COVID-19: Recommendations and considerations for you and your business - Second Edition
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Second Edition COVID-19: Recommendations and considerations for you and your business
Welcome I n the second COVID-19 Recommendations and considerations for you and your business guide, our experts provide you with more practical advice on what recent changes might mean and the impacts they may have on you and your business. Please feel free to reach out to any of the listed key contacts (or your regular McCullough Robertson contact) should you have any questions or concerns. We are here to support you in any way we can. Please note that the information contained in this guide is correct as of 1 April 2020.
Contents
MACRO OVERVIEW Planning and Environment
These legal insights are relevant to individuals and State Government urgently amends key legislation
businesses operating across a range of industries. and practices in response to COVID-19 | page 22
Corporate Real Estate: Acquisition & Disposal
The Treasurer announces significant changes to the COVID-19: Property acquisition and disposal | page
FIRB regime in response to the COVID-19 26
pandemic | page 4
Real Estate: Leasing
Tax COVID-19: Leasing in precarious times | page 30
Stage Two – Cushioning the economic impact of
COVID-19 | page 6 Banking and Finance
COVID-19: Update | page 34
Employment
JobKeeper Payments – wage relief support for Finance
employers | page 10 Practical considerations for electronic execution |
page 38
Employment Relations and Safety
Modern award changes to COVID-19 Pandemic | Intellectual Property
page 12 COVID-19 updates for intellectual property right
holders, applicants and opponents | page 40
Estates
Your personal affairs | page 16 MICRO OVERVIEW
These insights are relevant to individuals and
Litigation and Dispute Resolution businesses operating in specific industries.
Courts open for business | page 18
Litigation and Dispute Resolution: Aged Care
Restructuring and Insolvency industry
Revolutionary variation of Australia’s insolvency Protecting against COVID-19 class actions | page 43
system for coronavirus era | page 20
Technology, Media and Telecommunications:
Allegiant IRS Entertainment industry
Management Liability, Directors and Officers Legal impact of COVID-19 on the entertainment
Liability Insurance – Insolvency and Premium industry | page 46
Increases | page 21
Technology, Media and Telecommunications: Data
Corporate: Insolvency Security
Register your security interests on the PPSR | page Data Security Checklist | page 50
21
MACRO OVERVIEW
Corporate
The Treasurer announces significant
changes to the FIRB regime in
response to the COVID-19 pandemic
W
ith effect from 10.30pm on 29 March There has been no suggestion that any
2020, the Treasurer has announced of the exemptions from the FIRB approval
drastic changes to the Foreign requirements will be amended and these will
Investment Review Board (FIRB) regime. be more important than ever in the current
context.
All monetary thresholds have been reduced
to $0. FIRB’s standard approval timeframe of It should be noted that significant FIRB
40 days will be extended to 6 months. Priority application fees are payable before FIRB
will be given to applications that protect and will start reviewing an application. No
support Australian business and Australian jobs. announcement has been made in relation to
the fees that will be payable for these smaller
See a copy of the Treasurer’s press release
transactions that are now subject to FIRB
here.
approval, but it should be assumed for the
Generally, foreign investors require FIRB time being that the standard fees will be
approval before they can invest into Australia payable
unless a specific exemption applies, or the (for example, for acquisitions of developed
proposed investment falls below a specified commercial real estate, these range from
monetary threshold. These thresholds differ $2,000 to $105,200).
depending on the type of investment and the
For transactions that are currently being
identity of the investor. For example:
negotiated, a full re-evaluation of the possible
• the acquisition of an interest in non- impact of these FIRB rules needs to be
sensitive developed commercial real estate undertaken. For transactions currently on foot
(including for example, entering into a lease that are subject to FIRB approval, the likely
for a term of 5 years or more, including extended processing timeframes need to be
extensions); or considered and, where possible, extensions of
time for the satisfaction of the condition may
• the acquisition of an interest of 20% need to be negotiated.
or more in the shares in an Australian
company, Key Contact Duncan Bedford | Partner |
Corporate & Tax | T +61 7 3233 8706 |
would usually only be subject to FIRB approval E dbedford@mccullough.com.au
if the investment is valued in excess of $275
million. Under the new rules, any proposed
acquisition by a foreign investor of any interest
in land (regardless of the type or value of the
land) or any acquisition of 20% or more of the
shares in an Australian company (regardless of
value) will require FIRB approval.
4
5
Tax
Stage Two - Cushioning the economic impact of
COVID-19
O
n 22 March 2020, the Federal • assistance to businesses to keep their workers
Government announced the second employed; and
stage of its economic plan to support
• support for workers and their households.
Australian businesses and their workers through
the unchartered waters created by the spread of In addition to the Federal Government measures,
the Coronavirus. The stimulus package extends a the States and Territories have each announced
number of the key measures announced in the stimulus packages to assist both businesses and
first package on 12 March 2020 (see our recent individuals.
publication on stage one of the package here).
Both stage one and stage two of the stimulus The table below provides a summary of the
package were passed by Parliament on 23 March measures now available to businesses under
2020, and received Royal Assent on 24 March the first and second stimulus packages. The
2020. The Federal Government has also now new stimulus package announced by the
announced that a third stage to the stimulus Federal Government comprises one key
package will follow shortly. taxation component aimed at providing
relief to businesses. These packages are also
From a tax perspective, stage two of the stimulus complemented by various administrative
package contains key measures aimed at concessions announced by the Australian
providing: Taxation Office (ATO).
