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melbourne commercial lawyer

PPSR - Audit and amend your apparent credit risk profile

The Personal Properties Securities Register (PPSR) established under the Personal Properties Securities Act 2009 (Cth) (PPSA) records security interests held by creditors over certain personal property of debtors.

A consequence of registration of security interests over the assets of a debtor, is that registration may also provide an indication of the apparent credit risk of the debtor to the world at large. For example, numerous PPSR registrations over a company is likely to indicate that the company may be indebted to numerous creditors. This may have an impact on that company’s ability to raise necessary finance.

However, not all registrations of security interests on the PPSR may be current or legitimate.  It’s common with some debtors that their PPSR registration profiles may contain registrations which no longer apply, or worse, were improperly recorded on the PPSR.

We have been advising clients that if they wish to improve their apparent credit risk profile on the PPSR, they should seek to have the non-current and improperly registered security interests removed from the PPSR.

The PPSA sets out a process for dealing with those registrations, which involves:

  • written demands by the debtor to the secured parties to remove or amend the registrations on the basis that the registrations no longer (or never did) secure any obligation from the debtor to the secured parties, including the payment of monies owed (e.g. in circumstances where the debtor has paid the creditor/secured party all amounts owed); and

  • if the secured parties do not remove or amend the registrations within 5 business days of service of those written demands, the debtor may apply to the Registrar under PPSA and seek assistance to have the registrations amended or removed.

If you would like assistance with the removal or amendment of registered security interests on the PPSR, please contact Nevett Ford.

Crowd-sourced equity funding arrives in Australia

In March 2017, the Corporations Amendments (Crowd-sourced Funding) Bill 2016 passed the Senate with the resulting Act to take effect in late September this year. 

Without a doubt, this is a significant piece of legislation as it will provide certain Australian corporations with an avenue to raise equity finance outside the current onerous and expensive regime.  The previous legislation, Chapter 6 D of the Corporation Act 2001 (Cth), was clearly designed for more substantial capital raising activities by larger well-resourced listed public companies. 

The Bill should assist smaller companies and start-up ventures (which usually have small asset bases and speculate futures which are unattractive to traditional debt financiers) to raise equity finance.

Perhaps one of the better descriptions of the operation of Bill is on the Australian Parliament website which states:

“Crowd-sourced equity funding (CSF) is a relatively new concept and is enabled by the rise of internet technologies. As the name suggest, it allows businesses to obtain capital from a large number investors (that is, a crowd) through an online platform, where each investor typically contributes a small amount of money in return for an equity stake in the business.

At its most basic level, CSF allows people to invest in unlisted shares issued by businesses.

CSF has gained attention because access to finance is considered a major impediment to improved productivity and innovation, particularly for smaller and/or newer businesses that are not able to access the more traditional sources of financing. CSF can notionally help to alleviate some of these constraints by introducing an additional source of finance for these firms. However, the current regulatory framework imposes burdens and costs that are considered significant impediments to more widespread utilisation of CSF in Australia. 

The proposed changes in this Bill are intended to alleviate these constraints. In its broadest form, the Bill will allow small companies, which would otherwise find it difficult to raise money through traditional sources of finance, to raise money from the general public through an online platform. The proposed changes are also intended to improve investment opportunities for retail investors. However, since small businesses and start-ups also pose a greater relative risk for such retail investors, the proposed amendments also aim to provide protection to these investors by imposing caps on the investments in any single offer and by imposing information and gatekeeping requirements on licensed CSF intermediaries.” 

Clearly, the new fundraising changes focus on raising money from the public in an online regime through licensed CSF intermediaries.

Amongst other changes to the Corporations Act, the Bill introduces a new Part 6D.3A of the Corporations Act, titled “Crowd- sourced funding”.

In a nutshell, amongst other things, new part 6D.3A:

  • defines the types of companies that may make offers (“eligible CSF companies), which are unlisted Australian registered public companies limited by shares which do not have a substantial purpose of investing in securities or interests in other entities and which meet an assets and turnover test (must be less than $25 million in both cases);
  • sets an issuer cap of $5 million which an eligible CSF company may raise in a 12 month period;
  • establishes the requirements of CSF offer documents including the mandatory use of CSF intermediaries and “offer platform” on which CSF offer documents are to be published;
  • defines when offers are open and closed and the period during which offers may be open;
  • sets out numerous obligations on the gatekeepers- i.e. the CSF intermediaries and how they operate their platforms and deal with application monies amongst other things;
  • defines when CSF offer documents are defective and the consequences of defective documents and the liability of directors and other parties;
  • describes when a retail investor applicant may withdraw their application (by providing a 48 hour cooling off period);
  • provides a cap on investment by retail investors ($10,000);
  • prohibits a company or a CSF intermediary financially assisting retail investors in acquiring securities
  • provides restrictions on advertising CSF offers; and 
  • provides that certain companies may be eligible for exemption from certain governance requirements in the Corporations Act.

