The ACCC has recently made the Competition and Consumer (Class Exemption—Collective Bargaining) Determination 2020 (Class Exemption). 

The Class Exemption will allow small businesses, franchisees and fuel retailers to collectively negotiate with their suppliers/processors, franchisor or fuel wholesaler (respectively), without first having to seek ACCC approval (although notification to the ACCC is required). 

The ACCC has advised that they will announce when the Class Exemption is ready for use, which is likely to be early 2021.  Please see the recent ACCC Media Release for further information - https://www.accc.gov.au/media-release/class-exemption-will-enable-small-businesses-to-collectively-bargain.  We will provide further updates as the ACCC releases its guidance for, and commencement date of, the Class Exemption.

Here are the latest updates from Sierra Legal - Newsletter.

If you have any queries about any of the articles in our Newsletter, please do not hesitate to get in touch with the Sierra Legal team.

Following our previous articles about temporary laws that were implemented because of COVID-19 to make it easier for company officers to sign documents electronically, the recent 2020-21 Budget indicates that reforms will be implemented to make these temporary laws permanent. 

The recent Budget also indicates that another welcome reform will be the permanent implementation of measures that allow companies to hold virtual Annual General Meetings.

We will provide further updates when any proposed measures become law.

We were delighted to assist CRG Operations Pty Ltd, and its directors Edward Plowman, Graeme Goldman and John Weste, on the recent acquisition of the Clark Rubber Group.

Clark Rubber is a successful Australian retailer with a history dating back to 1946.  With a national store footprint, Clark Rubber stores are specialists in pools, foam and rubber and over the past 75 years, Clark Rubber has developed into one of the most recognisable retail brands in Australia with a reputation for providing high quality customer service.

You can read more about Ed, Graeme and John here - https://www.splashmagazine.com.au/crg-operations-acquires-clark-rubber/ or visit the Clark Rubber website - https://www.clarkrubber.com.au/.

We congratulate CRG Operations on the acquisition, and wish the new owners and the Clark Rubber Management Team all the best for their continued growth and success.

If you need assistance with buying or selling a business please do not hesitate to get in touch with the Sierra Legal Team.

In our April legal update we provided commentary on temporary changes to the insolvency/bankruptcy regimes in the Corporations Act and Bankruptcy Act that were implemented to assist businesses and individuals navigate through Covid-19.

One of the changes was a new, temporary,  ‘safe harbour’ provision so that the directors of a company that incur a debt while the company is insolvent (or the company becomes insolvent as a result of incurring the debt) will not contravene the Corporations Act and those directors will not contravene their personal duty to avoid insolvent trading.  This temporary safe harbour that was to originally expire in September 2020, but has now been extended to 31 December 2020.

However, notwithstanding the extension to the safe harbour period, directors will need to be aware of the wording of the temporary ‘safe harbour’, particularly paragraph (3) set out below, and a director’s ability to rely on the safe harbour.

The temporary safe harbour provides that subsection 588G(2) of the Corporations Act (which is the duty on a director to avoid insolvent trading) does not apply in relation to a person and a debt incurred by a company if the debt is incurred:

1. in the ordinary course of the company’s business; and
2. during the period commencing on 25 March 2020 and ending when the temporary safe harbour is revoked (which is currently expected to be 31 December 2020); and
3. before any appointment during that period of an administrator, or liquidator, of the company.

Therefore, the wording of this safe harbour provision appears to suggest that, in addition to satisfying paragraphs (1) and (2), to rely on the safe harbour an administrator or liquidator must be appointed by the directors prior to the end of the safe harbour period.  That is, the safe harbour will not apply, and directors of the company could still be liable for debts incurred during the safe harbour period, unless an administrator or liquidator is appointed prior to the end of the safe harbour period.

Please get in touch with the Sierra Legal team if you have any queries.

Our May 2020 Legal Update on document signing by companies during Covid-19 provided guidance on temporary laws that were implemented that made it easier for company officers to sign documents, including permitting an agreement to be signed electronically by company officers.  The new law was to last for 6 months from 6 May 2020.

The Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (“Determination”) has now extended the operation of the temporary laws until 21 March 2021. 

Please see our May 2020 Legal Update for further details on these temporary laws and the ways in which a document can be signed by a company. If you have any queries please get in touch with the Sierra Legal team.

We recently sat down with Senior Associate Ken Gitahi to ask all the burning questions …

When did you start at Sierra Legal? 1 February 2018.

What were you doing before Sierra Legal? I was a senior lawyer at another top tier boutique corporate law firm in Melbourne.

What do you do with your time when you aren’t advising on M&A deals and reviewing contracts? Generally running around after my 3 very energetic kids (ages 7, 5 and 3).  Given the current Covid-19 lockdown in Melbourne, however, I have not been doing much running around after the kids (which I’m not complaining too much about).  The home-schooling, on the other hand, has been the biggest test of patience I have ever had to endure.  Bravo to all the teachers out there.

What was your first job? Door-to-door sales/collections for a not-for-profit in Perth.  Tough gig, especially in the WA summer, and we had to be in full suits too!  Needless to say, I didn’t last long, BUT some “good” came from it (see the answer to the next burning question).

What was the first thing you bought with your own money? A first generation X-box console!!!  It was quite the momentous occasion when I walked into that EB Games store and plonked my hard earned $$$ from the aforementioned door-to-door sales/collections job.  I used to be quite the gamer in my younger days.  Not so much now though, sadly, principally due to the 3 very energetic kids previously referred to. 

What was the last book you read? ‘Too Much and Never Enough’ by Mary L. Trump PhD.  I’m about to start reading ‘Disloyal’, A Memoir by Michael Cohen.  There’s a theme here clearly.  I am fascinated by US politics in the Trump era particularly in the current lead-up to the November 2020 presidential elections.  Australian politics, by comparison, is quite uneventful, for which I am incredibly grateful.  Long may that continue! 

Favourite place? Masai Mara National Reserve.  Google it!

Favourite food? Kenyan-style chapatis.  Google them!

Least favourite food? Anchovies.  Licorice a close second.  Pickles, too.  Can’t. Stand. Them. #dontgoogleoreatthem!

Best advice you have received?

