If you’re not in the business of supplying to retail consumers, you could be excused for thinking that the consumer guarantees under the Australian Consumer Law (ACL) were not something you needed to worry about.

However, given the definition of “consumer” in the ACL, the consumer guarantees already apply to a number of business to business transactions (in addition to business to retail consumer transactions), and from 1 July 2021 they will apply to a lot more.

The definition of “consumer” already applies to supplies (including to business customers) of goods and services:

• of a kind ordinarily acquired for personal, domestic or household use of consumption; or
• for a price of $40,000 or less,

but from 1 July 2021 the $40,000 threshold will increase to $100,000.

This means that any business that supplies goods or services to another business where the value of those goods or services is less than $100,000 will need to comply with the consumer guarantee regime in the ACL.

(There is no change to the exclusions from this regime, including for goods purchased for re-resupply or use in production or manufacture.)

There are 9 consumer guarantees that apply to goods and 3 consumer guarantees that apply to services. These include, for example: guarantees for goods relating to acceptable quality, fitness for purpose and compliance with express warranties and guarantees for services relating to fitness for purpose and being performed with due care and skill.

Among other available remedies, “consumers” (including business customers) can potentially claim uncapped compensation from a supplier (including for consequential losses) if they suffer loss or damage as a result of breach of a consumer guarantee (for example, for business losses resulting from goods or services that are found not to have met a guarantee relating to fitness for purpose.)

In many circumstances, however, a limitation of liability clause that meets the very specific requirements of the Australian Consumer Law can be effective.

Sierra Legal can assist by reviewing your standard terms to ensure that an appropriate limitation of liability clause is in place and advising on the consumer guarantees and other relevant obligations under the Australian Consumer Law.

It is now six months since Senior Consultant, Michael Abrahams, joined us in a part time capacity (while continuing his other role as General Counsel, Company Secretary & Integrity Officer at Essendon Football Club).

We sat down with Michael to talk about his observations on returning to private practice after almost 15 years as an in-house lawyer.

What are the key differences between working in-house and advising clients in private practice?

As an in-house lawyer, you have a range of internal clients, but you are a part of the organisation itself, so you develop a deep understanding of the organisation, its priorities and how it thinks and you also have an opportunity to influence and improve the organisation from the inside.

Private practice lawyers aren’t usually embedded in the client’s business in the same way, but you do get the opportunity to work with a wider range of clients in different industries and have the benefit of working alongside other senior lawyers (which you don’t necessarily get to do in-house).

Based on your experience, are there opportunities for businesses and their lawyers to get more out of the relationship by thinking in different ways?

Absolutely! In my experience, businesses often look at contracts and other legal matters on an individual basis and only involve their lawyers when more significant matters come to their attention.

Sometimes these matters take up a lot of legal resources and can arise when the client is already practically committed to the transaction (so are no longer in the best bargaining position).

Alongside this, the business will inevitably be entering a significant number of other contracts all the time (which may not be very formal or obvious, such as when buying on a supplier’s terms) and these might get no attention from a legal or risk perspective.

I think there is huge scope for businesses to address this by using the right external lawyers to help them identify their true key risks and create the systems, procedures and templates to address them in a systematic and efficient way.  Technology can play an important role in this and it’s exciting that at Sierra we are able to offer an extra element to this service through our contract automation service, Arreis Automation.

Personally, moving back into a private practice as a senior lawyer, it’s great to have the opportunity to take what I have learned in-house and make a difference for a range of clients and not just my one employer.

Sierra Legal is pleased to announce that Davide Cavalleri has joined the firm as Special Counsel.

Davide is a highly experienced corporate and commercial lawyer who specialises in mergers and acquisitions, corporate advisory and general commercial law.

As part of Davide joining the team, we ask him all the tough questions…

What were you doing before Sierra Legal? I was a special counsel in the corporate/commercial team in a mid-tier firm.  Prior to that, I was a principal in a smaller boutique commercial law firm in Melbourne.  I also owned and ran a small manufacturing business for a time in between, which got me out of the legal ivory tower – it helped me appreciate a little what some of our business clients have to deal with on a daily basis.

What do you do with your time when you aren’t advising on M&A deals and reviewing contracts? I took up running about 12 years ago.  I really enjoy it, both to keep fit and as a form of stress release.  I also like pottering about the garden, although that can be a challenge with Melbourne’s weather.

What was your first job? A sales clerk in an electrical components wholesaler.  After a while, I knew the names and specifications of a vast quantity of stock items, without having a clue as to what most of them were actually used for.

What was the last book you read? “A Promised Land”, Barack Obama’s memoir.

Favourite place? Port Douglas, in far north Queensland.  As a Melbournian, I suspect I’m not alone in saying that.  There are plenty of ex-southerners living up there!

Favourite food? I confess I have a soft spot for a good pizza.  I limit my intake these days though, as it has to be followed up by a very long run to burn off the calories!

Least favourite food? Dairy and cheese (although I make an exception where it’s a pizza topping).

