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DEAL TRENDS: MANAGING THE RISK OF RECOVERY IN FINANCIAL TRANSFER TRANSACTIONS.

We’ve recently noticed that both buyers and sellers have heightened concerns about their risks and exposures when transferring financial advice portfolios. Both are looking for different ways to manage their financial risk of recovery. Sellers want to know what their liabilities and obligations to the buyer are and when they will end. While buyers want certainty about what they can make a claim for and whether the seller has the financial resources to meet their indemnity and warranty liability.

Following on from my recent post on warranties and indemnities in the sale of financial advice portfolios, in this post I outline five ways that the financial risk of recovery can
be managed in these transactions.
1.Professional Indemnity (PI) Insurance

It’s standard for a seller to be required to hold PI insurance in sale agreements for financial advice portfolios. But for PI insurance to be effective
in mitigating risk, the buyer must have confidence that it will cover the seller’s exposure for a period of time after the sale. Without this, the
indemnities are worthless because there is essentially no safety net if the seller can’t fund the payment of a claim. The PI insurance run-off period
is a critical element of this.
Traditionally, sale agreements have required PI insurance to be current at completion and maintained in run-off for a minimum of 6 years. But following
the Hayne Royal Commission we’ve seen a hardening in the PI insurance market for the financial services industry. This has made it difficult for most
sellers to obtain PI run-off insurance for more than 3 years.
PI Insurance also may not cover the seller if they haven’t complied with community standards or practices, or if they’ve breached the law. For example,
if they charged clients for services that were never provided. The government has also recently extended its reach to consider eligible financial disputes
dating back to 1 January 2008.
These issues are making it difficult to determine what is an acceptable PI insurance run-off period. So I’ve had to identify other creative ways to help
buyers limit their exposure and mitigate their risk of financial recovery.
2.Warranty and Indemnity (W&I) Insurance 

W&I insurance is often used to cover the buyer for financial loss when the seller breaches the specific warranties and representations they gave in
the sale agreement. This is often referred to as a buy-side policy.
In a buy-side policy, the buyer may recover directly from the insurer for any loss suffered. This mitigates their risk that the seller won’t be around
or have sufficient funds to cover a claim. This makes W&I insurance a useful tool to bridge the divide between the seller’s need to limit their
liability and the buyer’s need for comprehensive warranties and indemnities that they know they can recover financially.
W&I insurance isn’t a new concept but it’s been gaining favour in Australia recently and I don’t see this changing. But it isn’t easy to obtain and
can be expensive. Whether it’s suitable for your transaction will come down to a number of factors including:

Deal value: The cost of the insurance may exceed the amount you’re insured for
Your commercial drivers: It’s often looked to when there are multiple sellers or the seller wants a ‘clean’ exit
Other available options to reduce the financial risk of recovery
Whether the parties are willing to do a deep dive due diligence: Insurers will require this before providing a W&I policy

3.Escrowed funds

Holding a portion of the purchase price in escrow is a relatively simple way for the buyer to know that there will be funds available to meet any warranty
and indemnity claims. Obviously the level of comfort depends on the amount held on escrow and how long it will be held there.
When negotiating an escrow fund, parties need to agree:

Who controls the escrow account
The amount to be held on escrow
How long the funds will remain in escrow
When the funds can be paid out
Who the funds can be paid out to
When unused funds can be released to the seller

All these details can be covered in the sale agreement.
If the deal is complex or high value, you could use an escrow agent. You may also need to put in place more complex documentation to regulate the arrangements.
For smaller deals, the escrow account could be jointly directed by the buyer and seller, or at the sole direction of the buyer.
4.Payment by instalment

When you pay by instalments, the buyer essentially defers payment. This reduces their upfront payment and increases their subsequent payment(s). Paying
instalments over a period of time is a well accepted practice in the financial planning book buy/sell space.
Current deals I’m seeing are pushing these out to 60% upfront with the balance paid over 12 to 24 months. This is usually on a 20%/20% basis. In the past,
the norm was a 70/30 split over 12 months. The current trend keeps the seller at risk for longer and gives the buyer a longer period and larger amount
to claim back.
I’m also seeing new and extended clawbacks and adjustments. These are being added to the traditional ‘rise and fall’ protections. This is being achieved
with bespoke provisions that cover specific risks including:

Remediation costs
Extension to breach of warranty claims
Changes in the law affecting remuneration, including fees for no or limited services and possible changes to life insurance commissions

The challenges faced by sellers are compounded by buyers expecting to pay lower multiples. Transactions are currently trending at the 2 to 2.3 x multiple.
Fixed purchase prices are also gaining favour.
5.Personal guarantees

As noted in my last post, buyers are now also asking sellers to give personal (owner/director) guarantees. But these are only worthwhile if the buyer does
due diligence on the guarantors and their financial position to make sure they can pay a claim.
If you’re negotiating or preparing to sign a portfolio transfer agreement, you should seek legal advice to make sure you’re mitigating your risk and exposure
under the agreement. If you would like any other information on tricks and traps for undertaking divestments, mergers and acquisitions, please get in touch.
We’d be happy to help.

