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.

******

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.

Integrated development environments (IDEs) have long been used by computer programmers as a way to improve efficiencies, reduce mistakes, and standardize outputs. In the latest release of the MIT Computational Law Report, Michael Jeffery provides an overview of the ways that IDEs could improve the practice of legal drafting.

Read more.

As part of the Dynamic Business "Let's Talk" series, Sierra Legal Senior Associate Troy Mossley shares his thoughts on pivoting and adapting business due to coronavirus:

“As a boutique M&A, corporate advisory and commercial law firm, we have had to completely reconsider our deal pipeline, the legal issues faced by our clients and the way in which we can continue to assist them.

A key part of this is continuing to have conversations with (and be a sounding board for) our clients, at no charge, to discuss their businesses and concerns, and the ways in which we can help each other through this period.  At the very least, we think this is just the right thing to do in these difficult times.

We also believe that continuing these conversations, regardless of whether any work will arise, will lead to new opportunities for us and our clients in the future.  We are also fortunate in that our ‘lean’ business model means that pre-CVOID-19 all of our lawyers primarily worked from home offices, so while we have not had to adapt the way we work, we have been able to quickly adjust to our clients’ circumstances by being very flexible in the way in which we charge for our legal services.”

Read more of the discussion from business owners and entrepreneurs here - https://dynamicbusiness.com.au/featured/lets-talk-pivoting-and-adapting-your-business-due-to-coronavirus.html

The Coronavirus Economic Response Package Omnibus Act 2020 (Act) is now law.  The Act includes temporary amendments (which started on 25 March 2020 and will continue for a period of 6 months from that date) to the Corporations Act and Bankruptcy Act to assist businesses and individuals navigate through this period.

A summary of the amendments are as follows:

For corporations:

• The minimum threshold (“statutory minimum”) for creditors to issue a statutory demand on a company will be increased from $2,000 to $20,000.
• The statutory time frame for a company to respond to a statutory demand will be extended from 21 days to 6 months.

For individuals:

• The minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will be increased from $5,000 to $20,000.
• The time a debtor has to respond to a bankruptcy notice will be increased from 21 days to 6 months.

Safe harbour: The Act also includes a new safe harbour provision so that directors of a company that incurs 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 safe harbour is provided on the condition that the debt is incurred in the ordinary course of the company’s business during the 6 month period commencing 25 March 2020. The explanatory memorandum to the Act suggests that a director is taken to incur a debt in the ordinary course of business if it is necessary to facilitate the continuation of the business during this six month period, which could include, for example, a director taking out a loan to move some business operations online or debts incurred through continuing to pay employees during the Coronavirus pandemic. Please be aware that the Corporations Regulations may stipulate circumstances when this safe harbour will not apply.  However, the relevant updates to the Corporations Regulations have not yet been published.

In line with ASIC’s approach to refocus its regulatory efforts on challenges created by the COVID-19 pandemic, ASIC is helping listed companies 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. This will assist companies that need to raise funds from investors urgently because of the impact of COVID-19. 

Please see the recent ASIC media release for further details or get in touch with a member of the Sierra Legal team.

https://asic.gov.au/about-asic/news-centre/find-a-media-release/2020-releases/20-075mr-facilitating-capital-raisings-during-covid-19-period/

To all of our clients, colleagues, friends, supporters, referrers, contacts and members of the broader Australian business community, in the coming weeks and months, Sierra Legal is here to assist in any way that we can.

If you need to discuss any issues that your business is facing, please use this link (https://www.sierralegal.com.au/meetings) to arrange a complimentary telephone call with one of our experienced lawyers.  In these challenging times, we may not have all of the answers.  However, if we cannot help you ourselves, we have a vast network of trusted contacts that are specialists in range of disciplines (including accounting, business advisory, restructuring and turnarounds, financial planning, business broking, insolvency and other specialist areas of law) and we are always happy to provide recommendations and introductions.

Even if you do not think your concern is a legal matter, please feel free to get in touch with one of the Sierra Legal team and we will do whatever we can to help.

As the Coronavirus pandemic sweeps across the globe, many Australian businesses are experiencing unprecedented levels of disruption.  This is due, in large part, to measures introduced by Australian and foreign governments to control the spread of the Coronavirus, including travel bans, geographic lock downs and social distancing and quarantine/isolation requirements.  These measures have disrupted supply chains within Australia and globally, and the ability of individuals to travel freely, both within and outside Australia.

