DC Alerts
Below you will find the latest DC Alerts
The National Business Name Register
The new rules will apply to any business that sells goods or services to consumers in trade or commerce.
Has your business registered its business name? ASIC is making life easier by cutting the red tape…
Key Points
- In NSW the Business Names Act 2002 (NSW) is being replaced by the Business Names Registration Act 2011 (Cth). Similar State and Territory laws to the NSW legislation are making way for the new nationalised system of business name registration.
- The changes are an attempt by ASIC to improve efficiency and remove red tape surrounding business name registration and compliance.
- The nationalised register shall commence from 28 May 2012 assuming the smooth legislative passage through State and Territory parliaments.
Summary
1. The new ASIC register shall allow businesses to register their business name with a single national register to obtain 'national registration status'.
2. Business names that are currently registered under the State and Territory systems shall automatically be
transferred across to the new register.
3. If a business name is due for renewal under the State and Territory system before the new nationalised register commences it is recommended that these businesses re-register their business name as soon as possible. If they do not before the new register commences they may not be able to protect their rights.
4. Business entities must register their business name under the current law. Under the soon to be proclaimed
legislation this requirement shall continue unless an exemption applies.
The exemptions include the following:
- The entity is an individual and the business name is the individual's name;
- The entity is a registered company and the business name is the company name; and
- The entity is a partnership and the business name consists of all the partner's names.
5. Businesses shall be allowed to suppress certain details in specific circumstances, such as protecting an individual's safety.
Conclusion:
It is vitally important for businesses to be aware of the changes that are taking place. If a business wants to ensure their rights are protected with regard to one of their most important assets, their business name, then they must comply with the new legislation. If you want to know more about the National Register, speak to one of our Legal Specialists today!
Alex Rybak | Solicitor Download (PDF) |
For more information, contact us: Level 7, 9 Hunter Street Sydney NSW 2000 T: 02 9222 8000 F: 02 9222 8008 DX: 707 SYDNEY |
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Government to get tough on hiring of illegal workers
Immigration Minister Chris Bowen announced the federal government will introduce new laws next year to crack down on the hiring of illegal workers.
"This government is committed to getting tough on dodgy employers and ensuring we have an effective sanctions regime in place to punish those who wilfully exploit foreign workers," Mr Bowen said.
"The new laws will establish civil penalties of up to $50 000 and fines of up to $10 000 for corporate bodies, and civil penalties and fines of up to $10 000 and $2000 respectively for individuals for the employing or referring of illegal workers," he said.
"This clearly addresses the deficiencies in the existing laws, as identified by the Howells Review."
Article - Thomson Reuters (Professional) Australia Limited
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Retailers and Manufacturers Beware!
From 1 January 2012, new rules will govern the wording of warranties given by suppliers to consumers who purchase goods and services.
Who is affected?
The new rules will apply to any business that sells goods or services to consumers in trade or commerce. Clearly, the rules will cover retail businesses.
What should affected businesses do?
Every affected business should review its warranty documents in advance of 1 January 2012 to ensure warranty documents satisfy the requirements new rules.
Background
There are two types of warranties given to consumers when they purchase goods or services. They are:
- 1. the consumer guarantees created by the Australian Consumer Law (“ACL”) and which are implied into every consumer contract. These cannot be excluded by businesses; and
- 2. warranties that goods or services will be defect free for a specified period of time.
Under the new rules, the warranties in category 2 above will be defined as ‘warranties against defects’.
- There is no legal obligation for a business to give a ‘warranty against defects’ to consumers but if the business does so, it must comply with the new rules.
Under the new rules, a “warranty against defects” is “a representation communicated to a consumer in connection with the supply of goods or services at or about the time of supply to the effect that a person will (unconditionally or on specified conditions):
- (a) repair or replace the goods or part of them; or
- (b) provide again or rectify the services or part of them; or
- (c) wholly or partly recompense the consumer;
if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced.”
