What happens to a business after bankruptcy?

Within 14 days upon receiving the sequestration order, the bankrupt must file a statement of their financial affairs with Insolvency and Trustee Service Australia (ITSA), and all relevant business documents must be delivered.

After the filing of a statement, the trustee can begin to administer the estate and call meetings with creditors whenever:

  • the creditors so direct via resolution;
  • a request is made in writing by at least a quarter of the creditors in value;
  • a request is made by a creditor or creditors of less than this value when security is lodged for the costs incurred from the meeting.

Additionally, trustees of a bankrupt’s estate can apply to the Official Receiver for a public examination of the bankrupt, and under such a circumstance, the bankrupt must answer any questions, and provide the necessary documents – even if such information may be incriminating.

What are the general types of insurance that a lessee should take out?

For a lessee of a commercial premises, the standard insurance obligations that will form most commercial leases are obligations to insure items such as plate glass windows, doors and to maintain public liability insurance.

Furthermore, under the common law where a lessee is required to undertake insurance against certain risks, a lessee may only engage with insurers approved by the lessor – even if the premium charged by the recommended insurer is greater when compared with other insurers.

The common law has also stated that lessors who have an absolute right to choose an insurer, are also afforded the right to withhold approval if a lessee chooses the services of another insurer, whilst having no obligation to inform a lessee as to the reasons behind the exercising of the right.

However, the Australian Competition and Consumer Act (the Act) prevents corporations, in this case a lessor, from engaging in exclusive dealing, and as a consequence statute law may have an effect on the ability of the lessor to direct which insurer a lessee must engage with and any similar clauses of such a nature must contemplate the effects of the Act on a lessor’s requirement that the lessee only insure with an improved insurer.

When does the law consider a corporation has engaged in unconscionable conduct?

In the event that it is a corporation, or an individual who is engaged in a trade or commerce who is involved in unconscionable conduct, s 20 of the Australian Consumer Law (ACL), gives effect to the common law, and more generally, statutory relief is also provided by the provisions found in both the ACL, and fair trading legislation across all jurisdictions in Australia.

Complimenting the ACL, the National Credit Code (NCC) can also be applied in circumstances where relief in respect of unconscionable terms or excessive interest in relation to consumer credit contracts is required.

For consumers, s 21 of the ACL prohibits unconscionable dealings and provides that a corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services, engage in conduct that is in all the circumstances, unconscionable. Meanwhile, fair trading laws extend the prohibition to individuals dealing in trade or commerce.

When determining whether a person is in contravention of s 21, s 22(1) of the ACL outlines the types of conduct that may be considered unconscionable by the courts which includes the following:

(1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier ) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer ), the court may have regard to:

(a) the relative strengths of the bargaining positions of the supplier and the customer; and

(b) whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and

(c) whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and

(e) the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and

(f) the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and

(g) the requirements of any applicable industry code; and

(h) the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and

(i) the extent to which the supplier unreasonably failed to disclose to the customer:

(i) any intended conduct of the supplier that might affect the interests of the customer; and

(ii) any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and

(j) if there is a contract between the supplier and the customer for the supply of the goods or services:

(i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and

(ii) the terms and conditions of the contract; and

(iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and

(iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and

(k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and

(l) the extent to which the supplier and the customer acted in good faith.

How do I know if the business I have started is a business partnership?

In ascertaining whether or not a business is a partnership, there are numerous tests which are applied and the following inquiries must be answered in the affirmative in order for the business to be deemed as a partnership:
  • all parties in the partnership share in the profits and losses
  • all parties have a voice in the management as proof of agency.

There are also additional considerations that must be taken into account, with three further negative rules, that outlines the circumstances in which a joint enterprise is not a partnership:

  • co-ownership, joint tenancy, or tenancy in common does not signify a partnership, and the prime example being is when a number of people buy and sell property together for profit
  • sharing of gross returns is not a hallmark of a partnership
  • sharing of profits and losses is prima facie evidence of a partnership.

It should be noted, that although the sharing of profits is usually prima facie evidence of a partnership, there are some caveats that may still be applied, in which a partnership does not exist and is spelled out in the various Acts relating to partnerships. One such example is when a widow or child of a deceased partner, receives an annuity of the portion of profits and the law has considered such actions do not usually constitute a partnership.

Business partnerships and third party liabilities - What actions are binding?

Except for New South Wales, all Australian jurisdictions have statutes that bind any partner undertaking acts on behalf of the business. For example, s 5 of the Partnership Act 1958 (Vic), states the following:

Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner.

