General

Companies signing contracts

In prior blogposts, we explained the differences between Deeds and Agreements and what Deed Polls are and we also explained how to properly execute a legal document depending on the type of entity entering into it.

This article relates to execution by or on behalf of an Australian corporation – a Pty Ltd (but not a public company) – that is, what are the requirements for companies signing contracts?

Part 2B of the Corporations Act 2001 (Cth) (Corporations Act) sets out how companies can execute legal document and the assumptions those dealing with companies may make about the execution of documents by or on behalf of a company.

Section 127 describes the ways in which a document may be executed by a company, namely by:

  • 2 directors; or
  • a director and a company secretary; or
  • for a company that has a sole director – that director, if:
    • the director is also the sole company secretary; or
    •  the company does not have a company secretary.

This applies regardless of any other requirements in the company’s constitution.

Companies can also sign via an employee, officer or an agent under s.126 acting with the company’s express or implied authority.

If a company executes a document in accordance with the those sections, then any person dealing with that company is entitled to assume under ss.128 & 129 that:

  • those persons shown as directors/company secretaries on ASIC’s register; and
  • anyone held out by the company as being an officer or agent of the company
  • are:
    • validly appointed;
    • have the authority to exercise the powers of the company; and
    • are properly performing their duties

This assumption applies even if an officer or agent of the company acts fraudulently or forges a document but not if that person knew or suspected that the assumption was incorrect.

Business should be wary of the authority of persons signing and query the person’s authority if they aren’t listed at ASIC formally as a director or company secretary.

Many businesses give higher level employees titles like “Director”, “Sales Director” and the like so, often so as to minimize pay rises or for other reasons, but they run the risk that those persons can bind the company due to the statutory assumptions identified above as they are potentially being held out by their titles as having authority to bind the company.

Separately, those employees also run the risk that they are considered ‘shadow directors‘ if the company runs into financial trouble, particularly where any director duties haven’t been followed.

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  by 01 Mar 2024 0 comments

What is a Deed Poll?

In a previous article, we explained the difference between Deeds and Agreements however, there is a special type of Deed that does not require more than one party to sign it to make it legally binding (although it can also be made by more than one party, jointly).

That document is the Deed Poll. As soon as it is signed by the party that executes it, it becomes immediately operative and binding.

Deed Polls are solemn declarations, so they are commonly witnessed by lawyers, Justices of the Peace and notaries (but they requirements as to who can be witnesses and whether you need one can differ between States and Territories).

Deed Polls are used for various purposes such as:

  • part of the process of changing your name or gender
  • affirming your identity (such as where you may use more than one name)
  • declaring:
    • a promise to do not not to do something (including keeping information confidential)
    • the validity of a document or right
    • a fact or intention
  • releasing rights

The unilateral obligation/s created by a Deed Poll can be enforced by any person with whom the covenant in the document was made as against the party making it, so they ought not to be entered into lightly.

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 / Estate Planning / General / Litigation / Risk management / Uncategorized  by 01 Dec 2023 0 comments

Leasing business premises from a SMSF

Many business owners own the commercial or industrial premises that they use to operate their business from.  Often that property is owned by a Self-Managed Superannuation Fund (SMSF).

Leasing business premises from a SMSF is becoming commonplace. SMSFs can be a tax-effective way to create wealth and provide for your retirement, in addition to providing some asset protection benefits however, they come with a requirement to comply with the Superannuation Investments (Supervision) Act 1993 (Cth) (SIS Act) and its Regulations.

Additional obligations apply when the SMSF is using a limited recourse borrowing arrangement and bare trust when borrowing to acquire the premises and consideration ought to be given to who the members of the fund are and what happens if they were to pass away.

One of the leasing obligations on SMSF trustees in the SIS Act is that there be a written Lease in place. Not only does there need to be a Lease in place, but it must be at ‘arms length‘ and on commercial terms.  This effectively means that it must have all of the usual or typical terms that would be expected to be in place if the property was being rented to a third party, for example with market rent being required to be paid in full and on time, with no discounts.

Practically, there are other benefits of having a proper Lease in place and one of them is that on the sale of the business, the Lease can be assigned to the purchaser so that the SMSF continues to get the benefit of the Lease and its protections after you cease to run the business. It also can assist your SMSF to maintain the value of the premises as any purchaser of the land is bound by it, so having a good yield is important.

