Company directors may be personally liable for a debt incurred by the company if –
They are directors at the time the company incurs the debt;
The company is insolvent at the time or becomes insolvent by incurring that debt; and
At that time, there are reasonable grounds for suspecting that the company is insolvent or would become insolvent.
Essentially, these are creditor protection provisions which actually don’t work all that well in practical terms. From the creditor’s perspective, successful action against directors is very rare and from the company’s perspective the provisions are a disincentive to “trade on” with a view to business recovery due to the potential risks to directors of doing that.
From September this year new legislation introduced so-called “safe harbour” provisions for company directors.
Directors will not be liable for certain debts incurred whilst the company is insolvent, if after suspecting insolvency, directors start taking a course of action “reasonably likely to lead to a better outcome for both the company and its creditors as a whole” than would be the case if the company immediately appointed an administrator or liquidator.
For the purposes of working out whether a particular course of action is reasonably likely to have a better outcome for the company, factors including whether directors-
are properly informing themselves of the company’s financial position;
have taken steps to prevent misconduct by officers and employees of the company;
have taken steps to ensure the company is keeping appropriate records;
are obtaining advice from an appropriate qualified person; and
are developing a plan for a restructure which is designed to improve the company’s financial position.
Directors seeking to rely upon these provisions should note –
The onus of proving that the safe harbour should apply rests upon the directors;
It only covers debts that are incurred in connection with the course of action during the period commencing when the course of action is first taken. It does not apply to debts incurred earlier;
The safe harbour can’t be relied upon if the company is failing to pay employee entitlements (including superannuation) or failing to comply with taxation law requirements.
Company laws are complex. At Everingham Solomons we have the expertise to assist you with all company law matters because Helping You is Our Business.
Buying a house is an exciting time however if you have not purchased a home before, or haven’t for a while, it is hard to know where to start, or how it all works! This short guide will help you through – from making your offer to buy, to a legally binding Contract.
Finance – one of the first things you should do is talk to your bank or finance broker. They will tell you how much you can borrow, the deposit you will need and what your repayments will be.
Research – get to know the property market. Look at properties sold in your area and attend open houses. Get to know real estate agents and let them know what you are looking for.
Offer – once you find your perfect place, make an offer! It is important to note at this stage you are not bound to buy the property and the seller is not bound to sell it to you, even though they have accepted your verbal offer. Both parties can change their mind, and should a higher offer be made the seller can certainly take it.
Advice – now that your offer has been accepted it is time to get some advice. Find a property Solicitor or Conveyancer to guide you through the process.
Inspections – these may include Pest and Building inspections, Survey report and inspection of Council’s records. It is ‘buyer beware’ – so make sure you know as much as possible about the property you are buying before you commit to the purchase.
Deposit – usually 10% of the purchase price. This can be paid any time after your offer is accepted. The deposit is usually held by the selling real estate agent. You will get your deposit back if you don’t proceed to exchange.
Contract – the Contract will be sent to your Solicitor/Conveyancer and you will then meet with them to go through the Contract.
Exchange – Once you have signed the Contract, are happy with your inspections and have formal approval of finance you are ready to exchange. Exchange is when both parties are officially ‘locked in’ to the purchase. Once you exchange you will also then know the settlement date – the day you get your keys!
Buying or Selling? Contact the Property Team at Everingham Solomons because Helping You is Our Business.
An Attorney acting pursuant to a Power of Attorney is required to comply with any and all conditions and limitations of the Power of Attorney instrument. A failure to do so, can result in the Attorney’s actions being declared unauthorised which in turn can lead to unintended consequences as the following case illustrates.
The deceased died in 2008. By her Will, the deceased gifted her interest in some real estate to her daughter. Some years before her death in 2002, the deceased had granted an enduring Power of Attorney to her son. In 2006 the deceased’s son signed paperwork as Power of Attorney for the deceased to sell the parcel of real estate that was the subject of a gift in the deceased’s Will. Importantly the Power of Attorney contained a condition or limitation in these terms:
“This Power of Attorney shall only be used upon my treating Medical Practitioner certifying that I am no longer physically or mentally able to sign documents or look after my own affairs.”