If you were stranded on a desert island, what 3 things would you want with you? A satellite phone and 2 fully charged backup batteries, so I can call for help and be rescued.

Best advice you have received? “To live in the moment”.  It’s easier said than done, though.

Welcome to the team Davide!

Tip 1:  Know what you are buying – shares or assets

Most people operate their business through a company.  This means that a buyer can either buy:

• the shares held by the shareholders in the company; or
• the assets used by the company to operate the business. 

However, if the business is operated by a sole proprietor or through a trust, then the buyer may be limited to buying just the assets.

The difference between a share purchase transaction and an asset purchase transaction is that:

• a share purchase transaction involves the buyer purchasing all of the shares in the company that operates the business.  When the buyer purchases all of those shares, the buyer becomes the shareholder or owner of the company - including everything that the company owns (i.e. plant and equipment, land and buildings, goodwill, intellectual property and rights and benefits under customer contracts).  Importantly, owning the company also typically means that you inherit any debts or liabilities of the company (which is factored into the purchase price).
• an asset purchase transaction involves buying some or all of the assets that the company uses to operates its business.  These assets may include contracts, plant and equipment, land and buildings, goodwill and intellectual property.  In an asset purchase transaction, the buyer may prefer to purchase just some of the assets that are used to operate the relevant business and leave behind other assets and any of the debts or liabilities with the company.   

The decision on whether to buy shares or assets may become clearer after undertaking due diligence on the target business. There may also be tax reasons why a buyer may to prefer to purchase shares over assets or vice versa, and a buyer should speak to its accountant about this at the outset.

Tip 2:  Negotiate an exclusivity period with the seller

If possible, a buyer should try to negotiate for an exclusivity period during which the buyer has the sole right to conduct due diligence on the target company and business.  This is intended to prevent the seller from trying to solicit other offers from (or negotiate with) other prospective buyers during the exclusivity period.   

Tip 3:  Understand your funding options

Before starting the acquisition process, a buyer should consider how it will fund the proposed acquisition (cash, debt finance from a financial institution, or possibly vendor finance).

If a buyer needs to get a loan to fund the acquisition, the lender may wish to take security over the shares or assets of the target business and review the due diligence on the target business. 

Tip 4:  Undertake due diligence

Due diligence is essentially an investigation into (and an appraisal of) the target business/company, to assess its assets, liabilities and commercial potential. 

From a legal perspective, this would include things like reviewing the business’ material contracts, funding and borrowing arrangements, any current litigation, records of any employees and their entitlements, and conducting searches on any land or buildings owned or occupied by the target business.

A buyer will usually also want to do financial, commercial and possibly tax due diligence on the target company or business (and should speak to their accountant about this). 

Due diligence is important because:

• a buyer should ensure that it knows what it is buying so that it can better manage its risk associated with the purchase of the target business; and
• it will assist a buyer to negotiate the terms of the purchase.  For example, legal due diligence may reveal that there are certain risks in the target business which the buyer may then want to protect against.    

The level of due diligence on the target business will depend on a number of factors including the value of the acquisition and the buyer’s experience in the relevant industry.  Please see our recent article for top tips when conducting due diligence.

Tip 5:  Understand what protections you may need in the documents as a result of due diligence

If the buyer still wants to proceed with the purchase after conducting initial due diligence, the next step is to prepare, negotiate and enter into definitive transaction documents to formalise the proposed sale and purchase of the target.  Sometimes a term sheet or heads of agreement is entered into first for the parties to agree on the key terms that will appear in the definitive transaction documents.

A buyer will need to understand any material issues arising from due diligence to translate those issues into protections sought by the buyer in the sale and purchase agreement.  Examples of buyer protections that are often included in a sale and purchase agreement include:

• having certain conditions precedent that must be satisfied before settlement or completion of the transaction;
• including provisions that require part of the purchase price to be held back or retained until a specified action or result is achieved; and
• including indemnities or warranties from the seller to address specific risks.

If you have any questions on buying a business, undertaking legal due diligence or would like assistance with conducting legal due diligence on a target business, please do not hesitate to get in touch with one of the Sierra Legal team.

Some interesting commentary and insights on mid-market M&A in Australia in 2021 in the latest Mergermarket publication.

We agree with the sentiments in the publication - despite interesting conditions in 2020, during the second half of the year we advised on a number of M&A/private equity transactions occurring across various industries.

The main drivers for these transactions seem to be: (i) 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); (ii) competing businesses merging to achieve cost efficiencies and greater stability; and (iii) companies seeking private equity investment for stability and future growth.

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.

Before buying a business, it is recommended that the buyer undertakes due diligence on the target business.  In conducting due diligence, a buyer should aim to know as much about the target business as it does about its own business. 