6
INCREASED ACCELERATED WAGE SUBSIDY CASH FLOW JOBKEEPER
INSTANT DEPRECIATION FOR TRAINEES BOOST VIA PAYMENT
ASSET ACTIVITY
WRITE -OFF STATE -MENTS
1ST PACKAGE 1ST PACKAGE 1ST PACKAGE 1ST & 2ND 30 MARCH 2020
PACKAGE
Small Businesses
(up to 20
employees) N/A N/A YES N/A N/A
SMEs
(no employees,
aggregated
turnover YES YES N/A NO YES
< $50m)
SMEs
(with staff,
aggregated
turnover YES YES N/A YES YES
< $50m)
Businesses
(with
aggregated
turnover
YES YES N/A NO YES
> $50m, but
< $500m )
Not-for-
profit (with
staff,
aggregated N/A N/A N/A YES YES
turnover
< $50m)
7BOOSTING CASH FLOW FOR EMPLOYERS For those businesses lodging monthly
business activity statements:
Both small to medium businesses (SME’s) and not
for profit entities, with aggregated (group) annual • 300% of the March monthly payment
turnover under $50 million, will be eligible to is credited, and 100% of the April, May
receive a cash flow boost aimed at keeping their and June monthly statements will be
employees engaged. automatically credited, up to the limit of
In effect, the cash flow boost introduced under $50,000; and
stage one of the stimulus package has now been • 25% of the total amount due for the
enhanced under stage two such that eligible 2020 financial year will be automatically
businesses can receive a total credit equal to credited in June, July, August and
either 100% of their liability for PAYG-withholding September upon lodgment (again, up to
in relation to salaries and wages paid to their the $50,000 limit).
employees (increased from 50%). The Government
also announced that a second round of credits ADMINISTRATIVE RELIEF MEASURES
will be introduced for tax periods from July to
To date, the ATO has also announced that
September 2020.
they are willing to work with taxpayers
As a result of these measures: affected by the pandemic. The ATO website
details a number of measures that a taxpayer
• the minimum credit for PAYG-withholding has
can seek to access. Importantly, these include:
been increased from $2,000 to $10,000; and
• the maximum credit for PAYG-withholding has
• an ability to defer income tax, FBT and
increased from $25,000 to $50,000 for the excise payments due in the period leading
2020 financial year. up to 12 September 2020. Businesses
should contact the ATO directly when
This means that eligible employers will receive experiencing difficulty meeting these
payments of at least $20,000 and up to a total of obligations;
$100,000. However, to qualify for the additional
payments, businesses must continue to be active • an option to change over GST reporting
into the 2020-21 financial year. from quarterly to monthly reporting from
the start of a new quarter (for example, 1
Practically, for those businesses lodging quarterly April 2020) in order to obtain faster access
business activity statements: to GST refunds;
• 100% of the March quarter payment, and 100%
• an option to vary PAYG-Instalments,
of June quarter payment is credited upon
and the ATO have stated that they will
lodgment (up to $50,000); and
not apply interest or penalties for varied
• an additional 50% of the total credit for the instalments for the 2020 financial year;
2020 financial year will be credited in June
• the ATO will also consider remitting
2020, and 50% credited in September (again,
interest and penalties from 23 January
up to $50,000).
2020 for those affected by COVID-19.
8Low interest payment plans will also be by each State and the Australian Capital Territory
available; and can be found here. In addition, the Northern
Territory has extended its ongoing payroll tax
• the ATO have stated that the residency
exemption for those who employ Northern
status of temporary or non-residents
visiting Australia should not be affected
Territory residents to 30 June 2021.
if they are required to remain in Australia Additional relief
due to COVID-19.
In addition to the payroll tax measures, the States
STATES AND TERRITORIES and territories have each announced other relief
Payroll Tax relief measures for businesses. In Queensland, these
measures include:
To date, every state and territory (except
South Australia) has announced payroll tax • rent relief for commercial tenants in
relief packages for eligible businesses. Each government buildings;
state has offered a slightly different form of
• offering a $500 rebate on electricity bills for
payroll tax relief – with a focus largely on
small and medium sized businesses that
refunds, referrals and even the waiver of
consume less than 100,000 kilowatt hours
payroll tax liabilities for a certain period.
(automatically applied to eligible electricity
In Queensland, the State Government has bills); and
already expanded the relief we outlined on 19
• waiving liquor licensing fees for businesses
March 2020, such that employers that pay less
than $6.5 million in Australian taxable wages
impacted by the enforced shutdowns.
can now apply: FUTURE FEDERAL, STATE AND TERRITORY
• for a refund of two months’ of recently INCENTIVES
paid payroll tax; The federal, state and territory governments continue
• for a three month ‘holiday’ from paying to announce additional stimulus packages aimed at
any payroll tax; and providing tax relief and other incentives for businesses.
For up to date information on incentives that might be
• to defer all payroll tax liability for the 2020 available to you and your business, please contact us.
calendar year, with payment not due until
14 January 2021. Key Contact Melinda Peters | Partner | Tax |
T +61 7 3233 8675 | E mpeters@mccullough. com.au
Employers that pay more than $6.5 million in
Australian taxable wages can also access the
two month refund and payroll tax deferral, but
will not be eligible for the three month payroll
tax ‘holiday’.
