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The legal world is continuously changing. As a business person without legal qualifications, it can be overwhelming. We regularly produce articles and legal news in Australia so you can get an overview of legal matters that are relevant to you.
You'll also find articles about our team, our firm, and our services, so you can get to know us better. Feel free to dig into our current library, and if you have any questions, you know who to contact - the team at Sierra Legal are waiting to help.
In today’s fast-evolving professional world, remote work has transformed from a temporary solution into a core aspect of modern workplace strategy. As businesses adapt to more flexible and innovative approaches, the benefits of remote work are being widely embraced by organisations and employees, reshaping how we think about productivity, work-life balance, and adaptability.
In today’s fast-evolving professional world, remote work has transformed from a temporary solution into a core aspect of modern workplace strategy. As businesses adapt to more flexible and innovative approaches, the benefits of remote work are being widely embraced by organisations and employees, reshaping how we think about productivity, work-life balance, and adaptability.
Sierra Legal's Remote Work Model: Pioneering for 14 Years
At Sierra Legal, we have embraced remote working for over 14 years, ensuring that our team and clients benefit from its numerous advantages. These include:
Remote work allows our team greater autonomy over their schedules, helping to balance professional and personal commitments. With no daily commute, our staff have more time for family, hobbies, and personal responsibilities while maintaining high levels of productivity. This approach has significantly contributed to increased job satisfaction and overall well-being across the firm.
At Sierra Legal, we have seen that remote work often leads to higher productivity. Our team benefits from fewer office distractions, the ability to create their ideal work environment, and seamless connectivity through advanced technology platforms. Tools like video conferencing and project management systems ensure that we stay connected and aligned, allowing us to continue delivering high-quality legal services.
Remote work has enabled Sierra Legal to reduce overhead expenses, such as office space and utilities. By allowing our team to work from home, we are able to invest more resources into technology and client service. It also opens up the opportunity to hire top-tier talent from across the country, ensuring we maintain the highest standards of legal expertise without location-based limitations.
Sierra Legal’s remote model enhances inclusivity by empowering employees with various personal responsibilities to excel. For individuals balancing raising children, caregiving or pursuing elite athletic careers, remote work offers the flexibility needed to navigate their unique circumstances. This adaptability ensures that all team members can fully engage and contribute their talents, enriching our workplace with diverse perspectives and skills.
Staff Member Spotlight: Ellie Sanford
Sierra Legal’s flexible and innovative working model provided the perfect opportunity for Ellie Sanford to join the team over a year ago.
As a full-time professional 800m track and field athlete for Puma, Ellie has been able to successfully balance her dual careers in both law and athletics.
Although Ellie was a talented athlete during her teenage years, she took a break from competitive sports to focus on her studies. After completing her Law and Commerce degrees at Monash University, she returned to full-time athletics training. Her dedication yielded results—she steadily improved her personal bests, becoming one of Australia’s top middle-distance runners. Since then, her athletic career has taken her to competitions all around the world, including representing Australia at the 2023 World Championships in Budapest.
Ellie credits Sierra Legal's remote working model with enabling her to successfully pursue both of her passions. "Balancing a professional sports career with law is challenging, but Sierra Legal's innovative approach to remote work has made it achievable. Their support has allowed me to perform at my best in both worlds," Ellie states.
Ellie's story is a testament to the power of flexibility and work-life balance - values that Sierra Legal has embraced for over 14 years.
Contact the team at Sierra Legal today to explore how we can support you.
As Australia’s legal landscape continues to shift, we believe it is crucial to stay aligned with the needs of our clients and the evolving challenges they face. That is why we have taken the opportunity to refresh Sierra Legal’s mission, vision and values. This update reflects who we are today—a dynamic and innovative legal firm, committed to delivering excellence while at all times maintaining the highest levels of integrity and client-focused service.
As Australia’s legal landscape continues to shift, we believe it is crucial to stay aligned with the needs of our clients and the evolving challenges they face. That is why we have taken the opportunity to refresh Sierra Legal’s mission, vision and values. This update reflects who we are today—a dynamic and innovative legal firm, committed to delivering excellence while at all times maintaining the highest levels of integrity and client-focused service.
Mission
Our mission is now more focused than ever: to deliver outstanding commercial solutions for our clients, by using our top-level experience and innovative approach.
Vision
Our refreshed vision is forward-thinking and ambitious: to continually create new and better ways of delivering legal services and utilise the best technology for the benefit of our clients and our staff.
Values
Our updated values reflect what we stand for and how we operate, both within the firm and in our relationships with clients:
As we move forward with this renewed focus, our mission, vision, and values are not just words — they are our commitment to continue to deliver outstanding commercial solutions for our clients, using an innovative and friendly approach.
Please reach out if you would like to hear more about how our updated mission, vision and values translate into the quality of our legal services.
Is registering your retention of title right on the PPSR all it’s cracked up to be? In this blog, we spotlight some of the limitations of registration, and outline additional strategies suppliers may consider implementing to manage credit risk.
You may know that if your business supplies goods to a customer under a contract or terms and conditions which include a retention of title provision (ROT), you need to have a valid registration on the Commonwealth personal property securities register (PPSR) to ensure the ROT will be enforceable against the customer if it becomes insolvent. However, from a credit risk management perspective, it needs to be recognised that even a valid PPSR registration of a supplier’s ROT has its limitations.
A classic ROT stipulates that ownership of goods sold by the supplier to its customer does not pass to the customer until the customer has paid for the goods. Many ROTs are drafted as ‘all moneys’ ROTs. That is, they provide that the customer does not acquire ownership of goods from the supplier until the customer pays all amounts owing by the customer to the supplier (whether it be for the price payable for those goods, or any other goods bought by the customer from the supplier at any time). ROTs typically give the supplier the right to re-take goods supplied to the customer if the customer fails to pay the supplier on time.
The inclusion of an ROT in a supply contract or terms and conditions will usually give rise to a security interest which is registrable on the PPSR as a purchase money security interest (or PMSI). A PMSI includes a security interest taken in goods supplied to a customer, to the extent that it secures all or part of the purchase price of those goods. An ROT which is properly registered as a PMSI confers a ‘super priority’ on the supplier in respect of the goods supplied to the customer, as well as the ‘proceeds’ of those goods (such as money received by the customer when it sells the goods to its own customers, and receivables owing to the customer arising from such sales). For example, a properly registered ROT PMSI will give the supplier a priority over security taken by a bank over ‘all present and after-acquired property’ (All PAP) of the customer under a general security agreement, even if the bank registered its All PAP security on the PPSR before the supplier registered its ROT PMSI.
To ensure a valid registration of an ROT as a PMSI, certain requirements need to be met, including (where the goods form part of the inventory of the supplier’s customer) registering on the PPSR before the customer takes possession of the goods.
Despite the above benefits of a valid ROT PMSI registration, there are some limitations which suppliers of goods should be aware of, including the following:
Therefore, a supplier may not wish to rely on ROT PMSI registrations alone to protect itself against customers that default or become insolvent. Other credit risk management strategies which a supplier may wish to consider include:
It is important to note that there is no ‘one size fits all’ approach to managing credit risk. For instance, a supplier with many customers with low value transactions may manage credit risk differently from a supplier which engages in high value transactions with a small number of customers.
While it’s important that you properly register an ROT on the PPSR against your customer if you wish to ensure that it will be enforceable on the customer becoming insolvent (and that the ROT will have the appropriate priority against competing registered security interests), registration will not give you complete protection. You should be aware of the limitations of registering on the PPSR and, if necessary, adopt appropriate additional risk management strategies.