The son took no legal advice before acting under the Power of Attorney. He obtained a letter from the deceased’s treating medical practitioner which provided:
“… Over the last twelve months, we have noticed significant deterioration in her mental state and recent testing show [sic] that she is suffering from significant dementia. She has reached the stage which I feel that she may not be capable of looking after her own affairs.” [emphasis added]
Pursuant to legislation, the authority bestowed upon the son to act as Attorney for the deceased pursuant to the Power of Attorney was subject to compliance with the condition or limitation that the Power of Attorney was not to be used unless the deceased’s treating medical practitioner gave a certificate that the deceased was no longer able to sign documents or look after her own affairs. The condition or limitation did not require a medical opinion. It required certification. “The formality associated with that requirement added to the protection of the deceased that the power of attorney would not be used prematurely”. In this case the Court held that the Attorney had no authority to sell the deceased’s real estate because the requirement for a certificate from the deceased’s medical practitioner was not satisfied by the doctor’s letter. Ultimately the Court ordered that the deceased’s gift of her interest in real estate to her daughter in her Will may be traced through the proceeds of sale of the real estate which was ordered to be paid to the daughter in substitution for the specific gift in the deceased’s Will.
This case serves to highlight the importance for persons acting as an Attorney to adhere strictly to the conditions and limitations of the Power of Attorney instrument. At Everingham Solomons, we have the expertise to advise you in relation to the issues involving Power of Attorney, because Helping You is Our Business.
Click here for more information on Lesley McDonnell
PEXA is a platform for e-conveyancing and facilitates an electronic settlement of your sale or purchase of land in real-time. Put in its simplest form, it is part of the e-conveyancing process that deals with property settlement and land registration, and is supported by legislation nationally. It is anticipated that by 1 July 2019, electronic settlements will be compulsory in NSW.
Most conveyancers and solicitors are making the move towards electronic settlements now as it provides greater certainty and security of a successful property settlement. Whilst there are various factors that can impact a property settlement, a simple matter of documents not arriving or a cheque being spelt incorrectly can delay a settlement by days. This can cause significant stress, especially for vendors who are relying on settlement funds or for purchasers having to reschedule removalists.
PEXA removes the manual aspect of property settlements. Therefore, there is no need to wait for settlement documents to arrive or to rush to the bank to organise bank cheques. In fact, an electronic settlement uses electronic funds transfers which have a faster clearance period.
PEXA also facilitates real-time lodgement of documents including the validation of documents prior to settlement. In a manual settlement, it can be weeks after settlement before a Transfer is registered. If the Transfer is requisitioned by the Land and Property Information, the process can be even longer. This results in delays in notification to the applicable government departments of the change in ownership. Whilst rare, this delay can also cause issues in the event new legal interests are registered on the title prior to registration of the Transfer.
We are still in the transition period for electronic settlements. It is, therefore, important you discuss with your conveyancer or solicitor whether it is available in your sale or purchase as all parties must be agreeable to processing the transaction via PEXA. There is also a fee in settling via PEXA, however, this fee is offset by the costs incurred in manual settlements including bank cheque, postage and agency settlement fees.
Everingham Solomons has and will continue to extensively invest in training for solicitors and staff to ensure a seamless transition occurs with the new system and to continually enhance client service quality.
At Everingham Solomons, we aim to process your transaction with due speed and minimum inconvenience to you because Helping You is Our Business.
Click here for more information on Jessica Wadwell
Last year, the New South Wales Government introduced surcharge land tax and stamp duty upon land purchases and land holdings by foreign persons. The surcharges are payable in addition to land tax and stamp duty normally payable and they are significant –
The land tax surcharge is 0.75% for the 2017 year increasing to 2% for 2018 onwards; and
The stamp duty surcharge from 1 July 2017 is a massive 8%.
Both surcharges relate to residential land only and were intended to put a brake on the level of foreign investment which was seen as driving escalating home prices particularly in the Sydney market.
The legislation to implement these changes coupled with the interpretation adopted by Revenue NSW (the new name for the former Office of State Revenue) has had some unexpected consequences resulting in potential liabilities for taxpayers who certainly wouldn’t consider themselves to be foreign persons.
It is particularly important that anyone who holds land in or proposes to purchase land in a discretionary trust, check to see whether they are potentially caught by these surcharges and take remedial action where appropriate.
