KNOWLEDGE CENTRE

Enterprise Legal - Recent Changes to Corporations Act Significantly Impact Timing for Director Resignations

In February 2020, changes were made to the Corporations Act 2001 (Cth) which significantly impacted the date on which Company Directors were deemed to have resigned. A 12-month transition period was implemented following these changes, which meant that as of 18 February 2021 these changes now apply in practice.

The timeframe for which a Company must notify ASIC of any resignation of a Director remains at 28 days after the resignation, however the new changes mean that if the Company does not give notice to ASIC (by lodging a Form 484) within that time period, the relevant Director will be deemed to have resigned on the date that ASIC actually receives the Form 484 (which could well be a date that is long after when the practical resignation took effect).

Prior to these changes, a failure to meet this timeframe resulted in the Company being required to pay a fee for the late notification, but didn’t negatively affect the resigning Director. In those circumstances, the task of notifying ASIC was generally left with the Company’s Accountant to carry out and the resigning Director didn’t usually have any cause for concern about whether the timeframe was met. This was because the Company was typically required to pay the late notification fee (not the resigning Director) and the resignation took effect in accordance with whichever date was specified in the notification (which means the resignation could be ‘backdated’ appropriately).

Moving forward, resigning Directors should now carefully consider what steps they can take, to ensure that notification is given to ASIC by the Company within the required timeframe. This will allow the resigning Director to ensure their resignation takes place on the relevant date, importantly ensuring that the Director does not unintentionally remain liable in their role as a Director of the Company.

Some recommended steps that a resigning Director could take, are to take on the onus of lodging the Form 484 (where practical) or to include additional clauses in share sale documentation (or other agreements which deal with the Director’s resignation) to impose a positive obligation on the Company to lodge the form within the required timeframe, with penalties, indemnities and releases to follow until such time as the Form 484 is submitted.

Do you need assistance with company restructuring or officeholder resignations? Contact our expert Business Law team, led by Principal Director & Legal Advisor, Peta Gray. 

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Enterprise Legal - Commercial or Retail Lease Dispute: When is it Time to ‘Lawyer Up’?

So you have followed our top tips for entering into a commercial or retail lease, but things haven’t exactly gone to plan. How do you know what the next step is?
And how do you know when it is time to get expert lawyers involved?

At Enterprise Legal, it is our view that most disputes are best handled early on before little problems become big problems. Whether you are a landlord or tenant, the best way to resolve a lease dispute is to ensure that it is handled properly from the start.

The following are ‘red flags’ that indicate that it’s likely time to chat with the Enterprise Legal team:

 

1. A Notice to Remedy Breach Has Been Issued

If you are a tenant and have been issued with a Notice to Remedy Breach, stop what you’re doing and come chat to a lawyer! Breach notices need to be issued in a particular way to be valid under law, and the reality is that most landlords (and even some lawyers) don’t get this right. If a Notice is incorrect, it will likely be invalid. If you engage a lawyer at this point not only can you ensure that any issues with a Notice can be resolved, but you may also find that your lawyer can help you negotiate an outcome with your landlord.

If you are a landlord and need to issue a Notice, don’t go at it alone! It is so easy to make a mistake when preparing and issuing a Notice to Remedy Breach so it is worth engaging a lawyer so that you can ensure that everything is correct. If a Notice is not valid you will ultimately end up spending more time and money than you would have if you had a chat to a lawyer to begin with.

 

2. You Are Not Getting Along With Your Landlord/Tenant

While disagreements between parties may just seem like straightforward interpersonal concerns at first, we all know that these things can escalate quickly! By chatting to a lawyer early on, you may be able to resolve your concerns, put your mind at ease, and ultimately avoid a prolonged dispute. Sometimes a simple letter from a law firm can make a real difference. If it doesn’t, you will have a record of your concerns and can point to your attempts to resolve issues later on down the track, which will assist your prospects significantly!

 

3. You Have Been Locked Out (Or You Want to Lock Out Your Tenant)

Landlords - hold your horses! Locking out a tenant is pretty serious, and you need to make sure that you have followed the appropriate steps before you escalate matters. If you don’t, you are at a real risk of ‘repudiating’ the lease (which is bad!) and being liable for the tenant’s damages.