If you need advice on registering your ROT on the PPSR, or the benefits and limitations of registration, please contact Sierra Legal.
Navigating commercial law can be complex, and misunderstandings are all too common. These misconceptions often lead to costly mistakes or missed opportunities. In this blog, we’ll debunk some of the most widespread myths to help you avoid potential pitfalls and make more informed decisions.
Navigating commercial law can be complex, and misunderstandings are all too common. These misconceptions often lead to costly mistakes or missed opportunities. In this blog, we’ll debunk some of the most widespread myths to help you avoid potential pitfalls and make more informed decisions.
This is one of the most frequently misunderstood aspects of commercial law. While it’s true that a company is considered a separate legal entity, directors and officers can still be held personally liable under certain circumstances. For example, this can occur if directors breach their duties, trade while insolvent, or engage in fraudulent or negligent activities. Directors owe a duty of care to the company and must act in its best interest. If these duties are breached, personal liability can arise despite the company’s separate legal status.
Sierra Legal’s tip: Directors need to be particularly cautious during financially challenging periods for the company to avoid insolvent trading, which could result in personal liability for the directors.
While Australian contract law recognises verbal agreements in some cases, relying on a handshake deal can be risky. Without a written contract, it can be difficult to prove the terms of the agreement if a dispute arises. Written contracts provide clarity and reduce the chances of misunderstanding. Additionally, certain transactions, like those involving the sale of land, are legally required to be in writing. In commercial dealings, a well-drafted written contract is always preferable to avoid costly legal disputes.
Sierra Legal’s tip: Always seek a written contract for key business transactions, even if there’s trust between the parties. It’s about protection, not distrust.
Not necessarily. Just because a term is written into a contract, that doesn’t automatically make it legally binding. Some terms may be deemed unfair or unenforceable, especially in the context of consumer and small business contracts. Under the Australian Consumer Law (ACL), unfair contract terms can be voided, particularly in standard form contracts. These include terms that create an imbalance of power, allow one party to terminate without good reason, or impose harsh penalties on one side.
Sierra Legal’s tip: Ensure contracts are balanced and compliant with all applicable laws. Don’t assume every term will hold up in court, especially if it unfairly favours one party.
Shareholders often believe they can control or manage the company’s day-to-day operations. However, this is not usually the case. Typically, the board of directors is responsible for managing the company. Shareholders are generally entitled to vote on significant matters, such as appointing directors or approving major transactions, but they do not get involved in daily management. Shareholders are the owners, but the directors are the decision-makers.
Sierra Legal’s tip: As a shareholder, it’s essential to understand the limits of your rights. Shareholder agreements and the company’s constitution often outline these boundaries, so it’s important to be familiar with them.
Many individuals and small business owners believe that legal advice is unnecessary for small transactions, assuming the risks and complexities are minimal. They often think that they can handle these transactions on their own without incurring legal fees. However, even small transactions can carry significant legal implications.
Sierra Legal’s tip: Always consult a legal professional, regardless of the transaction size. Doing so will allow you to make better-informed decisions and ultimately contribute to the success of the transaction.
Conclusion
Legal issues can be complex, and misunderstandings can lead to costly errors or missed opportunities. By seeking legal advice when entering contracts, managing corporate governance, or addressing liability matters, you can protect your interests and ensure compliance with the law.
Contact the team at Sierra Legal today to explore how we can support you.
Navigating the Australian Foreign Direct Investment (FDI) landscape can be complex, especially with the regulatory oversight of the Foreign Investment Review Board (FIRB). In this blog post, we'll delve into the FIRB approval process and highlight the key considerations for foreign investors looking to invest in Australia.
Navigating the Australian Foreign Direct Investment (FDI) landscape can be complex, especially with the regulatory oversight of the Foreign Investment Review Board (FIRB). In this blog post, we'll delve into the FIRB approval process and highlight the key considerations for foreign investors looking to invest in Australia.
Australian FDI refers to the investment made by foreign entities into Australian businesses and assets. The Australian government regulates FDI through FIRB, which evaluates foreign investment proposals to ensure they align with national interests. Understanding FIRB's guidelines, thresholds and approval processes is essential for foreign investors. Significant criminal and civil penalties can apply for non-compliance.
The process of gaining FIRB approval is summarised below.
Before diving into the Australian market, foreign investors must familiarise themselves with the following key considerations:
Navigating the complexities of Australian FDI and FIRB requires strategic guidance and legal expertise. Sierra Legal can provide foreign investors with comprehensive legal support throughout the investment lifecycle, including assistance with the establishment of appropriate investment vehicles, drafting and negotiating agreements in relation to the investment, and advising on and obtaining any necessary FIRB approvals. Get in touch with one of our team members today.
The Federal Government is poised to revamp the ‘sophisticated investor’ regime. This blog will explore the existing sophisticated investor test, analyse the proposed changes, and assess the potential implications of these alterations on the investment landscape for both investors and corporations.
The Federal Government is poised to revamp the ‘sophisticated investor’ regime. This blog will explore the existing sophisticated investor test, analyse the proposed changes, and assess the potential implications of these alterations on the investment landscape for both investors and corporations.
Understanding the current regime
In Australia, the term ‘sophisticated investor’ is defined under the Corporations Act 2001 (Cth) and carries specific financial and regulatory implications. Individuals or entities meeting specific financial criteria, such as a certified net asset value of at least $2.5 million (including the family home) or a gross income of $250,000 per annum for the last two years, gain access to a broader spectrum of financial products and investment opportunities that may not be available to retail investors.
While this status opens doors to potentially lucrative investments like private equity, venture capital, early-stage startups and unlisted real estate, it also entails forgoing certain consumer protections. Sophisticated investors are deemed capable of navigating higher-risk activities, such as buying shares without a prospectus, and are subject to different regulatory considerations compared to their retail counterparts.
What are the proposed changes?
The proposed adjustments to the sophisticated investor regime are geared towards refining the criteria for determining eligibility. These proposed changes include:
Why the changes?
The drive behind these changes stems from the aim to enhance investor protection and adapt to the ever-changing financial landscape. Concerns within the Federal Government have emerged due to the static nature of the test thresholds, which were established in 2001. The lack of adjustment has resulted in a significant surge in the percentage of Australians meeting the criteria for sophisticated investors, escalating from a mere 1.9% in 2002 to over 16% in 2021. This notable increase is primarily attributed to the rapid appreciation of family home prices, facilitating the qualification of smaller investors who may be averse to substantial losses as sophisticated investors.
Potential implications for investors
The suggested alterations to the sophisticated investor regime may carry substantial consequences and potential impacts for investors, such as:
Potential implications for corporations
A more stringent sophisticated investor test may result in a decline in the number of individuals and entities meeting the criteria, carrying significant implications for corporations, including:
In response to these potential changes, corporate entities are advised to proactively adjust their strategies. Staying informed about regulatory developments, seeking advice from legal and financial experts, and reevaluating investor outreach strategies are essential for navigating the evolving landscape. As regulations evolve, diversifying investment strategies and considering a broader range of potential investors, both sophisticated and retail, may help mitigate the effects of any alterations to the sophisticated investor test.
Conclusion
Stay tuned for further updates on the sophisticated investor regime. If you have any questions or would like to discuss these developments further, please don't hesitate to reach out to the Sierra Legal team.
The Personal Property Securities Act 2009 (Cth) (‘PPSA’) is set to undergo a significant transformation. This blog delves into the PPSA, the proposed changes, and why businesses should pay attention and prepare for the impending changes.