“There’s still time to change the road you’re on” – (advice received from Led Zeppelin)

“You gotta fight for your right to party” – (advice received from Beastie Boys)

We recently sat down with Peter Jorgensen, Managing Director of All States Vehicle Logistics Pty Ltd trading as Spiral Logistics.

Peter is an energetic, analytical and innovative CPA-qualified senior executive with over 20 years’ experience in the transport and logistics sectors.  He also has a dual role as the CFO of a Property Developer.  He has extensive commercial and business experience, including in relation to business acquisitions.

Peter was instrumental in facilitating and implementing the acquisition of Spiral Logistics, a leading Australian logistics business for specialised freight, with a focus on providing transport services to the steel industry in Victoria, New South Wales and Queensland.  Sierra Legal worked closely with Peter on the legal aspects of this acquisition.

In this Q&A, Peter shares his thoughts and tips on acquiring a business in Australia.

When you look at buying a business, what are you actually buying?

Most people operate their business through a company.  This means that you can either buy the shares held by the shareholders in the company or the assets used by the company to operate the business.  If the business is operated by a sole proprietor or through a trust, then you may be limited to buying just the assets.

Can you share your top 5 tips when acquiring a business?

Tip 1:  Try to negotiate an exclusivity period with the seller, during which the seller cannot deal with other prospective buyers in relation to the sale and purchase of the business.

Tip 2:  Understand your funding options.  Before negotiating with a seller in relation to the purchase of a business, you need to know how you will fund the purchase price.  If you will get the funds from a loan (for example from a bank) you should speak to the bank and obtain a pre-approval for the loan and ensure that the purchase of the business will be subject to the bank agreeing to provide the loan.

Tip 3:  Undertake due diligence.  This is an important process through which you investigate the business to verify its past activities and performance, and its future prospects, to ensure you are paying a fair price for it.  Through due diligence, you can also identify any risks associated with the business and its future prospects and determine whether to proceed with the purchase at all, or how the identified risks can be addressed.  Due diligence can be a time consuming process so this should be taken into account when negotiating the length of the exclusivity period with the seller.

Tip 4:  Understand what protections you may need in the transaction documents as a result of due diligence.  These protections typically take the form of warranties and indemnities from the seller in the transaction documents.

Tip 5:  Engage as early as possible with any third parties whose approval may be required to complete the transaction (e.g. banks, landlords, customers, suppliers etc).  This will assist with the early identification of any requirements that need to be complied with before the approvals are provided and ensure that delays to the completion of the transaction are minimised.

What kind of due diligence would you typically conduct on a target business?

Ideally a buyer should conduct commercial, financial, tax and legal due diligence on a business it is proposing to acquire.  Depending on the buyer’s experience or familiarity with, and the complexity of, the type of target business and its sector, the buyer may choose to conduct the bulk of the commercial and/or financial due diligence itself and only engage external advisers to assist with tax and legal due diligence.  However, depending on the target company and the nature of its business, or based on preliminary findings from the due diligence process, the buyer may also need to engage other experts to assist with the commercial due diligence, such as property/planning experts, environmental experts and lawyers with expertise on employment matters, IP matters (e.g. patent attorneys) and insurance matters.  If costs are an issue, then it is possible to engage external advisers such as accountants, tax advisers and lawyers to only conduct limited scope due diligence on discrete, material areas of the target’s business.

If a buyer will engage external advisers to conduct due diligence, those experts would typically provide a due diligence report to the buyer.  Typically, I would request that a due diligence report is prepared on an “exceptions only” basis (i.e. where the focus is to identify issues that are discovered during the due diligence exercise and which would include recommendations on how to deal with any such issues).  However, for less complex or risky acquisitions, or if costs are an issue, then it may be possible to request a report that only focuses on some key, material areas (i.e. a very limited scope due diligence report).

Thanks to Peter for his time and for sharing these thoughts and tips.

If you are a business that requires specialist freight or logistics support, please contact Peter on +61 411 695 634 or peter.jorgensen@spirallogistics.com.au (https://www.spirallogistics.com.au/).

If you are looking at acquiring a company or business and require legal support with your acquisition, please get in touch with one of the Sierra Legal team.

On 31 March 2020, ASIC and the ASX announced temporary capital raising relief measures to assist ASX-listed entities affected by the COVID-19 pandemic to undertake emergency capital raisings (please see our March article on these measures). These measures were updated with effect from 23 April 2020 (please see our April article on these updates) and extended until 30 November 2020 by the ASX on 13 July 2020.

On 15 September 2020, the ASX released Compliance Update no. 09/20 to announce further changes to these measures as a result of the ongoing stabilisation in market conditions since these measures were extended in July, and to announce a number of other compliance updates, as summarised below:

Changes to the temporary emergency capital raising relief

• From 16 September 2020, any listed entity wishing to take advantage of the ASX temporary emergency capital raising relief measures must satisfy the ASX that it is raising capital predominantly for the purposes of addressing the existing or potential future financial effects on the entity resulting from the COVID-19 pandemic and/or its economic impact, along with satisfying the other existing conditions.
• Where a capital raising appears to the ASX to have inequitable features for existing security holders, the ASX may withhold the benefit of the relief measures from the listed entity, even if the capital raising is specifically COVID-19 related and urgently needed.

Ratification of issues of securities under the increased placement capacity relief

• Under the temporary emergency capital raising relief measures, the 15% limit on placements by listed entities without shareholder approval in listing rule 7.1 has been increased to 25%.
• Following a number of queries from listed entities and their advisers, the ASX has reiterated in Compliance Update no. 09/20 that listed entities that have utilised the temporary extra 10% placement capacity under listing rule 7.1 cannot subsequently ratify or replenish the used up extra 10% placement capacity.
• Listed entities that have relied on the temporarily increased placement capacity in listing rule 7.1 are only able to approve or ratify issues made from their normal 15% placement capacity under listing rule 7.1 but not from the 10% temporary extra placement capacity.