The following are some key tips to keep in mind when conducting due diligence on a target business:

• Negotiate an exclusivity period with the seller:  An exclusivity period will ensure that the buyer can devote time and resources to undertake due diligence as the only prospective buyer and without being concerned that the seller is, at the same time, trying to solicit other offers for the target business.
• Engage experienced advisers:  A buyer should engage advisers (such as lawyers, accountants and tax advisers) experienced in advising on M&A transactions to assist in conducting (and reporting on) due diligence on a target business.  Advisers experienced in M&A transactions and conducting due diligence will know what issues to focus on (or look out for) during the due diligence process.  
• Agree on the scope of the due diligence:  Before obtaining detailed information on the target business, the buyer and its advisers (legal and financial) should agree on the scope of the due diligence.  The scope of the due diligence review will depend on factors such as the nature of the business, the size and value of the business and the risk appetite of the buyer.  Often, materiality thresholds are adopted to enable the buyer’s due diligence team to focus (and report) only on matters that exceed the thresholds, making the review of the due diligence materials relevant and efficient.
• Obtain detailed information about the target company:  A buyer should request detailed information from the seller about the target business.  To assist with this, the buyer (or its advisers) should provide the seller with a detailed due diligence questionnaire/checklist that requests information (and copies of documents) about the target business. Ideally, the seller will respond to the due diligence questionnaire/checklist while at the same time collating the supporting documents in an online data room.  The materials in the data room should, as far as is possible, be arranged in folders (and sub-folders) that correspond to the structure of the due diligence checklist to make it easy to locate information in the data room and to make it easy to delineate the sections of the data room that each of the buyer’s experts will focus their review on.
• Conduct a detailed and targeted review:  Once the Seller has completed the questionnaire and uploaded documents into the data room, the buyer and its relevant advisers will review the completed questionnaire/checklist and material in the data room.  Typically, a due diligence review is divided into:
• Legal due diligence:  includes a review of the corporate structure and records of the target company, material contracts, results of searches of registered intellectual property, business names, registrations of personal property securities and other securities, and current proceedings, transfer of employees and their entitlements.
• Commercial due diligence:  includes a review of real property/premises, plant and equipment, stock and inventory, systems and processes, employees, customers, products and services, suppliers, assets, insurance, market trends and issues.
• Financial due diligence:  includes a review of financial performance, financial position, maintainable earnings, debtors, creditors, work in progress, salaries and wages, superannuation, finance facilities, guarantees and bonds, pre-payments, tax returns, liabilities, notices, disputes, penalties.
• Tax due diligence:  includes a review of tax returns, liabilities, notices, disputes, penalties, etc and the tax impact of the transaction (as structured) on the buyer; and
• Obtain formal due diligence reports:  Once the buyer’s advisers have completed their review of the due diligence materials, they should report to the buyer in writing on their findings.  Often, advisers may report to the buyer on an “exceptions basis” only (unless the buyer requires otherwise).  This means that the due diligence report would only mention issues identified from the due diligence exercise whose value or impact would be over a certain materiality threshold.  The recommendations will inform the buyer’s decision on what action(s) to take in relation to the material issues identified during due diligence. 
• Allow sufficient time:  The collation of relevant documents and information by the seller, and the review of those materials by the buyer, take time, so allow sufficient time for proper due diligence to be undertaken as part of the transaction timetable.
• Negotiate relevant protections in the transaction documents:  Following completion of the due diligence process (and provided the buyer wishes to proceed with the transaction), the next step is negotiating and entering into definitive transaction documents to formalise the proposed sale and purchase of the target company.  The material issues identified in the due diligence reports and the respective recommendations of the buyer’s advisers will frequently translate into protections sought by the buyer in the relevant transaction documents, which may include the completion of certain remedial actions as conditions precedent to completion; a pre or post-completion undertaking to take a specific action; an indemnity to protect the buyer from specific material risks; or additional warranties addressing specific or general areas of concern for the buyer.

If you have any questions on buying a business, undertaking legal due diligence or would like assistance with conducting legal due diligence on a target business, please do not hesitate to get in touch with one of the Sierra Legal team.

• Melbourne
• Unique and flexible work environment
• Relaxed, close-knit and supportive team
• Broad range of corporate and commercial work

Are you tired of working in a typical “ivory tower” law firm, or the constant pressure of personal fee budgets?  Do you want to be part of a dynamic and growing team with genuine flexibility around work location and hours? 

Sierra Legal is a boutique legal practice that was formed 10 years ago.  Our current clients, to name a few, include Bingo Industries, Bulla Dairy Foods, Chubb Insurance, Clark Rubber, Edison Growth Fund, Energy Power Systems Australia, Hisense, Medibank, Simoco Wireless Solutions, Straight Bat Private Equity and World Vision Australia.

We have offices in Melbourne and Brisbane, but when our lawyers are not out seeing clients, they are often working from home offices and communicating regularly with each other online.  All our lawyers have come from large firms (including Middletons/K&L Gates, McCullough Robertson, King Wood Mallesons and Clyde & Co) and share a common desire to practise law in a far more flexible workplace environment, but still being part of a friendly, supportive team that does interesting, high quality legal work.  Unlike most if not all other law firms, we do not have personal fee budgets, but are instead focused on the customer, by delivering top-quality and commercially focused legal services for our clients.

