Dispute Resolution

Could you be a shadow director?

Shadow directors

The term ‘director’ is defined in s.9 of the Corporations Act 2001 (Cth) (Act) to mean:

(a)          a person who:

(i)            is appointed to the position of a director; or

(ii)           is appointed to the position of an alternate director and is acting in that capacity;

regardless of the name that is given to their position; and

(b)          unless the contrary intention appears, a person who is not validly appointed as a director if:

(i)            they act in the position of a director; or

(ii)           the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.

That is, (a) refers to directors notified to ASIC and (b) covers those who are de facto directors or shadow directors.

Consequently, a person who has not been validly appointed as a director of a company (and whose details are not therefore recorded in ASIC’s registers) may nonetheless be deemed a director of that company if they have influence to the extent that the directors of the company are accustomed to acting in accordance with the person’s instructions or wishes or if they act as if they are a director.

Indicators of being a shadow director

Examples of being a de facto or shadow director can include:

  • having independent authority to negotiate and manage executive matters on behalf of the company (like negotiation of important contracts or the managing employment)
  • promotion of the person to the public as having power to bind the company.
  • having unfettered control of the company’s bank accounts
  • being involved in setting up the company

Subparagraph (b)(ii) does not generally apply to advice given by the person in the proper performance of functions attaching to the person’s professional capacity (such as an external accountant, lawyer or professional adviser), but can include employees and spouses of directors (who may own assets as part of a risk minimization/asset protection strategy implemented by their director spouse).

Those that sit on so called “advisory boards” should pay particular attention to the way in which they carry out their roles and the way in which the company follows (or questions or considers) their recommendations or suggestions.

Consequences

A shadow director will be required to comply with director duties under the Act and can become liable for things like insolvent trading under section 588G.

If you are determined to be a shadow director, penalties can include:

  • a fine of up to $200,000, imprisonment for up to 5 years, or both;
  • personal liability for any loss or damage incurred; and
  • permanent or temporary orders prohibiting you from taking part in the management of a company.

How to help prevent being a shadow director

Steps that can be taken to help minimize the risk of being deemed a director of a company or the consequences of it include:

  • documenting the authorities of key personnel, including limits on authorities, autonomy and decision making (including in employment contracts, workplace policies etc)
  • putting in place robust internal procedures for decision making and approvals
  • ensuring ASIC registers are accurate and up to date
  • limiting advice provided to that which is within your professional qualifications
  • advisors, key staff and ‘advisory boards’ presenting any advice as a recommendation for a company’s consideration, rather than being a direction or instruction to the company or its board
  • otherwise, properly documenting communications
  • consider appropriate insurances

FURTHER INFORMATION

For further information in relation to any business related or company matters, 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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New laws for casual employees

The Fair Work Act 2009 (Cth) (Act) has been amended with effect from 27 March 2021 in relation to casual employees.

Here are the 4 practical steps that most employers should take to help ensure compliance with the Act and prevent disputes from arising with their casual employees:

1.            Casual Employment Information Statement

The Fair Work Ombudsman has now made available a new Casual Employment Information Statement (CEIS). Both new and existing casual employees must be given a CEIS.

From 27 March 2021, all employers must give every new casual employee a CEIS before, or as soon as possible after, they commence their employment.

Small business employers (those with less than 15 employees) must give their existing casual employees (those employed before 27 March 2021) a copy of the CEIS as soon as possible after 27 March 2021.   All other employers must give their existing casual employees a copy of the CEIS as soon as possible after 27 September 2021.

Note that the CEIS does not replace the Fair Work Information Statement (FWIS). The FWIS is still required to be provided to every new employee (casual employees should receive both the FWIS and the new CEIS).

2.            Update casual employment contracts

The Act now includes a definition of ‘casual’ employee. Under the new definition, a person is a casual employee if they accept a job offer from an employer knowing that there is no firm advance commitment to ongoing work with an agreed pattern of work.

With retrospective effect, the question of whether an employee is a casual is now assessed based on what was agreed when the employment was offered and accepted, not on the pattern of hours later worked or some other subsequent conduct occurring during the course of their employment.

Employment contracts for casuals, if they don’t already, should:

  • state that the employment is casual;
  • specify that the employer can elect to offer work and that the employee can elect to accept or reject it; and
  • confirm that there is no guarantee of ongoing or regular work and that the employee will only work as required.

3.            Specify the casual loading in employment contracts and payroll documentation

The changes to the Act also remove the ability (which arose from several recent cases such as Workpac v Rossato) for employees to “double-dip” and receive entitlements as permanent staff as well as retaining the casual loading already paid to them (in lieu of such other entitlements).