In this environment, the ability of individuals and entities to comply with ongoing contractual obligations may be severely tested, and in some cases, may be rendered impossible.  Even though the occurrence of a global pandemic could not reasonably have been foreseen by parties to a contract, a party that is unable to comply with its contractual obligations due to the effects of the Coronavirus pandemic may, depending on the terms of the relevant contract, still be in breach of the contract and liable to compensate the counterparty for the counterparty’s resulting losses.

Since the effects of the Coronavirus pandemic will likely linger for the foreseeable future, it is important that parties under a contract take immediate steps to head-off any issues that may arise.  We would recommend taking the following actions:

Undertake a review of active contracts

Now is the time to undertake a review of your active contracts, with the assistance of your lawyers, to identify the options or remedies that are available if either you, or a counterparty, cannot comply with contractual obligations in the current circumstances.

Some key things to look out for in a contract review are:

• Force majeure provisions that allow a party to delay the performance of contractual obligations due to the occurrence of an event beyond its reasonable anticipation or control and which prevents it from performing those obligations.  Generally, the occurrence of a global pandemic would ordinarily fall within a broadly drafted force majeure provision, but it is important to check the definition carefully.  It is also important to understand the precise steps required for a party to validly rely on a force majeure provision and to follow them as required under the contract.
• Delay or extension of time provisions that entitle a party to a delay, or an extension of time, in complying with contractual obligations, as a result of specified events occurring.  Checking these specified events will be critical to determining whether or not one or more of them would apply in the current circumstances.  Equally important is understanding the precise steps that a party seeking to rely on the benefit of these provisions must follow.
• Default provisions, which specify the circumstances in which one or more parties will be in breach of the contract.  A failure to comply with any provisions of a contract is a common event of default.  For example, in an equipment supply contract, a failure to deliver the relevant equipment to the purchaser by a specified date would ordinarily be an event of default under that contract.
• Termination provisions, which provide for the termination of a contract by a non-defaulting party if an event of default occurs in relation to the defaulting party.  Ordinarily, being in breach of a contract, and failing to remedy the breach within a specified period (if the breach is capable of remedy), will entitle the non-defaulting party to terminate the contract.  Some contracts may also provide a non-defaulting party with a right to terminate the contract if the defaulting party is unable to comply with one or more of its obligations under the contract for a specified period of time due to events beyond the defaulting party’s reasonable control.  One of the consequences of a non-defaulting party terminating a contract due to an event of default occurring in respect of the defaulting party is that the non-defaulting party can seek to recover, from the defaulting party, its losses arising from the termination of the contract.

Regular communication with counterparties

Keep in regular contact with the other party(ies) to your contract and notify them as soon as possible if you suspect, or expect, that you may not be able to comply with any obligations due to the effects of the Coronavirus pandemic.

Notifying your counterparties early may enable them to take steps to minimise or eliminate any adverse effects that they may experience if you are unable to perform one or more contractual obligations.  This may help generate and maintain goodwill between the parties, which may be required if you need the counterparty’s co-operation to amend the contract to accommodate the difficulties you are experiencing.

The contract may also contain a specific requirement requiring you to notify the counterparty in writing if you suspect, or expect, that you may not be able to comply with any obligations under the contract.  A failure to do so may constitute an event of default.

Take action to mitigate any losses

It is not just the party that may be prevented from complying with its contractual obligations due to the Coronavirus pandemic that should take some action.  If you anticipate that the counterparty to your contract may experience difficulties in complying with the contract due to the Coronavirus pandemic, you should take active steps to minimise the losses you may suffer as a result. 

Not only is this a prudent commercial approach to take, it is also required by law in many instances.  Even if the counterparty breaches the contract and you are entitled to terminate the contract and recover from the counterparty the losses you have suffered as a result, you may be prevented under law from recovering any losses that you would not have suffered had you taken reasonable steps to minimise your losses.

***

If you have any questions regarding the drafting of, or compliance with, any commercial contracts given the effects of the Coronavirus pandemic, please get in touch with Ken Gitahi or one of the other Sierra Legal team members – https://www.sierralegal.com.au/team.

Would your corporate group benefit from lodging one set of accounts with ASIC?