Updates to ASX listing rule Guidance Notes

In Compliance Update no. 09/20, the ASX announced the release of updates to listing rule Guidance Notes 3, 4, 12 and 19, as follows:

• Guidance Note 3 (Co-operatives and Mutuals Listing on the ASX) has been updated to add a new section 7.6 addressing the ‘mutual capital instruments’ that mutual entities are now able to issue under Part 2B.8 of the Corporations Act and the similar ‘co-operative capital units’ that co-operatives are able to issue under Division 2 of Part 3.4 of the Co-operatives National Law.
• Guidance Note 4 (Foreign Entities Listing on the ASX) has been amended to add the Tel Aviv Stock Exchange as an acceptable listing venue for foreign exempt listings and to reflect the relief ASIC has recently granted to US-incorporated listed companies to allow them to prepare and file accounts under section 601CK of the Corporations Act using US GAAP rather than Australian IFRS.
• A number of changes have been made to Guidance Note 12 (Significant Changes to Activities) including to clarify the preliminary steps an entity should take before announcing a proposed significant transaction under listing rule 11.1.
• Guidance Note 19 (Performance Securities) has been substantially amended to address emerging areas of concern with performance securities, including by expanding this Guidance Note to cover performance options and performance rights, as well as performance shares.

Compliance requirements for draft notices of meeting

• On 1 December 2019, a number of substantial amendments were made to the listing rules relating to the requirements for notices of meeting and voting exclusions.
• In Compliance Update no. 09/20, the ASX reminds listed entities to ensure that draft notices of meeting submitted to the ASX for review reflect these amendments.

Changes to operating hours during daylight saving

• Daylight saving commences in New South Wales, the Australian Capital Territory, Victoria, Tasmania and South Australia at 2:00 a.m. EST on Sunday, 4 October 2020, and will end at 3:00 a.m. on Sunday, 4 April 2021.
• As Western Australia will be 3 hours behind Sydney time during daylight saving, ASX Market Announcements will stay open until 8.30 p.m. EST (5.30 p.m. WST) starting on Monday, 5 October 2020.

A copy of Compliance Update no. 09/20 can be found here.

Sierra Legal is proud to have advised the National Lotteries and Newsagents Association (NLNA) on an exhaustive tender process that resulted in the appointment of Finn Business Sales as the exclusive business broker of the NLNA, to represent Australian newsagents seeking to buy or sell newsagency businesses.

Finn Business Sales is part of Australia’s largest business brokers network – The Finn Group – which is Australia’s largest network of business brokers in Australia and has offices in all major cities and regional areas of Australia.  Australian newsagents looking to buy or sell newsagency businesses will therefore benefit from the depth of experience and resources available to Finn Business Sales.

The NLNA is the peak national body representing the interests of Australian newsagents and lottery agents.  Over 5,000 Australian newsagents and lottery agents have subscribed with the NLNA, which was formed with the clear purpose of improving the income and profile of its subscribers.

As part of its partnership with Finn Business Sales, the NLNA has established “News4Sale”, which is a platform that enables Australian newsagents to list their newsagency businesses for sale.  The “News4Sale” platform is available to all Australian newsagents via https://www.nlna.com.au/news4sale/.

Sierra Legal is an industry partner of the NLNA and is the preferred provider of commercial legal services to the NLNA and its subscribers.  We congratulate Finn Business Sales on its successful tender and appointment as the exclusive business broker of the NLNA.

For more information, please contact Craig Sanford and Kenneth Gitahi at Sierra Legal.

Sierra Legal would like to congratulate Straight Bat Private Equity on the recent completion of its first portfolio investment in one of Australia’s leading process engineering service providers.

Straight Bat Private Equity is an income oriented private equity fund that invests in mature, highly robust, medium sized Australian businesses and as a long-term partner with founders.

Straight Bat Private Equity is associated with the family of Flight Centre co-founder Geoff Harris AM, and its team includes Geoff and Brad Harris, Janine Allis, Adam Lewis, Steve Gledden, Rob Nicholls and Richard Palmer.

Sierra Legal assisted Straight Bat Private Equity on all the legal aspects of its first portfolio investment.

For more information, please contact Craig Sanford or Ken Gitahi at Sierra Legal.

Here are the latest news updates from Sierra Legal - Newsletter.

We recently sat down with Jonathan Lewin, Commercial Director of Simoco Wireless Solutions Pty Ltd.

Simoco Wireless Solutions specialises in building wireless communications networks for sectors where reliability, integrity and clarity are paramount, from utilities to government, public safety to transport.

In this Q&A, Jonathan shares his thoughts on the importance of having an effective set of terms and conditions for use with suppliers.

What are supplier terms and conditions?

Supplier terms and conditions set out the basis on which a business and a supplier to that business will transact with each other. 

While a business will usually have a set of terms and conditions for use with its customers or clients, many businesses do not have their own terms and conditions for use with their suppliers.

Why are they important and what is the advantage of having them?

It is important that a business has its own supplier terms and conditions because a business’ own terms of supply are likely to be more favourable to the business.  This is particularly important for regular or high-value suppliers.  If a business does not have its own supplier terms and conditions:

• the supplier’s terms and conditions (which will typically be more favourable to the supplier) will usually apply; or
• if neither party has any relevant terms, the terms of the agreement between the business and the supplier will need to be determined in other ways (e.g. from correspondence between the parties, general legal principles etc), which can lead to uncertainty, which in turn can lead to costly disputes.

While it may not always be possible for a business to engage a supplier on the business’ own supplier terms, the advantage to the business of having such terms is that:

• it will generally allow these terms to at least be proposed as the basis of engagement with the supplier; and/or
• used as a basis for negotiating better terms of supply from the relevant supplier. 

Sometimes, if a supplier insists on using their own terms and conditions, the business can also use its own supplier terms and conditions as a guide for requesting changes to the supplier’s terms and conditions that may be more favourable to the business.

In your experience, what are the most negotiated terms or concepts in a supplier’s terms and conditions of trade?

In general, I usually find that the most commonly negotiated terms with suppliers are:

• price; and
• the time it will take for the relevant goods or services to be provided. 

After that, other areas of focus are usually concepts relating to when risk in the goods or services passes from the supplier to us, termination rights, indemnities and limitations on liability.

In your experience, what can be some of the worst outcomes for a business if it is not able to use its own supplier terms and conditions or at least negotiate some more favourable terms in the supplier’s terms and conditions?

