Holding company liability for debts of subsidiary

When advising on the suitability of corporate structures, we are commonly asked whether a holding company can be liable for the debts of a subsidiary.  The answer (of course) depends on a number of factors. [Read more…]

ASIC v Macdonald – have the lessons been forgotten?

The case of Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287 (ASIC v Macdonald) decided in the New South Wales Supreme Court, highlights the importance of strict adherence to the requirements of the Corporations Act 2001 (Cth) (Act) when preparing minutes of Directors’ meetings (Board Meetings) for them to be relied upon as evidence in a proceeding. [Read more…]

Shadow directors and de facto directors

The definition of “director” in section 9 of the Corporations Act 2001 (Cth) (Act), goes beyond directors validly appointed, and includes de facto directors and shadow directors.  This article explores the level of involvement in the affairs of a company that a person must have to be deemed a de facto director or a shadow director. [Read more…]

“Approved by ASIC” – a $20,000 problem…

Whilst the financial services sector seems to have embraced the innovation economy, a recent case shows just how important it is for Australian Financial Services Licence, (AFS) holders to take care when advertising their products.

A recent case brought by the Australian Securities and Investments Commission, (ASIC) is a reminder that when advertising investment schemes precise language needs to be used.

[Read more…]

What is a Share Subscription Agreement?

A share subscription agreement (Share Subscription Agreement) is a promise by a potential shareholder, also known as a subscriber, to make payment of funds to a company (Company) in an agreed number of “tranches”, in return for the Company issuing and allotting a certain number of shares at a certain price, such that the subscriber becomes a shareholder (Shareholder).  A Share Subscription Agreement must include the number of shares that will be issued to the Shareholder, and the order and timing by which funds will be advanced.  Sometimes it seems that a Share Subscription Agreement merely sets out the provisions of a term sheet (Term Sheet) in a fuller and more precise manner.  [Read more…]

What is a Preference Share?

Preference shares (Preference Shares) are a class of share that gives the holders some right or preference over another class of shares.  A Preference Share is often thought of as a ‘hybrid’ security, as it has features of both debt and equity.  Like ordinary shares, Preference Shares are issued by a company at the time of issue, or may be capable of being purchased on the market.  Pursuant to section 254A(2) of the Corporations Act 2001 (Cth), a company can only issue Preference Shares if the rights which attach to such shares are set out in the company’s constitution, or have been approved by a special resolution of the company.  A company does not have to be listed on a stock exchange to issue preference shares. [Read more…]

What is a Shareholders Agreement?

A shareholders agreement (Shareholders Agreement) is a contract that attempts to regulate the rights and obligations of Shareholders or Members (used interchangeably) in the context of their ownership of securities in a company.  The company itself may also be a party to the Shareholders Agreement.

Shareholders Agreements are not compulsory like the Replaceable Rules or a Constitution as required by the Corporations Act 2001 (Cth) (Act).  On incorporation, or on obtaining an investor, many companies choose to regulate the rights and obligations of Members in addition to regulating various aspects of the management of the Company by preparing and executing such an Agreement. [Read more…]

What is a Franchise Agreement?

A franchise agreement (Franchise Agreement) is defined in clause 5(1) of the Franchising Code of Conduct (Code), located in Schedule 1 of the Competition and Consumer (Industry Codes–Franchising) Regulation 2014 – as:

  • a written, oral or implied agreement;
  • in which a person (Franchisor) grants to another person (Franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the Franchisor; and
  • under which the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol that is owned, used, licensed or specified by the Franchisor or an associate of the franchisor; and
  • under which, before starting or continuing the business, the Franchisee must pay or agree to pay to the Franchisor or their associate an amount; for example, an initial capital investment fee or a payment for goods or services.

[Read more…]

Trust restructures – relief from capital gains tax

Capital gains tax (CGT) is applied to and calculated on the realisation of “capital gains”.  If a business wants to transition from a Unit Trust to a company structure (for example) and the value of the Units in the Trust has increased then it’s likely that the sale or transfer of the Units will result in a capital gain by the Unitholder.  In circumstances where the Unitholder may not have actually received any cash to pay the capital gains tax, surely there must be an exception? [Read more…]

Structuring contracts and capital gains tax

It seems that wherever you turn in Australian commercial transactions you are faced with a state or federal tax.   Capital Gains Tax (CGT) applies to a capital gain which is made upon a disposal of a CGT Asset, subject to specific exceptions and exemptions.  CGT forms part of income tax and is not considered a separate tax.  A capital loss cannot be claimed against income but can be used to reduce a capital gain in the same income year.  If capital losses exceed capital gains in an income year, they can generally be carried forward and deducted against capital gains in future years. [Read more…]

Dundas Lawyers
Street Address Suite 12, Level 9, 320 Adelaide Street Brisbane QLD 4001

Tel: 07 3221 0013

Send this to friend