Another unique feature of Sierra Legal is its document automation service offering, Arreis Automation.  This involves us coding and hosting bespoke web apps for our clients, which enables them to automatically generate their own contracts and other documents themselves from Sierra Legal’s online software platform (see https://www.sierralegal.com.au/arreis).

Importantly, over the last 10 years, Sierra Legal has demonstrated an extraordinarily high retention rate with its team members, in that only 2 of our lawyers have left the business during that period!

We are looking for a talented Melbourne based corporate/commercial lawyer to join our growing team at Senior Associate or Special Counsel level, to work on a broad range of complex and interesting M&A, corporate and commercial matters. 

You will be working within a close-knit team of experienced commercial lawyers, principally in some or all of the following areas:

• Mergers and acquisitions
• Reverse listings, IPOs and public company takeovers
• Capital raisings and debt restructuring
• Commercial agreements
• General corporate legal advice
• Preparation and automation of template documents as part of Arreis Automation

We are seeking candidates who possess an outstanding analytical mind, strong interpersonal and communication skills, excellent drafting skills, attention to detail, personal integrity, self-motivation and the ability to work as part of a close-knit team. 

If you would like to be considered for this exciting and unique role, please email your CV in confidence to careers@sierralegal.com.au

Happy New Year!

We are excited to be back in 2021 to continue providing exceptional, commercially focused legal services to our clients in the following areas:

✔️️ M&A (including buying and selling companies and businesses).

✔️ Shareholder transactions (including shareholder agreements and joint ventures, private equity transactions and IPOs).

✔️ Corporate advisory (including Corporations Act and ASX Listing Rules advice).

✔️ Commercial law (including customer and supplier contracts, IT and IP licences, outsourcing contracts and finance arrangements).

If you are thinking about engaging in a corporate/commercial transaction in the next 12 – 18 months, please do not hesitate to get in touch with one of the Sierra Legal Team, as it is never too early to have an initial discussion.

For further information on us, our experience and some of the innovative products we offer, please also see:

📢 https://www.sierralegal.com.au/what-we-do and https://www.sierralegal.com.au/experience for further details on our legal services, flexible fee arrangements/products and our experience; and

📢https://www.sierralegal.com.au/arreis on our innovative legal automation platform, Arreis Automation.

We look forward to working with you in 2021!

We would like to wish all of our clients, colleagues, referrers, connections, family and friends a happy festive season and a big thank for your continue support during 2020!

We look forward to continuing to work with everyone in 2021.

When did you start at Sierra Legal? I started at Sierra Legal in February 2014.

What were you doing before Sierra Legal? I was living and working in London as a Senior Associate in the Corporate team at SJ Berwin LLP (now King & Wood Mallesons) in London. 

What is the most exciting thing you are working on right now? I am working on some commercial agreements for a business that, amongst other things, provides some very cool drone equipment and services for cinematographic use (including for movies like Thor Ragnarok and Aquaman).

What do you do with your time when you aren’t advising on M&A deals and reviewing contracts? I have 2 daughters who keep me very busy outside of work.  I’m currently also in the middle of a home renovation project and I provide some company secretarial assistance to a not-for-profit accelerator for early stage start-ups in the Agricultural and Food sectors in Australia. I also like swimming, bike riding, yoga, gardening and doing Just Dance with my girls.

What was your first job? Waitressing for a couple of Malaysian restaurants in Brisbane.

What was the first thing you bought with your own money? I don’t remember but I’m sure it would have been some sort of fashion item – maybe a purse or a pair of shoes!

What was the last book you read? The Secret Commonwealth by Phillip Pullman. Before that, I also started reading Homo Deus (A Brief History of Tomorrow) by Yuval Noah Harari, but I haven’t finished this one yet – it’s interesting but a bit dry.

Favourite place? My favourite city that I’ve visited is Istanbul.  Otherwise, I love any place with a good beach.

Favourite food? Too difficult to choose just 1 – my top 3 would probably be Malaysian Fried Kueh Teow (a fried, flat noodle dish); Malaysian egg and onion roti canai with lamb curry; roast chicken or roast pork (with yorkshire pudding, veg and gravy).  The first 2 are from growing up in Malaysia and the last choice had to go on the list because when I was pregnant with my first daughter in London, I went off all Asian food and kept craving roast (particularly roast chicken) and 3 veg!

Least favourite food? Japanese natto (fermented soy beans).  I lived in Japan for a year after I graduated from Uni and I could never bring myself to have more than a taste – I don’t like the texture.

If you were stranded on a desert island, what 3 things would you want with you? An oasis, veggie seeds and some music.  It might be nice to be stranded there for awhile if I had these things! 

Best advice you have received? Not really advice but a quote I once read, which seems to have a number of variations but is essentially as follows – a person really only needs 3 things in life to be happy: something to do, someone to love, something to look forward to!

On 19 November 2020, ASX released Compliance Update no. 10/20 to announce the expiry, on 30 November 2020, of the temporary capital raising relief measures that had been introduced to assist ASX-listed entities affected by the COVID-19 pandemic to undertake emergency capital raisings.