In summation, this section holds that any act undertaken by a partner for the purpose of the business partnership binds the other except if the outside party knows that the partner lacks the authority to act for the business in the particular matter, or is unaware that the person is a partner.

Within partnerships, a partner can be both an agent and a principle of the partnership. As such, one partner can bind the other, while the partners may also be bound by each other.

Who has to pay outgoings in a commercial lease?

For the most part, a lessee will not be responsible for the payment of any outgoings unless so provided within the leasing agreement, and which is also recoverable within legislation.

All States and Territories have some sort of provision in regards to outgoings, and we can look at s 39 of Victoria’s Retail Leases Act 2003 as our statutory example, with the section stating a tenant is not responsible for any outgoings, except in accordance with the provisions of the lease that specify:

  • the outgoings that are to be regarded as recoverable; and
  • in a manner consistent with the regulations, how the amount of the outgoings will be determined and how they will be proportioned to the tenant; and
  • how any outgoings or any part of the outgoings may be recovered by the landlord from the tenant.

Furthermore, the outgoings under s 39(2) of Victoria’s Act, may also prescribe the manner in which the amount of outgoings can be determined and apportioned by a tenant.

Are casual employees protected by unfair dismissal laws?

The decision in Ponce v DJT Staff Management Services Pty Ltd t/as Daly’s Traffic[2010] FWA 2078 in some ways paved the way for casual employees to bring an unfair dismissal claim in reliance upon s 384(2)(a) of the Fair Work Act 2009 (Cth) (the Act).

The applicant in the case, Cori Ponce, worked for the respondent company daily and nightly over a 21 month period, satisfying the s 384(2)(a) requirement of employment on a regular and systematic basis, while also meeting the six month minimum employment period set out in s 383(a) of the Act. Commissioner Roe who oversaw the matter, articulated the principles attached with employment on a regular and systematic basis, which included the following observations:

  • Regular and systematic does not necessarily mean the hours and days must be regular and systematic: Commissioner Roe found that regular and systematic under the Act, meant that there must be sufficient evidence to establish that a continuing relationship between the employer and the employee has been established – which is the reason why the Act has included within its provisions, that an employee must also have a reasonable expectation of continuing employment.
  • If the hours worked are small, and the gaps between days and times worked is long, other evidence must be produced to demonstrate regular and systematic employment: in instances where there is no clear pattern of employment, evidence of employment on a regular and systematic basis can also include the following: the employer regularly offered work when suitable work was available at the times when an employee has made him or herself available to work for the employer; and work had been offered and accepted on a sufficient basis where it can be no longer regarded as simply occasional or regular.
  • Hours worked by the employee were similar or exceed full-time ordinary hours can also be deemed as strong evidence of regular and systematic employment.
  • The reasonable expectation of continuing employment is not only about having that expectation at the moment of termination, but the expectation during the period of service as well.

What are the relevant pieces of legislation affecting employers and superannuation?

The primary legislative instrument affecting employers is of course the Act – that provides for the liabilities, charges and payments of charges and distribution of payments received. The minimum contribution required by employers is 9% of an employee’s ordinary time earnings, excluding overtime rates. On the other hand, bonuses, commissions, shift and casual loadings are payable on remuneration. However, it should be noted that in March 2012, the super guarantee charge percentage has been changed, and an incremental change to 12% has been introduced, with the abolishing of the upper age limit of super guarantee payments.

At the time of writing (January 2013) the incremental increase of super guarantees will be spread over the next six years with the following table setting out the rate percentages:

Financial Year Super Guarantee Charge Percentage
1 July 2013 – 30 June 2014 9.25%
1 July 2014 – 30 June 2015 9.5%
1 July 2015 – 30 June 2016 10%
1 July 2016 – 30 June 2017 10.5%
1 July 2017 – 30 June 2018 11%
1 July 2018 – 30 June 2019 11.5%
After 30 June 2019 12%

 

Employers should also be aware that the Tax and Superannuation Laws Amendment 2012 Measures (No 1) Bill 2012 requires employers to report from 1 January 2013, both the amount, and expected due date of contribution payments on payslips of employees.

There are a number of legislative instruments that regulate super, such as the Superannuation Industry (Supervision) Act 1993, that covers matters relating to trustees, investments, management, fund accounts and administration, enquiries and complaints, and also theFinancial Services Reform Act 2001, which broadly governs the necessary licences required to run a super fund.

What are the types of messages considered 'commercial' for the purposes of the Spam Act?

Due to the fact that the Act legislates against commercial electronic communications, it’s essential to be familiar with the types of messages that the Act considers as commercial.