Most discretionary trusts give the trustee a very wide power to distribute income or capital to potential beneficiaries and the beneficiary class is usually quite expansive. The interpretation adopted by Revenue NSW is to the effect that a discretionary trust will be liable for the surcharges even though none of the beneficiaries who actually receive or are likely to receive distributions of income or capital are foreign persons. Essentially, if there is a theoretical possibility that a foreign person could be a beneficiary, then the surcharges will apply.
Depending upon the trust deed concerned, it may be a relatively simple matter to amend the trust to remove the prospect of surcharges applying.
As land tax is assessed on the basis of landholdings as at 31 December each year, it is important that trust deeds be reviewed prior to that time.
At Everingham Solomons we have the experience and expertise to assist you with this issue because Helping You is Our Business.
Sometimes getting back to work after a workplace injury is not a seamless transition, particularly if you can’t perform your previous role. If after an injury your doctor has certified you capable of doing some work or even your pre-injury work hours, but has placed restrictions on what type of work you can do, this can become tricky to navigate what your role at work will be with your employer. Some examples of restrictions your doctor may have provided could be a restriction in the amount of weight you are able to lift, the number of hours you are either able to sit or stand for, or a restriction on where in the workplace you are able to work.
If on your return to work your employer tells you they have no suitable duties for you or that they have changed workers compensation insurers and the new insurer will not cover you, this can be refuted. Under section 49 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) your employer must provide suitable work at your request. The employment provided needs to be suitable and so far as reasonably practicable the same as, or equivalent to, the employment you held at the time of the injury. As for the workers compensation insurer not covering you, your employer is correct in saying the new insurer will not cover you but the workers compensation insurer at the time of the injury should cover you, regardless if they are no longer your employer’s current insurer.
There are some circumstances where employment does not have to be provided, for example if providing employment is not reasonably practicable.
If you are currently facing this problem and are having difficulty with your employer providing suitable duties then please contact Everingham Solomons because Helping You is Our Business.
A company is its own legal entity. While it doesn’t have a pulse, just like a person, a company can enter into contracts, incur debts, sue and be sued in its own name.
The directors of a company however must be living, breathing people. They are the people that control the company. Although the company is able to do things in its own name, it does so at the will of the directors.
Because a company is a separate entity from the directors that guide it, normally a company’s debts are repaid only from the company’s assets. The company’s creditors do not have access to the directors’ personal assets to repay the company’s debts. Understandably, this causes frustration for the creditors where the company is broke but its directors appear wealthy.
One of the few exceptions to this rule comes from section 588G of the Corporations Act which makes it an offence for a director to causes a company to incur a debt knowing that the company cannot repay it. The offence is known as insolvent trading.
If a director causes or allows the company to trade whilst insolvent , the creditor, the company liquidator, or ASIC can sue the director personally to have the director repay the debt either to the creditor or the company.
The proceedings against the company director are not only compensatory. They can be criminal in nature as well. ASIC has the power to prosecute directors for insolvent trading with the penalties including fines up to $220,000 and imprisonment for 5 years. The director can also be disqualified from acting as a director in the future.
A word of warning however: Insolvent trading cases are relatively rare. They are legally complex and expensive to pursue. Very few company liquidations result in insolvent trading prosecutions.
The practicality of dealing with companies is that creditors should be diligent in investigating the company’s creditworthiness and should often take written guarantees from the directors or shareholders behind the company.
If you have any commercial litigation enquiries, contact Everingham Solomons because Helping You is Our Business.
As of Monday 20 November 2017 changes to the Graduated Licensing Scheme (the process you go through from learner to fully licensed driver) are being implemented for new licence holders.
These changes only apply to new licence holders, being people applying for a new category of licence after 20 November 2017.
For new licence holders after 20 November 2017, there are 3 major changes:
1. Hazard Perception Test
The Hazard Perception Test (“HPT”) is a computer based test that measures a driver’s ability to recognise potentially dangerous situations and respond appropriately. Currently Provisional P1 (red) licence holders must pass the HPT to progress to a Provisional P2 (green) licence. As of 20 November 2017 Learner Drivers will need to pass the HPT before they are eligible to undertake a driving test.
2. Driver Qualification Test
The Driver Qualification Test (DQT) is a two part computer based test that assess a driver’s knowledge of the road rules and a driver’s ability to recognise and respond to hazards. Currently Provisional P2 licence holders must pass the DQT to progress to a full licence. On 20 November 2017 the DQT will be abolished for new licence holders.