Previously, these capital raising relief measures had been updated with effect from 23 April 2020, extended until 30 November 2020, and further updated on 15 September 2020 as a result of the ongoing stabilisation in market conditions.

However, following recent consultations by ASX with ASIC and other industry stakeholders, ASX confirmed in Compliance Update no. 10/20 that the temporary capital raising relief measures will expire on 30 November 2020.

A listed entity seeking to rely on these capital raising relief measures is required to (among other things):

• announce the capital raising to the market on or before 30 November 2020; and
• give written notice to ASX (not for release to the market) about the proposed capital raising, with ASX to then acknowledge by written notice that the entity is entitled to rely on the capital raising relief measures.

A copy of Compliance Update no. 10/20 can be found here.

Sierra Legal welcomes Michael Abrahams to the team as a Senior Consultant.

In conjunction with his work for Sierra Legal, Michael will also continue as General Counsel, Company Secretary and Integrity Officer at Essendon Football Club.

Welcome Michael!

Buying a business normally involves a substantial amount of due diligence by the buyer on the target business.  Before committing to the transaction, the buyer will want to ensure that it knows what it is buying, including what obligations it is assuming, the nature and extent of the target businesses contingent liabilities, problematic contracts, litigation risks, and intellectual property issues.  

As such, it is important for a seller to have all of their business records and documentation up to date, so that a buyer can obtain a good understanding of the business and to minimise the risk of a buyer undervaluing the business or not proceeding with the acquisition.

In our experience, the following are a few key matters that buyers don’t want to see when they are undertaking due diligence:

• Corporate registers not up to date:  This could reflect that the rest of the business documents and records are inaccurate and unreliable. If the register of members is not accurate and up to date, it may be difficult to prove who the owners/sellers are (in a share sale transaction).
• Business assets owned by numerous entities:  The buyer could be concerned that it may not be purchasing all of the assets required for the business.  The buyer may also need to expend time and costs to restructure the business and its assets after the transaction – the buyer may take this into consideration and reduce the purchase price.
• Numerous registrations on the Personal Property Securities Register:  This could ring alarm bells that the business is relying too heavily on credit.  The release of registrations on the PPSR can be a time-consuming process and often causes delays in completion.
• Intellectual property that is essential to the business is not owned by the seller:  The buyer could be concerned that it may not be able to acquire or use the intellectual property required for the business.  The buyer is likely to require the acquisition of, or right to use, the intellectual property as a condition precedent to completion.
• Lack of contracts or expired contracts:  The buyer could be concerned that the relationships with major customers and suppliers may end after the sale.  This may create uncertainty as to whether the business has in place all of the contracts needed for its ongoing operation, and its continued revenue or supply (as the case may be).
• Contracts with onerous assignment or change of control consent provisions:  This could mean that the third party may not consent to the sale.  This is particularly important for agreements with major customers and suppliers.
• Salaries, employee entitlements and superannuation payments are not up to date:  There could be a risk of potential action by employees for unpaid salary and entitlements. This could reflect that the business has not been managed properly, and that there could be other hidden liabilities.
• Leases that have expired or are about to expire:  If a premises is required for the business and the lease has expired or is about to expire, the buyer could be concerned that it may not be able to continue to use the premises after completion. This could also reflect that the business has not been managed properly.
• Litigation that is on foot or threatened:  The buyer could be concerned that the business may be exposed to unknown liabilities or liabilities of uncertain value, as well as potential damage to its reputation or goodwill.

Whether the above are critical to a buyer will depend on the nature of your business, the purchase price, and the risk appetite of the buyer.  Many of the above items can also be corrected or managed before you proceed to offer your business for sale. 

If you are a business owner who is considering selling your business and you are concerned about whether there are any issues or gaps with your records and documentation, you may consider arranging a legal audit of your business prior to it being offered for sale.  If a legal audit is of interest, please get in touch with one of the Sierra Legal team.   

We are growing!  

Sierra Legal is proud to announce that Michael Abrahams, a highly regarded commercial lawyer, is joining our expanding law firm. 

Michael has been the General Counsel, Company Secretary and Integrity Officer at Essendon Football Club since 2014, and is excited to be sharing this role with his new part-time position as a Senior Consultant at Sierra Legal.  

Michael’s broad range of experience as the General Counsel at Essendon will add a valuable dimension to the suite of legal services that Sierra Legal provides its clients, particularly those clients who themselves have in-house legal teams or are looking to outsource part or all of their legal function.  Michael's unique skills and position as a practising in-house lawyer who "knows what the client thinks", will further enhance the Sierra Legal unique offering and client promise - top quality legal advice, that is commercially focused, on time and reasonably priced.

Michael’s passion for legal drafting, and developing systems that result in more efficient and effective legal and commercial outcomes, will also be put to good use as part of Sierra Legal’s innovative and cutting-edge document automation service offering, Arreis Automation.  

Welcome to the team Michael!

