Reversal Of Effect Of Sons Of Gwalia Decision - Ending Of Equal Ranking Of Shareholder Claims With Claims Of Unsecured Creditors In Corporate Insolvency
Date: July 30, 2010
Authors: Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
The Corporations Act will be amended so as to reverse the decision of the High Court of Australia in Sons of Gwalia v. Margaretic. The Sons of Gwalia decision determined that, in a corporate insolvency, certain shareholder claims against a company rank equally with the claims of other unsecured creditors. Before that decision, the claims of unsecured creditors had ranked in preference to that of shareholders seeking a return of share capital upon a corporate insolvency.
The High Court decision had been criticized upon the basis that it was inequitable for shareholder claims to rank as creditors alongside ordinary unsecured creditors like small businesses. The effect of the High Court decision was to enable investors who, as shareholders, had been mislead into making an investment in a corporation, to claim redress at the effective expense of creditors. This was seen as unfair to creditors who were often simply owed money for work they had already done or for materials they had already supplied. The effect of the Sons of Gwalia decision also increased the cost – and limited the availability – of credit to the general detriment of corporations and their shareholders.
The amending legislation removes the right of persons bringing claims regarding shareholdings to:
- Rank as creditors in a voluntary administration or a winding-up, unless they receive permission from the Supreme Court; or
- Receive reports to creditors, unless they make a request in writing to the external administrator.
Effectively, the situation that existed before the High Court decision has now been reinstated.
The amending legislation is known as the Corporations Amendment (Sons of Gwalia) Bill 2010 and was expected to be passed in the Spring session of Federal Parliament. Its passage will be delayed until the sitting of the new Parliament in late 2010.
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
For any further information concerning this article, please contact Michael Pickering at LAC Lawyers Pty Ltd in Melbourne.
Tax Law - Large business entities(Part 1)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO does not treat large business entities with the same anonymity as other taxpayers, since there are relatively few of them and they contribute a disproportionate amount to revenues. This article deals with the special rules developed by the ATO to deal with, and engage with, large businesses.
Tax Law - Large business entities(Part 2)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO does not treat large business entities with the same anonymity as other taxpayers, since there are relatively few of them and they contribute a disproportionate amount to revenues. This article deals with the special rules developed by the ATO to deal with, and engage with, large businesses.
Tax Law - Large business entities(Part 3)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO does not treat large business entities with the same anonymity as other taxpayers, since there are relatively few of them and they contribute a disproportionate amount to revenues. This article deals with the special rules developed by the ATO to deal with, and engage with, large businesses.
Tax Law - Large business entities(Part 4)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO does not treat large business entities with the same anonymity as other taxpayers, since there are relatively few of them and they contribute a disproportionate amount to revenues. This article deals with the special rules developed by the ATO to deal with, and engage with, large businesses.
Tax Law - Demerger(Part 5) – Cost base calculation
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A complicated and often misunderstood area of tax law is the CGT and dividend tax relief available in respect of demergers. A demerger occurs when a group of entities (basically, companies or fixed trusts) divides itself into multiple entities or groups in a certain way. This part of the article goes into more detail about how the interest-holders of the head entity ought to adjust the cost bases of the interests in the demerged entity they end up holding.
Tax Law - Tax Debts - Personal Liabilities of Directors for Company Tax Debts
Date: October 24, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In most situations where a company has a tax debt, the Commissioner of Taxation and the ATO will respect the “corporate veil” and not touch the assets or money of the individual directors or shareholders.
Business and Commercial Law - Agency Agreements
Date: April 13, 2011
Section 55 of the Property, Stock and Business Agents Act 2002 provides that a written agency agreement must be prepared for all services to be performed by an agent for a client (principal), unless the services relate only to livestock.
Business and Commercial Law - Partnerships - The traps and pitfalls
Date: January 07, 2011
Author(s): Scott Gray LPAB, Grad. Dip. Legal Practice
There are no strict legal requirements for the forming of a partnership other than when two or more persons carry on a business in common for profit, however given that this is a legal relationship it is advisable to create a written partnership agreement so that the terms of the relationship are clarified between the partners.