I have had experiences where a business has either had to:

• pay a supplier for items that were not built to specifications; or
• pay the supplier despite the goods being delivered late (with the flow on effects of late delivery being that the business’ ability to fulfill its own obligations to the end customer was affected). 

Because the supplier’s terms and conditions limited the supplier’s liability for such things, there was limited recourse for the business and as such the business decided to “settle” the matter by paying an agreed amount to the relevant supplier (as it wasn’t worth it for the business to engage in a lengthy dispute resolution process with the supplier).

I have also been involved in a situation where a business ordered goods from a supplier under the supplier’s terms and conditions, where the goods were required for a high-value contract with the end customer.  The supplier delivered some but not all the goods which caused the business to be in breach of its contract with the end customer.  Because of the non-delivery of the goods, the business withheld payment for the goods.  The supplier then made payment claims against the business (notwithstanding the fact that it failed to supply the majority of the goods that were ordered).  The business was then forced into a semi-litigious battle with the supplier which resulted in significant loss and damage to the business.  This may have been mitigated if the business had used its own supplier terms and conditions or a more favourable version of the supplier’s terms and conditions.

Thanks to Jonathan for his time and for sharing these thoughts and tips.

If you are a business that requires wireless communications network solutions, get in touch with the team from Simoco Wireless Solutions (https://www.simocowirelesssolutions.com/).

If you are a business owner and have any questions on the legal aspects of your customer or supplier terms and conditions, or if you require assistance with preparing a set of customer or supplier terms and conditions, please get in touch with one of the Sierra Legal team.

We were delighted to assist CEO James Rennie and Australian UAV on their recent acquisition of, and merger with, leading drone business Uaviation.  It was a pleasure working with James and his team!”

You can ready more about Australian UAV and Uaviation here - https://www.auav.com.au/auav-uaviation-merger/

Jen has just enjoyed a 6 month secondment with Medibank’s in-house legal team, supporting their Customer and Portfolio division and advising on consumer-facing collateral and their customer loyalty program.  During that time, she gained insight into the private health insurance industry (including how it responded to Covid-19), Medibank’s diverse business, and how its flexible culture supports work/life balance.  She also picked up some tips on how to look after her health and wellbeing!

As part of the DynamicBusiness.com.au "Let's Talk" series, Sierra Legal Senior Associate Troy Mossley shares his thoughts on "the legal support your business needs." Read Troy's thoughts and the rest of the discussion here - https://dynamicbusiness.com.au/featured/lets-talk-the-legal-support-your-business-needs.html

Sierra Legal Director, Michael Jeffery, has recently been featured in this article by Dorna Moini from Documate. Thanks Dorna!

Article: https://www.law.com/legaltechnews/2020/06/22/5-ways-smbs-use-automation-to-keep-up-in-the-remote-and-online-world/

Following the launch of Arreis Automation - Sierra Legal’s new document automation service - in 2019, we are excited to be named in Australasian Lawyer’s Innovative Firms 2020 list!

Arreis Automation helps businesses, law firms and other professional service firms with their document automation needs, by designing, coding and hosting the contracts and other documents that they use on a repetitive basis (allowing those documents to be generated through a simple webapp).

If you have any questions about our legal services or how Arreis Automation can benefit your business, do not hesitate to get in touch with the Sierra Legal team.

Despite challenging conditions, we are still seeing a number of M&A/private equity transactions occurring across various industries.  The main drivers for these transactions seem to be:

• owners of businesses that have solid fundamentals (despite current market conditions) seeing it as a good opportunity to exit their business (with buyers equally seeing it is a good opportunity to buy);
• competing businesses merging to achieve cost efficiencies and greater stability; and
• companies seeking private equity investment for stability and future growth.

To assist owners of businesses/companies with the initial stages of planning a potential transaction for the sale of their business in Australia (or the sale of all or some of their shares in the entity that operates that business), we have prepared a high-level M&A planning checklist which you can download free here – Download.

If you have any questions on the sale of your business (or if you are a buyer, on buying a business), please get in touch with the Sierra Legal team.

We recently sat down with Special Counsel Jenny Lau to ask all the burning questions….

1. When did you start at Sierra Legal?
2. June 2011
3. What were you doing before Sierra Legal? 
4. I was a senior associate at Middletons (now K&L Gates), where I was part of the M&A team. At them time of joining Sierra Legal, I was on maternity leave with my third baby, my oldest was about to start prep at a school near home in the following year.  With 3 young kids, the opportunity to do the work I enjoy from home with great flexibility came at the perfect time.
5. What is the most exciting thing you are working on right now?
6. I am currently on a secondment at Medibank, supporting their legal team and advising on a range of contracts and ACL issues.  I really enjoy secondments as they give me insights into how the client’s business works, what their pain points are and how we, as external advisers, can better support them.  Secondments also put me outside my comfort zone, and enable me to learn and grow to be a better lawyer, leader and person.
7. What do you do with your time when you aren’t advising on M&A deals and reviewing contracts? 
8. Spending time with my family or catching up with friends – usually with lots of cooking and eating.  In the rare occasion when I can have some quiet time alone, I enjoy escaping with a book and a cup of tea, or doing some mindfulness meditation.
9. What was your first job? 
10. Admin at a small law firm… boring…
11. What was the first thing you bought with your own money?
12. I can’t really remember but it was probably something I can eat…
13. What was the last book you read? 
14. I am currently reading The Road to Winter by Mark Smith.  The story is set in a town which has been wiped out by a virus – very fitting (and a little scary) in our current circumstances!
15. Favourite place? 
16. Kyoto, Japan. I especially love the Nightingale Floor at Nijo Castle – it makes a very clever and romantic security alarm system!
17. Favourite food?
18. Dumplings – I love how the making and eating of them can bring family and friends together.
19. Least favourite food?
20. Celery and green capsicums – don’t put them in dumplings!
21. If you were stranded on a desert island, what 3 things would you want with you?
22. Too hard to answer…
23. Best advice you have received?  
24. “Be who you’re meant to be and you’ll set the world on fire.”

Following on from our recent article on signing of documents by companies during COVID-19, set out below is a summary of other updates to witnessing requirements that have been recently introduced in Australia.