3. Extension of Licensing Period for Suspended Drivers
A driver must hold a Provisional P2 licence for a period of 2 years before they are eligible for a full licence. Under the new scheme, drivers will not have to undergo any further testing at this stage however they will only be eligible for a full licence if they have not committed an offence resulting in suspension. Where a Provisional P2 driver receives a demerit point suspension, or has their licence suspended for unsafe driving, they will remain a provisional driver for an extra 6 months for every suspension they receive.
All existing Licence conditions and restrictions for learner and provisional drivers (eg. speed limits, probation on driving high powered vehicles; peer passenger restriction; zero blood alcohol limit; prohibition on using a mobile phone while driving; and displaying plates on the front and rear of the vehicle) remain in force.
At Everingham Solomons Solicitors we have the knowledge and experience to assist you in all traffic law matters because Helping You is Our Business.
Companies are a common structure favoured by businesses, particularly where there are a number of unrelated parties involved. One of the main reasons for this is because the shares in the company provide for a clear definition of the interest or share held by each shareholder in the company and its assets and also because it facilitates with relative ease, the sale and purchase of shares and accordingly the change of shareholders’ interests in the company.
Another draw card prompting people to use a company structure, is the ability to lock in a flat corporate tax rate in the year in which the income is derived, with the potential for shareholders to claim franking credits when dividends are subsequently paid. Currently the corporate tax rate is in the range of 28.5 % to 30% and there may be small cuts to that tax rate in the future.
As a comparison, an individual will be paying at least 34.5% tax rate, including the Medicare levy for every dollar above $37,000 of income in a year.
From an asset protection perspective, the use of a company can provide a high level of protection, if the objective is to quarantine the risk to the company. This is because the company’s creditors will generally only have access to the company’s assets in the event of insolvency and will not have access to a shareholders personal assets.
Where however it can be shown that a company has been trading whilst insolvent or where there are unpaid company tax debts, directors may be held personally liable for the debts of the company.
A significant disadvantage of a company particular in relation to holding assets which are likely to increase in value, is that companies are ineligible for the 50% capital gains tax discount. Furthermore, the small business capital gains tax concessions are effectively negated by the use of a corporate entity.
The time to consider which entity you will commence or run your business is at the time you are considering commencing the business, as there are usually significant transactional costs and taxes associated with changing the structure after the business has commenced.
We can at Everingham Solomons, assist you with most business matters because Helping You is Our Business.
My name is Libby Campbell and I have recently joined the team at Everingham Solomons as a Solicitor.
I was born and educated in Tamworth where I attended Tamworth Public School and McCarthy Catholic College. I then attended the University of New England in Armidale graduating with a Bachelor of Arts, majoring in Sociology, and a Bachelor of Laws before completing my studies with a Graduate Diploma in Legal Practice through the College of Law in Sydney.
While I love visiting the capital cities and traveling overseas, I choose to live and work in Tamworth because our region provides wonderful opportunities and lifestyle. I have always played in the local competitions for netball and oztag, and I enjoy watching the latest production from the Tamworth Musical Society.
I bring to my role at Everingham Solomons prior experience working in a multinational specialist personal injury firm. At Everingham Solomons, I will continue my work in personal injury, particularly Workers Compensation, working with Director Mark Grady. I will also be pursuing my interest in Family Law working with Director Jennifer Blissett. Additionally, I will further develop my knowledge in property law, having worked locally in the real estate industry prior to commencing my tertiary studies.
Everingham Solomons is a progressive legal firm, with a strong focus on developing and maintaining current legal knowledge relevant to the lives and businesses of our clients. We have accredited specialists in Personal Injury Law, Family Law, Property Law and Business Law. This proven expertise coupled with vast practice experience of the Directors of the firm enables Everingham Solomons to service clients in the North West and far beyond.
I am looking forward to meeting clients and assisting with your legal matters.
Click here for more information on Libby Campbell.
Company directors may be personally liable for a debt incurred by the company if –
Sometimes getting back to work after a workplace injury is not a seamless transition, particularly if you can’t perform your previous role. If after an injury your doctor has certified you capable of doing some work or even your pre-injury work hours, but has placed restrictions on what type of work you can do, this can become tricky to navigate what your role at work will be with your employer. Some examples of restrictions your doctor may have provided could be a restriction in the amount of weight you are able to lift, the number of hours you are either able to sit or stand for, or a restriction on where in the workplace you are able to work.