Applications for the deferral and ‘holiday’
must be lodged by 31 May 2020.
A table outlining the payroll tax relief offered
9Employment
JobKeeper payments - wage relief
support for employers
T
he Australian Government is offering The JobKeeper payments will also apply
wage subsidies to help employers in relation to those employees who were
retain their employees during the employed on 1 March 2020, subsequently
COVID-19 pandemic, and keep employees ceased employment, and then were re-
engaged until the inevitable rebound. employed by the same employer.
WAGE RELIEF ELIGIBLE BUSINESSES
Eligible businesses (including not-for- Under the proposed fiscal package,
profits) who elect to participate in the businesses will be eligible for the subsidy if
scheme can expect a wage subsidy their:
of $1,500 per fortnight per eligible
employee. The JobKeeper payment is a • turnover is less than $1 billion and will
flat rate regardless of a person’s salary. be reduced by more than 30% relative
An employer will continue to receive the to a comparable period a year ago (of
JobKeeper payment for each employee at least a month); or
while they remain employed. Eligible sole • turnover is $1 billion or more and will
traders will also receive a single payment of be reduced by more than 50% relative
$1,500 per fortnight. to a comparable period a year ago (of
HOW IT WILL WORK at least a month); and
Eligible employees whose wages are at • business is not subject to the
least $1,500 per fortnight before tax, will ‘Major Bank Levy’ (currently ANZ,
continue to receive their pay as normal. Commonwealth, NAB, Macquarie and
The JobKeeper payment will assist the Westpac only).
employer to subsidise all or part of the ELIGIBILITY FOR EMPLOYEES
employee’s income.
Employees will be eligible if they are:
If an employee usually receives less than
$1,500 in income per fortnight before tax, • at least 16 years of age and were
their employer must pay their employee employed by the employer as of 1
at least $1,500 per fortnight, before tax March 2020;
(regardless of whether the person is
• full-time, part-time, or a long-term
working or stood down). Superannuation
casual (a casual employed on a regular
on the amount that is the difference
basis for over 12 months as at 1 March
between an employee’s usual fortnightly
2020);
income, and the JobKeeper payment, is a
discretionary matter for the employer. • not receiving the JobKeeper payment
10from another employer; and (declaration of recent business activity), ABN and
eligible employee details.
• an Australian citizen, the holder of a
permanent visa, or any other relevant For further information on any of the issues in
visa (Subclass 444 visa holder, protected this article, and other workforce measures
special category visa holder, or a non- available to employers because of the effects of
protected special category visa holder COVID-19, please contact our team below.
residing continually in Australia for 10 Key Contact Mick Moy | Partner | Employment
years or more). Relations and Safety | T +61 7 3233 8720 |
E mmoy@mccullough.com.au
WHAT’S NEXT?
Employers should familiarise themselves with
these new measures as well as the relevant
legislation, once it has been passed by the
Federal Parliament, likely early next month.
In the interim, businesses can register their
interest in the scheme via the ATO’s website,
or wait to apply online. Information required
by the ATO will include revenue information
11Employment Relations and Safety
Modern award changes to COVID-19 Pandemic
O
n 24 and 28 March 2020, the Fair directions:
Work Commission (FWC) made its first
determinations to vary two modern • For employees to perform duties outside
awards (Hospitality Industry (General) Award the scope of their classification subject
2010 (Hospitality Award) and Clerks – Private to the duties being within their skill and
Sector 2010 (Clerks Award)) in response to competency, being safe and the employee
the coronavirus (COVID-19) pandemic and the being licensed and qualified to perform
challenges employers are currently facing. It is them, and the Higher Duties provision in
likely that similar flexibility changes will follow the Hospitality Award;
for a range of awards given the extensive • For full-time employees to work fewer
reach of the pandemic across industries. hours (an average of between 22.8 and
HOSPITALITY AWARD CHANGES IN 38 ordinary hours per week) and the
RESPONSE TO COVID-19 employer will pay the employee on a pro
rata basis;
On 24 March 2020, the FWC granted
an application by the Australian Hotels • For part-time employees to work fewer
Association, and supported by the United hours (an average of between 60% and
Workers Union, to vary the Hospitality Award. 100% of their guaranteed hours per week
The application sought to insert a new or the guaranteed hours per week over
schedule to provide for award flexibility on a the roster cycle); and
temporary basis. • For employees to take annual leave with
The FWC acknowledged that the recent 24 hours’ notice, subject to the employer
Government announcements in response considering the employee’s personal
to COVID-19 would likely have a substantial circumstances.
impact on employers and employees in the Employees that are directed to work fewer
hospitality sector. The FWC determined that hours will continue to accrue annual and
the variation was necessary to achieve the personal leave based on the employee’s
modern award objective and to ensure the ordinary hours of work prior to the
retention of as many employees as practicable commencement of the Schedule. Employees
in the current crisis. that take annual or personal leave will also
The determination varies the Hospitality be paid leave based on their ordinary hours
Award to insert ‘Schedule L – Award flexibility of work prior to the commencement of the
during the COVID-19 Pandemic.’ The award Schedule.
variation commenced on 24 March 2020 and While employers can direct employees to
will operate until 30 June 2020. The Schedule take annual leave, this does not prevent
allows employers to make the following an employer and employee agreeing to
12the employee taking annual leave. By arrangments for clerical and administrative
agreement between the employer and workers in response to COVID-19.