Background

Certain types of documents (including wills, mortgages, affidavits, statutory declarations, and deeds) that are required to be signed by an individual (as opposed to a company) are only properly executed by that individual where they sign the document in the presence of a witness.

As a result of COVID-19 related social distancing requirements that are currently in place, some Australian states and territories have passed regulations to allow for the witnessing of certain types of documents by audio-visual link (e.g. via platforms such as Zoom, Skype, Teams etc).

As at the date of this article, the Australian Capital Territory, New South Wales, Queensland and Victoria have all passed legislation/regulations to temporarily allow some documents to be witnessed via audio-visual link.  However, the Northern Territory, Tasmania and Western Australia are yet to follow suit (although the Tasmanian government has indicated that similar arrangements may be put in place soon).  In South Australia, the list of persons who may take statutory declarations has been expanded, however, witnessing of documents must still be done in person.

Australian Capital Territory

In the ACT, the COVID-19 Emergency Response Act 2020 (ACT) (ACT Legislation) allows the signing of certain documents to be witnessed by audio-visual link.  The ACT Legislation commenced on 14 May 2020. 

The ACT Legislation applies to affidavits, wills, health directions and general or enduring powers of attorney.

The witness must:

• observe the signatory signing the document in real time; and
• confirm the signature was witnessed by signing the document or a copy of the document; and
• be reasonably satisfied the document they sign is the same document, or a copy of the document, signed by the signatory; and
• endorse the document, or the copy of the document, with a statement:
• of the method used to witness the signature of the signatory; and
• that the document was witnessed in accordance with section 4 of the ACT Legislation.

The ACT Legislation also provides that a witness may:

• sign a counterpart of the document as soon as practicable after witnessing the signing of the document; or
• if the signatory scans and sends the witness a copy of the signed document electronically - countersign the document as soon as practicable after witnessing the signing of the document.

The ACT Legislation will expire 12 months after the COVID-19 state of emergency declarations cease to be in force in the ACT.

New South Wales

In New South Wales, the Electronics Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (NSW) (NSW Witnessing Regulation), allows the signing of certain documents to be witnessed by audio-visual link.  The NSW Witnessing Regulation commenced on 22 April 2020.

The types of documents that can be witnessed in this way are wills, powers of attorney (including enduring powers of attorney), an agreement or deed (that individuals need to sign in the presence of a witness), enduring guardianship appointments, affidavits (including annexures) and statutory declarations.

Under the NSW Witnessing Regulation, a person who witnesses the signing of a document by audio visual link must:

• observe the signing of the document in real time, and then sign the document, or a copy of the document themselves;
• be reasonably satisfied that the document signed by the signatory is the same document, or copy of the document, as the one the witness is signing;
• endorse the document (or copy of the document) with words that specify the method used to witness the signing and that it was witnessed in accordance with the NSW Witnessing Regulation (e.g. a statement that the document was signed in counterpart and witnessed over audio visual link in accordance with clause 2 of Schedule 1 to the Electronic Transactions Regulation 2017).

The NSW Witnessing Regulation also allows:

• the witness to sign and endorse a counterpart of the document; or
• the signatory to send an electronic copy of the document signed by the signatory to the witness who can then counter sign that copy of the document,

in each case, as soon as practicable after witnessing the signing of the document.

The NSW Witnessing Regulation also allows other witnessing-related arrangements to be conducted via audio visual link, including confirming or verifying the signatory’s identity, and swearing or affirming the contents of an affidavit.

The NSW Witnessing Regulation is due to expire on 22 October 2020 (or a later date up to 12 months after it commenced if prescribed by regulation).

Queensland

In Queensland, the Justice Legislation (COVID-19 Emergency Response—Wills and Enduring Documents) Regulation 2020 (Qld) (QLD Regulation) allows the signing of certain documents to be witnessed by audio-visual link.  The QLD Regulation commenced on 15 May 2020. 

It allows for the signing of wills and enduring documents (e.g. enduring power of attorney) by individual signatories to be witnessed by audio visual link, provided the witness is a “special witness” (or if more than 1 witness is required, then at least 1 witness must be a special witness).

A special witness can be an Australian lawyer, notary public, a justice or commissioner for declarations approved by the chief executive, or a justice or commissioner for declarations provided they are employed by the law firm (or Public Trustee) who prepared the document and they witness the documents during the course of their employment. 

The QLD Regulation also allows for a substitute signatory to sign a will or an enduring document, on behalf of the signatory, at their request provided that the substitute signatory meets the strict the strict requirements set out in the QLD Regulation.

A document may be witnessed by audio-visual link only if:

• where applicable, the witness observes the signatory direct the substitute signatory to sign the document; and
• the audio visual link enables the witness to be satisfied, by the sounds and images made by the link, that the signatory or substitute signatory is signing the document; and
• the witness observes the signatory or substitute signatory signing the document in real time; and
• the signatory or substitute signatory signs each page of the document; and
• the witness is satisfied that the signatory is freely and voluntarily signing the document or directing the substitute signatory to sign the document.

The special witness who witnesses the signing of a document by audio -visual link must take reasonable steps to identify the signatory’s identity and that the signatory’s name matches the name of the signatory on the relevant document.

The special witness must also provide a certificate stating

• that the document was signed and witnessed during the relevant period (namely, the period starting on the commencement and ending when the COVID-19 emergency period ends); and

• that the document was signed and witnessed in accordance with the QLD Regulation; and
• the steps the witness took to verify the identity of the signatory; and
• if a substitute signatory signed the document -
• the identity of the substitute signatory; and
• a description of the direction given by the signatory to the substitute signatory; and
• if a substitute signatory was directed by the signatory by audio visual link to sign the document - the grounds on which the witness is satisfied that the substitute signatory is permitted to be a substitute signatory for the document; and
• the process followed for signing and witnessing the document; and
• that the special witness is a special witness; and
• whether an audio visual recording was made of the signing or witnessing of the document; and
• any other matters the special witness considers relevant to the signing or witnessing of the document.

The QLD Regulation is due to expire on 31 December 2020.