Certain wholly-owned companies may be relieved from the requirement to prepare and lodge audited financial statements under the Corporations Act, where they enter into a deed of cross guarantee with their parent entity, other entities in their corporate group, and meet certain other conditions.  The end result is that only the parent company needs to prepare and lodge audited accounts with ASIC, which can simplify financial reporting requirements and reduce costs. 

If you work with a large corporate group that is seeking to take advantage of this reporting relief, or if you work with a corporate group that already has a deed of cross guarantee in place and the structure of the group has changed (or is planning to be changed), we recommend that you start the process as soon as possible so that the relevant documents can be prepared, finalised and lodged with ASIC by 30 June. 

If you have any questions on the ASIC instrument and obtaining relief, or if you need assistance with preparing and lodging the relevant documents, please get in touch with one of the Sierra Legal team.

You can book an online video conference with us using the link below:

https://www.sierralegal.com.au/meetings

We recently sat down with James Nickless, General Counsel at The MaxSoft Group.

MaxSoft (through its subsidiaries including StrataMax, StrataCash, StrataPay and StrataLoans) is one of the leading providers of software and financial services to the body corporate and strata industry. 

James, having previously been a Partner at 2 national law firms specialising in body corporate and strata law, has been General Counsel at MaxSoft for 2.5 years. 

James is the first legal counsel employed by MaxSoft and, in his first General Counsel role, he shares his thoughts on lessons learnt in the past 2.5 years.

What are some of the biggest lessons learned from your first role as General Counsel?

• You are not the rock star anymore.  In private practice, the lawyers are the producers who provide the services that generate the revenue.  Everything in a law firm is designed around supporting the lawyers and enabling them to perform at their best.  In a software company, the software developers are the rock stars and the lawyer plays a supporting role.  It is difficult to appreciate the value you are providing by reducing risk, improving compliance and often advising against certain initiatives when compared to the much more tangible value calculation about total billable hours per year.
• Non-lawyers often perceive you differently to how other lawyers do.  Sometimes off the cuff comments or personal opinions can be taken as set-in-stone, legal gospel by colleagues just because “the lawyer said it”.  You have to be careful to clearly distinguish at times when you are giving a legal opinion and when you are simply offering a commercial or personal perspective on something.  When you are used to debating and brainstorming legal concepts with other lawyers, it can be challenging when people simply take your conjecture as “the answer” and when they interpret your weighing up alternatives as “not knowing the answer”.
• Not everybody thinks like you do.  In law firms, there are generally more similar personality types and thinking styles than in-house (massive over-generalisation, I know).  It is both challenging and rewarding to look past these differences and to collaborate with others that think and act completely differently to the way you are used to doing things.  I have really learned to try harder to truly understand the ideas of others and find the value that isn’t immediately apparent to me.  It is amazing that the process for generating good ideas and solving problems in-house is not always a linear, logical and controlled process.  Often someone else’s throw away comment can spark a genius solution that no one person would have come up with on their own.

What is your favourite thing about working in-house?

Having “buy-in” to the company as a whole and being able to experience the difference made by my contribution.  In private practice, much of my interaction with clients was transactional in nature and I didn’t often get to see the lasting effects of my work.  It would generally be the case that “if it ain’t broke, don’t talk to the lawyer”.  It is nice now to be able to give things the full attention that they need, not simply the amount of time I could allocate between various clients or the effort commensurate with the amount a client wanted to pay. 

We thank James for his time and for sharing these thoughts and lessons.  Hopefully they resonate with other in-house lawyers.

At Sierra Legal, we assist a number of in-house legal teams.  If you are interested in exploring different ways of working, we would be happy to share some insights with you.  These insights include some things other in-house legal teams are doing to deliver value to their clients and get the most out of their external legal spend.  Please get in touch with one of the Sierra Legal team - https://www.sierralegal.com.au/team

As part of the Dynamic Business "Let's Talk" series, Sierra Legal Senior Associate Kenneth Gitahi shares his thoughts on going public:

“A proprietary (or private) company may consider going public (that is, converting to an unlisted public company) to make it easier to raise capital from the general public.  However, this benefit needs to be weighed against the increased regulatory and cost burdens that apply to public companies.

The requirement to hold an AGM, appoint an auditor and prepare audited financial reports, are among the key regulatory and cost burdens that public companies face.  Public companies also pay a much higher annual registration fee and they must have at least 3 directors and at least 1 company secretary.  Removing a director of a public company can only be done at a general meeting by shareholders (and not by directors).  Removing an auditor requires ASIC’s consent.

