Entrepreneur visa

The Australian Department of Immigration & Border Protection (DIBP) is making changes to the visa system as part of the National Innovation and Science Agenda.

 

It is intended that these changes will help Australia attract and retain the best and brightest entrepreneurial talent and the skilled, talented people Australia needs to drive ideas from research to commercial reality.

 

On 10 September 2016, DIBP launched a new Entrepreneur visa’ stream and amended the ‘points test’ for the skilled migration programme.

 

The Entrepreneur visa is part of the Business Innovation and Investment visa programme. Entrepreneurs interested in applying for the Entrepreneur visa will need to submit an Expression of Interest (EOI) in SkillSelect and be nominated by a State or Territory government.

 

Key eligibility criteria includes:

• Applicants must be undertaking, or proposing to undertake, an entrepreneurial venture in Australia.
• The entrepreneurial venture must not be related to residential real estate or labour hire or involve purchasing an existing business or franchise.
• Applicants must also be under 55 years of age, have a competent level of English, and have at least 30 per cent interest in their entrepreneurial venture.
• There must be one or more funding agreements in place for at least $200,000 between the entrepreneur or venture and a third party funding body or bodies.
• Sources of third party funding are limited to state and territory governments, Commonwealth agencies, Publicly Funded Research Organisations, and investors registered as a Venture Capital Limited
• Partnerships (VCLP) or Early Stage Venture Capital Limited Partnerships (ESVCLP). Agreements outlining funds from a combination of these sources are also acceptable.
• Applicants must have a business plan outlining their plans for their venture in Australia.

An Entrepreneur visa holder can progress to permanent residency after four years if they can meet a measure of success, which includes factors such as business turnover, employment of Australians and ability to obtain significant financial backing.

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Victorian retail landlords – remember your notice obligations

Landlords of premises regulated by the Retail Leases Act 2003 (Vic) (RLA) should diarise the various dates needed for them to comply with their notice obligations under Sections 28 and 64 of the RLA, especially if they wish to avoid unintentionally extending the term of the lease.  In this regard, even though the relevant lease document may clearly record the last day of the lease, that date may be extended by Sections 28 and 64, which may have consequences for a landlord who requires the premises to be vacated by a particular date.

Section 28 provides:

• If a lease contains an option exercisable by the tenant to renew the lease for a further term, the landlord must notify the tenant in writing of the date after which the option is no longer exercisable.  That notice is to be given at least 6 months and no more than twelve months before the date the option is no longer exercisable (Last Date);
• However, the landlord is not required to provide that notice if the tenant exercises or purports to exercise the option before being notified of that Last Date;
• If the landlord fails to provide the notice to the tenant within the required timeframe, the lease is taken to provide that the Last Date is extended to a date which is 6 months after the date landlord notifies the tenant;
• If that extended date is after the term of the lease ends, the lease continues until the extended date;
• However, if the tenant exercises the option prior to the extended date, the new lease commences at the expiry of the old lease, rather than the total term of the lease being extended.

Consequently, an unplanned extension of the term of the lease may occur where a landlord fails to provide, or is late in providing, a Section 28 notice to the tenant and where the tenant does not eventually exercise its option.

Section 64 provides:

• If the tenant under a lease does not have an option to renew the lease for a further term, the landlord must at least 6 months but no more than twelve months before the lease term ends, give written notice to the tenant:
  • offering the tenant a renewal of the lease on the terms specified in the notice; or
  • informing the tenant that the landlord does not propose to offer the tenant a renewal of the lease;
• An offer to renew the lease cannot be revoked without the tenant’s consent for sixty days after it is made;
• If the landlord fails to give the notice within the required time frame:
  • the landlord must give the tenant a notice containing that information; and
  • the lease continues on the same terms and conditions until the day being 6 months after the notice was actually given to the tenant.

Accordingly, a failure by a landlord to give a Section 64 notice to a tenant may have the effect of extending the term of the lease (and, accordingly, the date upon which the premises may be vacated) to a date which is 6 months after receipt of the notice.

If you require assistance with regards to drafting and serving Section 28 and Section 64 notices (in accordance with the provision of notices clause in your lease) please contact Andrew Bini, Senior Commercial Lawyer, at Nevett Ford Melbourne.

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Retail leasing Ministerial determination

It is not uncommon for a commercial  landlord to desire to have a lease fall outside the operation of the Retail Leases Act 2003 (Vic) (RLA), thereby enabling the landlord to claim land tax and lease preparation legal costs as an outgoing from the tenant. 

What constitutes a “retail lease” (being a lease which is regulated by the RLA) is set out in Section 4 of the RLA.  One of the exceptions to a lease being a “retail lease” is where the tenant is a body corporate or a subsidiary of body corporate whose securities are listed on a stock exchange located outside of Australia that is a member of the World Federation of Exchanges (WFE) (see Section 4 (2)(d) of the RLA).