employee, during the operation of the
Schedule, an employee may take twice as The determination varies the Clerks Award by
much leave at half the rate of pay for the inserting ‘Schedule I – Award flexibility during
period of annual leave. the COVID-19 Pandemic.’ The Schedule includes
the following flexibility changes:
Access the FWC’s determination and
Schedule L here. • For employees to perform duties within
their skill and competency regardless of their
Access the reasons for the FWC’s decision classification, provided the duties are safe
here. and the employee is licensed and qualified
to perform them;
CLERKS AWARD CHANGES IN
RESPONSE TO COVID-19 • For employers to roster part-time employees
working from home by agreement for a
On 28 March 2020, the Fair Work
minimum of two consecutive hours on any
Commission granted an application by
shift, and for casual employees working
the Australian Chamber of Commerce
from home by agreement to be entitled to a
and Industry (ACCI) and the Australian
minimum payment of two hours’ work at the
Industry Group (AI Group), with support
appropriate rate;
of the Australian Council of Trade Unions
and the Australian Services Union, to • For the spread of ordinary hours for day
vary the Clerks Award. These changes workers to be between 6.00am and 11.00pm,
provide greater flexibility for employment Monday to Friday, and between 7.00am
13and 12.30pm on Saturday, for employees WHAT NEXT?
working from home by agreement with
the employer; These award changes are aimed at providing
employers and employees with the various
• For employers and full-time and part-time flexibilities in working arrangements that are
employees to agree to reduced ordinary now seen as necessary options to preserve,
hours (where approved by a percentage as best as can be, ongoing employment of
of employees and in accordance with employees, and businesses as a whole.
a prescribed voting process as set out
under Schedule I) ; Given the widespread impact of COVID-19
on employers and employees, we anticipate
• For employers and employees to agree to that other unions and employer associations
the taking of up to twice as much annual will make applications to vary other modern
leave at a proportionately reduced rate; awards. Employers should stay informed
of any award changes to assist with the
• For employers to direct an employee to
management of their employees during this
take accrued annual leave with at least
time.
one week’s notice or on shorter notice if
agreed; and We will publish further information about
variations to other modern awards.
• For employers to require employees to
take annual leave as part of a close down, Key Contact Tim Longwill | Partner |
or for employees who have not accrued Employment Relations and Safety |
sufficient leave to take paid annual leave T +61 7 3233 8974 | E tlongwill@
for the part of the close down for which mccullough.com.au
they have accrued leave and unpaid leave
for the remainder of the close down.
Schedule I operates from 28 March 2020 until
30 June 2020 unless extended beyond this
date.
Access the FWC’s determination and
Schedule I here.
Access the reasons for the FWC’s decision
here.
1415
Estates
Your personal affairs
A s critical as your business
considerations are your personal
affairs. It is an important time to
take stock of your succession
An enduring power of attorney allows the
appointment of an attorney for both
financial matters and personal and health
matters. An enduring power of attorney
planning so that you and your also terminates on death, but it endures in
families can feel confident that they the event that a principal loses capacity to
are protected if the worst happens. make decisions.
Wills and business succession planning For those clients who are choosing to (or
are required to) self-isolate due to illness
Some of our clients are feeling anxious or because of compromised immune
wondering whether their estate planning systems, it may be necessary or beneficial
and business succession is appropriate and to have a power of attorney (of either
up to date. We encourage our clients to type) in place to appoint someone to act
contact our team to discuss your on their behalf in relation to financial
documents to ensure that they still meet matters. A power of attorney for financial
your objectives. matters allows your appointed attorney to
act for the principal in relation to any
All of our teams have measures in place matters relating to financial or property
that allow us to take instructions and have affairs, including legal matters relating to
meetings (whether in person or by video or financial or property affairs. Examples of
teleconference) while complying with social financial matters include:
distancing guidelines or allowing our clients
to remain self-isolated where necessary. If • Paying rates, taxes and other property
any of our clients are in a position where expenses;
they require estate planning documents but • Carrying on a trade or business on
are self-isolated, we can work you to behalf of the principal;
achieve the best outcome in the
circumstances. • Dealing with banks, including
depositing and withdrawing money for
Power of attorney the principal; and
• Dealing with real property, including
There are two main types of power of
signing contracts and transfer
attorney document: enduring powers of
documents.
attorney; and general powers of attorney.
A power of attorney for financial matters
A general power of attorney operates only may allow you to continue your day to day
to give the appointed power to deal with operations through a trusted friend or
financial matters on a person’s behalf (the family member, while allowing at risk
principal). A general power of attorney individuals to remain isolated.
ceases to operate if the principal dies or
loses capacity to make their own decisions. Key Contact: Scott Whitla | Partner |
A general power of attorney does not Estates | T +61 7 3233 8778 | E swhitla@
allow the attorney to make any health or mccullough.com.au
lifestyle decisions for the principal.
1617
Litigation and Dispute Resolution
Courts open for business
T
he Federal and State Courts have announced adjustments
to their usual procedures going forward, but importantly the
Courts remain open and are continuing to hear and progress
matters. Procedures are in place to minimise face-to-face contact,
including remote hearings (by phone or video) wherever possible.
There has been some relaxation in relation to signing of documents
and affidavits, given the practical difficulties posed by remote working
arrangements and isolation requirements. Where remote hearings
aren’t possible, the Courts are continuing to hear matters face to face,
but only if the circumstances really warrant it.
