General

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.

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

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.

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

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.

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

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.

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

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.

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

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.

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

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.

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

 

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.

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

in Asset Protection / Estate Planning / General / Risk management / Uncategorized  by 01 Dec 2022 0 comments

Personal Guarantees

A personal guarantee is a written promise by a person (guarantor) that if a third party doesn’t pay its debts to the party entitled to the benefit of the guarantee, then the guarantor will make those payments.

Personal guarantees are regularly given by directors and sometimes shareholders of companies to personally guarantee the payment of money or obligations on behalf of the company, but they are also given on behalf of other individuals such as children.

They can be essential security for small to medium businesses in their contractual dealings with customers as the guarantor is then personally liable to pay the debt, whereas without the guarantee, the company could enter into liquidation and the contracting entity would have to prove the debt in the liquidation and risk not getting any return at all.

Common examples of where personal guarantees are used are in relation to:

  • leases of real property by companies;
  • loans by banks to adult children when purchasing property;
  • company loans from banks; and
  • company applications for credit at other businesses.

Managing risk

Entering info a personal guarantee is risky. You are placing your own assets at risk for the benefit of another person or entity so you should get legal advice before entering into one as well as assessing the commercial or other merits of providing the guarantee at all.

Considerations to help limit the risk include:

  • capping the maximum amount of the guarantee or the term in respect of which the guarantee is valid for;
  • requiring the guarantee to be secondary only (and not create a primarily liability of the guarantor);
  • removing security provisions such as caveats;
  • not allowing any variation to the agreement between the beneficiary and the person/entity whose liabilities are being guaranteed without your notice or consent;
  • seeking to have the guarantee removed  at some point once the borrower can demonstrate their own capacity to repay the debt.

however, often the beneficiary of the guarantee will not agree to these changes.

Aiding enforceability

If you are seeking to rely on a personal guarantee in your business, then you ought to get it drafted by a lawyer however, some basic tips to aid in enforceability include:

  • obtain a copy of the guarantor’s identification documents to properly identify them;
  • conduct some due diligence on the guarantor’s financial standing/capacity to pay;
  • obtain actual security for the guarantee obligation;
  • ensure it is signed and witnessed by an independent adult

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 Asset Protection / Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Insolvency & Bankruptcy / Risk management  by 01 Sep 2022 0 comments

Properly executing documents

When it comes to properly executing documents, depending on the type of document and the parties executing it, there are different requirements for it to be valid.

The manner of execution depends on matters such as:

  • Party – whether a party is an individual, a partnership, the Government, an association or a corporation (and whether those signatories are parties in their own right or as a trustee of a trust or a superannuation fund;
  • Document – whether it is a Deed or just a contract or an Agreement; and
  • Physical/Electronic – whether it to be signed online or in person, or a combination of both.

PARTY TYPE

Individuals

An individual may execute a document by simply signing it with their signature witnessed by a person who is not party to it.

Partnerships

For a partnership to be bound by a document or a deed, either all partners to the partnership or an individual authorised by all the partners (whether or not the individual is a partner) should execute the document or deed.

Often, documents will be executed by a partner on behalf of a partnership. This authority may be set out in the partnership deed or a power of attorney. If you cannot obtain a copy of the relevant authority, you should consider obtaining a warranty from the individual in the relevant execution clause that they have authority of the partnership to so execute the document.

Companies

Section 127 of the Corporations Act (Corporations Act) sets out the ways in which a document may be executed by a company. If a company executes a document in this way, anyone will be able to rely on the protection in other sections of the Corporations Act for dealings in relation to that company. A company may execute documents under seal or choose not to have a company seal and even if the company has a seal, it need not apply it.

A company may execute a document with or without a seal if the document is signed by:

  • 2 directors; or
  • a director and a company secretary o; or
  • a sole director (there is no requirement for a private company to have a secretary).

Companies can also sign via an agent under s.126 of the Corporations Act.

For more information on how companies can becomes bound by the actions of its agents and employees, click here.

Associations

Usually an incorporated association signs documents by having 2 committee members sign it but often the Rules of Association need to be examined to confirm this.

An unincorporated association is not a legal entity and so cannot contract in its own right so be careful entering into any contract of value with them.

Trusts

A trust is not a legal entity and as such, it cannot contract in its own right so all acts relating to a trust must be undertaken by its trustee or trustees.

The type execution clause that should be used will depend on what type of entity the trustee is (eg a company  or one or more individuals) execution clause should be used if the trustee is a company).

Although a trust is not a legal entity, it may be a tax entity so may have its own ABN. You should therefore confirm that the ABN being used is the ABN of the trust and not the ABN of the trustee. An ABN is a great identifier.

If you are unable to confirm that the trustee has the power to enter into the arrangement (which can usually be ascertained by examining the trust deed), you should consider obtaining a representation and warranty from the trustee that it has the power to execute the document or deed on behalf of the trust.

DOCUMENT TYPE

There are various reasons for choosing between the different types of document. such as greater (often double the length) limitation periods for enforcing obligations in deeds compared to just agreements. Sometimes legislation requires transactions by deed, but oftentimes deeds are used as they are the most solemn act a person can perform in relation to an item of property or any other right.

Agreement / Contract

Generally, a contract is in place and is valid if the following conditions are met:

  1. Intention to create legal relations
  2. An offer
  3. Consideration (price) being agreed
  4. Acceptance

A written signature is not necessarily required for a valid contract to exist. The terms of the agreement also can be agreed verbally.

Contracts can be signed electronically (even with the click of a mouse) since the Electronic Transactions Act 2000 (NSW) (ET Act) and corresponding legislation in Australia’s other States and Territories.

Deed

Traditionally, to be a valid, as a deed the document had to be “signed, sealed and delivered” and thus it had to be:

  • written (on paper or parchment);
  • signed and the parties’ seal/s applied); and
  • delivered (physically to the other party),

however now, there is no requirement for a seal (where it is described as a deed or expresses that is is ‘sealed’ and it is witnessed appropriately), the parties are presumed to have ‘delivered‘ it on execution and the parchment requirement has also been dispensed with given the ET Act, amendments to the Conveyancing Act 1919 (NSW) and, in relation to companies, the passing of the  Corporations Amendment (Meetings and Documents) Act 2022, which from 01 April 2022 (after the temporary COVID-19 pandemic measures ended on 30 March 2022), amended the Corporations Act to permanently allow things such as:

  • director or member meetings virtually, such as through Zoom or Teams meetings etc (regardless of the requirements under their constitutions); and
  • documents, including deeds, to be executed electronically.

As Deeds do not require consideration like a contract, often it can be sensible to include a nominal item (such as $10) as consideration just in case the document isn’t valid as a deed – as it can still be relied on as a contract, possibly even if not signed by the other party but part performed.

WET INK OR ELECTRONIC?

Documents now can either be signed:

  • in physical form with ‘wet ink‘ signatures;
  • electronically; or
  • a combination of both.

Either way, the method of signing must clearly and reliably identify the part and indicates the party’s intention in respect of the information recorded in the document.

Obviously, special care needs to be taken with parties that are not Australian residents and to consider the governing law and jurisdiction of the arrangement.

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 Asset Protection / Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Litigation / Online Issues / Property / Risk management  by 01 Aug 2022 0 comments
Page 1 of 1212345...10...Last »