The Personal Property Securities Act 2009 (Cth) (‘PPSA’) is set to undergo a significant transformation. This blog delves into the PPSA, the proposed changes, and why businesses should pay attention and prepare for the impending changes.
The PPSA is a comprehensive legal framework that governs the registration and management of security interests in personal property. It was introduced to simplify and standardise the process of securing assets, reducing disputes and enhancing transparency in transactions.
The Personal Property Securities Register (‘PPSR’) is the online platform where these security interests are registered and searched. It acts as a centralised database, allowing businesses and individuals to record their security interests and conduct searches to determine if another person or entity has existing security interests registered against it.
On 22 September 2023, the Australian Government invited public consultation on its response to the 2015 statutory review of the PPSA (‘Whittaker Review’). The Whittaker Review made 394 recommendations to reduce complexity and allow the PPSA to better meet its objectives. Of the 394 recommendations, the Government has proposed to accept (in whole or in part) 345 recommendations.
The proposed reforms are designed to assist small business, financiers and consumers by simplifying processes, reducing risks and costs, and increasing usability of the PPSR. The exposure draft of the amending legislation and regulations, and other consultation materials, are available here.
Some of the proposed changes to the PPSA include:
Some of the key changes to the PPSR registration process include:
What’s next?
The Government is seeking input on the proposed reforms to assess whether they will meet the needs of lenders, consumers and businesses. The submission period opened on 22 September 2023 and is scheduled to close on 17 November 2023.
These suggested reforms might require adjustments to contracts, documents, IT systems, and business practices. Secured parties should carefully evaluate the potential impact on their current registrations, security interests, and overall business operations as they move forward.
Stay tuned for further updates on the PPSA. Contact the Sierra Legal team today to discuss how the reforms will affect your business.
Time is running out to ensure compliance with Australia's new Unfair Contract Terms (UCT) regime.
Starting 9 November 2023, significant changes will take effect, impacting standard form small business contracts and consumer contracts.
Read our blog for a concise breakdown of the updates and take action before 9 November to ensure your business complies with the UCT regime.
Australia’s unfair contract terms (UCT) regime is designed to protect consumers and small businesses from unfair contract terms in certain 'standard form’ contracts.
On 9 November 2023 significant changes to the UCT regime will take effect and, among other things, the range of contracts that fall within the operation of the regime under the Australian Consumer Law and the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) will be expanded.
Notably, the changes include broadening what constitutes a small business contract. Under the Australian Consumer Law, the UCT regime may apply to standard form business contracts where one party to the contract:
Similar changes will apply under the ASIC Act, although there is an additional requirement for the upfront price payable under the relevant contract to be $5million or less (excluding interest).
Further, Courts will have additional powers in relation to contracts that contain unfair terms under the UCT regime, including the ability to impose significant financial penalties. For example, companies that breach the UCT regime under the Australian Consumer Law could incur a maximum financial penalty that is the greater of:
If your business uses standard form consumer contracts or small business contracts, now is the time to act.
If you need assistance to ensure your business complies with the UCT regime, please call Sierra Legal.
Companies often encounter the need to transfer contracts, whether due to internal restructuring or commercial transactions. However, this process isn't as straightforward as a mere name change. Generally, contracts can be legally transferred using one of two methods: assignment or novation.
Explore our latest blog to delve into these methods and gain valuable insights into the complexities of complexities of transferring contracts.
Whether it's due to internal restructuring or meeting commercial requirements like a business sale, many companies encounter the need to transfer contracts from one entity to another. However, it's important to note that this process is not as simple as replacing one party's name with another. In most cases, contracts can be legally transferred through one of two methods: assignment or novation.
An assignment of a contract involves transferring the rights (but not the obligations) of the outgoing party to the incoming party. Typically, an assignment doesn't require the consent or agreement of the other party involved in the contract (the continuing party), unless specifically stated in the terms of the relevant contract.
To effect an assignment, a deed is often executed by both the outgoing party and the incoming party. If the consent of the continuing party is necessary, it is usually convenient to include this consent in the deed and have the continuing party execute it as well.
An assignment does not relieve the outgoing party of its ongoing obligations to the continuing party under the contract. In order to protect the outgoing party against future breaches of contract by the incoming party, it is common for the assignment deed to include provisions where the incoming party:
Even if the consent of the continuing party is not required, for the assignment to have legal effect written notice of the assignment must be given to the continuing party. This written notice ensures that all parties involved are informed about the transfer.
Another method to transfer contracts is through novation. In legal terms, novation refers to the substitution of a new contract for an existing one, maintaining the same terms as the original contract, but between the continuing party and the incoming party instead of between the continuing party and the outgoing party. Unlike assignment, a novation transfers both the rights and obligations under the relevant contract from the outgoing party to the incoming party.
In practice, novation is commonly achieved by substituting the outgoing party with the incoming party. This means that, from the effective date of the novation, the incoming party assumes all the rights and obligations previously held by the outgoing party, and the continuing party releases the outgoing party from any further obligations under the contract.
It is important to note that the agreement of the continuing party is always required for a novation to be legally effective. While novation offers certain advantages over an assignment, such as a better legal liability position for the outgoing party, it can be more challenging to accomplish due to the necessity of securing the continuing party's agreement.
Similar to assignment, novation typically involves executing a deed of novation, which states the agreement of all parties to substitute the outgoing party with the incoming party.
In addition to novation and assignment, there are indirect methods available for transferring rights and obligations under a contract. For example, where a party to a contract is a company, it may be possible to transfer the company's rights and obligations under a contract by the shareholders of that company transferring their shares in the company to a third party. By doing so, the company remains a party to the contract, eliminating the need for assignment or novation. Instead, a new shareholder obtains control of the company and indirectly obtains the benefit of the rights, and the burden of the obligations, of the company under the contract.
When faced with the need to transfer a contract, whether through assignment, novation, or an indirect method, it is important to consider several factors to determine the best option for your specific situation, including:
By carefully evaluating these factors, you can make an informed decision on the most suitable transfer method for your specific circumstances.
For more information and to navigate the transfer process smoothly, please contact any member of the Sierra Legal team, whose contact details can be found here (Link).
Discover the key considerations for contracting with legal entities in our latest blog.
From identifying the right party to confirming their authority to contract, we cover it all.
Learn about:
When entering into a contract, it is essential to be well-informed about the identity of the other party. Both you and the counterparty will have responsibilities and obligations under the contract, such as providing goods or services, or making payments, or both. Ensuring that you are contracting with a legal entity or “legal person” will mean that you can sue them if they breach the contract. Likewise, it is important to be aware of those who have the ability to take legal action against you.
Here, we provide some tips to help you navigate the complexities of contracting with various types of legal entities.
You should only enter into a contract with a legal entity (or ‘legal person’), being one that can, under the law, sue and be sued. For example:
Apart from ensuring that the other party is a legal entity, it is vital to confirm that you are contracting with the intended party. Mistakenly entering into a contract with the wrong party can lead to complications and difficulties, particularly in cases involving businesses operated through different entities. For instance, if an individual operates a business through a company, and you are a customer or supplier of the business, any contract with the business should be entered into by the company (as the supplier of goods or services, or your customer, as applicable), and not the associated individual (who may be a director or shareholder of the company). Contracting with the individual in this example could give rise to complications, such as if you needed to make a claim for defective goods or services supplied, or a claim for money owed to you, under the contract.