The amounts actually paid to the employee as casual loading operate as a reduction to, or are set off against, of any amount that may later be determined to be payable by the employer for permanent employee entitlements.

Casual employment contracts thus should:

  • clarify that the employee is paid a casual loading (usually 25%) and that the loading is paid on the basis that the employee is not entitled to relevant permanent employment entitlements such as annual leave, paid personal leave, redundancy pay and the like; and
  • identify the dollar amount of the loading from the base hourly rate where possible.

Further, payroll documentation (including payslips) should separately identify the dollar value of the casual loading paid in each pay period.

4.            Identify eligibility for casual conversions

Once employed as a casual, an employee will continue to be a casual until they either:

a)       become a permanent employee through:

(i)            casual conversion, or

(ii)           are offered (and accept the offer of) full-time or part-time employment, or

b)      stop being employed by the employer.

Although many employers had pre-existing casual conversion obligations in relevant Modern Awards or enterprise agreements, these casual conversion provisions are now included in the National Employment Standards (NES), which means that now employers that were not historically subject to such conversion obligations are subject to the casual conversion pathway regime. Small business employers (with fewer than 15 employees) are not subject to these rules.

The new provisions require employers to offer permanent employment to any casual employee who has:

  • been employed for 12 months; and
  • worked a regular pattern of hours on an ongoing basis for at least the last 6 months of that period; and
  • the employee could continue working those hours as a permanent employee without significant change.

An employer need not make an offer of casual conversion if there are “reasonable grounds” not to, based on facts that are known or reasonably foreseeable (such as where the employee’s position will cease to exist within 12 months, the hours of work that employee is required to perform in the following 12 months will be significantly reduced or the employee’s availability cannot accommodate the significant change in the employees’ hours/days required to be worked).

During the 6-month transition period ending 27 September 2021 and from then on, employers should identify any employees that may meet the criteria for conversion and make an offer of casual conversion to an eligible employee within 21 days of the employee attaining 12 months of employment. There is a form and process relating to the offer (and its acceptance).

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to any employment related issue or any business/commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@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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New rules for resigning directors

The Treasury Laws Amendment (Combatting Illegal Phoenixing) Act 2020 (Cth), which came into effect from 17 February 2021, changed the process and timing relating to director resignations and the resignation of last remaining directors, as well as granting additional powers to ASIC, the ATO and liquidators.

The Act made changes to the Corporations Act 2000 (Cth) as well as taxation administration and GST legislation in an attempt to help prevent illegal phoenixing activities (when a new company is incorporated with the intention to continue the business of a failed company, using the same controllers and assets) including preventing the disposal of assets for less than market value and would prevents or hinders the property being available for creditors (known as ’creditor defeating dispositions’).

The regulations made seek to prevent backdating of resignations and having companies left with no directors at all.

Late notification of resignations

If ASIC is notified of a director’s resignation more than 28 days after the actual resignation date, ASIC will treat the date ASIC receives the notice as the ‘effective date’ of the resignation. Late lodgment fees will still apply.

Practically, this will mean that even if a company director had resigned, that director will remain responsible for the conduct of the company as a director until the later ‘effective date’.

Administrative oversight will not be an excuse even if a third party such as an accountant was responsible for notification.

Last remaining director

Any notices to ASIC that have the effect that a company is left without at least one director will be rejected (or member resolutions of a company to that effect are void).

Some exceptions to this rule exist, including if the last director passes away, the company is being wound up and if the director never consented to their appointment.

Practical approach to resigning

If you are a resigning director (or are removed as a director by resolution), not only should the company notify ASIC of the change in directorship using the standard form 484, you should also take steps yourself to notify ASIC using the form 370.

FURTHER INFORMATION

For further information in relation to any business related or company matters, 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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Enforcing judgments overseas (and vice versa)

The success of enforcing judgments overseas will largely depend on the laws of country where the judgment is sought to be enforced. Sometimes the common law or a treaty allows enforcement but often it relies on a statutory arrangement.

Australia has reciprocal arrangements with various countries but as a general rule, to be enforceable in another jurisdiction, the judgment must be:

  • for a fixed sum;
  • consistent with the laws or public policies of the relevant country; and
  • final and conclusive, and

you must provide a verified copy of the original Australian judgment, a translation of the judgment into the relevant language, an affidavit or similar providing at least details of the Australian proceedings, the relevant debt, details of the overseas debtor. There may be some other local matters to tend to as well.