Katie Johnston

September 2019

What Is A Sales Funnel?

Always hearing about Sales Funnels? Not quite sure how they relate to your business? This article explains why this model is fundamental to any growing business.
The post What Is A Sales Funnel? appeared first on Lawpath.

What can I do if I am in dispute with my franchisee?

We are seeing more and more high-profile disputes with some of Australia’s leading franchises as franchises work together to challenge the imbalance of power often between the franchisee and the franchisor.
High profile cases like Mortgage Choice, Retail Food Group, Ultra Tune, Nando’s and 7-Eleven have shed light on the fact that all is not well in the franchise world.
As the economy changes and the way business is conducted pressure is often put on franchises and one of the most prevalent sectors is the food, drink and hospitality industry.
The Franchising Code of Conduct is a mandatory industry code across Australia that regulates the conduct of franchising participants towards each other.
It regulates the conduct of franchisees and franchisors, including the obligation to act in good faith and for franchisors to disclose important information before a franchisee enters into a franchise agreement. This means parties must act honestly, and not arbitrarily.
The Australian Competition and Consumer Commission (ACCC) is responsible for the administration and enforcement of the Franchising Code. The new Franchising Code of Conduct commenced on 1 January 2015.
What do you do if you have a dispute with your Franchisor?
The Franchising Code of Conduct requires that franchisors develop internal procedures for handling disputes with franchisees. This procedure must be set out in the franchise agreement and meet minimum standards set by the Code.
The Code also provides a procedure for resolving disputes.
When a dispute arises, either party may initiate the complaint handling procedure under the Code, or under the franchise agreement.
The Code requires you to first try to resolve your dispute with the other party by sending them a notice of dispute which clearly outlines:

the nature of the dispute
what outcome you want
what action will settle the dispute.

If you can’t agree on an outcome within three weeks, either party may refer the matter to mediation, which involves an informal negotiation between the parties facilitated by an independent third party.
Mediators attempt to assist franchisors and franchisees to resolve their dispute without going to court. Mediation is mandatory for both parties to attend and to genuinely try to resolve the dispute.
If Mediation is not successful then the parties can consider court proceedings which is often costly, lengthy and stressful.
It is important to get solid legal advice if a dispute arises with your franchisor and know your legal rights. At FC Lawyers, we have acted successfully for a wide range of franchisees in a variety of industries.
If you are in a dispute with your franchisee or have any other franchising questions, please contact our team today.
The post What can I do if I am in dispute with my franchisee? appeared first on FC Lawyers.

Murdochs Recognised as Leading Lawyers in Multiple Areas of Law

We are delighted to announce our rankings in Doyle’s Guide for 2019!
Doyle’s Guide is an independent organisation that rates and recommends law firms and individuals in the legal industry factoring in peer recognition, relevant industry bodies and client reviews.
The rankings are released throughout the year from February to November, with family law usually being the first announced. The most recently released rankings are for Wills and Estates lawyers in Queensland, with our team’s listings including:

Tom McVeigh – Preeminent Wills, Estates & Succession Planning Lawyer
Tom is one of only five lawyers listed as Preeminent and the only one outside of Brisbane, an outstanding achievement!
Leanne Matthewson – Recommended Wills, Estates & Succession Planning Lawyer
Juanita Maiden – Recommended Wills & Estates Litigation Lawyer

This brings the firm’s tally of lawyers included in Doyle’s Guide for 2019 to 8 – an impressive number for a team of 20 lawyers.  The rankings announced earlier this year include:

Tony Randall – Leading Agribusiness Lawyer
Craig Shepherd – Leading Commercial Litigation & Dispute Resolution Lawyer
John Lobban – Leading Insolvency & Restructuring Lawyer
Andrew Crooke – Leading Family Lawyer (High-Value/Complex Property & Commercial Matters) – Regional Qld
Andrew Crooke – Leading Family & Divorce Lawyer – Toowoomba, Darling Downs & Western Qld
Sarah Adams – Recommended Family & Divorce Lawyer – Toowoomba, Darling Downs & Western Qld

The firm has also received a number of mentions with these rankings achieved in 2019:

Recommended Commercial Litigation & Dispute Resolution Law Firm
Leading Agribusiness Law Firm
Leading Second Tier, Leading Wills, Estates & Succession Planning Law Firm
Recommended Leading Wills & Estates Litigation Law Firm
Leading Second Tier, Family & Divorce Lawyers – Toowoomba, Darling Downs & Western Qld

Our sincere thanks for your continued support and trust which has helped us to achieve these rankings.
The post Murdochs Recognised as Leading Lawyers in Multiple Areas of Law appeared first on Murdoch Lawyers.