To safeguard your rights, it is good practice to:
While verifying a party’s authority to enter into a contract may not be necessary where they are an individual or a company, it becomes crucial when dealing with trusts or partnerships, particularly in high-value or high-risk contracts. Consider taking the following steps:
By verifying that the counterparty is a duly recognised legal entity, possesses the necessary authority to act and meets your satisfaction as the intended contracting party, you can mitigate risks, protect your interests, and establish a solid foundation for successful contractual relationships. For more information or to seek specific advice tailored to your unique circumstances, please contact any member of the Sierra Legal team, whose contact details can be found here (LINK).
Changes to the unfair contract terms regime come into effect on 9 November 2023 which will broaden the scope of business contracts that will fall within the regime. From this date, proposing, using, or relying on unfair contract terms in standard form contracts will be banned and penalties for breaches of the law will apply.
Read our latest blog post to determine if your business will be affected by the changes.
Changes to the unfair contracting provisions of the Competition and Consumer Act 2010 (Cth) (CCA) and the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) are due to take effect from 9 November 2023. The changes:
Ahead of the changes taking effect, Australian businesses, including those that were previously unaffected by the unfair contracts regime, should review their standard form contracts to ensure they do not contain any unfair contract terms.
A term of a standard form consumer or small business contract may be unfair if it:
Whether a contract term is ‘unfair’ depends on the particular circumstances of that contract and ultimately can only be determined by a Court. However, guidance can be obtained from examples given by the ACCC and applicable case law. Terms which could be ‘unfair’ include:
The changes to the unfair contracts regime offer increased protections for consumers and small businesses, and include:
Previously, if a Court found a relevant contract term ‘unfair’ the Court could deem that term void and unenforceable. Under the new regime:
The new regime will apply to a contract if one party to the contract is a ‘small business’. The definition of ‘small business’ has been expanded to be one that:
In circumstances where the ASIC Act applies (i.e. in relation to financial products and services) there is an additional requirement that the upfront price payable under the contract does not exceed $5 million (increased from $1 million) .
A contract may be determined to be a ‘standard form contract’ despite there being an opportunity for a party to negotiate minor changes to the contract or to select a term from a range of options provided.
Increased penalties were introduced in November 2022 for breaches of the CCA and those penalties will apply to the new unfair contract terms regime. For individuals, the maximum penalty that may be imposed by a Court is $2.5 million and for companies, the maximum penalty is the greater of:
In addition to these penalties, the Court will have additional powers, including to:
The expanded unfair contracts regime will apply to standard form consumer contracts and small business contracts: (i) entered into from 9 November 2023; or (ii) renewed or varied from 9 November 2023.
The changes broaden the scope of contracts that will fall within the revised unfair contract terms regime and can result in significant financial penalties for businesses. It is likely that the Australian Competition and Consumer Commission (ACCC) will be prioritising enforcement of the new regime and will be active in commencing proceedings against businesses who have not complied with their obligations.
Your business should carefully review its standard form contracts with small businesses and consumers for terms that are potentially unfair. As part of this review your business should identify, and ensure it has systems in place to continue to identify, all commercial partners who may fall within the new definition of ‘small business’.
If you need assistance reviewing your contracts and ensuring compliance with the updated unfair contracts regime, please call Sierra Legal.
Planning to sell your business?
Discover how to maximise your business’s sale potential with our comprehensive blog - Thinking of selling your business? Here’s how to maximise your sale potential
From organising financial records to safeguarding intellectual property, we cover essential steps to ensure a successful sale.
Selling a business can be a significant undertaking, requiring careful planning and execution. To improve the chances of a successful sale it is essential to present your business to potential buyers in the best possible light. Over the next few weeks, we will share some of the key factors you should consider if you are thinking of selling your business. Addressing these considerations can maximize the sale potential of your business.
It is important to evaluate contracts and agreements associated with your business. Identify key contracts, such as customer agreements, supplier contracts, leases, and employment agreements. Evaluate the ability to transfer or assign these agreements, including whether consent will be required from the other parties to the agreement. Ensure that key contracts have been properly dated, executed, and have not expired. Be sure to address any issues with respect to the contracts proactively to avoid complications during the sale process.
Before initiating the sale process, it is imperative to review and organise your financial records. Buyers will closely scrutinize your financial statements to evaluate the profitability and sustainability of your business. Ensure financial records, including income statements, balance sheets, tax returns, and cash flow statements, are accurate, up-to-date, and well-documented. Consider engaging an accountant or financial advisor to assist you in preparing these records to demonstrate the full potential of your business.
Protecting your intellectual property rights is crucial when selling a business. Conduct an audit of your IP assets, including trademarks, copyrights, patents, trade secrets, and proprietary technologies. Verify that all necessary registrations are in place and up to date. Ensure that your IP is adequately protected through confidentiality agreements, non-disclosure agreements, and non-compete clauses. Review existing IP assignments and licences to verify their transferability and identify any restrictions or obligations. Demonstrating a strong and protected IP portfolio will enhance the perceived value of your business to potential buyers.
Before selling your business, ensure that your operations are fully compliant with relevant laws and regulations. Conduct a thorough review of your business practices, licenses, permits, and regulatory obligations to identify any non-compliance issues. Rectify any deficiencies and ensure that any relevant licences and permits can be transferred to the new owner. Demonstrating a commitment to legal compliance will instil confidence in potential buyers and minimize potential legal risks associated with the acquisition.
Evaluate your employee matters to ensure compliance with employment laws and regulations. Review employee contracts, confidentiality agreements, non-compete clauses, and any agreements that may impact the transferability of employees. Assess any potential labour disputes, outstanding employee claims, or pending litigation that may affect a sale of the business. Ensure that key employees are satisfied and engaged, as their departure during the sales process could adversely affect the value of your business. Open communication and preparation will promote a smoother transition and maintain employee trust and morale.
If your business operates from a leased property, review your lease agreement to determine its transferability. Identify any restrictions or conditions related to lease assignment and prepare to obtain the necessary consents from the landlord. If you own the property, a property lawyer should be engaged to ensure the smooth transfer of ownership and address any potential encumbrances or title issues. Resolving lease or real estate matters upfront will mitigate complications during the sale process.
In an increasingly digital world, data privacy and protection have become critical concerns. Evaluate your business's data protection practices and ensure compliance with relevant privacy laws, such as the Australian Privacy Principles (APPs). Identify and address any potential data breaches or vulnerabilities to protect the privacy rights of your customers, suppliers and employees. Demonstrating a robust data protection framework will enhance the reputation of, and trust in, your business.
Prepare for the due diligence process by compiling essential documents and information that buyers may request. Be transparent and forthcoming with disclosures to potential buyers, providing them with accurate and complete information about the business. Conduct your own due diligence on the buyer to ensure their credibility and ability to complete the transaction. Engage legal professionals to guide you through the due diligence process and assist in identifying and addressing any legal or financial issues that may arise. By conducting thorough due diligence and making proper disclosures, you can build trust with potential buyers and minimize the risk of post-sale disputes or liabilities.
Selling a business requires careful preparation and attention to detail. By considering the key factors mentioned above, you can position your business in the best possible light for potential buyers. Seeking advice from professionals experienced in business sales will further increase your chances of a successful and profitable transaction.
Please contact the Sierra Legal Team if you require further information about this topic or assistance with the sale of your business.
In our latest eye-opening blog - Unlocking the Power of Shareholders Agreements: Beyond the Illusion of a 'Standard' Legal Document - we debunk the misconception that shareholders agreements are mere formalities.
Discover why customisation is crucial and how these agreements can shape the relationship between your company and its shareholders.