Tenants, if you are locked out, it is time to chat to a lawyer pronto! You do have options here, including obtaining an injunction to regain access to the premises. If you are unlawfully locked out, you may be entitled to claim damages from your landlord or claim that they have repudiated the lease. Either way it is imperative to make sure that you act quickly!

 

4. You Just Want to End Your Lease

If you want to terminate your lease early, there may be options available to you. If you want to terminate and minimise your risk, you’re going to want to speak with a lawyer first to work out how to properly terminate your lease, minimise your risk, and perhaps even resolve the concerns leading to termination of the lease.

 

5. Something Just Doesn’t Feel Right But You’re Not Sure What

Maybe something relating to your lease just doesn’t feel right and you want to get a sense as to whether it’s okay or not. The law is a confusing beast, and without the experience and expertise of a lawyer, it might not always be clear if something is okay and if you can proceed. If you are ever unsure, it may be a sign that it is time to chat to the Enterprise Legal team. If something is amiss, we will be able to quickly identify any issues and whether something can be done, or alternatively be able to set your mind at ease.

 

While you can’t always avoid a dispute, the best way to avoid significant costs and a lengthy legal battle is to act quickly. To resolve your concerns swiftly, engage the expert Enterprise Legal Disputes team to help you with your lease dispute.

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Enterprise Legal - How to Avoid a Lease Dispute

At Enterprise Legal, we always say that ‘prevention is better than cure’. So when it comes to commercial, industrial or retail lease disputes, the best way to prevent them is to ensure you understand what you are signing up for in the first place and to negotiate some protections at the time of entering into your lease. After all, a lease is typically one of the biggest financial obligations that your business may need to commit to, keeping in mind that you are usually committed to your obligations for a minimum of three or five years!

Whether you’re a Landlord or Tenant, here are our top five tips to keep in mind when entering into your next lease:

 

1. Heads of Agreement/Letter of Offer Terms

Quite often, before a lease is prepared, the parties will sign a short document or letter outlining the key terms of the deal. This document is usually referred to as a ‘Heads of Agreement’ or ‘Offer to Lease’ and is often prepared by the real estate agent managing the deal.

Although usually an Offer to Lease is not binding on the parties, it forms the basis of the formal lease terms. This stage of lease negotiations is the best time to negotiate key terms, before either party incurs the expense of preparing and negotiating formal lease documents. If either party seeks to amend terms that are agreed in a Letter of Offer after formal lease documents have been prepared, it can create friction between the Landlord and Tenant at a very early stage in their association.

We recommended that you seek legal advice on the terms of an Offer to Lease, to ensure a smoother lease negotiation process and to avoid the potential for a dispute.

 

2. Permitted Use 

A frequent issue in lease negotiations is whether a Tenant will have the exclusive right to operate their business type (specified as the ‘permitted use’) in the centre/complex. This means that it’s very important for a Landlord to consider whether any Tenant’s proposed use conflicts with any rights the Landlord has already given to existing Tenants in the centre/complex.

A more commonly overlooked issue around permitted use is which party is responsible for ensuring that the intended use can lawfully be conducted from the premises. The widely accepted position in leasing matters is that the Tenant is responsible for all aspects of ensuring their intended use can be carried out from the relevant premises. A Landlord will typically include protections in the Lease under which the Landlord expressly states they do not warrant or guarantee that the premises will be fit for the Tenant’s intended use, and further that the Tenant is obliged to obtain all necessary consents/approvals (i.e. liquor licences, council approval etc) to run their business from the premises.

Landlords should always ensure this protection is included in their Lease and Tenants should understand that it is a matter for them to ensure that the premises will be fit for their specific purpose. To avoid disputes, a Tenant should make enquiries early (prior to signing a lease!) to ensure they can lawfully conduct their business from the premises. Failure to do this can result in having to comply with notices from applicable authorities (eg. Council), which can be extremely expensive!

 

3. Repairs to Equipment 

Another common area of dispute relates to responsibility for fixing certain equipment (such as air-conditioning equipment) in the premises if they need repairing.  

A lease should cover off on the responsibility of the parties to maintain equipment, and to repair/replace it when it breaks. Typically, a Tenant is responsible for ‘wear and tear’-related repairs, whereas a Landlord will be required to attend to all repairs or replacement that are of a ‘capital nature’ provided that the Tenant has regularly serviced or maintained that equipment during the Term and has not deliberately or wilfully contributed to the damage. However, that will not always be the case and it is important that both parties check the relevant clauses in their Lease to understand their obligations. It is also beneficial (especially for the Tenant) to take steps to understand the condition of any relevant equipment (such as air conditioning) at the time of entry into the Lease.