Enforcing a foreign judgment in Australia

The Foreign Judgments Act 1991 (Cth) provides for the recognition and enforcement of foreign judgments in Australia.

To be enforceable, the foreign judgment must generally:

  • be less than 6 years old;
  • require the payment of money;
  • be final and conclusive (even if subject to or likely subject to an appeal); and
  • not have already been satisfied in the foreign jurisdiction.

Which countries have reciprocal arrangements?

The statutory schemes only apply to countries that have entered into reciprocal arrangements with Australia for the enforcement of each other’s judgments (See Schedule to Foreign Judgments Regulation 1992).

This includes British Virgin Islands, Cayman Islands, Fiji, France, Germany, Italy, Israel, Korea, Japan, Korea, Papua New Guinea, Singapore, Sri Lanka, Switzerland and the United Kingdom.

It does not include China (although technically Hong Kong is included), India, Russia or the United States of America.

New Zealand has special arrangements as set out below.

New Zealand arrangements

Part 7 of the Trans-Tasman Proceedings Act 2010 (Cth) allows New Zealand judgments of a broader nature to be enforced in Australia including some judgments that don’t solely relate to the payment of money.

This excludes things like probate, guardianship, and the welfare of minors.

Enforcement

Registration of the foreign judgment can be as simple as filing  an application in a Supreme Court, where a judge will process the application (assuming it meets the requirements) in chambers in the absence of the other party and register it as a judgment in that court. The judgment debtor must be served with notice of the registration when the judgment is registered.

The registered foreign judgment can then be enforced like any other judgment such as by way of:

FURTHER INFORMATION

For further information in relation to enforcing a judgement, debt recovery, litigation or any other commercial law matter, 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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Does marriage, separation or divorce affect my Will?

This blogpost is limited to New South Wales as the laws in each State and Territory differ in relation to these matters.

Marriage

If you get married after you sign a Will, the Will is revoked unless it is specifically stated to have been made in contemplation of that particular marriage taking place.

Marriage will not affect a gift to the person who is your spouse at your date of death or their appointment as your executor.

Entering into a defacto relationship does not have the same impact on a Will as a marriage, but this can give rise to other rights as regards the property of the relationship whilst the parties are alive (and claims in relation to the division of the estate on their deaths).

Divorce

Subject to the contrary intention being expressed in a Will, if you divorce after you make your Will, it only revokes or cancels any gift to a former spouse and their appointment as executor.

It will not however cancel their appointment as trustee of property left on trust for beneficiaries that include children of both you and your former spouse.

Separation

If you don’t update your Will after you separate, your spouse may inherit any property you left to them and they can still be the executor of your estate if named as such in theWill.

The take away

If any time your circumstances change (such as a birth or death in the family, a marriage, separation or divorce or a material change in finances for the better or the worse) you should consider whether your estate planning documents require any updates. It may be that no change is necessary, but it at least should be considered.

FURTHER INFORMATION

For further information in relation to Wills and estate planning, 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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Am I entitled to a copy of a Will?

At a very emotional time, often there is confusion as to what rights and obligations exist in relation to obtaining a copy of someone’s Will.

Many clients ask us “Am I entitled to a copy of a Will?” or “Do I really need to give them a copy of the Will?

It should go without saying that no-one is entitled to see the Will of a person who is still alive! After death however, the Succession Act 2006 (NSW) provides that any person who has possession or control of a Will of a deceased person must allow any one or more of the following persons to inspect or to be given copies of the will (at their own expense):

“(a) any person named or referred to in the Will, whether as a beneficiary or not,
(b) any person named or referred to in an earlier Will as a beneficiary of the deceased person,
(c) the surviving spouse, de facto partner or issue of the deceased person,
(d) a parent or guardian of the deceased person,
(e) any person who would be entitled to a share of the estate of the deceased person if the deceased person had died intestate,
(f) any parent or guardian of a minor referred to in the Will or who would be entitled to a share of the estate of the testator if the testator had died intestate,
(g) any person (including a creditor) who has or may have a claim at law or in equity against the estate of the deceased person,
(h) any person committed with the management of the deceased person’s estate under the NSW Trustee and Guardian Act 2009 immediately before the death of the deceased person,
(i) any attorney under an enduring power of attorney made by the deceased person,
(j) any person belonging to a class of persons prescribed by the Regulations.”

As you can see:

  • there are a number of persons that have a right to a inspect or to be given a copy of the Will; and
  • the executor or person with possession or control of a Will (which could include a lawyer or firm that holds it in safe custody) have an obligation to provide a copy on request.