In the realm of business, a shareholders agreement serves as a crucial compass regulating the relationship between a company and its shareholders and the management of the company and its affairs. Yet, the misconception lingers that this agreement is a mere formality, a quick-fill template. In truth, the creation of a valuable shareholders agreement demands meticulous deliberation and purposeful tailoring. While certain issues and themes may be ubiquitous, no two agreements are likely to address them all in the same way.
The nature of the issues to be dealt with in a shareholders agreement (and how they are addressed) will depend on factors such as:
As an example, in the case of a company which has 2 or 3 equal shareholders who work in the business, the following are likely to be paramount considerations in the drafting of a shareholders agreement:•
By contrast, the key issues to be addressed in a shareholders’ agreement for a company that has a broader and more varied shareholder base will be different and potentially more complex. Such a company may, for instance, have a founding shareholder or shareholders, shareholders who are professional investors (such as private equity and institutional investors), and/or employee shareholders, with different shareholdings. The key issues for a shareholders agreement for this kind of company may include:
To prepare a relevant and workable shareholders agreement, it is necessary to consider the particular circumstances of the relevant company, its shareholders, and their needs. For a company with a small shareholder base, the shareholders agreement may focus on fundamental rights and protections that apply to all shareholders equally. With a complex or large business, and/or shareholders with different holdings of shares and different interests, it becomes critical to identify and address the objectives of particular shareholders, their needs in terms of the degree of control they wish to have over the company, and the nature of any special or reserved rights they may require.
In the course of drafting a shareholders agreement, there are likely to be negotiations between shareholders (particularly where there are majority and minority shareholders), so that a balance (or compromise) is reached. A lawyer who is experienced in drafting and negotiating shareholders agreements will be able to identify key issues relevant to the company in question, and should be able to propose options for addressing those issues in the agreement.
The specific provisions and issues to be addressed in a shareholders agreement will always depend on the unique circumstances and objectives of the company and its shareholders. All of this goes to show that the oft-repeated line that ‘a shareholders agreement is just a standard document’ is really just a myth.
If you need a shareholders agreement prepared for your company, or advice on one, please contact the Sierra Legal team.
Discover the power of earn-out arrangements with our latest blog post Top Tips for Negotiating Earn-Out Arrangements. We explore how earn-outs bridge valuation gaps and mitigate risks, all while aligning incentives and preserving cash flow. We also outline the basics of earn-out arrangements, their advantages, and potential drawbacks. Gain valuable insights on negotiating and documenting earn-outs successfully, with expert tips to ensure fairness, clarity, and enforceability. Read out our blog for essential knowledge for structuring your M&A deals and realising the potential of earn-out arrangements.
Earn-out arrangements are commonly used in mergers and acquisitions to bridge gaps between buyer and seller valuations of a target business. Under an earn-out arrangement, a portion of the purchase price (usually calculated as a percentage of future earnings) is deferred and contingent on the business meeting certain predetermined performance targets.
The use of earn-out arrangements can benefit both buyers and sellers. The seller can potentially receive a higher purchase price if the business performs well in the future, while the buyer is provided with some protection against overpaying for a business that may not perform as expected. Earn-outs can, however, be complex and require careful negotiation and drafting to ensure the terms are clear and enforceable.
In this article, we look at the basics of earn-out arrangements, their advantages and disadvantages, and our top tips for negotiating and documenting earn-out arrangements.
An earn-out is a contractual arrangement under which the buyer agrees to pay a portion of the purchase price for a business to the seller at a later date, if certain agreed-upon targets are met. Earn-outs typically take place over a period of one to three years and can be based on financial metrics (such as revenue, EBITDA, or net income) or other performance indicators (such as customer growth or product development).
There are several reasons why buyers and sellers might choose to use earn-out arrangements in an M&A transaction:
In an uncertain economic environment, earn-out arrangements can help bridge the ‘valuation gap’ between the buyer and the seller regarding the value of the business. If the buyer and the seller have different expectations about the future growth potential of a business, the buyer may be hesitant to pay the full asking price upfront. By agreeing on future performance targets, the parties can set a baseline for what they expect the business to be worth and negotiate payment terms based on that expectation.
When a buyer acquires a business, their valuation of it will be based on certain assumptions about future earnings potential and growth prospects. These assumptions are derived from the information available at the time of the acquisition. There is inherent uncertainty associated with these projections, so the actual performance of the business may differ from what was originally expected.
Utilising an earn-out arrangement, the buyer can mitigate some of this risk by linking a portion of the purchase price to the future performance of the business. If the business performs well after the acquisition, the buyer will be required to pay the earn-out to the seller. However, if the business does not perform as expected, the buyer may not have to pay the earn-out or may only be required to pay a reduced amount. In this way, earn-outs enable the buyer and seller to share some of the risk associated with the acquisition.
Earn-out arrangements can also help align the incentives of the buyer and seller, as both parties have a shared interest in ensuring that the business performs well after completion of the acquisition. This can be particularly useful if the seller is to remain involved in the business post-acquisition, as they are incentivised to ensure the business continues to perform well.
An earn-out arrangement can allow the buyer to preserve cash flow in the short term, as they need not pay the full purchase price upfront. This can be particularly useful if the buyer needs to invest in the business post-acquisition to drive growth or if they are already carrying a significant amount of debt.
While earn-out arrangements can be a useful tool for structuring M&A transactions, there are also drawbacks to consider:
Earn-out arrangements can be complex and time-consuming to negotiate, as they require detailed financial projections and agreement on metrics that will be used to measure performance. Issues may arise around the calculation of earn-out amounts, the timing of payment, and the parties’ obligations during the earn-out period. Additionally, tracking and verifying performance over the earn-out period can be challenging, which can lead to disputes between buyer and seller.
The future performance of a business is inherently uncertain, which can make it difficult to agree on the financial targets for an earn-out arrangement. Additionally, external factors such as changes in the economy, industry, or regulatory environment can impact business performance. This can make it challenging to accurately predict future earnings.
Earn-outs have the potential to create integration challenges for the buyer, especially if the seller remains involved in the business. This can lead to conflicts over decision-making. They can also cause misaligned incentives between the buyer and the seller. For example, the seller may prioritise short-term financial results at the expense of long-term growth to maximize their earn-out payment.
Even if the business performs well, there is always a risk that the buyer will not make the earn-out payment. To mitigate this risk, sellers commonly seek a form of security in respect of the buyer’s obligation to pay a deferred earn-out payment.
Negotiating and documenting earn-out arrangements can be complex, and it’s important to approach the process carefully to ensure that the arrangement is fair, clear and legally enforceable. Here are some of our top tips for negotiating successful earn-out arrangements that benefit both parties:
Negotiating and documenting earn-out arrangements requires careful attention to detail and a thorough understanding of the legal and financial implications. By following these tips, both buyers and sellers can ensure their earn-out arrangements are comprehensive, transparent, and designed to achieve their objectives.
Important regulatory changes are on the horizon. Starting from 1 July 2023, the Australian Government will introduce a new Register of Foreign Ownership of Australian Assets.
As of 1 July 2023, the Australian Government will introduce a new Register of Foreign Ownership of Australian Assets (Register).
The Register will be administered by the Australian Tax Office (ATO) and will record foreign interests in a broad range of Australian land, entities, businesses, and assets. The primary purpose of the Register is to consolidate the existing reporting framework for foreign ownership of Australian assets into a single, comprehensive database. It will replace existing registers covering residential land, agricultural land, and water rights, and incorporate reporting obligations covering a wider range of transactions. Importantly, reporting requirements in relation to the Register may apply irrespective of whether Foreign Investment Review Board (FIRB) approval is required for a transaction.