Commercial Law - Drafting Commercial Agreements
Date: November 01, 2010
Author(s): LAC Lawyers
Lawyers are often called upon to draft documents on behalf of clients when they wish to enter a business agreement with another person or entity for the furtherance of a common goal. From the client perspective; drafting a commercial agreement should not be complicated or involve consideration of legal issues.
Business and Commercial Law - Defences to Directors Penalty Notices
Date: October 08, 2010
Author(s): LAC Lawyers
When faced with liquidity problems, it is common for companies not to make the relevant payments to the Commissioner of Taxation in regards to their tax obligations under Income Tax Assessment Act 1936.
Business and Commercial Law - Liability of Directors in Trustee Company's
Date: October 08, 2010
Author(s): LAC Lawyers
You have been appointed as a Director of a Corporate Trustee pursuant to a Deed of Trust and you are now concerned about your function and role in the Corporate Trustee with respect to the liabilities of the Corporate Trustee and your liabilities to the Trust if there are insufficient assets to meet the Trust’s liabilities.
Business and Commercial Law - Restraint of Trade
Date: October 08, 2010
Author(s): LAC Lawyers
Key employees have always been the cornerstone of every successful business or enterprise and great difficulties are caused by the sudden loss or departure of key employees which in turn could harm the relationship between the business and its clients. Key employees have over the years enjoyed a close relationship with clients and losing them would have a detrimental effect on the management and reputation of the business.
Insolvent Trading
Date: September 22, 2010
Author(s): LAC Lawyers
Insolvent trading occurs when a company incurs a debt when it is unable to pay its debts as and when they fall due. LAC Lawyers' Bankruptcy & Insolvency team offer expertise in all aspects of Bankruptcy & Insolvency Law. Get instant results - call LAC Lawyers today on 1300 799 888 .
Is it the beginning of the end for discretionary trusts and one-man companies - A change of view point
Date: September 01, 2010
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
There are suggestions that Australian courts are now changing their approach to the interpretation of statutes with the effect that discretionary trusts are not as useful in avoiding statutory obligations. In other words, in the words of the Bob Dylan song “… the times, they are a-changin”!
Is it the beginning of the end for discretionary trusts and one-man companies - Centrelink, Bankruptcy and Taxation
Date: September 01, 2010
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
Another example is Elliott v. The Secretary of the Department of Education, Employment and Workplace Relations decided in 2008 immediately before the High Court of Australia’s decision in Spry and was concerned with the means test for Centrelink pensions.
Is it the beginning of the end for discretionary trusts and one-man companies?
Date: September 01, 2010
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
The traditional usefulness of discretionary trusts arises from the puzzling position they hold in the law. Property transferred to these entities is effectively ownerless until discretionary trustees determine to appoint the property to discretionary beneficiaries.
Insolvency & Bankruptcy Law - What is Part IX and Part X under the Bankruptcy Act 1966
Date: May 10, 2010
Author(s): LAC Lawyers
Part IX and Part X agreements under the Bankruptcy Act 1966 enable debtors to present creditors with proposals of settling debts. The payments are less than the amount of the debt itself and are paid in full and final settlement of the entire debt.
Insolvency & Bankruptcy Law - You are owed money, what should you do?
Date: May 10, 2010
Author(s): LAC Lawyers
A creditor is someone who is owed money by and individual more often referred to as a Debtor. As a creditor there are several options available to you to recover the debt that is owed to you. The amount of money or debt owed to you will determine the method by which you are able to recover the money from the Debtor.
Family Law - The Competing Issues of Bankruptcy and Family Law
Date: January 13, 2010
Author(s): LAC Lawyers
Family law property settlements or applications for spousal maintenance may be further complicated where one spouse is bankrupt or considering bankruptcy. In these circumstances, a conflict clearly arises between the competing interests of a trustee in bankruptcy and the separated non-bankrupt spouse in determining how property should be distributed between the parties.
Intellectual Property - Trade Practices - The Law of Passing Off
Date: August 28, 2009
Author(s): LAC Lawyers
The principle behind the tort of “passing off” is that a person cannot represent their goods or services as those of another. The action for passing off protects business goodwill and reputation from wrongful appropriation.
Business Law - Personal Guarantees & Indemnity
Date: August 04, 2009
Author(s): LAC Lawyers
If you are a supplier of goods and operate your business on a credit system then it pays to protect your position in relation to your debtors. The following scenario depicts a common occurrence in the supplier/purchaser market leading to frustration and ultimately loss of moneys owning.