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 / Estate Planning / General / Property / Risk management / Superannuation  by 01 Oct 2023 0 comments

Retirement Village Contracts

Moving into a retirement village is generally more complicated than purchasing a residential property because of the additional considerations involved such as:

  1. Ownership structures
  2. Cost options
  3. Exit arrangements

although there are obviously benefits such as enhanced security, easier lifestyle and better access to appropriate services and activities, like-minded and similarly aged residents and the friendships they are formed and maintained.

We obviously can’t advise on whether a village or operate is suitable for you or your needs as they may change in the future (you and your family can only do that) but we can advise you on what it all means, legally.

Ownership structures

Retirement villages vary in terms of ownership models. There are several major types, including:

  • outright ownership (where you actually own the unit or townhouse)
  • loan and licence (where the majority of the ingoing contribution is documented as a repayable loan to a village operator in return for a licence to occupy a unit)
  • lease or sub-lease arrangement (where you lease the unit from the village operator or sublease it from the village operate who leases it from the owner)

Cost options

The on-going costs involved after the initial purchase/contribution need to be considered and fully understood. Fees for the additional services, building and maintenance levies and administration costs (as well as contribution to council rates, utilities and strata levies etc) can be added. The amounts and types vary from village to village and between operators.

Exit arrangements

The contract should also outline any fees and obligations associated with your departure from the village. The ‘departure fee’, ‘deferred management fee’ or ‘exit fee’ is commonly calculated as a percentage paid per year of residency, and is generally capped at a maximum, for example, 2% per year capped at 20% after 10 years. It may be calculated on your entry payment, or the amount the next resident pays to move into your unit when you leave.

The contract can also determine which party or parties benefit from any capital gain on the premises,

Retirement Village legislation

The Retirement Villages Act 1999 (NSW) as last updated by the Retirement Villages Amendment Act 2020 (NSW) applies to ’registered interest holders’ – those who have a long-term registered lease that entitles them to at least 50% of any capital gain (profit) of the sale of the premises. Such residents must sign a contract in the standard form. The standard form is designed to be adapted and used for all types of village arrangements (eg a licence, leasehold etc as noted above).

Contract

Although a general enquiry documents is provided to prospective residents enquiring about a village, the following documents must be attached to the actual contract:

  • a copy of the Disclosure Statement that was given to the resident;
  • the Condition Report for the premises (if one is required to be prepared);
  • a list of the village services and facilities;
  • the NSW Fair Trading document, ‘Moving into a retirement village?’ and
  • the village rules (if any).

Disclosure Statement

The Disclosure Statement is important and contains things such as a table of fees and charges payable and an ‘average resident comparison figure‘ or ARCF to help you understand and compare the financial cost of living in different villages. The ARCF is the sum of the following fees and charges over an assumed residency period of 7 years (84 months), averaged to a monthly figure:

  • the total amount of recurrent charges payable under the village contract;
  • the departure fee payable by the resident if the premises are permanently vacated at the end of that period; and
  • capital gains, if any, payable to the operator by the resident in respect of the unit.

Operators can ask residents to pay a maximum of $50 towards the cost of preparing a contract but they must give prospective residents a copy of the proposed contract at least 14 days before signing it.

The standard contract form does not have to be used where a resident buys a strata or community scheme unit (using a sale of land contract) or in relation to an agreement to buy company title shares.

Cooling off and settling in

All residents have a 7 day cooling-off period after signing the contract. During this time, either party can end the contract (for any reason) by notifying the other party in writing and any money paid must generally be refunded. Importantly, if a resident moves in during the cooling-off period, the cooling off period ends immediately!

All residents are however entitled to a 90-day settling-in period, which means if a resident needs to move out (for any reason) within the first 90 days of their occupation, they only have to pay:

  • fair market rent for that period;
  • the cost of any repairs for damage (this does not include general wear and tear);
  • an administration fee of no more than $200; and
  • to reimburse the operator for the reasonable costs of making any alterations or adding any fixtures or fittings you requested to the premises.

No departure fee can be charged during the settling-in period and the amount paid to move into the village will be refunded (subject of course to the terms of the contract).

Before making the decision to move in, you should take the time to read the documents provided, obtain independent legal advice and if necessary, seek appropriate financial advice from an expert.

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 Estate Planning / General / Property  by 01 Sep 2023 0 comments

What is independent legal advice?