Significant penalties may be imposed for failure to comply with reporting requirements.
From 1 July 2023, “foreign persons” (as defined in the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA)) must make a notification via the ATO’s online portal within 30 days of a trigger for notification occurring.
What constitutes a trigger for notification differs depending on the type of asset(s) involved.
Numerous notification triggers apply to the acquisition of interests in Australian businesses or entities by foreign persons, including where a foreign person takes an action that is:
If a foreign person acquires an interest in an Australian entity or business which was previously notified to the Register, it must also report any subsequent increase in its interest of 5% or more.
The notification requirements also apply to an Australian entity that becomes a foreign person, for example via acquisition. If this occurs, the Australian entity will need to report interests that would have required approval under the FATA if they had been acquired immediately after the Australian entity became a foreign person.
Where Australian land is concerned, a foreign person must generally notify the ATO where they acquire (for example):
The ATO must also be notified if:
Reporting requirements also apply in respect of interests in exploration tenements and registrable water interests.
The introduction of the Register will increase compliance obligations for foreign persons as it captures a broader set of transactions than those currently required to be reported. For instance, the Register will cover not only acquisitions and disposals, but changes occurring while an interest in the asset is held, such as changes in the nature of Australia land and changes to the quantum of the foreign person’s interest in a business or entity.
Currently, the acquisition of freehold or leasehold interests exceeding five years in commercial land does not require reporting unless FIRB approval is required and the relevant approval contains a reporting condition. Going forward, all acquisitions of interests of this type will need to be notified to the ATO for inclusion in the Register.
Australian entities will be required to report ownership of certain assets if they become foreign persons. An Australian entity can become a foreign person for the purposes of the FATA due to changes in its direct or indirect ownership. Tracing rules apply which mean companies incorporated in Australia can be classified as foreign persons under the FATA due to upstream interests.
More detail on reporting requirements is provided in amendments to the Foreign Acquisitions and Takeovers Regulation 2015 (Cth).
The introduction of the Register marks a significant change in the reporting and compliance landscape for foreign investors in Australia. With increased obligations and potential penalties for non-compliance, foreign persons should familiarise themselves with the new requirements and seek appropriate advice to ensure they remain compliant in an evolving regulatory environment.
The law regulating foreign investment in Australia is complex, and the information provided here is intended for general informational purposes only. This article should not be relied upon as a substitute for obtaining specific advice tailored to your circumstances. If you are considering foreign investment in Australia, we recommend you seek professional advice that takes account of your specific situation.
Two years ago, Clark Rubber started harnessing the power of Arreis, our document automation software, to help them streamline and automate the preparation of their legal franchise documentation for new and renewing franchisees.
Today, their staff (even without legal training) can complete an online survey to generate an entire suite of franchise contracts in less than 15 minutes.
Read CEO Anthony Grice’s article in the FCA Franchise Review about how automating the process has helped the Clark Rubber team reduce errors, ensure up-to-date documents, and save valuable time and resources.
The ability to do all this without the need for full time lawyers has been a real game-changer for Clark Rubber.
Two years ago, Clark Rubber started harnessing the power of Arreis, our document automation software, to help them streamline and automate the preparation of their legal franchise documentation for new and renewing franchisees.
Today, their staff (even without legal training) can complete an online survey to generate an entire suite of franchise contracts in less than 15 minutes.
Read CEO Anthony Grice’s article in the FCA Franchise Review about how automating the process has helped the Clark Rubber team reduce errors, ensure up-to-date documents, and save valuable time and resources (READ HERE).
The ability to do all this without the need for full time lawyers has been a real game-changer for Clark Rubber.
In part 1 of last week’s blog post we spoke about Business email compromise (BEC). What it is, how a BEC attack works and the types of BEC attacks. This week we discuss the risks that a BEC attack poses to your business and some of the steps you can take to lower the risk of a BEC occurring within your business.
There are multiple risks to your business, should a BEC attack occur, including:
It is important that every business understands cyber risk and takes steps to mitigate it. This means being prepared, knowing how to respond, and understanding both your regulatory requirements (ie. notification requirements under privacy legislation) and your contractual requirements (ie. a notification requirement of a breach under your contracts with third parties).
Preventing BEC attacks requires a multi-layered approach that includes a combination of technical and non-technical measures. Some key steps that organisations can take to reduce the risk of BEC include:
By taking these steps, you can reduce the risk of falling victim to a BEC attack and minimise the impact of an attack once it occurs. It is important to remain vigilant and stay informed about the latest threats and trends in cybersecurity. Being proactive about information security is essential.
If you would like to discuss BECs in greater detail, how to respond to an attack, compliance requirements or have your privacy and data protection policies reviewed or updated, get in touch with a member of our Sierra Legal team today.
Business email compromise (BEC) is a type of cybercrime that involves targeting companies and organisations through their email systems with the goal of stealing money or sensitive information. What is a BEC? How do these attacks work? What risks do they pose to your business and how can you protect your business? In this two-part blog series, we answer these questions in detail.
Business email compromise (BEC) is a type of cybercrime that involves targeting companies and organisations of all sizes, from small startups to large corporations, through their email systems. BEC scams are increasingly common and can result in significant financial losses for businesses, as well as damage to their reputations.
In the most recent report published in November 2022 by the Australian Cyber Security Centre (ACSC), in the 2021-2022 financial year, the ACSC received over 76,000 cybercrime reports. This equates to one cyber incident report every seven minutes (or over 200 reports a day). Given that reporting a cyber incident to the ACSC is voluntary, it is likely that the true number of cyber incidents in Australia is significantly higher than those reported. In monetary terms, the ACCC’s Targeting Scams Report 2022, states that Australian businesses were scammed out of $277 million in “payment redirection” cons through BECs over the course of 2021.
Email remains the number one way to attack businesses, particularly with the increased demand for hybrid and remote working, making employees vulnerable. It is therefore crucial to position yourself with the knowledge and skills that can help to prevent a BEC event from happening to your business.
BEC is a type of cybercrime where the scammer gains access to an employee’s email account through a phishing attack or other means of hacking. Once they have access, they can monitor the employee's email traffic and use this information to send fraudulent emails that appear to come from the company's executives or other high-level employees or from a law firm, bank, internet provider or other supplier used by the business. These emails often request the recipient to transfer funds, change account details, or share sensitive information. They may also contain malware or other malicious code that can infect the recipient's computer or network.
Scammers either gain unauthorised access to a legitimate email account from which they send an email, or they send it from an email address which looks like a legitimate email account, known to you or your employees, but which contains a small change (i.e. the email address is off by a letter or two or it might be the correct email address but via a different domain). This is done in the hope that the email address mismatch is not noticed by the recipient.
The email usually contains a request for urgent payment or sensitive information. The attacker may also use social engineering techniques, such as pretexting, to convince the victim to comply with their request.
Once the victim has been duped into making a payment or providing sensitive information, the attacker may use this information to perpetrate further fraud or sell the data on the dark web. In some cases, the attacker may use the compromised email account to send additional fraudulent emails to other employees, spreading the attack throughout the organisation.
There are several types of BEC attacks, each with its own modus operandi. Some common types of BEC attacks include:
CEO Fraud: In this type of attack, the attacker impersonates the CEO or other high-ranking executive and sends an email requesting an urgent payment or transfer of funds.
Invoice Fraud: The attacker sends a fraudulent invoice, posing as a supplier or vendor, requesting payment for goods or services.
Lawyer Impersonation: The attacker poses as a lawyer or legal representative and requests confidential information or payment for legal fees.