Debt Recovery - Personal Insolvency Agreements
Date: August 04, 2009
Author(s): LAC Lawyers
If you find that you are overwhelmed with debt and cannot pay all those debts as and when they are due but at the same time you do not want to be declared a bankrupt, you may still have the option of entering into a Personal Insolvency Agreement (“PIA”).
Success in an Appeal to a University Body for an Accusation of Plagiarism
Date: August 04, 2009
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
Property Law - Business Leases - Tenants in Trouble
Date: July 04, 2009
Author(s): LAC Lawyers
Tough economic times can bring grief to all of us, in varying degrees. It’s almost a cliché that we should be cautious in our business affairs. But by so doing we should be able to weather the storm. Caution is needed before entering into a lease. But what if the tenant finds itself in a situation which it had not seen coming?
Employment Law - General Employee Entitlement & Redundancy Scheme (GEERS)
Date: June 05, 2009
Author(s): LAC Lawyers
If you have been made redundant or have lost your job because your employer has gone bust and you have not been paid your outstanding wages or entitlements, then you may be eligible for payment under GEERS.
Business & Commercial Law - Franchising Law - Franchising Code of Conduct
Date: May 29, 2009
Author(s): LAC Lawyers
Franchising in Australia is governed by the Franchising Code of Conduct (“FCC”). This piece of legislation was design to protect potential franchisees from unscrupulous franchisors and requires the franchisor to disclose certain information to the franchisee so as to...
Bankruptcy & Insolvency Law - What Can I Do If I Am Declared Bankrupt?
Date: April 29, 2009
Author(s): LAC Lawyers
The global economic crisis has no doubt affected millions of people and businesses world-wide. Australia is not immune and coupled with record high unemployment and talks of recession, it is not surprising that many people cannot pay their debts and the instance of bankruptcy proceedings being commenced by creditors has increased as a result.
Business Law - Business Structures - Companies
Date: April 22, 2009
Author(s): LAC Lawyers
A company is a form of business organisation made up of members or shareholders and managed by directors.
Business Law - Business Structures - Partnerships
Date: April 02, 2009
Author(s): LAC Lawyers
The term “Partnership” is defined in the Partnership Act 1892 (the “Act”) as the relationship that exists between persons carrying on business in common with a view of profit. From this...
Insolvency & Bankruptcy - Unfair Preference Payments
Date: March 07, 2009
Author(s): LAC Lawyers
You run a successful business supplying quality products to a hungry market. Generally your clients are very good with payment however due to the economic downturn some clients have not been able to pay their invoices on time and you have noted that recently that your company has sent out a few reminder letters prompting payment. The majority of those prompted eventually made payment.
Bankruptcy - What happens to our house if my spouse is made bankrupt?
Date: December 01, 2008
Author(s): LAC Lawyers
Consider your options by reading this article or for more information call us today.
Debt Recovery - The Common Stages
Date: September 24, 2008
Author(s): LAC Lawyers
At LAC Lawyers we are able to assist you with all debt recovery matters and advice you on the best method of enforcement to avoid unnecessary costs having regard to the circumstances of each matter.
Commercial Litigation: When is your lawyer not really your lawyer?
Date: May 19, 2008
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
Over the last decade, there has been enormous growth in the appointment of in-house lawyers employed by corporations to provide a range of legal services from corporate covenants to debt collection to litigation support and advice. These lawyers are generally called in-house or general counsel.
Voluntary Administration
Date: May 04, 2008
Author(s): LAC Lawyers
If a company is having cash flow problems, unable to pay its debts as and when they fall due such as GST, superannuation or creditors then a Director must consider voluntary administration. This enables the company to avoid continuing to incur debts while it is insolvent.
Franchising - ACCC Increases Focus on Franchisor Obligations
Date: February 08, 2008
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
New franchising regulations will commence on 1 March 2008. Franchisors will need to comply with the current franchising code up until 1 March 2008 and then comply with the amended code afterwards.
Partnership Agreements - Simple and Flexible Business Vehicles (Vic.)
Date: January 28, 2008
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
The only real test is whether the parties were carrying on a business in common with a view of profit as defined in the Partnership Act. For taxation purposes it simply amounts to the joint receipt of income.