However, much confusion has arisen in trying to determine whether the relevant overseas stock exchange is a member of the WFE.

In an effort to reduce the confusion, the Victorian Minister for Small Business, Innovation and Trade has made a determination dated 12 August 2016, pursuant to the Minister’s powers under clauses 4(2)(g) and 5 of the RLA, which has the effect of excluding the following tenants from the definition “retail premises”:

            “bodies corporate or companies or corporations whose securities are listed on a stock exchange outside Australia or the subsidiaries (including subsidiaries as defined in Section 9 of the Corporations Act 2001) of such bodies corporate, companies or corporations”.

It is expected that the determination will make it easier for landlords and their advisors to determine if the RLA will apply to leases to tenants or their subsidiaries who are corporations listed on overseas exchanges.

If you require assistance with retail leasing, please contact Andrew Bini, Senior Commercial Lawyer, Nevett Ford Melbourne Pty Ltd.

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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 Andrew Bini, senior commercial lawyer, Nevett Ford Melbourne.

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Buying a business? Do your due diligence first!

Whether you intend on purchasing a small retail business or the business operations of a listed public company, the same fundamental approach should be applied: do your due diligence first!

As advisors to purchasers of businesses of various types and sizes, we are regularly involved in conducting legal due diligence.

However, a purchaser’s pre-contractual due diligence should not be limited to a lawyer’s review of legal matters, but should extend to:

• Inspection of plant and equipment: being a physical investigation by the purchaser (or preferably by qualified contractors on behalf of the purchaser) into the state of plant and equipment and other hard assets sold with the business.  If there are any problems with those assets, then the purchaser’s lawyer should be in a position to negotiate amendments to draft sale contracts requiring the vendor to rectify those problems prior to settlement.  Physical due diligence should also indicate whether the sale price reflects the true value of the physical assets being sold;
• Inspection of the premises including the landlord’s fixtures, fittings and installations.  Again this should be done by a qualified person on behalf of the purchaser and a report provided.  Issues arising out of that report should be dealt with in the sale contract to ensure the vendor rectifies issues prior to the purchaser taking possession of the premises and potentially becoming liable for hidden problems.
• Financial due diligence into the business including a detailed review of the financial statements of the business for at least the last five years.  The purchaser’s accountant should report on the financial status of the business including whether the purchase price is reasonable based on the business’s financial performance in recent years.
• Enquires with the local council and with owners of adjoining businesses as to potential changes to the local environment, such as the construction of roads, the construction of multi-level buildings adjacent to the business premises and other matters which might lead to business disruption in the future. 

Ideally legal due diligence will involve at least the following:

• An investigation into the status of the vendor:  If the vendor is a company, what is its registration status with ASIC?  In this regard, the assets of a deregistered company are vested in ASIC and cannot be dealt with by that company until re-registration, which may be problematic;
• Determining whether the vendor a trustee: If it is, then the sale contract should record the vendor as being the trustee of a trust to ensure the purchaser will acquire both legal and equitable title to the business assets;
• Personal Property Security Register searches to determine the existence security interests which may be registered over the assets of the vendor.  This will identify the parties from which the vendor must obtain releases of those security interests prior to or at settlement;
• An examination of significant contracts held by the vendor including the extent to which plant and equipment is leased by the vendor.  Also, significant customer contracts should be reviewed to determine whether those incomes streams can be assigned to the purchaser at settlement.  If they are not capable of assignment then, the sale price may have to be reduced to reflect the loss of those income streams;
• A review of the premises lease documentation including a determination of the extent of time remaining under the lease and options and, consequently, the amount of time the purchaser will have to obtain a return on its investment.  If there is insufficient time remaining under the lease we suggest the sale contract be made conditional upon the vendor obtaining the landlord’s consent to extending the term of the Lease as part of the transfer of lease documentation;
• A review of the status of all licences and permits held by the vendor to conduct the business which are to be transferred to the purchaser at settlement – thereby enabling the purchaser to lawfully conduct the business at the premises on and from settlement; and.
• Review of employment agreements and liabilities.

Once each area of due diligence has been undertaken and the material issues have been identified, it becomes the purchaser’s lawyer’s role when negotiating the sale contract to have included in the contract specific obligations on the vendor to rectify those issues prior to or at settlement.  Of course, that depends on how willing the vendor is open to bearing the cost of rectifying those issues.