Even greater regulatory burdens are faced by public companies listed on a stock exchange, which must also comply with the rules of the stock exchange.

Seeking independent professional advice before going public is vital.”

Read more of the discussion from business owners and entrepreneurs here - https://dynamicbusiness.com.au/featured/lets-talk-taking-your-company-public-with-an-ipo.html

When Craig Sanford established Sierra Legal in March 2010, what he had in mind was something very different to the traditional “ivory tower” law firms in the industry.  He created a boutique firm that provides high quality and commercially focused legal services to its clients, using a close-knit team of friendly and highly experienced lawyers who enjoy a technology savvy and truly flexible working environment.  For a boutique firm, Sierra Legal has some great clients, including Medibank, Bingo Industries, BP, Hisense, Chubb Insurance, Simoco Wireless Solutions and World Vision Australia.

To help Craig reflect on the last 10 years since starting Sierra Legal, he recently sat down with one of his colleagues, young gun Troy Mossley, and responded to a number of wide ranging questions.  Here is the interview …

Why did you decide to start Sierra Legal 10 years ago? 

After finishing my law and science degrees at Monash Uni in the early 90s, I went straight into a large Australian law firm called Middletons, now known as K&L Gates.

I worked extremely hard at Middletons, and made it to partnership by the time I was 30.  I learned a lot and had a fantastic experience, and had the privilege of working with some great partners, including John Mann, Warwick Isherwood, Andrew Chambers, Robert Desmond, John Kelly and Robert Springall (some of whom are still at the firm!).

However, after 19 years at Middletons, my wife, Katie, and I decided that it was time for a change - I wasn’t seeing a lot of my family, the 12+ hours a week of commuting to and from work was starting to wear a bit thin, and I thought that if I didn’t try something else after such a long time at Middletons, I never would! 

I wasn’t really excited about the idea of jumping into another large law firm or changing to a different profession, so I decided to “give it a crack” and start a new law firm from scratch in March 2010!

Sierra Legal initially ran alongside a separate corporate advisory business (Hawksburn Capital) founded by Mark Thexton and James Chisholm.  While Sierra Legal now operates independently (focusing purely on legal matters), Mark and James were certainly instrumental to the initial growth and success of Sierra Legal and I am grateful for their support. 

Did you ever see yourself as an entrepreneur?

I never really saw myself as an entrepreneur.  In fact, if you were to ask my colleagues and friends at the time I left Middletons, I’m sure most of them would have said that I was the last person they would have expected to jump out on my own.

I suppose I first had a taste of being an entrepreneur in my teenage years by doing a few little things to earn some money.  I remember buying a couple of cheap second-hand bikes, doing them up and then selling them for a profit.  I also did a letterbox drop in the neighbourhood offering to mow people’s lawns, do some landscaping and other odd jobs, and some people took me up on it.  There were little things like that, but nothing in a big way.  It wasn't really until 2009/2010 when I suddenly had that big entrepreneurial urge to quit a perfectly stable and well-paying job, and start a new business from scratch!

How did you initially find the jump from a big firm to a start-up?

It was a big shock to the system.  The first 6 months were very hard.  I probably underestimated how difficult it is to start up and run a new business.

Back when I was a partner at Middletons, I had a full-time secretary, a dedicated team of lawyers and infrastructure to back me up.  But I had to leave all that behind when starting Sierra Legal.  

Cash flow was a real concern in the beginning.  Coming from a regular good-paying job, I had to invest in the new business and make lots of sacrifices along the way.  I didn't earn anything for the first 6 months or so, and had 2 kids in a private school.  Plus, Katie and I foolishly started a home renovation at about the same time as starting the business.  There was a lot more money going out than coming in!

Katie and I had to put in place a strict budget for the family in the early days, making sure we didn’t spend beyond our means.  When we went to the supermarket, we had to stick to our budget.  Unlike when I was a partner in a big law firm, we couldn’t just buy something because we wanted to.  Fortunately, we had some savings, so we had a bit of a buffer to get us through those early days.  I was also very lucky to have a wife and family who were supportive of me taking the big jump.

Do you have any regrets in starting Sierra Legal?

Absolutely not. 