If you are:

  • borrowing money from a bank or someone else, like a parent,
  • have some special vulnerability in relation to a borrowing arrangement (such as due to age, inability to speak English well etc),
  • borrowing in relation to a self managed superannuation fund’s limited recourse borrowing arrangement, or
  • perhaps going guarantor on a loan for a company or a family member for their loan,

then chances are you will be asked to get “independent legal advice” from a solicitor in relation to the loan and the security for the borrowing or guarantee.

The document evidencing the loan is usually a:

  • Loan Agreement,
  • Letter of Offer or similar

and may have accompanying terms and conditions etc.

Security for a loan arrangement usually takes the form of a:

  • Mortgage,
  • Caveat or
  • Security Interest registered on the PPSR.

Independent advice us usually required by the lender so that it cannot (easily) be argued later that the borrower or guarantor didn’t understand the gravity of the arrangements being put in place – so although you get the advice, it is really for the lender’s protection.

In order to give independent legal advice, the lawyer will read the loan and security documents provided, advise you as to the meaning and effect of them and discuss any risks.

You will then be required to sign a document called a Declaration under oath confirming that you obtained independent legal advice before you freely and voluntarily signed the loan/guarantee/security documents.

Often the lender will also require the borrower or guarantor to obtain “independent financial advice” from a financial advisor, accountant or other appropriately qualified person. Lawyers, simply by virtue of their profession, possess no special skill to give financial (as distinct from legal) advice.

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 Asset Protection / Business / Commercial Law / Dispute Resolution / General / Litigation / Property / Risk management  by 01 Aug 2023 0 comments

Severing a joint tenancy

If you own real property with others, then it is either held as “joint tenants” or as “tenants in common“. For more information on the difference between both, please click here.

Assuming land is held jointly, on your death it will pass to the surviving joint tenant/s regardless of what you state in your Will. This is known as the “right of survivorship” and it operates because each joint owner of the property owns the whole of the land at the same time as the others, so the deceased owner simply drops off the title leaving the remaining joint tenants on title. This isn’t automatic as the land registry needs to have the details of the death to update the register, but it is a relatively simple process.

Joint tenancy may be a suitable scenario for a husband and wife where the survivor expects to retain the house however, generally joint tenancy is not suitable for investments as the investors would want their family or beneficiaries to inherit their interest in the property on their death, rather then their co-owners on title. From an estate planning perspective, tenants in common would generally be more sensible in this situation.

Property is sometimes incorrectly held as joint tenants because, for example:

  • people inherit property from their parents jointly with siblings, but they intend for their own children to inherit it on their deaths, rather than it staying with their surviving siblings;
  • sometimes purchasers just don’t understand the difference or don’t take advice at the time of acquiring a property (or the advice they got was wrong); or
  • they have divorced or separated and not taken any steps to separate their assets, update their property interests or estate planning arrangements

however, this is not a massive problem provided that they identify the issue and seek to rectify it without delay;

You can sever a joint tenancy. Severing a joint tenancy changes the nature of ownership so you and your co-owners own the land as tenants in common, which allows you to leave your share of the property to anyone in your Will (or if you don’t have a Will, under the laws of intestacy).

NSW Land Registry Services allows joint tenancies to be severed (converted to tenants in common) either unilaterally or with the consent of the other joint owners.

No stamp duty is payable in such a severance.

FURTHER INFORMATION

For further information in relation, 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 / Estate Planning / General / Property / Risk management  by 01 Jul 2023 0 comments

Getting out of a Lease

Leases (whether commercial or retail*) come to an end at the End Date or Terminating Date stated on the Lease.

Sometimes there is an early termination provision. Often there is not.

Getting out of a Lease in that scenario is not simple. There are however, ways for a Lease to end earlier than the Termination Date:

  • Surrender; and
  • Assignment or Transfer

Surrendering a Lease

Surrendering a Lease is where both parties (the Owner/Lessor/Landlord and the Lessee/Tenant) both agree for the Lease to end before the Term of the Lease has expired.

A form of Surrender of Lease~ is used for registered Leases as it needs to be registered with NSW Land Registry Services (NSWLRS).

Often, a Surrender of Lease is used as a precondition to a new Lease being granted (either to the same Lessee or a new one, such as on a business sale) as 2 Leases of the whole of the same premises cannot concurrently exist.

Transfer / Assignment of Lease

A Transfer of Lease or an Assignment of Lease is a relatively commonplace transaction in leasing, and is particularly common in relation to a sale of business.

The current Lessee seeking the assignment as part of its business sale (Assignee) effectively asks the Lessor to approve of to the assignment of the Lease in favour of the proposed new Lessee that is buying the business (Assignee).