Essentially, any messages that has originated or is directed towards an Australian that is intended to offer, promote, or advertise the following, will be seen as commercial for the purposes of the Act:

a product or service;

land;

investment or business opportunities, or alternatively suppliers of products, services or business opportunities.

In ascertaining whether a message is commercial, the content of the message will be looked at, such as how it was presented, and the inclusion of any relevant links and information. However, certain designated commercial electronic messages may be exempt, such as messages from charities, educational bodies, or religious groups, on the proviso that only factual information is included within the communication, and the sender has provided full contact details, along with the ability for the receiver to unsubscribe from future communications.

What is defamation?

At its most basic level, defamation is the publishing of something that is likely to cause harm to a person’s reputation by:

  • having others think less of the person;
  • causing others to shun and avoid the person;
  • causing hatred, contempt or ridicule of the person;
  • having the estimation of the person to be lowered by others;
  • affecting the person’s private character and reputation, and also their business or professional life.

One of the key questions is not whether the person has been offended or insulted, but rather, has the perception of that person by others been harmed through the publication of words, pictures, or any other medium that can convey meaning. Furthermore, the presumption of harm and actual harm may not need to be demonstrated.

What are the punishments for a person found to be engaging in bait advertising?

A person who is found to be contravening the s 35(1) provisions of the Australian Consumer Law, can face the following civil pecuniary penalties:

 

  • $1.1 million for a body corporate;
  • $220,000 for other persons.

 

The courts can also issue: undertakings; substantiation notices; public warning notices; infringement notices; injunctions; damages; compensatory orders; orders for non-party consumers; non-punitive orders; adverse publicity orders; orders disqualifying a person from managing a corporation; and orders for preservation of property.

A person in breach of the bait advertising provisions may also face criminal liabilities under s 157 of the ACL, with the maximum penalty of $1.1 million for a body corporate and $220,000 for any other person which can be imposed by the court.

Because of the potential detriment of bait advertising, s 157 does not consider intent when determining whether a person has committed an offence and is reflected in the Second Explanatory Memorandum, which states:

The strict liability nature of this offence reflects the potential for widespread detriment, both financially for individual consumers and for its effect on the market and consumer confidence more generally, that can be caused by a person that breaches this provision, whether or not he or she intended to engage in the contravention.

What risk minimisation strategies should businesses adopt when using social media?

For a brand to minimise its risk, it can develop a solid social media strategy. It is critical to ensure employees charged with updating the brand’s social media are aware of the legal implications of sharing unauthorised content. Constant monitoring of social media pages to disallow others from sharing infringing content is also essential. A quick response to allegations of copyright breaches through removing the offending material is also a solid policy option.

Constant vigilance will stop copyright infringement on social media, and allow the people to profit from their original work.

How is a business partnership determined?

Just merely stating the fact that a partnership exists may not be enough in determining the existence of a partnership. Alternatively, a partnership may still have formed even in instances where the parties have explicitly stated otherwise. Therefore, if parties share in the net profits of a business may be viewed as evidence of a partnership.

For a more tangible definition of a partnership, s 6(1) of Queensland’s Act outlines the rules in determining the existence of a partnership by having a regard to the following:

(1) In deciding whether a partnership does or does not exist, regard must be had to the following rules–

(a) joint tenancy, tenancy in common, joint property, common property, or part ownership does not of itself create a partnership as to anything held or owned jointly or in common, whether the tenants or owners do or do not share any profits made by the use of anything held or owned jointly or in common;

(b) the sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived;

(c) the receipt by a person of a share of the profits of a business is prima facie evidence that the person is a partner in the business, but the receipt of such a share, or of a payment contingent on or varying with the profits of a business, does not of itself make the person a partner in the business, and in particular–

(i) the receipt by a person of a debt or other liquidated amount by instalments or otherwise out of the accruing profits of a business does not itself make the person a partner in the business or liable as such;

(ii) a contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not itself make the servant or agent a partner in the business or liable as such;

(iii) a person being a deceased partner’s child or spouse, and receiving by way of annuity a portion of the profits made in the business in which the deceased person was a partner, is not by reason only of such receipt a partner in the business or liable as such;

(iv) the advance of money by way of loan to a person engaged or about to engage in any business on a contract with that person that the lender is to receive a rate of interest varying with the profits, or is to receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such;

(v) a person receiving by way of annuity or otherwise a portion of the profits of a business in consideration of the sale by the person of the goodwill of the business is not by reason only of such receipt a partner in the business or liable as such.

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