee will be removed and replaced with their ‘legal personal representative’ (LPR). An example of an LPR is an attorney appointed an enduring power of attorney or executor under a Will.

Another complication is that when a member/individual trustee dies and their death benefit commences to be paid from the SMSF, the trustee/s will need to change again (as the LPR cannot continue to act in place of the deceased member).

Every change of trustee will need to be reflected on all assets of the SMSF (including updating the title to any real property), causing delay and expense to the SMSF and family, at a time when the family would rather be focused on assisting the debilitated member of grieving their death.

Death or incapacity of a director of a corporate trustee

Where there is only one member remaining in the SMSF (due to death or rollout of a member), the remaining member will not have to find a second person to act as co-director of the trustee (single member SMSFs are required to have 2 trustees if the trustees are individuals). Title to the SMSF assets does not need to be changed, although ASIC’s register will.

Reduced ASIC fees

The expense of registering and maintaining a company is the most common deterrent to SMSFs using a corporate trustee however, unlike being a trustee of a family, discretionary or unit trust, where a company only acts as trustee of a SMSF, it is a ‘special purpose company’ (meaning it will receive the benefit of reduced ASIC annual return fees.

Other benefits

Having a company act as trustee can also offer some litigation exposure protection and may assist with borrowing under a Limited Recourse Borrowing Arrangement as some lenders require it

Overall, having a corporate trustee can be a more efficient, cost-effective and administratively simpler option for your SMSF and can be an integral part of your overall estate plan.

FURTHER INFORMATION

For further information on estate planning, corporate, superannuation or succession issues, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Estate Planning / General / Litigation / Probate / Risk management / Superannuation  by 01 Sep 2021 0 comments

Abolition of Certificates of Title

From 11 October 2021, changes to the land titles system in NSW will apply as part of the transition away from paper-based processes.

The Real Property Amendment (Certificates of Title) Act 2021 makes 2 significant changes with effect from that date:

  1. the cancellation of Certificates of Title (CT) for real property and the control of the right to deal (CoRD) framework – the CoRD being the electronic equivalent of a CT; and
  2. all land dealings must be lodged electronically – referred to as ‘100% eConveyancing’.

Accordingly, on 11 October 2021, all existing CTs will be cancelled and new CTs will no longer be issued. From then on, existing CTs cannot be required to be produced to have a dealing or plan lodged for registration at NSW Land Registry Services (NSWLRS, formerly NSW Land & Property Information and the Land Titles Office).

What does this mean for you?

There are 3 main changes from the current practice for landowners:

  1. those who pay off their mortgage will not receive a CT as was traditionally the case.
  2. a purchaser of property without the need for a mortgage will not receive a CT.
  3. when a plan of subdivision is registered, and new parcels of land created, CTs (or CoRDs) will no longer be issued for those parcels.

In all instances, an “Information Notice” will issue, which will confirm the dealings registered and date of registration.

Abolition of Certificates of Title 

Landowners of unencumbered land (that is with no mortgage) who have a CT don’t have to do anything either before or after 11 October 2021. After this date however, the CT will no longer be a legal document (and thus will have no legal effect), although you may like to keep it for sentimental reasons (although the current CTs aren’t anywhere near as impressive looking as the old system ones).

Note that just because you have paid of your mortgage, it may still be registered no title – it must be formally discharged. If you want the CT, you ought to act quickly to have it discharged and the new CT issued prior to 11 October 2021 as you will not get one after that date.

Those who own unencumbered land, but have someone else holding or storing their CT, may wish to request to have it back. From 11 October 2021 there will no longer be a remedy under the Real Property Act 1900 to get a CT back from others, given it has no legal effect.

Lenders holding CTs

If you hold a CT in as informal security for an unregistered mortgage or charge over a property following an advance of money or provision of goods or services, you should take steps to protect your interests before 11 October 2021 as when CTs are cancelled, this method of securing payment will no longer be available or effective.

From 11 October 2021 lawyers and licensed conveyancers no longer need to ask for a copy of their CT when acting on a sale or when lodging a dealing for registration.

100% eConveyancing

The Registrar General has declared under the NSW Conveyancing Rules that all electronic dealings listed in the Schedule of eDealings are mandated to be lodged electronically.

All land dealings to be lodged with NSWLRS can only be done electronically by a subscriber (e.g. a lawyer, licensed conveyancer or bank) to an Electronic Lodgment Network.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

Stay up to date – LinkedIn | Facebook | Twitter | Instagram

in Business / Commercial Law / General / Probate  by 12 Aug 2021 0 comments