In the above definition, it is important to note that:
- (i) a warranty need not be in writing. It merely needs to be a ‘representation’. The risk is that retail staff could make inadvertent statements to customers during discussions about a product which could be relied upon as a warranty;
- (ii) a warranty need not be given to a consumer on the date of sale of a good or service. It can be constituted by a representation communicated at or about the time of supply; and
- (iii) a warranty no longer needs to be contained in a formal warranty document. Any written material could be a warranty. This could include wording on packaging or on a label on an item.
New Warranty Wording
Under the new rules, all warranties against defects must:
- (a) be contained in a document that is easy to read, clear and legible;
- (b) concisely state: (i) what the business giving the warranty will do so that the warranty is honoured; and
- (ii) what the consumer must do to in order to claim the warranty. (c) prominently state the supplier’s name, address, telephone number and email address (if any);
- (d) state the period in which a defect must appear if the consumer is entitled to claim the warranty; (e) clearly set out the procedure for a warranty claim, including the address to which a claim should be sent;
- (f) state who will pay the cost of claiming the warranty and, if it is the business, the procedure under which the consumer can claim the cost;
- (g) state that the benefits to the consumer under the warranty against defects are in addition to other rights of the consumer; and
- (h) include word for word the following mandatory text:
"Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure"
Relationship between Warranties and Consumer Guarantees
Warranties against defects are additional to the implied consumer guarantees under the ACL. In some cases, the consumer guarantees may provide a remedy after the claim period for a warranty against defects period has expired.
Penalties for failure to comply
Failure to comply with the new warranty rules can result in a fine of up to $50,000 for a corporation and $10,000 for an individual. A breach of the consumer guarantees can result in a fine of up to $1.1million for a corporation and $220,000 for an individual.
What you should do:
Warranty Documents: Retail businesses and manufacturers should review their warranty terms and conditions prior to 1 January 2012 to ensure that all warranty documentation complies with the requirements of the new rules.
Staff Training: Retail staff will need to be educated about the new rules to ensure compliance with the rules and to avoid making inadvertent warranty representations to consumers.
The Commercial Team at Diamond Conway can review your warranty documentation and advise you on what changes
need to be made to ensure that your business is compliant with the new rules. Please contact Phillip Meisner or Michael Tzirtzilakis of the Commercial Team.
Michael Tzirtzilakis | Senior Associate
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For more information, contact us: Level 7, 9 Hunter Street Sydney NSW 2000 T: 02 9222 8000 F: 02 9222 8008 DX: 707 SYDNEY |
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Retention of Title
Radical Changes on the Horizon
Does your business have a ‘retention of title’ clause in its trading terms?
The days when a supplier could invoke a retention of title clause in an attempt the recover unpaid goods from a company in liquidation will soon be over.
In early 2012, the Personal Property Securities Act 2009 (Cth) (the “Act”) will activate a new Personal Property Securities Register (the “PPSR”). The rationale underlying the Act and the PPSR was the perceived need for the unification of a number of disparate State and Commonwealth securities registers (among them the ASIC Register of Charges and the Register of Encumbered Vehicles (REVs)) into a single, national register. The reasoning behind the reforms appears logical – having one national securities register is conducive to efficiency and should generate cost savings for business.However, under this new system the fundamental, intuitive and well recognised concept of title to goods is, What matters under the new regime is whether or not a ‘security interest’ (as defined by the Act) is created by the substance of a transaction between the parties, not necessarily by documents which record that transaction. If a ‘security interest’ is deemed to be created, it must be registered on the PPSR. If the ‘security interest’ is not registered and one party is bankrupt or wound-up, the trustee in bankruptcy or the liquidator can deal with the property which is the subject of the security interest and disregard the actual owner.
Retention of Title Clauses
There are a number of ‘security interests’ which are required to be registered. Critically, the supply of goods on credit pursuant to a retention of title clause is classified as a ‘security interest’ which must be registered on the PPSR.What should affected businesses do?
New Trade Accounts
Your terms of trade must be amended to include a reference to the fact that the retention of title constitutes a ‘security interest’ pursuant to the Act, together with a clause under which the recipient of goods irrevocably agrees to assist with the prompt registration of the security interest, including an undertaking to sign all PPSR registration forms and acknowledgements. Make it clear in your terms that the customer agrees that you will take a security interest over all goods being sold.