 

4. Insurance 

Tenants in particular should always consider the specific wording of any clause in their Lease that deals with insurance obligations, to ensure the Landlord’s requirements will be commercially acceptable to the Tenant, especially in light of their intended business use.

Some practical examples are:

  • Where the Lease requires insurance to be taken jointly in the names of the Landlord and Tenant. This seems innocent enough, but the practical reality is that this type of insurance cover can be onerous and expensive for a Tenant to obtain. Realistically, a Landlord generally requires this so that they can receive notice if a Tenant makes a claim on their insurance policy in relation to the Premises. The practical compromise is that the insurance clause should only require the Tenant to note the Landlord as an ‘interested party’, which does not cause extra cost and which requires the insurer to provide notice to the Landlord if any claim is made.
  • Where the Lease requires business interruption insurance. This is a ‘big hitter’ as far as the cost of insurance is concerned. A Tenant should consider whether they really require and whether they can afford this type of insurance, before they agree to be bound by a lease to obtain it.

 

5. Landlord’s Right to Redevelop/Relocate

Landlords of multi-tenant centres or complexes (eg. shopping centres or strip-malls) typically include clauses which give them the right to relocate Tenants to comparable locations within the centre/complex, or to redevelop or demolish part of all of the centre/complex.

Tenants should always carefully consider the specific wording of these clauses and the practical implications. At a minimum, the clause should stipulate that any relocation must be to a comparable location and it should deal with how the rent will be treated in those circumstances, but as a further step, the Tenant should consider whether they want to (where practical) have the right to return to the original location. It is also important to contemplate who will be responsible for the costs of the Tenant’s fit-out in the new location in these circumstances.

 

A well drafted and well-understood lease will go a long way to avoiding a dispute arising between the Landlord and the Tenant. To avoid a costly dispute, engage the expert Enterprise Legal Business Law team to help you with your next lease negotiation:

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Enterprise Legal - First Industrial Manslaughter Prosecution Sentence Against an Individual Under Queensland’s New Laws

In a first for Queensland, Mr Jeffrey Owen of Owen’s Electric Motor Rewinds has become the first individual to be charged with industrial manslaughter under the Work Health and Safety Act 2011 (Qld) (the 'Act').

Tragically in July 2019, a worker at the Owen's Electric Motor Rewinds site was fatally crushed by a portable generator that was being unloaded by a forklift. It is alleged that the forklift directly flipped as a result of Mr Owen overloading the forklift.

This is the first prosecution of an individual for industrial manslaughter in the state of Queensland and if convicted, Mr Owen faces a maximum penalty of 20 years' imprisonment.

The offence of industrial manslaughter was included in the Work Health and Safety Act 2011 (Qld) (WHS Act), as well as the Electrical Safety Act 2002 (Qld) and Safety in Recreational Water Activities Act 2011 (Qld) and is defined as negligent conduct that causes, or substantially contributes to, the death of a worker, and a prosecution may be brought against a body corporate or individual senior officer.

It carries a maximum penalty of over $10 million dollars for a company, or 20 years’ imprisonment for a senior officer and was introduced in 2017 following increased numbers of workplace fatalities.

Industrial manslaughter is subject to the same guidelines and standards as criminal manslaughter and criminal negligence under the Criminal Code (Qld) 1899 and the same defences for criminal manslaughter are also available, excluding the defence of ‘accident’.

Organisations and their most senior directors and supervisors will face severe consequences should one of their workers be fatally injured on the job and it is vital that appropriate steps are taken to ensure the safety and wellbeing of those in the workplace. This was highlighted in the Queensland District Court case of R v Brisbane Auto Recycling Pty Ltd & Ors [2020] QDC 113 where a fine of $3 million was imposed on a company for industrial manslaughter and his Honour Judge Rafter SC stated:

“The sentences imposed should make it clear to persons conducting a business or undertaking, and officers, that a failure to comply with obligations under the Work Health and Safety Act 2011 (Qld) leading to workplace fatalities will result in severe penalties.”

For guidance and support on Workplace Health and Safety compliance and prosecutions, contact Enterprise Legal’s Workplace Relations team today:

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