Crucially, all courts are encouraging parties to take active steps to
resolve matters and reach agreement where possible, in the hopes
of limiting the frequency of appearances. In light of these measures,
delays may be expected in the progression of ongoing litigation, but
it is clear that we must all respond sensibly to these changes, and be
flexible and innovative in the way we pursue or defend litigation in the
coming months.
Key Contact Guy Humble | Partner | Litigation and Dispute
Resolution | T +61 7 3233 8844 | E ghumble@mccullough.com.au
1819
Restructuring and Insolvency
Revolutionary variation of Australia’s
insolvency system for coronavirus era -
novel times certainly do lead to novel
measures
W
ith the prospect of huge numbers 21 days to six months.
of businesses becoming insolvent
In addition, the Australian Taxation Office has
and collapsing in the coming weeks
announced that it will enter into arrangements
and months due to the effects of Government-
with taxpayers as necessary, including temporary
enforced travel bans and business ‘lock-downs’,
reduction of payments or deferrals, or withholding
the Australian Government has implemented a
enforcement actions.
number of important measures to protect directors
from Australia’s harsh insolvent trading laws, and to Whilst these measures will give breathing space for
prevent creditors from bankrupting individuals or the next six months, businesses and directors will
winding up companies over unpaid debts. need to start planning now how they will meet their
obligations when the temporary measures come to
The measures announced yesterday include the
an end.
following changes to the law which will last for six
months, unless extended further: Further details are included in the fact sheet issued
by the Australian Government – available here.
• a moratorium against personal liability for
‘insolvent trading’, i.e. failing to prevent a Key Contact Scott Butler | Partner | Restructuring
company incurring debts while insolvent, and Insolvency | T +61 7 3233 8653 | E sbutler@
for debts incurred in the ordinary course of mccullough.com.au
business;
• an increase in the debt required for creditors
to be able to issue a statutory demand on a
company from $2,000 to $20,000 (a company’s
failure to satisfy a statutory demand allows a
creditor to apply to wind up the company in
insolvency);
• an increase in the time to satisfy a statutory
demand from 21 days to six months;
• an increase in the threshold for a creditor to
serve a bankruptcy notice from a judgment
debt of $5,000 to a judgment debt of $20,000
(an individual debtor’s failure to satisfy a
bankruptcy notice allows a creditor to apply to
bankrupt the individual); and
• an increase in the time period for individual
debtors to respond to a bankruptcy notice from
20Allegiant IRS
Management liability, Directors and Officers
liability insurance – Insolvency and premium
increases
K
ey financial lines insurers have recently advised At a time when businesses need some premium relief,
that they are placing an insolvency exclusion we also received news today that the section of the
on all Management Liability and Directors and Management Liability policy which covers crime, will
Officers Liability policies moving forward. They are also see premium increases starting as of 23 March
also intending to increase premiums. 2020.
Such an exclusion in the policy wording precludes Crime Cover is a comprehensive crime section that
cover for claims made against an insured whilst sits under a Management Liability policy. It provides
trading insolvently. cover to the company for loss arising from dishonest
acts such as theft and fraud by employees including
Often, such an exclusion reads, “any claim arising
theft of stock. Claim examples are theft by employee
from or in any way whatsoever connected with the
or theft by a contractor or a consultant.
insolvency, liquidation, bankruptcy, receivership or
administration of the company, any subsidiary or any Sadly, insurers project that such claims will be on the
associated company, its actual or alleged inability to increase and in anticipation of this, they will be putting
meet any or all of its debts as and when they fall due”. the premiums up for all new renewals as of 24 March
2020.
We strongly encourage businesses and directors to
take this time to review their Management Liability If you would like to further discuss the insolvency
and Directors and Officers Liability policies and to exclusion update, including a claims scenario for your
contact the insurance advisory team at Allegiant IRS Business Continuity plan, please do not hesitate to
to discuss what this means for you in the event of a contact Brad Russell from Allegiant IRS.
claim.
Key Contact Brad Russell | Partner | Insurance and
The intention to increase the premiums for Corporate Risk | T +61 7 3233 8786 | E brussell@
Management Liability and Directors and Officers mccullough.com.au | www.allegiantirs.com.au
Liability Insurance is unfair at this time considering
the insurers have been increasing their premiums and
reducing Directors and Officers Liability capacity for
some years now.
Corporate: Insolvency
Register your security interests on the PPSR
T
The current climate should serve as a good retention of title clauses and certain bailments
reminder for secured parties to ensure security and leases. Even with the proposed insolvency law
interests have been correctly registered on the changes, there are adverse consequences in terms of
Personal Property Securities Register (PPSR). priorities and enforceability of security interests on the
insolvency of a grantor if these timeframes are not met,
There are strict time frames for registration of
or registrations contain defects.
security interests on the PPSR. As a general rule,
registrations must occur within 20 business days of Key Contact Kirby Jukes | Partner | Banking and Finance
the date of a security agreement, however there | T +61 7 3233 8897 | E kjukes@mccullough.com.au
are shorter timeframes for purchase money security
interests (PMSIs) which include interests under
21Planning and Environment
State Government urgently amends key
legislation and practices in response to
COVID-19
S
ince COVID-19 became a public June 2020.