Existing Trade Accounts
Where possible, new terms of trade which deal with the PPSR (as above) should be submitted to your customers. The intention is for these terms of trade to replace the existing terms of trade.
Systems and Procedures
Establish a register of ‘security interests’ held by your business. This should include a folder containing copies of PPSR registrations. This will ensure that once your business is notified that a liquidator has been appointed to a trade customer, you can quickly and efficiently forward a copy of your security registration to the liquidator, thereby protecting your goods from being sold and the proceeds distributed amongst creditors.
Staff and Training
Educate credit managers about the PPSR and the concept of ‘security interests’, registration procedures and registration deadlines to ensure that all eligible ‘security interests’ are validly registered.
What happens if you don’t register?
If your customer goes into insolvency and your retention of title is not registered as a security interest, you will lose the right to recover your unpaid goods from a liquidator because the Act will gives priority to other competing parties who have registered their security interests.What you can do to protect your business?
If you have a concern that your commercial trading terms may not be compliant with the requirements of the PPSR, contact Phillip Meisner or Michael Tzirtzilakis from the Commercial Team at Diamond Conway who can assist you by reviewing of your documentation and advising you on what needs to be done to ensure that your security interests are properly documented and registered.
Michael Tzirtzilakis | Senior Associate
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For more information, contact us: Level 7, 9 Hunter Street Sydney NSW 2000 T: 02 9222 8000 F: 02 9222 8008 DX: 707 SYDNEY |
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A New Source of Director Liability
"In a recent decision of the Supreme Court of Queensland, an often overlooked section of the Corporations Act (the “Act”) was invoked by a plaintiff to make a director personally liable for the indebtedness of a company. The case is extraordinary because, by invoking section 1324 of the Act, creditors and shareholders - people to whom company directors owe no legal duties - now appear to be able to seek and obtain an order for damages against a company director".
Under section 1324 of the Act a court can, where a director has contravened (or is about to contravene) the Act, and on the application of a person affected by the conduct of a director, either:
- grant an injunction to prevent a director from contravening the Act; and/or
- order a director to pay damages to any other person.
Former rugby league player Jarrod McCracken was a director of a property development company. His company was a defendant in litigation involving the alleged breach of a development contract. The plaintiff in those proceedings succeeded in obtaining an award of $1.5 million damages plus interest against McCracken. In McCracken's case, the Court invoked section 1324 and ordered him personally to pay damages to the plaintiff (a creditor of his company) for a breach of directors duties owed to his company.
Prior to this decision, it was considered ‘settled law’ that company directors did not owe any duties to creditors of companies. Even in cases where directors are held personally liable for the insolvent trading of their company, such proceedings are usually initiated and maintained by a liquidator. Unsecured creditors have not had any legal interest in the company's assets and they did not have a right to bring proceedings against directors for their management of the company. The Court's use of section 1324 creates considerable uncertainty about these established principles.
The decision also has ramifications for another class of people previously thought not to be owed any duties by company directors – shareholders. Shareholders have not traditionally been able to recover damages directly from directors for breaches of duties owed to companies. This principle also now seems to be uncertain. An appeal of the McCracken decision has been lodged. If the original judgment stands, the ramifications for companies extend beyond the legal liabilities of directors because directors who suffer an judgment to pay damages to company creditors, shareholders or other third parties for a breach of statutory directors’ duties may not be covered by their Directors & Officers insurance policy: section 199B of the Act makes it illegal for companies to pay Directors & Officers insurance premiums to cover liabilities arising from, amongst other things, wilful breaches of duty owed by a director to the company. Invariably, all Directors & Officers insurance policies exclude such liabilities.
Michael Tzirtzilakis | Senior Associate
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For more information, contact us: Level 7, 9 Hunter Street Sydney NSW 2000 T: 02 9222 8000 F: 02 9222 8008 DX: 707 SYDNEY |
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