I have some great memories from my time at Middletons/K&L Gates, and I think it was and still is a great law firm.  However, Sierra Legal has been a fantastic journey.  I am really proud and grateful in terms of what we (being me and the rest of the Sierra Legal team) have been able to create and achieve at Sierra Legal over the last 10 years.  Most importantly, I genuinely enjoy getting up in the morning (or at least most mornings!) to do my job … for me, that is the key measure of success from a work and business perspective.

The flexibility associated with running my own business has also been great.  Over the last 10 years since starting Sierra Legal, I’ve been able to be a much bigger part of the lives of my wife and kids than might have otherwise been the case if I’d kept working in a big city law firm.  It has also enabled me to take up 2 other passions, being athletics and share trading.  In terms of athletics, I have been able to juggle the demands of the business with a proper athletics training schedule, and have been fortunate to win medals on the National and World stage at various masters athletics championships - a couple of highlights have been a silver medal in the 800m at the World Masters Athletics Championships in Perth in 2016 and a gold medal (and Australian record) in the 4 x 400m relay at the World Masters Athletics Championships in Spain in 2018.

When did you hire your first employee?

Sierra Legal hired its first employee in early 2011, about a year after starting the business.  Mike Jeffery came across to Sierra Legal as a Senior Associate from a large firm in Brisbane called McCullough Robertson. 

Mike is now a Director of Sierra Legal - he has been with the business so long that I pretty much regard him as a co-founder of the business, and he has certainly been a massive part of our success and growth over the years.

Since employing Mike in 2011, we have slowly built the team to the point where we now have a fantastic team of dedicated, loyal and highly experienced lawyers.  It’s by far the best team I’ve ever had in my 29 years of being in the legal profession.

As a relatively small firm, have you had any trouble retaining staff?

We have had an amazingly good staff retention rate.  In 10 years, we have only lost one lawyer from the business.  Interestingly, that person left the firm a few years ago to take on an in-house legal role at Medibank, which is now one of our largest clients.

What is Sierra Legal’s secret in having this high staff retention rate?

I think it’s been a combination of factors.  At Sierra Legal, we offer something totally different to traditional law firms:

• We have a genuinely flexible working environment.  I think a lot of firms say that they have flexible work practices, but they don’t really.  In our case, we have offices in Melbourne and Brisbane where staff can sit and work if they really want to, but for most of the time when not out on the road, all of us work predominantly from home offices.  Everyone is encouraged to prioritise family activities, whether that be school pickups and drop-offs, family holidays or just having dinner with the family, and we fit in work around that.  Don’t get me wrong, all of our lawyers work extremely hard, but everyone knows that they have total flexibility to enable them to fit everything they want to into their lives.
• As well as having great clients, we tend to do a lot of interesting and high-value work, which obviously helps in keeping everyone happily engaged in their work.
• We don’t have personal fee budgets.  Instead, we set and monitor team goals and work collectively towards achieving them.  I think it’s fair to say that personal fee budgets are hated by most lawyers working in traditional law firms!  At Sierra Legal, we really are focused on working as a team and doing the best possible job for the client - if we do that, then our view is that the fees will look after themselves.
• All team members share in the profits of the firm, and everyone has visibility over the financial performance of the firm - by this I mean profit, as well as revenue.
• We have zero office politics.  This might be a product of our flexible working environment, as well as having people in the team that are closely aligned in terms of their business, family and personal goals.  Everyone just gets along well with each other!
• All team members are given the opportunity to understand and share in the strategy and direction of the firm.  As an example, a year or so ago we were approached by a large law firm that was keen to acquire Sierra Legal - before making a decision, I discussed this fully with the team and soon discovered that they weren’t interested, so we didn’t do the deal!

Overall, I think the secret to retaining staff is just to treat everyone equally and with respect.  Some of the things that I have just mentioned are pretty unique for a law firm, and probably result in less dollars in my pocket as a business owner.  But again, if we can have a business where everyone enjoys getting up in the morning to come to work, that’s what makes me happy!

With everyone doing a lot of work from home offices, do you find it difficult to maintain a strong team culture?

Since we have only lost one lawyer from the business in 10 years, I think we are doing something right in terms of maintaining a good culture.  With the team spread over Melbourne, Brisbane and the Gold Coast, we regularly communicate with each other on Zoom - so it just means that we see a lot of each other in 2D rather than 3D! 

I sometimes look back at when I was a partner at Middletons, and can honestly say that I spend a lot more time communicating with staff now at Sierra Legal compared to when I was at Middletons, mainly because of the admin and other responsibilities associated with being a partner in a big law firm that would often soak up a lot of my day.