health emergency in late January
2020, the continued growth of the During this period further amendments to
pandemic and the associated uncertainty the PA and the EDA, which have all now
that it generates has impacted upon taken effect, will result in the following
standard practices and procedures in changes.
the planning, environment and local Temporary use licences
government sectors, much like other
areas of life. Any person may now apply for a
temporary use licence which will have
In response to the economic impacts and effect for the duration of the applicable
social distancing requirements associated event. Temporary use licences are
with COVID-19 the Public Health designed to allow increased flexibility for
and Other Legislation (Public Health existing land uses and allow an applicant
Emergency) Amendment Act 2020 (QLD to:
COVID-19 Act) was urgently passed
by the Queensland Parliament without • change the conditions of an existing
amendment on 18 March 2020. development approval;
Similarly, in NSW the COVID-19 Legislation • provide that the use of a premises
Amendment (Emergency Measures) Act is not required to comply with
2020 (NSW COVID-19 Act) commenced requirements that would constrain its
on 25 March 2020. operation; or
WHAT YOU NEED TO KNOW • increase that intensity or scale of an
existing use by, among other things,
Applicable event including a new use.
Amendments to the Planning Act 2016 Temporary use licences will be essential
(Qld) (PA) and the Economic Development to ensuring important services can
Act 2012 (Qld) (EDA), allow the Minister effectively operate to meet the
to declare an ‘applicable event’ in which community’s needs during the applicable
a raft of temporary measures will be event.
allowed.
Extending and suspending statutory
The Minister has subsequently declared periods
COVID-19 to be an applicable event that
has effect from 20 March 2020 until 20 Where the Minister is satisfied that,
because of the applicable event, it is
22necessary to do so, the Minister may allow for Development in NSW
increased flexibility by issuing notices to either
The NSW COVID-19 Act authorises the NSW
extend or suspend the period for the doing of
Planning Minister, after consultation with the
a thing.
Minister for Health, to make orders enabling
This power will be essential to appropriately certain developments to occur without any
managing development assessment development consent or compliance with the
timeframes during the applicable event so Environmental Planning and Assessment Act
that developers and assessment managers 1979 (NSW).
avoid any prejudice.
It also removes requirements to have a physical
Despite the seriousness of the ongoing copy of relevant environmental assessment
public health emergency the Minister is yet to documents on public exhibition for inspection so
provide any such notices as at the date of this long as exhibition copies are made available
article. electronically.
Relaxation of hours of operation Local government elections
The Minister may now, by notice published The QLD COVID-19 Act included further
on the Department’s website (link) declare emergency amendments to the following acts:
that provisions of the PA, requirements of a
• Electoral Act 1992 (Qld);
designation or a condition of a development
approval that would otherwise restrict the • Local Government Act 2009 (Qld);
movement of goods does not apply during
the applicable event. • Local Government Electoral Act 2011 (Qld);
and
The intent of this amendment is to
immediately assist with the management of • City of Brisbane Act 2010 (Qld).
supply chains and to allow business such as These amendments were designed to maximise
supermarkets to operate 24 hours per day, public health and safety and facilitate possible
seven days per week. suspension or termination of the 2020
quadrennial local government elections.
Similarly, the NSW COVID-19 Act enables the
Local Government Minister to postpone local
23government elections in NSW, which reviews and callovers listed prior to
are currently scheduled to be held in 10am in Brisbane are to be conducted
September 2020. It is anticipated that by telephone.
these elections will be postponed
until September 2021. While the Planning and Environment
Court is continuing to provide
With respect to local council practitioners with the opportunity
meetings, the obligations under the to participate in without prejudice
Local Government Act 1993 (NSW) meetings charged by the ADR Registrar,
will be satisfied if: all such conferences in Brisbane are
to take place via teleconference or
• Council meetings are held
video conference. If for any reason the
remotely, in whole or in part
parties must appear in person they
using audio visual technology;
will be required to observe strict social
and
distancing requirements.
• If practicable, members of
Telephone appearances are to be
the public can attend council
requested by sending an email to P&E
meetings via Webex, or if not
List Manager.
practicable the members of the
public are informed of what Filing and signing
occurred at the meeting through
an appropriate channel approved While the Planning and Environment
by the Minister. Court’s Brisbane registry is still open at
the date of this article, those wishing
OTHER PRACTICAL to provide draft orders to the Planning
IMPLICATIONS and Environment Court should forward
them by email to the relevant Judge’s
Court appearances
Associate by 4.00pm the day before
Queensland Courts, like the rest of appearing.
society, have had to adapt to the
At this stage electronic filing has
ongoing impacts of the COVID-19
not been permitted for other Court
pandemic. With the exception of jury
documents.
trials, all proceedings in Queensland
are to continue. Key Contact Stuart Macnaughton |
Partner | Planning and Environment
To achieve this while protecting
| T +61 7 3233 8869 |
public health and safety, the Planning
E smacnaughton@mccullough.com.au
and Environment Court has notified
practitioners and parties that in order
to avoid significant congregations of
people in the court room all hearings
of directions hearings, reviews,
mentions, applications, pre-calloverReal Estate: Acquisition and Disposal
COVID-19: Property acquisition and disposal
T
he real estate market is rapidly • Review any termination or delay
changing as a result of the current provisions in your contract now and
COVID-19 pandemic. Consideration adapt as appropriate.
of potential disruptions that may be
caused by the pandemic should be made Buyers should also consider:
for any new property contracts entered • If finance is required, obtain any
into. required approval as soon as possible
For buyers or sellers who have entered and, ideally, prior to entering into the
into contracts for the sale and purchase contract or well in advance of the
of land, the uncertainty caused by the settlement date.