Given that the majority of companies in Australia are proprietary limited companies, which by definition in the Corporations Act are not public companies, the Bill will not afford proprietary limited companies the ability to participate in the crowd-source funding regime.

However, the Federal Government has indicated an intention to introduce further legislation to enable proprietary limited companies to access the crowd-sourced funding regime in the near future.

If you would like further information on crowd-sourced equity funding including the conversion of your existing company into an entity which would qualify as an eligible CSF company, please contact Nevett Ford

Retail Leasing

Landlords should avoid delays in providing executed Lease document to tenants

Section 22 of the Retail Leases Act 2003 (Vic) (RLA) provides:

  1. Within 28 days (or such other period as is agreed in writing between the landlord and the tenant) after being given a copy of the retail premises lease signed by the tenant, the landlord must give the tenant a copy (which may be a photocopy) of the lease signed by the landlord and the tenant.
  2. If the landlord fails to provide the executed lease to the tenant within that period, the tenant may give the landlord a written notice of termination of the lease at any time within 28 days after:
  • entering into the lease, 
  • the tenant is given a copy of the lease signed by the landlord and the tenant; or

whichever happens last

  1. If the tenant gives the landlord a notice of termination in accordance with the above, the lease terminates 14 days after the notice is given.

Accordingly, Section 22 requires a landlord to give to the tenant a copy of the lease document signed by both the landlord and the tenant within 28 days of receiving a copy of the lease document signed by the tenant.

A failure by a landlord to provide the fully executed lease document to the tenant within that 28 day period, places the tenant in a position where the tenant obtains a window of opportunity to terminate the lease.

In an effort to avoid the situation where the tenant is empowered to terminate the lease under Section 22, we suggest that if, prior to the execution of the lease documents, a landlord anticipates a delay in returning the fully executed lease document to the tenant, then the landlord should ensure the lease contains a provision which allows the landlord to return the executed lease document to the tenant outside of the 28 day period. This is allowable because Section 22 clearly states “within 28 days, or such other period as is agreed in writing between the landlord and the tenant”.

If you require assistance with retail leasing please contract Nevett Ford.

Why do we need terms and conditions of trade?

Many of our clients who are suppliers of goods and services operate under formal written terms and conditions of trade.

Prudent clients usually have their terms and conditions periodically reviewed to ensure they provide the best available protection.

For example, in recent years many suppliers of goods have amended their terms and conditions to include new provisions under which the customer grants a security interest over the goods supplied in favour of the supplier, to support the customer’s payment obligations. The grant of the security interest enables the supplier to register that security interest on the register created under the Personal Properties Security Act 2009 (Cth) (PPSR).  Without registration of a security interest, a supplier might not have the ability to recover the goods, or amounts owed with respect to the goods, if the customer goes into liquidation or declares bankruptcy.

However, it is evident to us that there are many suppliers who trade without proper terms and conditions or with outdated terms and conditions which do not entitle the supplier to register security interests on the PPSR.

The simple answer to the question as to why terms and conditions of trade are necessary is twofold:

  • to clearly set out the terms of the sale of goods and/or services arrangement (ie the contractual relationship) between the supplier and the customer; and

  • to provide the some protection a supplier of goods may need in the event of non-payment.

Typically, when a supplier is dealing with a new customer the supplier will provide the new customer a credit application, usually accompanied by a director’s guarantee.  At this point we recommend the supplier also provide its terms and conditions of trade to the new customer and arrange to have the credit application, the director’s guarantee  and the terms and conditions of trade signed by the new customer.

Apart from the usual mechanical provisions regarding ordering of goods and/or services, price, delivery, price variation and variation and cancellation of orders, terms and conditions should clearly set out:

  • the terms of payment;

  • an obligation on the customer to pay interest on outstanding amounts at a specified rate if payment is not received on the relevant due date;

  • a right in the supplier to charge the customer all costs (including legal costs) incurred by the supplier in pursuing and recovering unpaid amounts;

  • retention of title (whereby title to the goods is not provided to the customer until such time as payment for the goods delivered have been received by the supplier) and the right for the supplier  to access the customer’s premises to recover the goods; and

  • PPSR provisions enabling the supplier to register a security interest on the PPSR.

Of course, there may be other specific or unique provisions depending upon the nature of the goods and services to be provided.

We have experience in preparing and amending terms and conditions of trade for suppliers of goods and services of various types.

If you would like more information on terms and conditions of trade please contact Nevett Ford Melbourne.