Victoria

In Victoria, the COVID-19 Omnibus (Emergency Measures) (Electronic Signing and Witnessing) Regulations 2020 (Vic) (VIC Regulation) allows the signing of certain documents to be witnessed by audio-visual link.  The VIC Regulation commenced on 12 May 2020.

The VIC Regulation allows the signing of the following types of documents to be witnessed via audio-visual link:

• affidavits;
• deeds and mortgages;
• statutory declarations;
• power of attorney documents; and
• wills, codicils and other testamentary instruments.

However, the witness must be able to satisfy himself/herself, via the audio-visual link:

• of the identity of the signatory;
• that the signatory has decision making capacity;
• that there is no defect such as undue influence, duress or unconscionable conduct apparent in the transaction; and
• that the signatory is signing freely and voluntarily.

A signatory must write or stamp under their signature a statement indicating that the document was witnessed using an audio-visual link in accordance with the VIC Regulation.

An example of a valid statement is:

“This document was witnessed by audio-visual link in accordance with the COVID-19 Omnibus (Emergency Measures) (Electronic Signing and Witnessing) Regulations 2020.”

There are also additional requirements for each type of document covered by the VIC Legislation. These requirements are summarised by the Victorian government in this link: https://www.justice.vic.gov.au/electronicwitnessing

These provisions will remain in place until the VIC Regulation is revoked.

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If you have any questions on signing a document, please get in touch with one of the Sierra Legal team.

With people working from home, or in lockdown, self-isolation or quarantine it has become more difficult for company officers to conduct physical, wet-ink execution of documents.  As such, on 6 May 2020, a new temporary law was passed (which will last for 6 months from that date) that makes it easier for company officers to sign documents.

This temporary law, which is implemented by way of the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (“Determination”), modifies the operation of s127(1) of the Corporations Act 2001 (Cth) (Corporations Act) to provide, among other things, that an agreement or deed can be signed electronically by company officers.

Background on section 127(1) of the Corporations Act

Section 127(1) of the Corporation Act states that a company may sign a document without using a common seal if the document is signed by:

• 2 directors;
• a director and a company secretary; or
• where the company has a sole director who is also the sole company secretary – that person.

If a company executes a document in accordance with section 127(1), people will be able to rely on the assumptions in section 129(5) of the Corporations Act (that is that the document has been duly executed by the company) for dealings in relation to the company.

What the Determination does

In summary, the Determination:

• Extends section 127(1) to also cover execution of a document in electronic form.

• Modifies Section 127(1) so that a company may execute a document without a common seal if 2 directors, a director and company secretary or the sole director/company secretary of a proprietary company either:

• sign a copy or counterpart of the document in physical form; or
• sign a document electronically, provided appropriate and reliable electronic communication that identifies the person and indicates the person’s intention about the contents of the document is used.

• Provides that the copy, counterpart or electronic communication must include the entire contents of the document, but it does not need to include the signature of another person signing the document physically or electronically.

What this means in practice

From a practical perspective, this now means that while the Determination is in force, the following methods of signing an agreement or a deed are permitted under section 127(1) of the Corporations Act:

• company officers may now wet-ink sign different copies of the document (i.e. the officers do not need to sign the same physical document);
• 1 company officer may wet-ink sign a document and can then fax or email a PDF copy of if to the other company officer and that second company officer can wet-ink sign that faxed or PDF copy;
• company officers may apply separate electronic signatures to electronic versions of the document (e.g. by pasting a copy of a signature into an electronic version of the document, signing a PDF of the document on a tablet, smartphone or laptop using a stylus or finger, or using a cloud-based signature platform like DocuSign).

Accordingly, the entire process of signing a document can be carried out using electronic communications provided that:

• the electronic communication is reliable under the circumstances to identify each signatory and their intention to sign the document on behalf of the company; and
• the entire contents of the document are included in the electronic communication (i.e. not just the signature page(s)). 

Some limitations

Please note that the following limitations still exist:

• The Determination does not change the requirements for signing documents (in particular deeds) where the signatories include individuals.  For example, deeds signed by an individual must usually be witnessed and attested.  However, the requirements relating to witnessing document signings are also being updated in light of COVID-19 – we will publish further information about this separately.
• The Determination does not assist where the signatories are entities that are not covered by section 127(1) (e.g. statutory corporations, foreign entities, governments and partnerships).
• The Determination only assists in relation to documents signed after 6 May 2020.
• The Determination will cease on 6 November 2020.

If you have any questions on signing a document, please get in touch with one of the Sierra Legal team.

On 31 March 2020, ASIC and the ASX announced temporary capital raising relief measures to assist ASX-listed entities affected by the COVID-19 pandemic to undertake emergency capital raisings.  Click here for our previous article summarising these relief measures.

On 22 April 2020, the ASX updated its relief measures to clarify certain matters and to improve the overall operation of the relief measures.  These updates took effect from 23 April 2020 and the key updates are summarised below:

Prior notification to ASX

• Before a listed entity can take advantage of the ASX temporary emergency capital raising relief measures, it must give a written notice to the ASX (not for release to the market) of its intention to do so and explain the circumstances in which it will utilise the relief measures. 
• The “circumstances” to be notified to the ASX in the notice include whether the capital raising is proposed to be made to raise urgently needed capital to address issues arising in relation to the COVID-19 health crisis and/or its economic impact, or for some other purpose.

Changes to the increased placement capacity relief

Follow on standard rights issues now allowed

Listed entities seeking to utilise the increased placement capacity under listing rule 7.1 are now allowed to undertake the placement, followed by a standard or accelerated rights issue, or, followed by an issue to existing security holders under a security purchase plan.  Previously, only an accelerated rights issue had been contemplated by the ASX.  This change is intended to benefit smaller listed entities that do not have a substantial base of institutional security holders and therefore get no benefit from undertaking an accelerated rights issue to institutional security holders.