An assignment is usually done by executing a tripartite Deed of Consent to Assignment of Lease by the Lessor, Assignor and the Assignee. The Lessor usually drafts the Deed of Consent to Assignment of Lease and the Assignor and/or the Assignee pay the costs of it (as they commercially agree).

The form used at  NSWLRS for this purpose is a Transfer of Lease~ and from the transfer date, the Assignee is responsible for complying with the Lease, paying rent and the like.

For Commercial Leases, the Lessor usually seeks information about the proposed Assignee and their financial standing before consenting and, depending on the terms of the Lease, consent can be withheld.

The Assignor may be released from those obligations or may (together with any personal guarantors) remain liable for the compliance with the Lease for the balance of the Term (effectively guaranteeing the new Lessee’s performance) depending on the Lease and the parties’ agreement. The Lease terms can specify the requirements to assignment.

Retail Leases on the other hand are slightly different and involve the issue of new Disclosure Statements etc as required by the Retail Leases Act 1994 (NSW). With Retail Leases, the Assignor can force the Lessee to give permission within a certain time after providing proof that the proposed Assignee has the same or better retailing skills and financial resources than the Assignee.

~In both cases, stamp duty (usually nominal in amount, unless a Lease is being transferred for a monetary payment) is payable and the transactions are performed online via the PEXA system.

Other options

Other options if surrender/assignment are not viable options, can include seeking to sublease part or all of the premises (consent may be required for this) so as to offset the rental expense on the main Lease.

*This article does not apply to residential leases.

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 / General / Property  by 01 Mar 2023 0 comments

Statement of Wishes

A Statement of Wishes can be an important tool in your estate planning arrangements, in addition to a:

A Statement of Wishes (or Memorandum of Wishes) is an informal (not legally binding) document that accompanies your Will (and is often kept with it, but doesn’t form part of it unless stated to) and gives to your executor or trustee important guidance on how you would like certain matters dealt with or attended to after your death, such as:

  • reasons for decisions made concerning your Will;
  • how you would like sentimental items distributed (assuming the Will allows this);
  • burial and organ donation suggestions (if not covered in the Will);
  • intentions regarding management of trusts and investments;
  • wishes regarding children’s care, maintenance and education;
  • locations of documents or keys to safes;
  • bank account and other relevant information, including assets a person owns or controls;
  • useful suggestions regarding businesses and their continued operation;
  • care for pets; and
  • passwords and login details for digital assets and various things including social media accounts and emails (noting that their terms of service may not strictly allow this).

It can be as detailed or broad in scope as you wish and can be updated as you need without necessarily having to change your Will, although the wording of your Will always takes priority or precedence over the Statement of Wishes.

A Statement of Wishes can be prepared at any time, although it is usually made at the time of making your Will or soon thereafter. You should review and amend it at regular intervals and when your family circumstances change.

It is usually a good idea to sign and date the Statement of Wishes and if it is intended that the Statement of Wishes be used as a Statement of Testamentary Intention or as evidence in any proceedings in relation to your estate such as for a family provision order under the Succession Act 2006 (NSW), then all facts, matters and circumstances referred to in it ought to be correct and you may want to put it in an Affidavit form acceptable to a Court.

Although executors and trustees may be obliged to provide a copy of a Will to certain persons and beneficiaries, they are not required to reveal the contents of a Statement of Wishes to a beneficiary.

Further, where a Statement of Wishes isn’t part of a Will, it isn’t filed with the Supreme Court and thus doesn’t become a public document like the Grant of Probate or a Grant of Letters of Administration with the Will Annexed and can remain confidential.

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 Dispute Resolution / Estate Planning / General / Probate / Risk management  by 01 Feb 2023 0 comments

Are your employment contracts up to scratch?

All employers ought to have in place robust Employment Contracts for all employees, whether they are casual, part time, full time, interns, seasonal or fixed term and provide the appropriate information statement/s.

For those employers that have a template/base contract or for those that intend to update their contracts, say for example after a promotion, role change or pay increase, then this information is relevant for you.

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 among other things imposed:

  • a prohibition on pay secrecy clauses;
  • limits on the ability to use fixed-term contracts; and
  • changes to flexible working arrangement request processing.

Pay secrecy

Sensibly, most standard form employment contracts contain confidentiality provisions including clauses that prohibit employees from disclosing their remuneration to other employees or anyone other than professional advisors such as lawyers, financial advisors and accountants.