Account Compromise: The attacker gains access to an employee's email account and uses it to send fraudulent emails to other employees or to request sensitive information.
In next week’s blog post we will continue the discussion on BECs, including the potential risks that a BEC attack poses to your business and how to lower the risk of a BEC attack occurring.
As businesses transition from the pandemic, the approach to remote work varies. Some opt for full-time office returns, while others embrace hybrid models.
At Sierra Legal, we’ve been remote work pioneers for over 13 years. In our latest blog, we share our thoughts on these various return to work approaches and discuss the untapped benefits of remote work.
As the world emerges from the pandemic, many businesses are pushing their staff to return to the office and resume pre-pandemic work routines. Some businesses are taking a hard-line approach, mandating that employees return to the office full-time, while others are offering a more flexible approach with a mix of in-office and remote work options.
Return to office policies can vary depending on the organisation and the industry, but in our view, there are some common drivers:
At Sierra Legal, we believe that people often do not fully appreciate the benefits of remote work, with many viewing it as a temporary solution that was only necessary during the pandemic.
Remote work can be a more superior working model for certain employees and roles, offering many benefits:
Whether remote work is a superior working model will depend on the needs and preferences of both employers and employees, but it is clear that remote work can be a win-win situation for all parties - not just the employer and employee, but also the employer’s clients, the employee’s family and friends, and the wider community.
At Sierra Legal, we have physical offices in Brisbane and Melbourne that we can access and use as required. However, we are predominantly a remote working model, with our team of lawyers having worked remotely for over 13 years (way before remote work became a “thing”). We have lawyers in Brisbane, Newcastle, Melbourne and even Cape Town, South Africa!
Working remotely has its challenges, but we’ve learnt the following over the years in building a highly productive and supportive remote work environment:
At Sierra Legal, we have successfully used a remote working model for over 13 years, making us experts in the field of remote work. We understand the nuances and challenges of working remotely and have developed strategies and best practices to ensure that we are able to maintain the highest standards of productivity and quality. With our extensive legal expertise and proven remote work experience, we are well-equipped to provide top-notch legal services to our clients, no matter where we are located.
Our latest case study, is a must-read for those interested in mergers and acquisitions, and for companies seeking guidance on how to prepare for a merger.
Michael Clemenger, the Managing Director of Clemenger International Freight engaged Sierra Legal early in the process to assist the company to successfully navigate its first M&A transaction.
The case study explores the process, challenges, and success of the merger with SJ Group in late 2022, demonstrating the value of engaging an experienced legal team when preparing for a merger or other transaction.
Sierra Legal recently advised the shareholders of Clemenger International Freight on a merger transaction, in which Clemenger's long-term partner, SJ Group, became a major shareholder of Clemenger International Freight, and with the enlarged Clemenger/SJ Group business having approximately 350 staff spanning across 14 cities in Australia, China, Hong Kong and New Zealand.
When the Managing Director and major shareholder of Clemenger International Freight, Michael Clemenger, first contacted Sierra Legal a few years ago, he had never been through a merger or other form of M&A transaction in the past.
Michael wanted to understand at an early stage what was involved and whether his business was ready for such a transaction. He needed an experienced legal team that could help him understand and prepare for the process.
After spending some time with Michael explaining the process involved in a merger transaction, we initiated a comprehensive “legal audit” of the Clemenger International Freight business.
This involved the following work on our part:
Following completion of the legal audit, Michael and his team spent some time working through and implementing the recommendations in the legal audit report.
A decision was then made in 2022 to proceed with the merger transaction with SJ Group, and the transaction successfully completed in late 2022.
Clemenger’s merger with SJ Group was a great success, for both Michael and his fellow shareholder in the company.
The legal audit helped the business get its “backyard in order” before entering into the merger, as well as enabling the due diligence process as a prelude to the merger to be conducted smoothly and without any “surprises”.
Once the recommendations in our audit report were implemented and a decision was made to proceed with the merger, we worked closely with Clemenger’s appointed corporate adviser to ensure that the merger was documented in a way that protected the shareholders to the maximum extent reasonably possible.
It was fantastic having Sierra Legal’s support throughout the whole journey that began with a comprehensive legal audit of our business a couple of years ago, and then finished with our recent successful merger with SJ Group. I was always impressed with the high level of legal expertise and experience offered by the team at Sierra Legal, but with the important overlay of always taking a commercial and practical approach. I also appreciated Sierra Legal’s reasonable and transparent pricing arrangements, and their willingness to work around the clock to meet deadlines and get the transaction completed.
Michael Clemenger
Managing Director, Clemenger International Freight ¶
Greenwashing is a form of marketing or public relations which uses dubious claims of environmental friendliness to entice consumers. As environmental concerns become an increasingly important factor in the purchasing decisions, companies can be tempted to make exaggerated or unverifiable claims about sustainability practices. Where these claims are misleading or deceptive, businesses can run into trouble with the law.
Both the Australian Competition and Consumer Commission and Australian Securities and Investments Commission have recently turned their attention to greenwashing, taking enforcement action against several organisations. Now, more than ever, businesses need to tread carefully when making environmental claims.
Greenwashing is a tactic used by companies to make their products or services appear more environmentally friendly than they actually are. It involves making false or exaggerated claims about the environmental benefits of a product or service to appeal to environmentally conscious consumers. The term "greenwashing" is derived from the word "whitewashing", which means to cover up or conceal something negative.
Greenwashing can take many forms, such as using vague or meaningless environmental buzzwords, including "green", "eco-friendly", or "sustainable", without providing any specific information on how the product or service is environmentally friendly. It can also involve exaggerating the environmental benefits of a product or service or making claims that are difficult to verify.
Greenwashing can mislead consumers into thinking that a product or service is better for the environment than it actually is, which can result in them making purchasing decisions based on false information and inadvertently supporting companies that engage in environmentally harmful practices.
Greenwashing can damage consumer trust in environmental claims and labels, making it more difficult for consumers to make informed decisions about the environmental impact of the products they buy. This can ultimately harm the environment by reducing the effectiveness of sustainability initiatives and slowing progress towards a more sustainable future.
Greenwashing can also undermine the efforts of companies that are genuinely committed to sustainability and environmental protection. By making false or exaggerated claims, companies that engage in greenwashing can make it more difficult for consumers to differentiate between genuine environmental leaders and those that are improperly trying to capitalize on the growing demand for environmentally friendly products and services.
Under the Australian Consumer Law (ACL), it is illegal for businesses to make false or misleading claims about the environmental benefits of their products or services. This includes claims that a product is environmentally friendly, sustainable, or has a reduced impact on the environment, if these claims cannot be substantiated. Greenwashing could be a breach of section 18 of the ACL (which prohibits engaging in misleading or deceptive conduct in trade or commerce) and section 29 (which prohibits a person from making false or misleading representations about goods or services).
The Australian Competition and Consumer Commission (ACCC) monitors compliance with the ACL and is looking to step up enforcement efforts, encouraging consumers and businesses to contact the ACCC to report any potentially misleading environmental or sustainability claims.
In late 2022, the ACCC undertook an internet "sweep" of a sample of businesses to assess their environmental claims. Releasing its findings earlier this month, the ACCC found 57% of businesses surveyed made sustainability claims that raised greenwashing concerns. The ACCC plans to undertake a more targeted analysis of the businesses involved, in addition to a number of active investigations already underway.