COVID-19 pandemic and government • Engage in discussions with sellers if
responses has raised questions regarding any extensions to the settlement date
the ability of the parties to comply with may be required.
their contractual obligations and to
complete contracts. • If new contracts are being negotiated,
request a tailored force majeure clause
It is important the terms of each individual be inserted which includes public
contract are reviewed, especially if the health pandemics.
settlement date on your contract is within
the next six months, or if you have any NEW CONTRACTS
concerns about your or another party’s Before entering into any new contracts,
ability to complete. Below are a number please consider inserting special
of matters that both sellers and buyers conditions governing delay or termination
should consider. of contract as a consequence of the
MEASURES TO MITIGATE RISK COVID-19 pandemic. Consideration
should be given to circumstances where
There are a number of risk management mortgagees shut down or suspend
measures both sellers and buyers can services, or any relevant local government
implement to mitigate the impact of or other authority shuts down or suspends
COVID-19: service.
• Work together during any due FOREIGN BUYERS
diligence processes, including the
sharing of any relevant searches, All foreign buyers will now require Foreign
rates certificates and expert reports in Investment Review Board (FIRB) approval.
relation to the property. Thresholds for all property classes have
been reduced to $0. All contracts entered
• Obtain any clearance certificates into with foreign buyers after 29 March
or rates certificates required for 2020 will need to include an appropriate
settlement as soon as possible.
26FIRB approval condition. These reduced
thresholds are intended to be a temporary
measure and are anticipated to return to
normal once the economic situation stabilises.
Expected approval times for FIRB applications
have increased from 30 days to up to 6
months.
SETTLEMENT
As most settlements in Australia can now
occur electronically via the PEXA platform,
property settlements, for the most part,
are not currently affected by government
responses to the COVID-19 pandemic.
However, going forward it would be prudent
to ensure that you can settle on PEXA if
required.
As further restrictions are put in place,
settlements may be affected by the shut
down or suspension of service of bodies
such as the land title offices in each State
and Territory. At this stage these bodies are
functioning, if only by post in some States. If
a land title office was to completely close or
its electronic systems were to fail, it may be
prudent to ensure that settlement can still be
undertaken in the traditional manner (where
possible), rather than electronically.
TERMINATION AND RESCISSION
Generally, property contracts do not allow
for termination or rescission except for
material and detrimental changes to the
property between entry into the contract and
settlement.
Most contracts only contain clauses allowing
one or either party to terminate for the other
party’s death, insolvency or lack of capacity.
27Where contracts contain force majeure refers to compliance with any lawful direction
provisions, the ability of a party to rely on or order by a government agency. We also
such a clause depends on how the force note that the standard contract provisions
majeure event is defined and the specific expressly excludes the operation of the delay
circumstances it is expressed to cover. The event provisions where the inability to settle
burden of proving its application rests with is due to ‘diminution in value of the Property
the party wishing to rely on the clause, and or other property of the Seller or Buyer’ or
any ambiguity in this respect will be read ‘termination of any agreement between a
against that party. party and another person ... relating to the
provisions of finance...'.
DOCTRINE OF FRUSTRATION
Time is not of the essence under New South
Absent any specific provisions in contracts,
Wales contracts. Conversely, there are also
it is possible in the current COVID-19
no delay events allowing any postponement
environment that parties may attempt to rely
of settlement in the Law Society standard
on the doctrine of frustration to terminate a
contract conditions. Small delays to
contract and renegotiate more favourable
settlement can be accommodated under the
terms. Under the common law, frustration
notice to complete period (generally 14 days
may be relied upon to discharge the
from the date the notice is issued), which is
obligations of the parties where unforeseen
required before a party that is ready, willing
circumstances arise, through no fault of the
and able to complete can terminate the
parties, which make performance of the
contract.
contract impossible.
Buyers should note that default interest for
However, this remedy has a very narrow
late settlement may be payable depending
scope, and importantly, will not apply
on how the default provisions are drafted in
where the change is only temporary, the
the contract (generally payable for any delays
circumstances were foreseen, or the event is
other than delays caused by the seller). When
expressly addressed in a force majeure clause.
entering into new contracts, buyers should
At this stage, it is unlikely most property
carefully consider default provisions and aim
contacts will be able to rely on this remedy.
to update them to exclude delays caused by
DELAY COVID-19 related matters.
Whether a party can refer to the COVID-19 OFF THE PLAN CONTRACTS
pandemic to delay the fulfilment of its
If you are currently a party to an off-the-
obligations will depend on the contract and
plan contract, you should consider whether
will differ in each State and Territory.
any potential interruptions to the normal
For example, under the Queensland Law operation of government agencies and
Society standard contract conditions, time other authorities, as well as the construction
is generally of the essence for settlement industry, will result in any delays to your
and there is limited ability to terminate. In settlement period, or allow the extension of
particular, the COVID-19 pandemic does any sunset dates under the contract.
not fall directly within the list of events that
would entitle delay. The only relevant event
28NEED HELP?
If you require assistance with
understanding your rights and obligations
during these precarious times, whether you
are preparing for settlement, or considering
entering into a new contract, please
contact us.
