Dispute Resolution

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.

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

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.

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

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.

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

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.

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

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

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

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

Family provision orders

Under the Succession Act 2006 (NSW), eligible persons may apply to the Supreme Court of New South Wales for a family provision order in relation to the estate or notional* estate of a deceased person to provide “for their maintenance, education or advancement in life”.

The first hurdle to overcome is being an “eligible person” and the second is whether the provision (if any) made for the applicant in the deceased’s Will** is adequate, and if not, what “family provision order” could be made to make it adequate. Unfortunately, this process is not as simple as we have explained it.

Limitation period

Claims for provision must be made within 12 months of the date of death of the deceased person (although in limited circumstanced, this time limit can be extended).

Process

After proceedings are commenced and the parties have put on the majority of their evidence, applications for family provision orders are generally referred to either a Court annexed mediation or to private mediation but if no agreement can be reached, the matter will be set down for hearing.

Eligibility

Those who are “eligible” to make a claim for a family provision order out of a deceased person’s estate include:

  • a spouse of the deceased at the time of the deceased’s death;
  • a former spouse of the deceased;
  • a person in a de facto relationship with the deceased at the time of death
  • children (including adopted children) of the deceased;
  • someone with whom the deceased was in a close personal relationship*** with at the time of their death;
  • those who have, at any time, been wholly or partly dependent upon the deceased and who either:
    • are a grandchild of the deceased; or
    • were, at any time, member of a household of which the deceased a member.

How do you know if you are to receive an inheritance?

Click here to read about how to get a copy of a deceased person’s will.

Adequacy

The Court won’t simply rewrite a deceased person’s Will based on claims of justice or unfairness such as unequally dividing an estate between siblings. The Court has a wide discretion in determining these matters and the nature of any order for provision that may be made.

The Court first considers if the gift (if any) was adequate and if not, what provision may be adequate.

The Court exercises is discretion to make an order and if so, on what terms, after considering the following factors:

  1. any family or other relationship between the applicant and the deceased, including the nature and duration of the relationship,
  2. the nature and extent of any obligations or responsibilities owed by the deceased to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased’s estate,
  3. the nature and extent of the deceased’s estate (including any property that is, or could be, designated as notional estate* of the deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered,
  4. the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person’s estate (that is the competing needs/claims of others),
  5. if the applicant is cohabiting with another person–the financial circumstances of the other person,
  6. any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased’s estate that is in existence when the application is being considered or that may reasonably be anticipated,
  7. the age of the applicant when the application is being considered,
  8. any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased or the deceased’s family, whether made before or after the deceased’s death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant,
  9. any provision made for the applicant by the deceased, either during the deceased’s life or made from the deceased’s estate,
  10. any evidence of the testamentary intentions of the deceased, including evidence of statements made by the deceased,
  11. whether the applicant was being maintained, either wholly or partly, by the deceased before the deceased’s death and, if the Court considers it relevant, the extent to which and the basis on which the deceased did so,
  12. whether any other person is liable to support the applicant,
  13. the character and conduct of the applicant before and after the date of the deceased’s death,
  14. the conduct of any other person before and after the date of the deceased’s death,
  15. any relevant Aboriginal or Torres Strait Islander customary law,
  16. any other matter the Court considers relevant, including matters in existence at the time of the deceased’s death or at the time the application is being considered.

*Where assets that were previously assets of the deceased prior to death (such as assets gifted or transferred by the deceased to another person or entity prior to death to attempt to avoid an application for an order for provision, superannuation, property owned as joint tenants between the deceased and another person), be considered as an asset of the estate for the purposes of an application for a family provision order.

**Note that even in intestacy (where there is no Will), an application can be made for a family provision order.

*** A “close personal relationship” is a relationship other than a marriage or a de facto relationship between two adult persons, whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care but not for reward or on behalf of another person or organization.

FURTHER INFORMATION

For further information in relation to Wills, Probate, Intestacy, 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.

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

in Dispute Resolution / Estate Planning / General / Litigation / Probate / Property  by 01 Jul 2021 0 comments

Consumer protection extension

In previous articles we explained the consumer guarantees under the Australian Consumer Law (ACL) in relation to goods and how the ACL applies to services, such as being of acceptable quality, fitness for purpose, matching description etc however, from 01 July 2021, the monetary threshold increases from $40,000 to $100,000 (an increase of 150%).

Presently, the ACL covers ‘consumers’ as being any person or business who acquires goods or services that

  • cost $40,000 or less; or
  • costing more than $40,000 but being ordinarily acquired for domestic, household or personal use or consumption; or
  • if the goods are a vehicle or trailer.

From 01 July 2021, the Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 expands the ambit of these non-excludable consumer rights to any goods or services acquired for an amount of up to $100,000, regardless of their intended use.