Family Succession Plan Workshop

Do you need a WILL or does your current WILL need to be updated?
Do you feel your LEGACY INTENT is not clear to your family or beneficiaries?
Murdoch Lawyers and Strategic Evolution invite you to attend our next Estate Planning Kickstart Workshop on Friday 1st November 2019 at Sanctuary Cove on the beautiful Gold Coast. These half day workshops are held every 2 months and will help you and your family update and complete your Estate Plan.
Facilitated by Mark Westcott (Strategic Evolution) and Tom McVeigh (Murdoch Lawyers), this workshop will provide you with a full set of ‘fill in the blank’ activities that will clearly document your intentions, share your dreams and create consensus with all your family members.
Strategic Evolution and Murdoch Lawyers have been working together over the last 6 years helping our mutual clients create a family legacy they are proud of.
Please watch the video about our workshop here
Benefits:

Maximise your estate and fulfil your promises
Understand ‘fairness’ versus ‘equality’ for everyone
Allow yourself to speak from the heart and let all the human parts of the plan shine through for those you love
Leave invaluable direction for loved ones after you have passed—everything your family will ever need, in one folder
Principles and capabilities to keep the family together, happy and harmonious to eliminate any potential future squabbles
At the conclusion of the Workshop, you will take away a fully documented, cohesive, concise succinct but powerful, structured plan for your Estate in one folder. All the clues you can leave behind for a smooth transition of your estate
PLUS – You will have access to our NEW online ‘Peace of Mind Foundations’ site. All the tools and capabilities uncovered on the day can be stored on this platform

What Participants Say
 “I am grateful for the way in which you manage my Succession Plan. It is an area which is essential to the future welfare of my business and my family. With your professional approach, I am forced to give it the priority it deserves.” P.J. EBLEN Adelaide, SA
“My family now have comfort in knowing that if the unimaginable was to happen, they would be taken care of. Thank you once again, to Mark, and your team.” K. AMBROSE-PEARCE Darwin, NT
“There is so much more to consider, thank you Mark.” T. PERRY Townsville, QLD
“I have a really good feeling about what we are doing.” J. EASTHAM Noosa, QLD
At only $97 per family, we invite you and everyone you care about to attend this workshop and make your plans and arrangements, in one day, before lunch!
For more information or to register your interest, please contact Mark Westcott on 0418 743 888 or email [email protected].
The post Family Succession Plan Workshop appeared first on Murdoch Lawyers.

Murdoch Lawyers Proudly Sponsor the Bush Bash League

Murdoch Lawyers are the proud sponsors of the inaugural Darling Downs Bush Bash League. This fantastic initiative by Toowoomba Cricket Incorporated brings together six teams comprised of local cricket players of various ages from across the region.
There are six teams participating which are owned by local businesses from Toowoomba and the Lockyer Valley, including Hip Pocket Workwear, Livewired Electrical, Liebke Tyres, George Banks Rooftop Bar, Aidacare Mobility & Healthcare Equipment, Pollock Farms Pty Ltd and Lockyer Valley Toyota.
Round 1 was on Sunday 15 September 2019 with all three games taking place at the Captain Cook Ovals in Toowoomba.
The full game schedule can be found on our Events page here.
There will be plenty on offer to keep the whole family entertained with Western Districts Cricket Club – Toowoomba Inc running a bar and barbecue, plus Wilsonton Shopping Centre is just up the street as well as an assortment of food venues.
Plus, one of the games will be live streamed by Power FM Toowoomba each week!
Come join us and enjoy a sausage and a beer while watching a beloved Australian pastime and supporting your favourite team!
The post Murdoch Lawyers Proudly Sponsor the Bush Bash League appeared first on Murdoch Lawyers.

Would you pay someone to assemble your flatpack furniture?