Given my experiences with Sierra Legal in terms of staff working remotely, I get a little frustrated with some people’s view that it is difficult to maintain a strong team culture if you aren’t all physically in the same office.  At Sierra Legal, I think we have clearly proven otherwise!  I also often wonder what our world would be like if other professional services firms (and possibly other types of businesses) could see the light and have their staff working predominantly from home offices - for a start, I think it would solve our massive traffic problems overnight and enable governments to divert the billions of dollars they are wasting on road infrastructure to more important things like hospitals and schools …

What are some of the key attributes to being a successful entrepreneur? 

For me, some of the key attributes would be hard work, self-discipline, positive attitude and humility.

I also think that one of the problems with some entrepreneurs is that they can be focused too much on the “big picture” and aggressively growing their business.  They sometimes lose sight of the detail and doing the best possible job for clients.  I think it’s important to still get that balance right between growing the business and looking ahead, while at the same time having a level of focus on the detail and service delivery to your clients so that the clients keep coming back to you.

The ability to build strong relationships with people, particularly customers and staff, is also crucial for a successful entrepreneur.

What is your biggest weakness in business and how do you overcome it? 

Attention to detail and being too hands on in the business.  While it is obviously important for a lawyer to have good attention to detail, I sometimes find myself spending too much time working in the business, rather than on it.  I have overcome this to some degree by building a fantastic team of senior lawyers that I can trust and rely on, enabling me to spend more time on strategic activities and new opportunities for the business. 

The other difficulty I have, which I’m sure is shared by a number of business owners, is finding the right work-life balance.  I think I still work too hard!  I often find myself online late at night doing work or looking for the next deal - but that’s because I enjoy what I am doing, and no longer think of it as work.  Having said that, I also recognise the importance of getting that work-life balance right …

What is the biggest challenge you have faced? 

In terms of Sierra Legal, the biggest challenge early on was enticing good people to join the business from larger firms when we didn’t have a long history.  It’s a lot easier now that we have been around for 10 years and have a great team.  

What was the best advice you were ever given?  What advice would you give someone starting a business? 

The best advice I was given was to just give it (Sierra Legal) a go, with my “security blanket” being my skills as a lawyer that I had developed over 19 years at Middletons – that is, if Sierra Legal didn’t work out, I could always just get a job with another law firm, so starting up my own business wasn’t overly risky after all!

The advice I would give to someone starting a business is lots of planning, start small, keep a close eye on your financials and work hard.

Before starting an entrepreneurial journey, I’d also encourage you to get out there and join the workforce or work with bigger teams of people to get some experience in a similar field to your proposed new business.  In those early years, I think you gain valuable experience by being around different people in a typical work environment.  To get some grounding in a traditional kind of job is important, maybe not for 19 years like me, but for at least a few years before you jump out on your own.

What was the biggest risk you ever took?  Would you do it again and why?  

The biggest risk I took at Sierra Legal was probably hiring our first employee 9 years ago - as I mentioned,  Mike is still with the business now, and is a Director of Sierra Legal.  At the time, it was a massive step up in terms of expenses, as well as the commitment and responsibility that comes with having an employee.  I would make the same decision again, as this was the starting point for us in terms of building a great team at Sierra Legal.   

What is your favourite quote on business, leadership or life and why? 

Revenue is vanity, profit is sanity, cash is king.  A lot of people seem to judge the success of a business on its size, including revenue and employee numbers, but as a business owner it soon became clear to me that profit and, more importantly, cash flow are the key measures for business success.

What next for Sierra Legal?

I’d like to keep the business going in its current direction, working with an awesome team and continuing to act for great clients doing high-quality, rewarding and profitable work.

I’m also really excited by the opportunities involved with our new automation service offering, Arreis Automation.  I can see this side of the business growing considerably over the next few years.

On a personal level, I would still like to be involved in the day-to-day work at Sierra Legal.  But maybe over time, I will transition to a more strategic, higher level role in the business.  It would be great to see all of the team that we have now, continuing to progress through the business and getting to Director level as well.  

In terms of the future size of the business, I can see us adding more great people to the team over time, but I certainly don't see Sierra Legal becoming another ivory tower law firm.  I still want to maintain that boutique firm environment at Sierra Legal, with genuinely flexible work practices and all the other attributes I’ve mentioned that set us apart from our competitors. 