Businesses ought to ensure that their terms and conditions, packaging and advertising covers this expanded definition and ensure that the consumer guarantees are provided for the greater value items and that the mandatory wording is included in relation to the consumer guarantees.

Additionally, staff ought to be made aware of the changes and their effect, arrangements made to identify these expanded ‘consumer’ sales and budgets ought to be adjusted to allow for more claims for refund, replacement or compensation.

FURTHER INFORMATION

For further information in 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 / Dispute Resolution / General / Litigation / Risk management  by 30 Jun 2021 0 comments

New eligibility rules for .au domain names

On 12 April 2021, the .au Domain Administration Rules: Licensing (Rules) took effect, consolidating in excess of 30 policies and guidelines which previously applied to all “.au” domain names.

The Rules apply to all registrants who create, transfer or renew a domain name with a “.au” country code Top Level Domain (ccTLD) and the registrars who administer those domain names. The new Rules affect .au namespaces created, transferred or renewed after 12 April 2021.

This includes the following open namespaces:

  • “.com.au” and “.net.au” for commercial entities;
  • “.asn.au” for incorporated associations, political parties, trade unions, sporting and special interest clubs;
  • “.org.au” for charities and non-profit organisations; and
  • “.id.au” for individuals who are Australian citizens or residents.

.au Domain Administration Limited (auDA) is the administrator and policy body for the .au ccTLD.

Existing domain name licences expiring after 12 April 2021 continue to be governed by the legacy licensing rules applicable at the time of registration or last renewal until the current licence period ends.

Accordingly, if you had already registered a domain name before 12 April 2021, then the Rules will not apply to that domain name until your current licence period expires and you renew that domain name, or you transfer it.

Any proposed registrant applying for any “.au” domain name licence must:

  1. have an “Australian presence“; and
  2. satisfy any eligibility and allocation criteria

Australian presence

To prove an Australian presence, a registrant can show either that they are:

  • in Australia (such as an Australian citizen or permanent resident, entity with an ABN, incorporated association, partnership, a company registered in Australia under the Corporations Act) etc; or
  • the owner of, or applicant for, an Australian registered trade mark.

Eligibility and allocation criteria

An intended registrant with an Australian presence must also satisfy any eligibility and allocation criteria for the relevant namespace.

Those name spaces are open to registrants who are a “commercial entity” (including Commonwealth entities, statutory bodies, incorporated limited partnerships, trading co-operatives and the government) who apply for a domain name which is:

  • a match or acronym to the registrant’s name;
  • a match to the registrant’s Australian registered trade mark; or
  • a match or synonym to the registrant’s goods, services or premises or an event they sponsor or activity they facilitate, teach or train

For Australian present registrants, a match is defined to mean a domain name that is identical to one, some or all of the words or numbers used in the applicant’s legal name, business name or Australian trade mark. While words or numbers may be omitted, they must be in the same order and must not include any additional words or numbers.

Previously, for foreign entities, a domain name could be “closely and substantially connected“ to the registrant’s trade mark however, the Rules now require an “exact match“ to the words which are the subject of the trade mark registration (excluding trivial items such as punctuation and articles such as “a”, “the”, “of” or “&” etc).

Renting or leasing domain names

Under the Rules, registrants are not allowed to rent or lease their domain names to a third party.

This excludes companies who license domain names held by related bodies corporate (provided they still meet the Australian presence requirement).

What to do for renewal?

If the requirements of the Rules and not satisfied, the licence for that domain name may be suspended or cancelled by the registrar or auDA.

If that domain name registered before 12 April 2021, you can use the time before renewal to assess whether it will comply with the Rules at renewal time and if it doesn’t, you can adopt an appropriate strategy as required.

This may include:

  • Shore up your Australian presence (this is especially so for our clients that are based overseas) by having an entity registered in Australian or obtaining trade mark in Australia.
  • Apply for your business name to be registered an Australian trade mark (this has the added benefit of you owning your name so others can’t use it – remember simply registering a business name gives no ownership in the name at all)
  • Registering a new domain name that does exactly match your name or trade mark.
  • If there is a domain name that does match your name and it is already registered by someone else, you can consider lodging a complaint to the registrar or through the .au Dispute Resolution Policy. Note that they may have a legitimate right to the same domain name as you.
  • Check who the domain name is registered to – is it in your name or your business/company’s name?
  • Consider if your IP/domain name licensing arrangements are such that you rent or lease a domain name to or from a company who is not a related body corporate connected to Australia – if not it may need to be transferred.

FURTHER INFORMATION

For further information regarding the new eligibility rules for .au domain names or in relation to any commercial law issue, 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 Asset Protection / Business / Commercial Law / Dispute Resolution / Intellectual Property / Online Issues  by 15 Jun 2021 0 comments

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.

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

 

in Asset Protection / Business / Commercial Law / Dispute Resolution / Employment / General / Insolvency & Bankruptcy / Litigation / Risk management  by 01 Jun 2021 0 comments