Franchise Agreements: Franchisee and Franchisor Responsibilities
Date: January 21, 2008
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
Franchisees and franchisors should always seek legal advice before entering into franchise agreements. The question arises, however, as to whether a lawyer should act for both or only one party.
Insurance Law and Business Interruption Insurance
Date: December 05, 2007
Author(s): Frank Egan B.A., LL.B., A.C.L.A., F.T.I.A. (Notary)
People in business insure their premises, contents and stock against the material damage risks of fire, explosion and other perils, but have they given the same thought to the other problems which would arise following any of these events, the problems which manifest themselves when the fire engines have driven away.
Franchising - Code of Conduct Changes from 1st March 2008
Date: November 21, 2007
Author(s): LAC Lawyers
The Franchising Code of Conduct ("the Code") applies to a franchise agreement entered into, renewed or extended on or after 1st October 1998.
Insolvency & Bankruptcy Law - Asset Protection - Can a house be seized from a spouse in bankruptcy proceedings
Date: November 20, 2007
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
Notwithstanding the spectacular growth of the share market and of superannuation funds, the matrimonial house remains the single greatest asset for most people.
Insolvent Trading and Director's Liability
Date: October 12, 2007
Author(s): LAC Lawyers
Directors may be liable, personally, under the Corporations Act, Trade Practices Act, and the OH & S Act, among other legislation. A Director may also be personally liable for non payment of taxes.
Business & Commercial Law - How To Improve Your Cash Flow and Statutory Demand
Date: October 05, 2007
Author(s): LAC Lawyers
Credit is an integral part of commerce, sometimes for the better and at other times for the worse. To improve your cash flow and to ensure that credit is being given to debtors who are credit worthy, a comprehensive credit application should be completed at the inception. From the information in the credit application referred to below you are likely to be in a better position to recover any debts.
An Explanation of Some Areas of Risk for Director's
Date: June 24, 2007
Author(s): LAC Lawyers
If you (personally) breach the Act, both you and the organisation may be prosecuted. If convicted, both you and the organisation may have to pay significant penalties.
Business & Commercial Law - Director's Duties To The Company
Date: June 21, 2007
Author(s): LAC Lawyers
What to expect when you call LAC Lawyers
Date: December 13, 2006
Author(s): LAC Lawyers
LAC Lawyers is a full service firm dedicated to the provision of superior legal services in Australia. Our aim is to provide unrivalled client satisfaction coupled with high quality service and advice. When you call LAC Lawyers our friendly reception staff will spend time with you to identify the area of law your enquiry relates to then pass you on to one of our qualified solicitor's who can help you.
The Benefits of Hiring A Lawyer
Date: August 16, 2006
Author(s): LAC Lawyers
The old adage “you get what you pay for” is as true today as it has ever been.
Why stay with your lawyer
Date: August 01, 2006
Author(s): LAC Lawyers
The lawyer/client relationship is a personal one and there are many reasons which will dictate who you can and cannot work with. If you don’t like your lawyer, should you change? Ultimately, the relationship between a lawyer and client must be built on mutual trust.
Employment Law, Contract Law - Is a person who has a services company entitled to relief under s 106 of the Industrial Relations Act (NSW)?
Date: September 26, 2005
Author(s): LAC Lawyers
The Civil Procedure Act 2005 (NSW)
Date: September 26, 2005
Author(s): LAC Lawyers
The Civil Procedure Act 2005 (NSW) commenced operation on 15 August 2005. The Act represents a major progression in the regulation of civil litigation in NSW. For the first time in history civil proceedings in the Supreme, District and Local Courts and the Dust Diseases Tribunal will be governed by one set of common rules.
Choosing a business structure - Which one is right for you?
Date: September 25, 2005
Author(s): LAC Lawyers
When starting out in business or changing the nature of your business you need to consider which method of operating the business is best for you.
Business and Commercial Law - Do’s and Don’ts for Small Businesses
Date: September 24, 2005
Author(s): LAC Lawyers
Starting a new business can be a daunting operation. A remarkably high percentage of small businesses fail within the first five years of operation. Sometimes that is because the business itself is not sound. However, on other occasions the problem lies in a lack of planning or an ignorance of the many legal requirements that must be met by the small business operator.