At the end of the day, our focus will always be on providing top quality service to our clients and retaining great staff, and I’m sure the business will continue to go from strength to strength.

As part of the Dynamic Business "Let's Talk" series, Sierra Legal Senior Associate Kenneth Gitahi shares his thoughts on raising capital - how do you know which option is best for you:

“Capital raising options for businesses include family loans, government grants, crowd-sourced funding, commercial loans, venture capital funding, and selling a share of the business (i.e. through private equity investment or an IPO).

The best option will depend on your business and funding requirements and may be influenced by factors such as the speed with which funding is required, cash flow of the business, the maturity of the business, the amount of funding required, the cost of funding, the flexibility with which the funds can be used, and the appetite for increased regulatory burdens that may apply to some forms of capital raising.

For example, borrowing from a family member can mean that the payment arrangements and use of funds are flexible and the money can be available quickly, whereas, approval for a commercial loan can take longer as a bank undertakes due diligence and commercial interest rates may be high.  In addition, the use of funds may be restricted to a specific project.

Seeking independent professional advice can help to determine the best capital raising option for your business.”

Read more of the discussion from business owners and entrepreneurs here - https://dynamicbusiness.com.au/featured/lets-talk-raising-capital.html

We are excited to be named as a finalist in the legal services category of the Australian Small Business Champion Awards 2020!

The last 12 months have been massive for us… and 2020 is shaping up to be even better!

Thanks to all of our clients, colleagues, referrers, family and friends for their continued support.

The Australian Treasury has recently released a consultation paper on proposed enhancements to the unfair contract term protections in the Australian Consumer Law.  This consultation paper invites interested parties to provide feedback on options to enhance the unfair contract term protections for small business, consumers and insurance contracts.  Such options include making unfair contract terms illegal and attaching penalties, strengthening powers of regulators, and changing the threshold for what constitutes a small business.  Please see https://consult.treasury.gov.au/consumer-and-corporations-policy-division/enhancements-to-unfair-contract-term-protections/ for further details.  If you are interested in making a submission, the closing date for such submissions is 16 March 2020.

If you have any questions on unfair contract terms and how they apply to your business please get in touch with one of the Sierra Legal team – https://www.sierralegal.com.au/team.

We recently sat down with Simon Isaacs, Founder and CEO, and Heath Fitzpatrick, COO of eBroker.

eBroker is an online business finance broker that uses AI and algorithm technology to match small business owners with various non-bank business lenders. 

In this Q&A, Simon and Heath share their thoughts on the unsecured loan market for small businesses in Australia and key issues to consider if a business is considering taking an unsecured loan.

What is the status of the unsecured loan market for small businesses in Australia?

Unsecured business lending is becoming an increasingly a popular choice among small businesses in Australia.  This is because there is an increasing number of lenders in the market that are prepared to lend on an unsecured basis, and there is an increasing use of technology to more adequately assess a borrower and that borrower’s risk profile.

What is an unsecured loan?

An unsecured loan means that the borrower doesn’t need to provide any assets to secure the loan.  It also means that even if the borrower has existing credit facilities in place, they can still be approved for a loan as no business assets or property is required as collateral.

However, in some cases calling a loan ‘unsecured’ is a bit of a misnomer.  While an unsecured loan may not be secured by physical assets owned by the borrower, a borrower will need to consider and be aware of the terms that apply to that loan and in particular any personal guarantees that may be given.  Such personal guarantees would make the loan secured by any personal assets owned by the guarantor.

What do lenders look for?

The common concerns of small businesses in obtaining an unsecured loan are that they are just starting out and don’t have a mature business; they have a bad credit history; or they don’t have enough assets to secure a loan.

While physical property or collateral may not be required, for unsecured loans, a borrower will be borrowing the funds against the future growth of their business. Lenders will consider:

• a borrower’s past transactions, credit/debit card sales, and account balance;
• whether a borrower has regular cash flow and account deposits to finance their business; and
• the amount of money a borrower has left after paying existing loans, suppliers, bills, etc. to determine if there is financial capacity to re-pay the loan.

How do repayments work?

Repayments are generally made at regular intervals. This is to reduce the risk on the lender side and also to monitor the borrower’s behaviour in making repayments. As to the amount that can be borrowed, this largely depends on the borrower’s monthly turnover. Usually, lenders will lend up to 80-90% of the borrower’s average monthly turnover to make sure there is some buffer to pay the principal and interest of the loan.