Of course, there needs to be proof provided that the person who made the Will has in fact died – ie, provide the death certificate (which usually happens via the executor or next of kin).

The purpose of this access to the Will is partly to allow an persons with a claim on a deceased estate to know if they have been provided for in the Will, that it is the deceased person’s latest Will and who the executor is.

There is sometimes also confusion as to the effect of clauses in Wills that provide for the appointment of a particular person or firm as the estate’s lawyers for the purposes of obtaining probate. The executor is free to choose whichever lawyer or firm they wish to act for them in obtaining probate and assisting with the administration of a deceased estate.

The Probate and Administration Act 1898 provides that the Will of the deceased, once admitted to probate, is a public document and that anybody is entitled to apply for a copy of it from the Supreme Court of New South Wales  (and paying the relevant fee) however, it is generally best to contact the person in possession of the document for a copy, before approaching the Supreme Court.

FURTHER INFORMATION

For further information in relation to Wills, Probate, estate planning or even International Wills, 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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Unpaid interns

Typically, unpaid internships offer a taste of what is usually involved in a job or industry, as well as the chance to network and to add practical experience to their resume.

Many businesses however seek to avoid paying lawful entitlements to employees by labelling them an “intern” or calling it a “vocational placement” or similar. In law firms (yes, they do it too), it’s a “law clerk”.

The fact is that if they are performing productive work for your business, they are an employee and are therefore legally entitled to be paid.

Before engaging an unpaid intern, business owners need to genuinely consider if the placement is providing them with work experience, a career opportunity and take steps to avoid the arrangement being considered exploitation. That is, are they really an unpaid employee?

To determine whether the arrangement is ‘employment’ ask yourself these questions about the proposed intern:

  1. Will they have actual responsibilities (as opposed to just observing)?
  2. Will their workload be similar to a paid employee?
  3. Will the intern replace a paid employee?
  4. Will the intern have administration duties?
  5. Will the intern collect coffee orders?
  6. Does your business rely on interns for ongoing duties?

If you answered “yes” to any of the above, they are assisting your business, not learning, so it is likely that your unpaid interns will actually be employees and hence entitled to minimum Award rates.

Even if you will genuinely have unpaid interns at your workplace, they should have a contract (although not an employment contract) covering that fact and requiring them to maintain standards such as confidentiality, returning company property at the completion of the placement etc.

FURTHER INFORMATION

For further information in relation to any employment related issue or any business/commercial law matter, 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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Is your business using the correct form of Fair Work Information Statement?

On 13 August 2020, the High Court of Australia handed down a decision about the method of accruing and taking paid personal/carer’s leave under the National Employment Standards.

The case was Mondolez Australia Pty Ltd v AMWU, which overturned a decision made by the Full Federal Court in August 2019 that could have resulted in significant claims for backpay and contraventions of the Fair Work Act 2009 (Cth) as its effect included that part-time employees are entitled to 10 days’ paid personal leave per year (the same as a full time employee), regardless of the number of days actually worked.

The High Court found that the entitlement to 10 days of personal/carer’s leave is calculated based on an employee’s hours worked, not days when interpreting s.96(1) of the Act such that a ‘day’ refers to a notional day, consisting of 1/10th of an employee’s ordinary hours of work in a 2 week period. Accordingly, 10 days of personal leave can be calculated as 1/26 of an employee’s ordinary hours of work in a year.

The Fair Work Ombudsman has updated the form of Fair Work Information Statement (FWIS) as a result.

Employees need to ensure they provide the correct form of FWIS to all new employees. Is your business using the correct form of Fair Work Information Statement?

FURTHER INFORMATION

For more information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au to discuss your needs.

This information is general only and is not a substitute for proper legal advice.

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Recording a private conversation without consent

Technology today is amazing. We have smartphones almost immediately available – they are light, portable and small are often used to record events… but how does that ease and regularity of use sit with an individual’s right to privacy?

In New South Wales, the Surveillance Devices Act 2007 regulates the use of listening devices.  That Act also covers the use of data surveillance, optical surveillance devices and tracking devices. Breaches of the Act can lead to criminal charges.

What is a listening device?

The Act defines a listening device as:

any device capable of being used to overhear, record, monitor or listen to a conversation or words spoken to or by any person in conversation, but does not include a hearing aid or similar device used by a person with impaired hearing to overcome the impairment and permit that person to hear only sounds ordinarily audible to the human ear

so it clearly includes mobile phones, GoPros and video cameras.