Follow on security purchase plans

The following updates will be relevant for listed entities utilising the increased placement capacity under listing rule 7.1 in a placement that is to be followed by an issue to existing security holders under a security purchase plan (SPP):

• If there is a limit on the amount to be raised under an SPP offer, the entity must:
• use all reasonable endeavours to ensure that SPP offer participants have a reasonable opportunity to participate equitably in the overall capital raising; and
• disclose why a limit is in place and how the limit was determined in relation to the total proposed fundraising;
• An entity that has the benefit of a waiver or exemption from ASIC to allow it to make SPP offers of more than $30,000 to individual holders under ASIC Corporations (Share and Interest Purchase Plans) Instrument 2019/547 in any 12 month period, is regarded as satisfying the conditions in that instrument;
• Any scale-back arrangements for SPP offers must be applied on a pro rata basis to all participants, and the scale-back must be based either on the size of their existing security holdings or the number of securities they have applied for; and
• ASX has granted a waiver in relation to exception 4 of listing rule 10.12, to allow parties covered by listing rule 10.11 (including directors) to participate in an SPP offer on the same terms as other security holders.

Additional disclosures by listed entities

• Within 5 business days of a listed entity completing a placement utilising the increased placement capacity under listing rule 7.1, the entity must announce to the market:
• the results of the placement;
• reasonable details about the approach the entity took in identifying investors to participate in the placement and how it determined their respective allocations in the placement (including the key objectives and criteria that the entity adopted in the allocation process, whether one of those objectives was a best effort to allocate pro-rata to existing holders and any significant exceptions or deviations from those objectives and criteria); and
• that, as far as it is aware, no securities were issued to or agreed to be issued in the placement to any person referred to in listing rule 10.11 without one of the following applying:
• the issue or agreement was approved by, or is conditional upon the approval of, security holders in accordance with listing rule 10.11;
• the issue or agreement was made in accordance with an exception in listing rule 10.12; and
• the issue or agreement was made in accordance with a waiver granted by ASX from listing rule 10.11.
• Within 5 business days of a listed entity completing a placement utilising the increased placement capacity under listing rule 7.1, the entity must give ASIC and ASX (but not for release to the market) a detailed allocation spreadsheet in electronic format showing:
• full details of the persons to whom securities were allocated in the placement (including their name, existing holding as understood by the entity, the number of securities they applied for at or above the final price or were offered in the placement); and
• the number of securities they were allocated in the placement (including any zero allocations).

Back-to-back trading halts

ASX has clarified that:

• It will permit a listed entity contemplating any form of capital raising to request two consecutive trading halts.  Previously this facility was only available to listed entities announcing their intention to undertake an accelerated rights issue;
• A listed entity seeking two consecutive trading halts must make that fact clear in its request for a trading halt and it must also state in that request that the consecutive trading halts are for the purpose of considering, planning and executing a capital raising.  Consecutive trading halts are not permitted for any other purpose;
• If a listed entity simply requests a trading halt, ASX will only grant it a single trading halt for a maximum of up to two trading days.  ASX will not entertain a subsequent application from the entity for a second consecutive trading halt.

Clarification of the withdrawal of ASX relief measures

• ASX can withdraw its temporary emergency capital raising relief measures for all listed entities prior to the scheduled expiry date of 31 July 2020, by a market notice to that effect.
• ASX can also withdraw its temporary emergency capital raising relief measures in respect of an individual listed entity, by giving that entity written notice to that effect.

Full details of the 22 April 2020 updates by the ASX to its temporary emergency capital raising relief measures can be found here.

On 31 March 2020, ASIC and the ASX announced temporary capital raising relief measures to assist ASX-listed entities affected by the COVID-19 pandemic to undertake emergency capital raisings.

ASX relief measures

The temporary emergency measures announced by the ASX will be implemented by way of class order waivers under listing rule 18.1 (meaning listed entities do not need to apply individually to the ASX to access the relief measures), and they will expire on 31 July 2020 unless the ASX otherwise decides to remove or extend them.  A summary of the main temporary emergency measures is as set out below:

Back-to-back trading halts

• A listed entity can now request 2 consecutive trading halts, allowing a total of up to 4 trading days in halt to consider, plan for and execute a capital raising.
• Back-to-back trading halts will not be permitted for other purposes.
• If an entity is not able to complete its capital raising within the 4 trading days, it will need to request a voluntary suspension for more time to do so.

Increased placement capacity

• The 15% limit on placements by listed entities without shareholder approval in listing rule 7.1 has been increased to 25%, however, a listed entity seeking to utilise this increased capacity in a placement must:
• make a follow-on pro-rata rights offer to its shareholders; or
• conduct a follow-on offer to its retail shareholders under a share purchase plan,
• in each case, at the same or lower price as the placement price.

• The increased placement capacity can only be used to issue fully paid ordinary securities.
• A listed entity can only utilise the increased placement capacity once, and once it has done so, the used up 25% placement capacity cannot be subsequently ratified or replenished.
• Entities that wish to do more than one placement using the increased capacity, or to issue securities that are not fully paid ordinary securities, will need to apply for individual waivers from the ASX.
• Eligible entities that already have the extra 10% placement capacity under listing rule 7.1A can either use their existing rule 7.1A capacity or the increased placement capacity under listing rule 7.1, but not both.

Waiver of 1:1 limit on non-renounceable rights offers

• The ASX has waived the 1:1 ratio limit on standard and accelerated non-renounceable rights offers.
• Rights offers with a ratio of greater than 1:1 now do not need to be renounceable and there is no cap in the size of non-renounceable rights offers.
• Listed entities proposing to rely on this waiver for non-renounceable rights offers need to notify the ASX of their intention to do so.

Full details of the ASX relief measures can be found here.

ASIC relief measures

• ASIC is helping listed entities raise capital quickly by giving temporary relief to enable certain ‘low doc’ offers (including rights offers, placements and share purchase plans) to be made to investors, even if they do not meet all the normal requirements.
• Normally the ‘low doc’ capital raising regime is not available if a listed entity has been suspended from trading on a stock exchange for a total of more than 5 days in the previous 12 months.  Listed entities to which this ‘low doc’ capital raising regime is not normally available would need to prepare a prospectus, or apply to ASIC for individual relief to nevertheless raise capital under this regime.
• Under ASIC’s temporary relief, a listed entity will be able to raise capital under the ‘low doc’ capital raising regime if:
• it has been suspended from trading on a stock exchange for no more than 10 days in the 12 months before the capital raising offer; and
• in the period commencing 12 months before the capital raising offer, and ending on 19 March 2020, it had not been suspended from trading on a stock exchange for more than 5 days.
• 19 March 2020 was the date on which the Australian government changed its travel advice to the most severe Level 4 warning: 'do not travel' overseas.
• Entities that have been suspended from trading on a stock exchange for more than 5 days before 19 March 2020, or, entities that have been suspended for more than 10 days in total, will need to apply for individual relief to conduct a ‘low doc’ capital raising or prepare and lodge a prospectus.
• ASIC’s relief is temporary and may be revoked by ASIC with 30 days’ notice.

