Corporate Governance

I recently attended the Australian Institute of Company Directors Course at Customs House and was inspired by an excellent program. It seemed to me that companies and how they manage their business are all bound by the same principles and affected by many of the same issues. Here are a few points worth considering: 1 Culture: Someone said “culture eats strategy for breakfast”. Maybe they are right and it takes strong and focused leadership to ensure culture develops in the right way. Make the rules about how you do business known and live by them as a Director; 2 Strategy: Without really knowing and understanding what you are about you cannot ever hope to reach your goals. Have a formal session each year and if you need it, get an external facilitator. make sure the team understand it so they can explain it in one sentence in a lift. Refresh this every year; 3 Financial Competency: The learning examples used included a family business secured by a family home with a basic balance sheet. As a Director if you cannot understand the numbers using 8 simple steps then you should resign.It is being able to read what is happening to a company that drives those numbers so you can make critical decisions; 4 Effective Decision making: As a key platform all business owners have to make decisions. By having a structured  process every time you are far more likely to make superior decisions for the long term sustainability of the enterprise. 5 Compliance & Risk: If you do not know the legal and accounting compliance and risk requirements then...

Crowdfunding Laws Bring an Exciting Change

Last year, the Federal Government announced it would introduce new laws to enable “Mum and Dad investors” to invest directly in start-up companies. Some of the changes to existing laws include: a 5 day cooling off period; an increase in the allowable cap on funds to be raised; a higher level of money to be held, up to $5 million. The Corporations Amendment (Crowd-sourced Funding) Bill 2015 aims at allowing small companies to attract investment in their business by the public injecting equity via “crowdfunding” as an on-line method. This is a revelation in the prior laws and runs against the regulations and political background which have resisted this method of capital raising. The key amendments are to the Corporations Act 2001 and will provide for a large number of shareholders to apply for shares in return for share capital in the start-up companies. Despite this forward thinking development in the law there are some sections of the business community that have expressed frustration with the proposed laws on the basis they do not go far enough and impose too many restrictions. The experience in other countries, such as Israel, point to alternative methods which are faster and less regulated in the process of raising essential capital for these new companies. As a form of consumer protection, the Australian legislation now requires that investors must go through appropriately licenced crowdfunding procedures. These procedures require a high level of due diligence on the proposal, to avoid likely misleading or deceptive conduct by company promoters. The public as investors are “consumers” under the Act and are strongly encouraged to seek their...
Family Trusts Part 2 – How You Can Plan for the Future

Family Trusts Part 2 – How You Can Plan for the Future

It is of great interest to us and most of our clients, how a Discretionary Family Trust dictates what will happen to their assets in the future. Most of our clients use Family Trusts as a wealth creation vehicle giving the flexibility for income distribution and Capital Gains Tax. It is really critical to understand that the assets within a Family Trust are not owned by the individual rather it is a control over the management of the trust and exercise of discretion as trustee that dictate the outcome. Consider the recent high profile case of Gina Reinhart in the dispute with her children over the control of the key trust that owned significant business interests. The “appointor” is the named individual that can appoint or remove “trustee” of the trust. The trustee has the day to day management and control of the trust and exercises discretion about business or investment decisions. However, if there is a dispute then the appointor can remove the trustee and insert a replacement trustee. It is vitally important that clients have the Trust Deed reviewed to check exactly who the appointor is and if they die, become disabled or insolvent, who in default will be appointed in that role. The last thing you want is for a trustee in bankruptcy to be controlling all of the assets and exercising the discretion to pay creditors. In addition, it is difficult for clients to dictate from the grave what will happen to those trust assets in the future on their demise. So what happens after you are dead to the property, money and shares you...
Family Trusts Part 1 – Who is in control of your Family Trust?

Family Trusts Part 1 – Who is in control of your Family Trust?

We often see Family Discretionary Trust Deeds which were set up several years (or event decades) earlier.  It is often overlooked that circumstances may have changed significantly since the Trust was established and that the ultimate controller of the Trust may not be the expected person. The case of Kniepp v Annuaka Pty Ltd  last year is a reminder of the potential risks. In that case, a Discretionary Trust established in 1991 named a deceased’s first wife as the person with the power to change the Trustee of the Trust (sometimes this person is called an ‘Appointor’). Despite divorce in 1995, the first wife’s power was never dealt with or removed. 19 years after separation she attempted to exercise her power to seize control of the Trust Fund. Although she was not successful on account of jurisdictional issue and interpretation of the specific Trust Deed in this case, the risk was real and potentially disastrous for the last family of the deceased. The person with power to change the Trustee of a Discretionary Trust can often be forgotten about over time. It is a case of ‘out of sight, out of mind’ unless the Trust Deed is reviewed periodically.   There is also a tendency to view Discretionary Trusts as ‘carbon copies’ of one another with identical functionality and governing rules. However, the precise terms of the trust deed are critical and we recommend to all our clients that Discretionary Trust Deeds are reviewed every few years to ensure it is appropriate given the current Law and individual...
Nothing is more certain than death and taxes

Nothing is more certain than death and taxes

  A very Happy New Year to everyone and I hope 2016 is amazing for you and your family. I start this year wrestling with the issue of taxation on deceased estates. It is very often overlooked by the key beneficiaries of an estate as they are always keen to get their hands on the cash. The problem is, before the Executor can make a payment, they must assess exactly what tax is payable, otherwise they will find themselves personally liable for the assessment by the ATO and no funds with which to pay the bill. With rising balances held in self managed super funds it is more than likely that there will be a death benefit payable from that as the source of funds. Before making payments the trustee must calculate the tax payable to the person based on their status as a “tax dependant” or not. A spouse will be able to receive a super fund payment without tax but a non-dependant adult child may not, subject to age, living at home status and study. It is very important a Will maker take into account the different tax consequences for different individuals when making an allocation between family members in terms of the overall estate assets, including family trusts and super. This gets even trickier when you have second or third marriage status and children of prior relationships. How do you ensure they get their share but allow the source of income to continue for the spouse? Control of a self managed super fund is critical and often the surviving spouse will want to maintain the assets...
Illegal Movie Downloads – Is it you?

Illegal Movie Downloads – Is it you?

All of us at some point know someone that has told us about illegally downloading a movie via an internet site. It seems unfair for those of us who pay full price through iTunes but most of us just figure that the younger generation are smarter than us. A new Federal Court case sheds some light on the rights of the movie makers as owners of the copyright and those pesky downloaders. What happens when they get caught and how do they get caught? It seems from the evidence in the Dallas Buyers Club Movie (DBC) and a group of Internet Service Providers (ISP), including IINet, Internode and Dodo, that the fight continues. On 14 August the Federal Court gave an indication of the compensation copyright owners can expect to claim in future copyright breach matters and how the illegal downloaders might expect to receive a bill. What happened here was a digital investigator found 4,726 IP Addresses from which the DBC movie was illegally downloaded and shared on “Bit Torrent”. The owner sought a Court Order requiring the relevant ISP to provide details of the owners of the IP Addresses. To get an Order like this they had to demonstrate a right to obtain relief against potential Defendants, namely the ISP account holders. The judge ordered the ISP to provide this information but DBC had to provide the letter of demand to the account holders. The concern here was an unreasonable demand for the level of damages suffered from the copyright infringement. In terms of the amount of money the owner of the copyright intended to claim, the...