It is an offence under s.7 to knowingly install, use or cause to be used or maintain a listening device to overhear, record, monitor or listen to a private conversation to which the person is not a party or to record a private conversation to which the person is a party.

There are some exceptions to this however, such as if:

  • all principal parties to the private conversation expressly or impliedly consent to its use, or
  • you are a principal party to the private conversation and:
    • it is reasonably necessary to protect your lawful interests; or
    • you do not intend to communicate or publish what was recorded or a report of it to anyone who was not party to the private conversation

The onus of proof for establishing an exception lies on the party seeking to establish the exception, and that onus is on the balance of probabilities.

Law enforcement officials can use listening devices in a range of circumstances including where they have a warrant from a Judge or Magistrate; if they don’t have a warrant but there is a serious or urgent matter requiring its use but not enough time to get a warrant; or where a police officer wearing a visible body worn video device etc.

Even if in Court proceedings, the exception to the rule is not found to apply, it might still (but in certain circumstances only) be possible to have the recording, or evidence based on it such as a transcript of what was said, admitted into evidence under the improperly obtained evidence rules in s.138 of the Evidence Act 1995 (NSW).

What is a private conversation?

A private conversation is conversation where it can be reasonably assumed that those involved in the conversation do not want the conversation to be overheard by others, that is, it is more informal or not public. A private conversation is not private if the people in the conversation can reasonably expect the conversation to be overheard by others.

Penalties

The best course is generally not to record a private conversation without consent unless it is absolutely necessary.

The penalty for individuals for a serious breach of the Act is an $11,000 fine or up to 5 years in prison.

A person who intentionally or recklessly communicates or publishes the contents of a private conversation which could endanger the health or safety of someone, or prejudice an investigation, faces a maximum penalty of 7 years in prison.

For corporations, offences under the Act attract a maximum fine of up to $55,000.

FURTHER INFORMATION

This information is general only and is not a substitute for proper legal advice.

For more information, please contact Craig Pryor at McKillop Legal on (02) 9521 2455 or email craig@mckilloplegal.com.au to discuss your needs.

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Coronavirus: Insolvency and Bankruptcy Changes

The financial effects of the COVID-19 pandemic are starting to be felt by many businesses with debts remaining unpaid for longer and those that may have limped through until now starting to have liquidity or cashflow problems.

If you or your business are considering options for debt recovery from customers, note that during the pandemic period (24 March – 25 September 2020 or any longer period prescribed by Regulations*), the laws regarding insolvency and bankruptcy in Australia have been varied by Schedule 12 to the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) such that when enforcing debts, the following have changed from the usual arrangements:

Bankruptcy Notices

The temporary measures to the operation of the Bankruptcy Act 1966 (Cth) and its Regulations introduced by the federal government include:

  • the minimum amount of a judgment debt required for the issue of a Bankruptcy Notice has increased from $5,000 to $20,000; and
  • the recipient individual’s time to pay or respond has increased from 21 days to 6 months.

Once a Bankruptcy Notice expires without being met an “act of bankruptcy” will have occurred and, as usual, the creditor that issued it can commence court proceedings to seek a sequestration order to bankrupt the individual.

Other changes include those in relation to the moratorium period for those that submit a declaration of intention to present a debtors petition for their own bankruptcy

Creditor’s Statutory Demands

The temporary changes affecting the Corporations Act 2001 (Cth) and its Regulations in relation to corporate debts include:

  • the threshold amount of debt/s required for the service of a Creditor’s Statutory Demand has increased from $2,000 to $20,000; and
  • the recipient company’s time to pay or respond has increased from 21 days to 6 months.

Once a statutory demand expires without the debt being paid or an arrangement for the payment of the debt being agreed, the creditor can commence court proceedings to wind up the debtor company.

Director liability for insolvent trading

Similar changes have also been made to laws regarding director liability for insolvent trading where the debts are incurred in the ordinary course of business (temporarily supplementing existing “safe harbour“provisions).

The above changes do not affect other enforcement measures such as: winding up companies on the ‘just and equitable‘ ground; garnishee orders; or writs for the levy of property.

The Schedule 12 changes relate only to those Bankruptcy Notices issued in the relevant period and those Creditor’s Statutory Demands served in the relevant period, not those issued or served (as the case may be) prior to 24 March 2020.

(*Note on 07 September 2020, the Federal Government extended these measures until 31 December 2020).

FURTHER INFORMATION

For further information in relation to debt recovery, bankruptcy, insolvency or any other commercial law matter, 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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