We are delighted to have assisted DWM Solutions and its founders and directors Nick Clift and Jeni Clift on their merger with Milan Industries.

Both DWM Solutions and Milan Industries are leading IT partners in providing Managed IT, Business Continuity Solutions, IT Security, Managed Hosting, and IT Consultancy services and the new dynamic business offers clients a reliable multi-national SMB and valuable mid-market service provider for IT support.

It was a pleasure working with Nick and Jeni and we wish Nick, Jeni, Milan and their team all the best for their continued growth and success.

The ACCC has recently commenced legal action in the Federal Court against Fuji Xerox Australia with the ACCC alleging that there are 31 different terms in Fuji Xerox’s standard form contracts that are unfair (including automatic renewal terms, excessive exit fees and unilateral prices increase). 

You can read more about the case against Fuji Xerox in the ACCC’s press release - https://www.accc.gov.au/media-release/fuji-xerox-in-court-over-alleged-unfair-contract-terms

If you need any assistance reviewing your standard form contracts to ensure that they comply with the Unfair Contract Terms regime in the Competition and Consumer Act, please do not hesitate to get in touch with the Sierra Legal team.

The ACCC has recently made the Competition and Consumer (Class Exemption—Collective Bargaining) Determination 2020 (Class Exemption). 

The Class Exemption will allow small businesses, franchisees and fuel retailers to collectively negotiate with their suppliers/processors, franchisor or fuel wholesaler (respectively), without first having to seek ACCC approval (although notification to the ACCC is required). 

The ACCC has advised that they will announce when the Class Exemption is ready for use, which is likely to be early 2021.  Please see the recent ACCC Media Release for further information - https://www.accc.gov.au/media-release/class-exemption-will-enable-small-businesses-to-collectively-bargain.  We will provide further updates as the ACCC releases its guidance for, and commencement date of, the Class Exemption.

Here are the latest updates from Sierra Legal - Newsletter.

If you have any queries about any of the articles in our Newsletter, please do not hesitate to get in touch with the Sierra Legal team.

Following our previous articles about temporary laws that were implemented because of COVID-19 to make it easier for company officers to sign documents electronically, the recent 2020-21 Budget indicates that reforms will be implemented to make these temporary laws permanent. 

The recent Budget also indicates that another welcome reform will be the permanent implementation of measures that allow companies to hold virtual Annual General Meetings.

We will provide further updates when any proposed measures become law.

We were delighted to assist CRG Operations Pty Ltd, and its directors Edward Plowman, Graeme Goldman and John Weste, on the recent acquisition of the Clark Rubber Group.

Clark Rubber is a successful Australian retailer with a history dating back to 1946.  With a national store footprint, Clark Rubber stores are specialists in pools, foam and rubber and over the past 75 years, Clark Rubber has developed into one of the most recognisable retail brands in Australia with a reputation for providing high quality customer service.

You can read more about Ed, Graeme and John here - https://www.splashmagazine.com.au/crg-operations-acquires-clark-rubber/ or visit the Clark Rubber website - https://www.clarkrubber.com.au/.

We congratulate CRG Operations on the acquisition, and wish the new owners and the Clark Rubber Management Team all the best for their continued growth and success.

If you need assistance with buying or selling a business please do not hesitate to get in touch with the Sierra Legal Team.

In our April legal update we provided commentary on temporary changes to the insolvency/bankruptcy regimes in the Corporations Act and Bankruptcy Act that were implemented to assist businesses and individuals navigate through Covid-19.

One of the changes was a new, temporary,  ‘safe harbour’ provision so that the directors of a company that incur 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 temporary safe harbour that was to originally expire in September 2020, but has now been extended to 31 December 2020.

However, notwithstanding the extension to the safe harbour period, directors will need to be aware of the wording of the temporary ‘safe harbour’, particularly paragraph (3) set out below, and a director’s ability to rely on the safe harbour.

The temporary safe harbour provides that subsection 588G(2) of the Corporations Act (which is the duty on a director to avoid insolvent trading) does not apply in relation to a person and a debt incurred by a company if the debt is incurred:

1. in the ordinary course of the company’s business; and
2. during the period commencing on 25 March 2020 and ending when the temporary safe harbour is revoked (which is currently expected to be 31 December 2020); and
3. before any appointment during that period of an administrator, or liquidator, of the company.

Therefore, the wording of this safe harbour provision appears to suggest that, in addition to satisfying paragraphs (1) and (2), to rely on the safe harbour an administrator or liquidator must be appointed by the directors prior to the end of the safe harbour period.  That is, the safe harbour will not apply, and directors of the company could still be liable for debts incurred during the safe harbour period, unless an administrator or liquidator is appointed prior to the end of the safe harbour period.

Please get in touch with the Sierra Legal team if you have any queries.

Our May 2020 Legal Update on document signing by companies during Covid-19 provided guidance on temporary laws that were implemented that made it easier for company officers to sign documents, including permitting an agreement to be signed electronically by company officers.  The new law was to last for 6 months from 6 May 2020.

The Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (“Determination”) has now extended the operation of the temporary laws until 21 March 2021. 

Please see our May 2020 Legal Update for further details on these temporary laws and the ways in which a document can be signed by a company. If you have any queries please get in touch with the Sierra Legal team.

We recently sat down with Senior Associate Ken Gitahi to ask all the burning questions …

When did you start at Sierra Legal? 1 February 2018.

What were you doing before Sierra Legal? I was a senior lawyer at another top tier boutique corporate law firm in Melbourne.

What do you do with your time when you aren’t advising on M&A deals and reviewing contracts? Generally running around after my 3 very energetic kids (ages 7, 5 and 3).  Given the current Covid-19 lockdown in Melbourne, however, I have not been doing much running around after the kids (which I’m not complaining too much about).  The home-schooling, on the other hand, has been the biggest test of patience I have ever had to endure.  Bravo to all the teachers out there.

What was your first job? Door-to-door sales/collections for a not-for-profit in Perth.  Tough gig, especially in the WA summer, and we had to be in full suits too!  Needless to say, I didn’t last long, BUT some “good” came from it (see the answer to the next burning question).

What was the first thing you bought with your own money? A first generation X-box console!!!  It was quite the momentous occasion when I walked into that EB Games store and plonked my hard earned $$$ from the aforementioned door-to-door sales/collections job.  I used to be quite the gamer in my younger days.  Not so much now though, sadly, principally due to the 3 very energetic kids previously referred to. 

What was the last book you read? ‘Too Much and Never Enough’ by Mary L. Trump PhD.  I’m about to start reading ‘Disloyal’, A Memoir by Michael Cohen.  There’s a theme here clearly.  I am fascinated by US politics in the Trump era particularly in the current lead-up to the November 2020 presidential elections.  Australian politics, by comparison, is quite uneventful, for which I am incredibly grateful.  Long may that continue! 

Favourite place? Masai Mara National Reserve.  Google it!

Favourite food? Kenyan-style chapatis.  Google them!

Least favourite food? Anchovies.  Licorice a close second.  Pickles, too.  Can’t. Stand. Them. #dontgoogleoreatthem!

Best advice you have received?

“There’s still time to change the road you’re on” – (advice received from Led Zeppelin)

“You gotta fight for your right to party” – (advice received from Beastie Boys)

We recently sat down with Peter Jorgensen, Managing Director of All States Vehicle Logistics Pty Ltd trading as Spiral Logistics.

Peter is an energetic, analytical and innovative CPA-qualified senior executive with over 20 years’ experience in the transport and logistics sectors.  He also has a dual role as the CFO of a Property Developer.  He has extensive commercial and business experience, including in relation to business acquisitions.

Peter was instrumental in facilitating and implementing the acquisition of Spiral Logistics, a leading Australian logistics business for specialised freight, with a focus on providing transport services to the steel industry in Victoria, New South Wales and Queensland.  Sierra Legal worked closely with Peter on the legal aspects of this acquisition.

In this Q&A, Peter shares his thoughts and tips on acquiring a business in Australia.

When you look at buying a business, what are you actually buying?

Most people operate their business through a company.  This means that you can either buy the shares held by the shareholders in the company or the assets used by the company to operate the business.  If the business is operated by a sole proprietor or through a trust, then you may be limited to buying just the assets.

Can you share your top 5 tips when acquiring a business?

Tip 1:  Try to negotiate an exclusivity period with the seller, during which the seller cannot deal with other prospective buyers in relation to the sale and purchase of the business.

Tip 2:  Understand your funding options.  Before negotiating with a seller in relation to the purchase of a business, you need to know how you will fund the purchase price.  If you will get the funds from a loan (for example from a bank) you should speak to the bank and obtain a pre-approval for the loan and ensure that the purchase of the business will be subject to the bank agreeing to provide the loan.

Tip 3:  Undertake due diligence.  This is an important process through which you investigate the business to verify its past activities and performance, and its future prospects, to ensure you are paying a fair price for it.  Through due diligence, you can also identify any risks associated with the business and its future prospects and determine whether to proceed with the purchase at all, or how the identified risks can be addressed.  Due diligence can be a time consuming process so this should be taken into account when negotiating the length of the exclusivity period with the seller.

Tip 4:  Understand what protections you may need in the transaction documents as a result of due diligence.  These protections typically take the form of warranties and indemnities from the seller in the transaction documents.

Tip 5:  Engage as early as possible with any third parties whose approval may be required to complete the transaction (e.g. banks, landlords, customers, suppliers etc).  This will assist with the early identification of any requirements that need to be complied with before the approvals are provided and ensure that delays to the completion of the transaction are minimised.

What kind of due diligence would you typically conduct on a target business?