Those clauses are no longer allowed and are not binding and employees now have a workplace right to share information about their remuneration or employment terms as they see fit.

Employers need to remove such clauses from new contracts entered into after 06 December 2022. Penalties can apply for breaches.

Fixed term contracts

From 06 December 2023, all employees on fixed-term contract (or consecutive shorter fixed term contracts) exceeding 2 years duration (or where there is more than one renewal even if less than 2 years duration) will be treated as continuing contracts, unless they fall within one of the limited exceptions in the Act or in a Modern Award.

Such employees will be entitled to unfair dismissal rules as part time and full time employees are. Penalties can apply for breaches.

Flexible work arrangements

The Fair Work Act (FW Act) contains a right for certain employees (eg, over 55s, those with disabilities, carers of young children or dependents or those involved with family violence) to request flexible working arrangements. Employers are obliged to consider those requests, but may refuse requests on reasonable business grounds.

From 06 June 2023, if an employer refuses a request or ignores it for greater than 21 days, then the fair Work Commission can intervene, direct arbitration and even make orders.

Employment contracts or workplace policies should be updated to include as much information as possible about the nature of the role, essential requirements etc, so employees understand what areas of flexibility may be feasible and what requests will reasonably be refused.

Workplace policies

In addition to having up to date and relevant Employment Contracts, employers also should have in place appropriate Workplace Policies. These can apply to employees as well as contractors to a business.

These can cover other issues such as the extension of areas of discrimination and harassment in the FW Act so employers can reasonably argue that all reasonable steps have been taken by them to prevent the discrimination or harassment.

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 / Dispute Resolution / Employment / General / Risk management  by 01 Jan 2023 0 comments

Power of Attorney for minors

The Powers of Attorney Act 2003 (NSW) (Act) provides for a person to appoint another person as their attorney to make financial and contractual decisions on their behalf.

The Act does not require that the person granting the power be an adult. Children too can thus grant a power of attorney. This is not the case for appointing an enduring guardian, which can only be done by an adult.

The document granting a power of attorney is a prescribed form under the Act.

For adults, if they are suffering from any illness, have deteriorating health, are going overseas or interstate or just want peace of mind, appointing an attorney to assist you to manage your affairs is generally a good idea.

Often children get diagnosed with medical conditions that may progressively affect their mental faculties or ability to read/write, so it is good to know that they can too appoint an attorney (such as a parent) to manage their financial affairs when required.

The child appointing an attorney must however, demonstrate understanding of what they are doing and that they are making the appointment freely and voluntarily, so their age and maturity are a relevant factor.

TYPES OF POWER OF ATTORNEY

A general power of attorney does not require a solicitor’s certificate however, it ceases to be of effect if you lose mental capacity (like where you are in a coma or suffer from dementia or some other illness that affects cognitive ability).

An enduring power of attorney on the other hand continues to be effective if you were to suffer such an incapacity. For this reason, an enduring power of attorney must be explained to you and witnessed by a lawyer who will provide a certificate in the prescribed form. We usually recommend an enduring power of attorney so that if some event happened to you that affected your capacity, your attorney would still be able to assist you.

HOW DOES A POWER OF ATTORNEY OPERATE?

The person appointing an attorney (the principal) can choose when the power of attorney is to take effect. It can be restricted to only take effect if a registered medical practitioner certifies that the principal is of unsound mind, upon some other event, from a date the principal determines or, it can operate immediately (for convenience).

An attorney may not use the principal’s monies or assets for gifts or benefits to the attorney or third parties unless this is specifically authorised in the document granting the power of attorney.

Provided the principal remains of sound mind, they can revoke a power of attorney at any time by signing a form of revocation and providing the attorney with that revocation.

The New South Wales Civil & Administrative Tribunal (NCAT) can review or revoke a person’s appointment as a power of attorney and can make a financial management order appointing a new attorney (or attorneys) or by appoint a representative of the NSW Trustee & Guardian if it is considered that your attorney/s is/are not making appropriate decisions on your behalf.

NCAT can also appoint a guardian by making a guardianship order so that the person’s medical, accommodation and lifestyle needs can be met however this is often only needed for children over 16 as their parents can generally consent to treatment under that age.

FURTHER INFORMATION

For further information in relation to estate planning or powers of attorney or contracting with minors generally, 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 Asset Protection / Estate Planning / General / Risk management / Uncategorized  by 01 Dec 2022 0 comments
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