What are the advantages of an unsecured loan?

• Approvals for unsecured loans are generally fast.  A borrower can get qualified and be advanced funds within 2-3 business days of an application.
• No physical collateral or security is required.
• Credit score is generally not an issue. A borrower is generally qualified based on the strength of their business.
• Flexible payments. Repayments are calculated and made based on business profits. If a business is having a slow month, they can make adjustments on profitable business months.

What to look out for / what are the disadvantages?

• Due to convenience and higher risk ratings, an unsecured loan normally attracts a higher rate of interest.
• It is important that a borrower carefully considers and checks the terms of the loan contract.  Unsecured loans can have stringent default or missed payment conditions.  This may include the ability for the lender to take possession of any of the borrower’s business assets or the ability to enforce any personal guarantees.
• Given the higher rates of interest and repayments, these loans are normally only viable over shorter terms. 

Last Tip

As mentioned, it is important that a borrower checks the terms of its loan contract carefully.  If a lender requires personal guarantees, an unsecured loan may not necessarily be truly ‘unsecured’ and personal assets of the guarantors (usually directors of the borrower) could still be at risk. 

Thanks to Simon and Heath for their time and for sharing these thoughts and tips.

If you are a business and are considering your finance options, please get in touch with the team from eBroker - www.ebroker.com.au.

If you are a business owner and have any questions on the legal aspects of a loan contract or any security being provided, please get in touch with one of the Sierra Legal team - https://www.sierralegal.com.au/team.

We are delighted to be an event partner of The Future Advisor accountants conference being held at the RACV Resort at Noosa, Queensland on 12 – 14 March 2020.

The conference will be a fantastic opportunity for accountants to actively participate in open discussions centred on what accounting firms will need to look like to meet the future needs of SME business owners and their expectations of accountants as their lead advisor.  There is a great line up of speakers, including Greg Hayes, Rob Nixon and other industry leaders.  Attendees will get an opportunity to share thoughts, ideas and opportunities, plus attend a welcome dinner and drinks and a networking river cruise.  I'm also told that there will be a guest appearance by Trent Innes, XERO Managing Director - Australia & Asia. 

Please see www.thefutureadvisor.com for further details.

Some interesting commentary on the M&A sale process in the latest Mergermarket publication “M&A Preparedness: How to plan for your next transaction”.  Please use the link to access a copy of the Report.

While the report is based on a survey of respondents based in North America, the same key findings and conclusions apply to Australian M&A transactions.  A couple of the key findings in the report include:

• When looking back on previous deals:
• 87% of respondents said they would they would have organised the company for a sale well in advance of the process beginning; and
• 57% of respondents would have retained outside counsel earlier in the process.

• Respondents noted that the greatest logistical challenge for sell-side preparation was readying the necessary legal, financial and technical paperwork. One respondent noted that “The absence of paperwork, records of meetings, or unsigned documents by necessary parties is a threat that will ultimately reduce the value of the seller. Buyer due diligence is concentrated mostly on concrete data and paperwork for previous transactions and references. Handling these is especially difficult if the sell-side is not organized.”

The key findings in the report support our previous recommendations that if you are proposing to sell your business, proper planning and preparation before entering into any discussions with potential buyer(s) will assist you in obtaining the best possible price for your business, limit delays and reduce exposure to risks. 

It is important to get everything in order before entering into discussions with a potential buyer to determine whether there are any gaps or errors in the information (or documentation which can be corrected before due diligence commences).  If you are able to give a potential buyer correct and up-to-date due diligence documents, this is likely to help give the potential buyer comfort, enhance value and lessen the severity of warranties and indemnities that may need to be agreed with the ultimate buyer.  Missing documents (or gaps in information) can have the reverse effect. 

 Such preparation can include a seller undertaking their own due diligence by considering and collating the documents/information that a potential buyer will want to see when conducting its due diligence.  Please see our articles 'Top 7 legal tips when selling a business' and 'Tips and traps for selling your business' for further commentary on seller due diligence and other tips if you are proposing to sell your business.

Please get in touch with one of the Sierra Legal team if you need any assistance with due diligence or the sale of your business.  We also have a template checklist of documents that a potential buyer is likely to want to review during due diligence that can assist you with the process.  Please contact us to obtain a copy.