Increased penalties for breaches of the ACL came into effect late last year, with the new maximum financial penalties for businesses now being the greater of:
It’s not just the ACCC monitoring compliance and taking action. The Australian Securities and Investments Commission (ASIC) can also take enforcement action against greenwashing activities and has made it one of its priorities for 2023. Late last year, ASIC issued its first penalty for greenwashing, fining Australian company Tlou Energy Limited $53,000 for making false or misleading sustainability related statements on the ASX.
In February this year, ASIC launched its first court action against alleged greenwashing conduct, commencing civil penalty proceedings in the Federal Court against Mercer Superannuation (Australia) Limited (Mercer) for allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
ASIC is seeking declarations and pecuniary penalties from the Court, together with injunctions preventing Mercer from continuing to make any of the alleged misleading statements on its website. It is also seeking orders from the Court, requiring Mercer to publicise any contraventions found by the Court.
Businesses should review any environmental or sustainability claims they have made in relation to their business to ensure:
The ACCC has a published guidelines for businesses on how to make accurate and substantiated environmental claims, which are available here. These guidelines provide information on how to avoid greenwashing and ensure that environmental claims are truthful, accurate and verifiable.
Now, more than ever, businesses need to tread carefully when making ESG claims.
Please contact the Sierra Legal Team if you require further information about this topic or assistance with your ESG obligations.
At Sierra Legal, we are experts in mergers and acquisitions and our team has extensive experience and knowledge in M&A transactions. 2022 was another busy year for us and here are the key transactions that we worked on.
At Sierra Legal, we are experts in mergers and acquisitions and our team has extensive experience and knowledge in M&A transactions.
2022 was another busy year for us on M&A transactions.
A selection of the key M&A deals we worked on in 2022 are set out below:
We advised the shareholders of Clemenger International Freight on a merger transaction, as a result of which Clemenger's long-term partner, SJ Group, became a major shareholder of Clemenger International Freight, and with the enlarged Clemenger/SJ Group business having approximately 350 staff spanning across 14 cities in Australia, China, Hong Kong and New Zealand.
We advised the shareholders of Cosmos 21 (a leading systems integrator and software development house, focusing on mobile technology platforms) on the sale to Zenput, a US-based technology company which has subsequently been acquired by CrunchTiime.
We advised on the sale of Nimbus Technology (the operator of the Nimbus Portal Solutions online document management system) to MYOB.
We advised on the sale of Maple Plan (the operator of an NDIS plan management business) to NIB.
For more information on our M&A expertise, please contact any member of the Sierra Legal team, whose contact details can be found here (LINK).
Significant reforms to Australia’s privacy laws took effect in late 2022, fast-tracked in response to a number of high-profile data breaches. The reforms substantially increase penalties for serious or repeated interferences with privacy and expand the enforcement powers of the Office of the Australian Information Commissioner.
Significant reforms to Australia’s privacy laws took effect in late 2022, fast-tracked in response to a number of high-profile data breaches. The reforms substantially increase penalties for serious or repeated interferences with privacy and expand the enforcement powers of the Office of the Australian Information Commissioner (OAIC). The 2022 reforms are intended to ensure businesses take privacy obligations seriously, with more extensive reforms expected within the next 12 to 18 months.
Key reforms that took effect in late 2022 include:
Penalties have been increased significantly for serious or repeated interferences with privacy. Penalties for individuals have been increased from $444,000 to $2.5 million. For bodies corporate, the previous penalty of $2.22 million has been increased to am amount not exceeding the greater of:
The definition of 'adjusted turnover' is similar to that introduced into the Australian Consumer Law and takes into account the sum of the values of all the supplies that the body corporate and any related body corporate have made or are likely to make during the period, with specified exceptions.
The reforms provide the OAIC with enhanced enforcement and information sharing powers. The OAIC can now issue infringement notices for failures to provide information when required, with associated penalties and a criminal offence for systemic failures to provide information.
The OAIC can also:
Overseas businesses are now bound to comply with the Privacy Act 1988 (Cth) if they “carry on business” in Australia. Previously such businesses were also required to collect or hold personal information in Australia before the Act would apply. This second limb has now been removed.
The 2022 legislative changes were just the start of the Australian’s Government’s planned reform of privacy laws. The Attorney-General's Department released its Privacy Act Review Report (Report) in February 2023, which proposes expansive reforms to the Privacy Act. Containing 116 recommendations, proposed reforms are aimed at strengthening the protection of personal information and the control individuals have over their information.
Over time reforms are expected to shift the burden from individuals, who are currently required to safeguard their privacy, and place more responsibility on organisations who collect and use personal information to ensure that their practices are fair and reasonable.
Feedback is now being sought to inform the Government’s response to the Report. Submissions are due by 31 March.
The regulatory and political focus on privacy means 2023 is an ideal time for businesses to review and reset privacy practices. Businesses should review their controls and policies relating to the collection, use, storage and de-identification of personal information in preparation for significant changes in Australia’s privacy regime.
Businesses should take the time to:
It is important to note that increased maximum penalties for serious or repeated privacy breaches and strengthened OAIC enforcement powers have already commenced.
Please contact the Sierra Legal Team if you require further information about the privacy changes or assistance with your privacy obligations.
In the final instalment of our IWD Q&A series, we sit down with Senior Associate - Katherine O'Brien who shares how she got started in law, how women can facilitate long term and profitable commercial relationships and how a fictional lawyer like Elle Woods from Legally Blonde, inspires strength.
Why I chose a career in the law?
I chose a career in law because I wanted to understand the documentation that facilitates economic activity in our society. Understanding this means I can contribute to economic growth by documenting the contractual relationships that allow economic activity to occur.
What unique perspectives do women bring to the law?
Women often bring a different approach to contractual negotiation, focusing more on relationship building and collaboration. This can be helpful in developing long term and profitable commercial relationships, especially in industries where negotiations can become confrontational.
Any female role models and why?
Elle Woods. Sure, she’s fictional, but she demonstrated that strength can be derived from traditionally feminine character traits and pursuits, not despite them.
In part 2 of our Sierra Legal IWD Q&A series, we sit down with Special Counsel Stacey Noonan who talks about why she chose to pursue a career in the law, the invaluable contribution women bring to the negotiation table and her perceived obligation to those who came before her to always advocate for equality.
Why I chose a career in the law?
I chose to study law because I thought it would be a good skill set to have, for whatever I career I chose in the future. Becoming a practising lawyer was not something I had planned on, but after discovering that the law was able to combine problem solving, logic and writing I found I really enjoyed it. I was also raised in a feminist household and attended an all-girls high school, growing up to believe I had every right to have a ‘seat at the table’ in whatever arena I was able to demonstrate the necessary skill. I didn’t even imagine that my gender would be an issue in the workplace. As a young lawyer, it came as quite a shock when I realised just how much of an issue it was!
What unique perspectives do women bring to the law?
The law applies to all genders so it only makes sense that all genders should have a role in all aspect of the law. Generally speaking of course, women have a different approach to problem solving and communication, and I’ve found that that approach can be invaluable around a negotiating table. There’s more than one way to get a deal done, and often what is needed is a different perspective or a different method of delivering the information.
Any female role models and why?
So many! As the saying goes, we stand on the shoulders of those that have come before us. Millions of women from all walks of life have fought big and small battles that have ultimately allowed me to have this career. I thank them all. And I recognise my obligation to those that come after me to do the same – to demand equality in all places it does not yet exist for women.
If you're looking to deal with a boutique commercial law firm that puts your needs first, contact Sierra Legal. We do what the big firms do but with a small, agile team that provides personalised service to each client.
Get in touch today and talk about how Sierra Legal can meet your commercial and corporate legal needs.
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