Quite often impatient purchasers pay the price for poorly conducted and/or limited scope due diligence.  Although sale contracts may offer some form of vendor warranties (covering things such as the operational condition of plant and equipment) they can be little comfort to a purchaser when after settlement the vendor has disappeared overseas on vacation or doesn’t have the finances to compensate the purchaser for breach of a vendor warranty.  On that basis, we firmly believe quality pre-contractual due diligence which extends beyond legal due diligence is prudent practice all purchasers should consider adopting.

At Nevett Ford Melbourne we have experienced commercial lawyers with extensive experience in assisting purchasers of all types of businesses.

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Be prepared for small business unfair contract laws

Further to our blogs of July 2015 http://nfcommerciallawyers.blogspot.com/2015/07/proposed-protection-to-small-businesses.html and April 2016 http://nfcommerciallawyers.blogspot.com/2016/04/protection-to-small-businesses-from.html, from 12 November 2016 amendments to the Australian Consumer Law will come into operation which are aimed to protect small businesses from unfair terms in standard form contracts.

Standard form contracts are contracts where the terms and conditions are set by one party and the counter-party has little or no opportunity to negotiate those terms. For the purposes of the new law, they include contracts:

• for the supply of goods or services or the sale or grant of an interest in land;
• where at least one of the parties is a “small business”, being a business employing less than 20 people;
• where the upfront price payable under the contract is no more than $300,000 or $1,000,000 if the term of the contract is greater than twelve months;
• entered into on or after 12 November 2016 and variation to existing contracts occurring after that date.

Examples of unfair terms include:

• terms which enable a party (but not the other party) to avoid or limit their obligations;
• terms which enable a party (but not the other party) to terminate the contract;
• terms that penalise a party (but not the other party) for breaching the contract; and
• terms that enable a party (but not the other party) to unilaterally vary the terms of the contract.

Unfortunately, only a court or tribunal will be able to to determine whether a term of a contract is in fact unfair. That is, it is not the role of the Australian Competition and Consumer Commission to make a determination on whether a clause in a contract is fair or unfair.

The effect of a term being determined unfair will render that term void. However, the balance of the contract should continue to bind the parties to the extent that the contract is capable of operating without the unfair term.

Certain contracts are excluded from the operation of the law which include contracts entered into before 12 November 2016 (unless renewed on or after that date), shipping contracts, constitutions of companies, managed investment schemes, certain insurance contracts and contracts in sectors exempted by the Minister.

If you think that a term in a standard form contract is unfair, the ACCC recommends you request the other party to remove the term or amend it so that it is no longer unfair. The ACCC further recommends that in the absence of a satisfactory outcome, that the aggrieved party seek a declaration from a court that the relevant term is unfair. Accordingly, it is not possible for a party to a standard form contract to unilaterally declare that a term in a contract is unfair and claim it has no impact on that party.

It is recommended that parties who impose standard form contracts on small businesses structure a compliance program aimed at identifying potential unfair terms in their precedent documents and take steps to amend those terms ahead of 12 November 2016.  A compliance program would entail:  

1. a review of existing contractual arrangements to identify counter-parties who qualify as small businesses;
2. identifying which of those contracts with small businesses are in fact standard form contracts;
3. identifying potentially unfair terms within contracts with those small businesses;
4. determining how to deal with those unfair terms; and
5. amending precedent documents to ensure all standard form contracts entered into with small businesses on and after 12 November 2016 comply with the new laws.

If you require assistance with reviewing your standard form contracts please contact Andrew Bini.

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Enforcing Chinese Arbitration Awards in Australia

With so much trade between China and Australia the question arises of how to resolve disputes when agreements are breached.


Many commercial agreements now include arbitration provisions for resolving disputes.


Disputes between Chinese companies and their Australian counterparts may be subject to the United Nations Commission on International Trade Law (UNCITRL) and its arbitration rules.


Where contracting parties have an arbitration clause in their agreement and a dispute arises the parties submit to arbitration and an award is made.


Once an award is made for money in favour of the Chinese company, the question is how does that company enforce its award against a company based in Australia.


An award made in China can be recognised and enforced in Australia under the International Arbitration Act 1974 in an Australian court that has jurisdiction over the amount of the award.


The Chinese company needs to ascertain the state in Australia in which the Australian company has its registered office and may then take proceedings in that state in the appropriate court to have the award recognised.


The Australian company can object to the recognition of the award on grounds set out in section 8 of the Act.


The main grounds for objection are that the award is not final, in the sense that it can or is subject to appeal or that the making of the award was induced or affected by fraud or corruption.


If the Australian court decides that an objection is not valid the award becomes an order of that court. Depending on the amount, the award/order can be enforced by a warrant to seize the Australian company’s goods or commencing winding up proceedings under the Corporations Act 2001.


If you require assistance in recognising and enforcing an award in Australia please contact Greg Doran in our litigation department.

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