Would you pay someone to assemble your flat-pack furniture? Is a trip to Ikea a big enough dent in an otherwise stress-free weekend without adding searches for lost screws and wondering what the difference between parts A and K really are? And then there are the helpful hints from your other half to deal with. Over […]

What happens if you are an affected lot owner and you don’t challenge the repeal of an exclusive use by-law in time?

A by-law for a strata scheme can only be made, amended or repealed if it is passed by special resolution at a properly convened general meeting. Once the by-law has been passed, it must be registered at the NSW Land Registry Services within six months. Under the previous legislation, this time period was two years.
If the by-law is a common property rights by-law that confers exclusive use or special privileges to lot owners, then there is another important requirement which is that each owner on whom the by-law confers rights or special privileges must provide their written consent to the by-law. This is required by section 143(1) of the Strata Schemes Management Act 2015. If this consent if not given, then section 143(4) of the Act has the effect that two years after the making of the by-law all conditions and preliminary steps precedent are taken to have been complied with. This includes returning a consent form.
In the recent case of Khadivzad v The Owners – Strata Plan 53457 [2019] NSWSC 157, the scheme previously had a special by-law giving some lot owners the exclusive use and enjoyment of common property to park their vehicles. This special by-law was subsequently repealed at a general meeting in 1999. However, the consent of the affected lot owners were not obtained. Some lot owners raised an objection to this and had their legal representatives write to the secretary of the owners corporation notifying the owners corporation that the repeal of the by-law was without their consent. This was not resolved. The lot owners did not commence proceedings to challenge the validity of the repeal of the special by-law or to establish that the special by-law remained in effect. The repeal of the special by-law was subsequently registered in November 2001 which was within the two year registration time period applicable at the time.
The owners of lot 9, who were among the lot owners who benefitted under the special by-law, commenced proceedings in 2018 alleging that the special resolution was not effective to validly repeal the special by-law because the written consent of the affected lot owners were not obtained.
The Court agreed that the written consent of the relevant lot owners was required and that it had not been obtained prior to passing the special resolution which purported to repeal the special by-law. However, the court went to state that because two years had passed since the passing of the special resolution, it had been conclusively presumed that the consent requirement was fulfilled.
Although the lot owner’s legal representative wrote to the owners corporation disputing the validity of a by-law this was not a sufficient challenge to prevent the presumption in section 143(4) of the Act applying. The Court held that the mere writing of a letter of complaint which cannot itself affect the validity or effectiveness of a by-law, or initiate a process that might lead to such an affect, cannot be considered to constitute a ‘challenge’ to a by-law. Rather, what is required before the end of the two-year period provided in section 143(4) of the Act is for proceedings to be commenced to challenge the validity of the repeal of the special by-law or to establish that the special by-law remained in effect.
The lesson to be learnt is, if you disagreed with the by-law being passed, repealed or amended and you are a lot owner granted a right or burdened with an obligation under the by-law then you need to take action within two years of the by-law being passed if you want to challenge it.
Written by Jasmin H. Singh and Allison Benson 16/09/2019

Update on tax residency – High Court refuses to grant ATO special leave to appeal in Harding

The High Court has refused to grant the ATO special leave to appeal the Full Federal Court’s decision in Harding v Commissioner of Taxation [2019] FCAFC 29. The effect is that the Full Federal Court decision stands.
In Harding, the Full Federal Court overturned the first instance decision, where the trial judge held that Mr Harding did not have a ‘permanent place of abode’ outside Australia because he did not occupy each of his apartments in Bahrain with the intention of dwelling in those apartments permanently.
The Full Federal Court decided that the relevant question was not whether a person’s specific house or apartment was permanent but whether Mr Harding had:

abandoned his place of abode in Australia; and
established himself permanently in Bahrain.

What does this mean for the permanent place of abode test?
Now that the High Court has refused to grant special leave, there are no further avenues of appeal for the ATO.
Australians living overseas can rely on the Full Federal Court’s decision in determining whether they have established a permanent place of abode outside Australia.
This decision is comforting news for Australians who no longer live in Australia and have settled permanently in another country. For those people, it is important to continue to gather evidence that they have a permanent place of abode in a country outside Australia. This is because, during any review by the ATO, the taxpayer must establish that on the balance of probabilities they have a permanent place of abode outside Australia.
Are there circumstances where the permanent place of abode test remains a risk?
There are still risks for taxpayers who are no longer living in Australia but may not have settled or established themselves permanently in one country.
It is relatively common for Australian citizens to have lived outside Australia for many years but in multiple countries.
The question will be whether they have established a permanent place of abode in each country where they have lived.
In our previous article, we describe some of the specific circumstances that we have seen where there are still risks that Australians have not established a permanent place of abode outside Australia based on the Full Federal Court’s decision in Harding.
You can access this article here.
Are there other risks in relation to tax residency?
The Full Federal Court’s decision in Harding provides comfort in relation to the permanent place of abode test.
However, an individual can be a tax resident of Australia under any one of the following tests:

the ordinary meaning of the word ‘resides’ test
the domicile and permanent place of abode test
the 183 day test
the Commonwealth superannuation test.