Full details of the ASIC relief measures can be found in ASIC’s media release on 31 March 2020 entitled “20-075MR Facilitating capital raisings during COVID-19 period”, which is accessible via ASIC’s website. 

In response to the coronavirus (COVID-19) pandemic that is currently impacting Australia and the world, the National Cabinet agreed on 7 April 2020 that all Australian states and territories would implement a mandatory “Code of Conduct” for commercial tenancies.

What is the purpose and objective of the Code?

• To impose a set of good faith leasing principles for application to commercial tenancies (including retail, office and industrial) between owners/operators/other landlords and tenants.
• To share, in a proportionate and measured manner, the financial risk and cashflow impact during the COVID-19 pandemic period (as defined by the period during which the JobKeeper programme is operational), whilst seeking to appropriately balance the interests of tenants and landlords. 

Who does it apply to?

Business tenants with annual turnover of up to $50 million and who are also eligible for the Commonwealth Government’s JobKeeper programme.

When does the Code come into effect and how long will it apply?

Each state and territory will have its own “effective date” (to be after 3 April 2020) to bring the Code into effect.  The Code will be given effect through relevant state and territory legislation or regulation. The Code is not intended to supersede such legislation, but aims to complement it during the COVID-19 pandemic period.  Please check the relevant state or territory government website for updates on the implementation of the Code in your state or territory.

The Code is expressed to apply during the COVID-19 pandemic period, as defined by the period during which the JobKeeper programme is operational.  However, some of the leasing principles in the Code (see further detail below) may extend for a “reasonable subsequent recovery period”.

What are the principles under the Code?

The Code sets out 11 overarching principles to guide any temporary arrangements that may be required to be agreed between landlords and tenants during the COVID-19 pandemic period.  These principles generally encourage landlords and tenants to work together to negotiate in good faith and act in an ‘open, honest and transparent manner’ to agree appropriate temporary leasing arrangements to achieve mutually satisfactory outcomes.

The Code also sets out the following 14 leasing principles to guide landlords and tenants in negotiating and implementing any temporary commercial leasing arrangements that may be required during the COVID-19 pandemic period: 

1. Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period).
2. Tenants must remain committed to the terms of their lease, subject to any amendments negotiated under the Code. Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under the Code.
3. Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals (including other forms of agreed lease variations such as pausing and/or hibernating the lease) of up to 100% of the amount ordinarily payable, based on the reduction in the tenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period.
4. Rental waivers must constitute no less than 50% of the total reduction in rent payable under principle 3 above over the COVID-19 pandemic period.  An example of how this principle would apply is included in the Code.  Rental waivers should constitute a greater proportion of the total reduction in rent payable in cases where failure to do so would compromise the tenant’s capacity to fulfill their ongoing obligations under the lease agreement. Regard must also be had to the landlord’s financial ability to provide such additional waivers. Tenants may waive the requirement for a 50% minimum waiver by agreement.
5. Payment of rental deferrals by the tenant must be amortised over the greater of: (a) the balance of the lease term; and (b) a period of no less than 24 months, unless otherwise agreed by the parties.
6. Any reduction in statutory charges (e.g. land tax, council rates) or insurance will be passed on to the tenant in the appropriate proportion applicable under the terms of the lease.
7. A landlord should seek to share with the tenant in a proportionate manner, any benefit the landlord receives due to deferral of loan payments, provided by a financial institution as part of the Australian Bankers Association’s COVID-19 response (or any other case-by-case deferral of loan repayments offered to the landlord).
8. Landlords should, where appropriate, waive recovery of any other expense or outgoing payable by a tenant, under lease terms, during the period the tenant is not able to trade. Landlords may reserve the right to reduce services as required in such circumstances.
9. If negotiated arrangements under the Code necessitate repayment, this should occur over an extended period in order to avoid placing an undue financial burden on the tenant. No repayment should commence until the earlier of the COVID-19 pandemic period ending (as defined by the Australian Government) or the existing lease expiring, and taking into account a reasonable subsequent recovery period.
10. No fees, interest or other charges should be applied with respect to rent waived in principles 3 and 4 above and no fees, charges nor punitive interest may be charged on deferrals in principles 3, 4 and 5 above.
11. Landlords must not draw on a tenant’s security for the non-payment of rent (be this a cash bond, bank guarantee or personal guarantee) during the COVID-19 pandemic period and/or a reasonable subsequent recovery period.
12. The tenant should be provided with an opportunity to extend its lease for an equivalent period of the rent waiver and/or deferral period outlined in principle 2 above. This is intended to provide the tenant additional time to trade, on existing lease terms, during the recovery period after the COVID-19 pandemic concludes.
13. Landlords agree to a freeze on rent increases (except for retail leases based on turnover rent) for the duration of the COVID-19 pandemic period and a reasonable subsequent recovery period, notwithstanding any arrangements between the landlord and the tenant.
14. Landlords may not apply any prohibition or levy any penalties if tenants reduce opening hours or cease to trade due to the COVID-19 pandemic.

While the leasing principles are high-level and, in some cases, their practical application may be unclear, landlords and tenants should be guided by the overarching principles.  Further guidance and/or updates on this subject matter may also become available as the Code is implemented in each state and territory.

What happens if the landlord and tenant cannot agree on temporary leasing arrangements under the Code?

The matter should be referred to applicable state or territory retail/commercial leasing dispute resolution processes for binding mediation (including Small Business Commissioners / Champions / Ombudsmen, where applicable).

Where can I get a copy of the Code?

You can access a full copy of the Code via this link, which is made available by the National Cabinet: National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles during COVID-19

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If you have any questions regarding the effects of the COVID-19 pandemic on a commercial lease, please get in touch with one of the Sierra Legal team members.