Ideally a buyer should conduct commercial, financial, tax and legal due diligence on a business it is proposing to acquire.  Depending on the buyer’s experience or familiarity with, and the complexity of, the type of target business and its sector, the buyer may choose to conduct the bulk of the commercial and/or financial due diligence itself and only engage external advisers to assist with tax and legal due diligence.  However, depending on the target company and the nature of its business, or based on preliminary findings from the due diligence process, the buyer may also need to engage other experts to assist with the commercial due diligence, such as property/planning experts, environmental experts and lawyers with expertise on employment matters, IP matters (e.g. patent attorneys) and insurance matters.  If costs are an issue, then it is possible to engage external advisers such as accountants, tax advisers and lawyers to only conduct limited scope due diligence on discrete, material areas of the target’s business.

If a buyer will engage external advisers to conduct due diligence, those experts would typically provide a due diligence report to the buyer.  Typically, I would request that a due diligence report is prepared on an “exceptions only” basis (i.e. where the focus is to identify issues that are discovered during the due diligence exercise and which would include recommendations on how to deal with any such issues).  However, for less complex or risky acquisitions, or if costs are an issue, then it may be possible to request a report that only focuses on some key, material areas (i.e. a very limited scope due diligence report).

Thanks to Peter for his time and for sharing these thoughts and tips.

If you are a business that requires specialist freight or logistics support, please contact Peter on +61 411 695 634 or peter.jorgensen@spirallogistics.com.au (https://www.spirallogistics.com.au/).

If you are looking at acquiring a company or business and require legal support with your acquisition, 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 (please see our March article on these measures). These measures were updated with effect from 23 April 2020 (please see our April article on these updates) and extended until 30 November 2020 by the ASX on 13 July 2020.

On 15 September 2020, the ASX released Compliance Update no. 09/20 to announce further changes to these measures as a result of the ongoing stabilisation in market conditions since these measures were extended in July, and to announce a number of other compliance updates, as summarised below:

Changes to the temporary emergency capital raising relief

• From 16 September 2020, any listed entity wishing to take advantage of the ASX temporary emergency capital raising relief measures must satisfy the ASX that it is raising capital predominantly for the purposes of addressing the existing or potential future financial effects on the entity resulting from the COVID-19 pandemic and/or its economic impact, along with satisfying the other existing conditions.
• Where a capital raising appears to the ASX to have inequitable features for existing security holders, the ASX may withhold the benefit of the relief measures from the listed entity, even if the capital raising is specifically COVID-19 related and urgently needed.

Ratification of issues of securities under the increased placement capacity relief

• Under the temporary emergency capital raising relief measures, the 15% limit on placements by listed entities without shareholder approval in listing rule 7.1 has been increased to 25%.
• Following a number of queries from listed entities and their advisers, the ASX has reiterated in Compliance Update no. 09/20 that listed entities that have utilised the temporary extra 10% placement capacity under listing rule 7.1 cannot subsequently ratify or replenish the used up extra 10% placement capacity.
• Listed entities that have relied on the temporarily increased placement capacity in listing rule 7.1 are only able to approve or ratify issues made from their normal 15% placement capacity under listing rule 7.1 but not from the 10% temporary extra placement capacity.

Updates to ASX listing rule Guidance Notes

In Compliance Update no. 09/20, the ASX announced the release of updates to listing rule Guidance Notes 3, 4, 12 and 19, as follows:

• Guidance Note 3 (Co-operatives and Mutuals Listing on the ASX) has been updated to add a new section 7.6 addressing the ‘mutual capital instruments’ that mutual entities are now able to issue under Part 2B.8 of the Corporations Act and the similar ‘co-operative capital units’ that co-operatives are able to issue under Division 2 of Part 3.4 of the Co-operatives National Law.
• Guidance Note 4 (Foreign Entities Listing on the ASX) has been amended to add the Tel Aviv Stock Exchange as an acceptable listing venue for foreign exempt listings and to reflect the relief ASIC has recently granted to US-incorporated listed companies to allow them to prepare and file accounts under section 601CK of the Corporations Act using US GAAP rather than Australian IFRS.
• A number of changes have been made to Guidance Note 12 (Significant Changes to Activities) including to clarify the preliminary steps an entity should take before announcing a proposed significant transaction under listing rule 11.1.
• Guidance Note 19 (Performance Securities) has been substantially amended to address emerging areas of concern with performance securities, including by expanding this Guidance Note to cover performance options and performance rights, as well as performance shares.

Compliance requirements for draft notices of meeting

• On 1 December 2019, a number of substantial amendments were made to the listing rules relating to the requirements for notices of meeting and voting exclusions.
• In Compliance Update no. 09/20, the ASX reminds listed entities to ensure that draft notices of meeting submitted to the ASX for review reflect these amendments.

Changes to operating hours during daylight saving

• Daylight saving commences in New South Wales, the Australian Capital Territory, Victoria, Tasmania and South Australia at 2:00 a.m. EST on Sunday, 4 October 2020, and will end at 3:00 a.m. on Sunday, 4 April 2021.
• As Western Australia will be 3 hours behind Sydney time during daylight saving, ASX Market Announcements will stay open until 8.30 p.m. EST (5.30 p.m. WST) starting on Monday, 5 October 2020.

A copy of Compliance Update no. 09/20 can be found here.