Most of the ATO audit activity we see continues to be targeted at the ordinary meaning of the word ‘resides’, and whether a person will continue to ‘reside’ in Australia based on their connections with Australia.
Taxpayers will need to ensure their evidence covers both the establishment of their permanent place of abode outside Australia, as well as the fact that they have stopped residing in Australia.
Please contact us if you would like assistance in relation to the evidence you should keep or would like to discuss your tax residency position.
The post Update on tax residency – High Court refuses to grant ATO special leave to appeal in Harding appeared first on Cooper Grace Ward.

Calderbank Offer of Settlement – Take it or Leave it?

Calderbank offer essentially means that the burden of costs will be unloaded on the party who unreasonably fails to accept an offer of settlement.
Offers contained in a Calderbank Letter are usually marked ‘without prejudice save as to costs’. It is recommended that a Calderbank offer be in writing.
At times the Calderbank offers of settlement may not appear appeasing to the recipient. However the difficult question is how could one responsibly rejects a Calderbank Offer.
The principles to be considered by the Court in determining whether a refusal of an offer is reasonable were outlined in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No.2) [2005] VSCA 298 being:
the stage of the proceeding at which the offer was received;

the time allowed to the offeree to consider the offer;
the extent of the compromise offered;
the offeree’s prospects of success, assessed as at the date of the offer;
the clarity with which the terms of the offer were expressed;
whether the offer foreshadowed an application for an indemnity costs in the event of the  offeree’s rejecting it.

It was further held in Victorian WorkCover Authority v O’Brien (2017) VSC 68 that the critical matter to consider in determining “ …whether a refusal of an offer is reasonable is whether the rejection of the offer was unreasonable in the circumstances.”
It can follow that if the recipient of an offer of settlement rejects the offer on the basis that the recipient’s case has  a reasonable prospect of success, the Court may not consider the rejection of offer unreasonable and hence may not award costs to the party that proposed the offer.
Further an offer of settlement that requires the recipient to capitulate is unlikely to be entertained by the court in circumstances that the recipient may have reasonable prospects of success.
The decision to accept or reject an offer of settlement requires expertise and substantial legal consideration.
If you require assistance and legal advice, our experienced solicitors at Pavuk Legal would be pleased to provide you with extensive advice in relation to unfair dismissal matters. Feel free to contact our office to speak with one of our friendly solicitors today.
The post Calderbank Offer of Settlement – Take it or Leave it? appeared first on Pavuk Legal.

Tips for Avoiding Disputes With Your Customers

Disputes with your customers can be damaging to your business. Here’s some ways you can help prevent them from occurring.
The post Tips for Avoiding Disputes With Your Customers appeared first on Lawpath.

Fairness in Franchising

Franchising is big business in Australia. It dominates around 9% of Australia’s Gross Domestic Product which accounts to around $180 billion.  Why then is there such a disparity between rights and interests of franchisees and franchisors? The Fairness in Franchising Report which was released in March 2019 attempts to address this issue. The nature of […]
The post Fairness in Franchising appeared first on Coulter Roache.

Payne v Davies [2019] FCA 1506

PRACTICE AND PROCEDURE – application for summary dismissal under s 31A, Federal Court of Australia Act 1976 (Cth) and r 26.01, Federal Court Rules 2011 (Cth) – where applicant alleged that the respondents’ refusal to enrol her into a tertiary course constituted racial discrimination in breach of the Racial Discrimination Act 1975 (Cth)- where Australian Human Rights Commission terminated the applicant’s complaint – where the preconditions to the Court’s jurisdiction in s 46PO(3) of the Australian Human Rights Commission Act 1986 (Cth) to entertain a complaint of victimisation are not met – where no evidence that the respondents could or did refuse or fail on demand to supply the course to the applicant – application for judicial review summarily dismissed

Orders or Parenting Plans – Which one is for you?

It is often the case that separated parents are able to reach an agreement about the parenting arrangements for their child or children. Parenting arrangements for children which are agreed upon can be set out in either ‘Consent Orders’ or a ‘Parenting Plan’. So, which one is best for you?