Key Contact Eva Vicic | Partner |
Real Estate | T +61 2 8241 5634 |
E evicic@mccullough.com.au
29Real Estate: Leasing
COVID-19: Leasing in
precarious times
D
uring these precarious times, landlords and
tenants alike should be aware of a number
of risk management measures that can
be implemented to mitigate the impact of the
COVID-19 pandemic on their leasing arrangements.
Below are a number of items which both landlords
and tenants should consider in relation to their
leases. Given that each lease is usually subject to
bespoke negotiations, it is important that the terms
of each individual lease are reviewed.
MEASURES TO MITIGATE RISK
ISSUE LANDLORDS TENANTS
Incentive Bring incentives forward (noting the Review incentive arrangements
arrangements risk if any tenants become insolvent to ensure that any closure of
the incentive cannot be recouped). the building which amounts to a
breach under the terms of the lease
does not result in forfeiture of any
incentive.
Payment of rent Consider providing temporary Engage in discussions with landlords
rent relief or entering into an if paying rent becomes difficult.
arrangement with tenants agreeing Some options include:
to cash in any security (if any) • entering a moratorium to delay
provided under the terms of lease. the payment of rent;
• requesting a rent free period
Consider abatement/deferral rather in exchange for agreement to
than rent free, noting that insurance extend the term of the lease by
payouts in the event of damage a period equal to the rent free
could be compromised where requested;
rental has been reduced rather • temporary utilisation of some or
than deferred. all security; or
• requesting a temporary
conversion to turn-over rent.
30ISSUE LANDLORDS TENANTS
Insurance Focus on Business Pack and As for landlords.
Industrial Special Risk (ISR) policies
as these are most likely to provide
cover for lost revenue or lost
profits arising from shutdowns
or customer or supply chain
disruptions.
There has not been a unified
approach by insurers. Review
insurance policies to determine
whether loss of rent income is
recoverable.
Other measures Issue correspondence to tenants in If new leases are being negotiated
in respect of relation to: or leases extended, request a force
mitigating • proactive measures being majeure clause be inserted which
the effects of adopted; includes public health pandemics.
COVID-19 • notification requirements of any
suspected cases of COVID-19;
and
• compliance with all laws that
impact use and possession of
the premises (such as health
and safety related laws).
SOME OTHER CONSIDERATIONS trading. In essence, provided the tenant
keeps paying rent in accordance with the
Can the tenant stop trading?
terms of the lease, there is no requirement
Payment of rent is an essential term under any to keep the premises open.
lease. In the absence of an express provision
allowing a tenant to cease trading in the event Building closure
of a disease pandemic, it is unlikely tenants can Most leases require the parties to comply
simply stop trading or paying rent during any with all laws affecting the use of the
closure period. Most leases do not have an premises, and to comply with any order by a
express provision that can be relied on. government authority.
Retail shop leases usually require tenants to However, if the closure of the building
continue trading, as well as requiring tenants is based merely on a government
to be fully stocked and staffed. Accordingly, recommendation and not an order, the
a tenant’s decision (without the landlord’s closure could amount to a breach by the
approval) to close the premises could amount
landlord.
to a breach of the lease. If a tenant pays
turnover rent, the lease should be reviewed to Rent reduction
consider the consequences of a closure.
Unless the lease contains a specific rent
Commercial leases do not necessarily contain reduction clause, the tenant does not have
a positive obligation on tenants to continue legal grounds to request a rent reduction if
31the building is closed or access is restricted. The closure of your business by a public
authority can constitute ‘damage’ under
The parties should also consider the specific
certain ISR policy wordings. However, many ISR
wording of any rent reduction clause as
policies will go on to exclude damage caused
it may or may not cover a public health
by pandemics or communicable diseases from
pandemic. Whether the landlord takes
business interruption cover, regardless of the
the commercial view in the prevailing
fact that the business has been ordered to
circumstances to reduce rent is at the
close by a public authority.
landlord’s sole discretion.
If your business does have infectious diseases
Force majeure
cover there are usually significant restrictions of
Some leases may contain a force majeure this cover, including a significantly lower limit of
clause. These clauses have the effect indemnity.
of relieving a party of its obligations if
As COVID-19 has been declared a pandemic
circumstances outside its control make it
by the World Health Organisation, the reality
impossible to perform them.
is that most ISR policies will not respond to
Ultimately, the consequences of such a business interruption sustained as a result of
clause depends on how the force majeure COVID-19.
event is defined. Terms such as ‘pandemic’
Again, as all insurance policies are not the
or ‘disease’ could cover COVID-19. Similarly,
same, it is important to consider that each
clauses referring to ‘acts of government’ or
policy will turn on its own wording. In particular,
‘impacts from the exercise of governmental
the exclusions and individual endorsements
powers’ could qualify as force majeure
need to be considered in detail.
events and permit a party to the lease to be
excused from performing their obligations Changes in legislation / updates
under the lease.
At the date of this article, NSW had passed
If the lease does not contain a force amendments which gives the NSW Minister
majeure clause, it is unlikely that there are wide ranging powers in relation to leasing.
grounds for either party to be excused from These powers include the capacity to issue
their leasing obligations. regulations to prevent landlords terminating
leases in particular circumstances. Further
Further insurance considerations
details are yet to be disclosed and the other
For the business interruption section of an States are expected to follow suit.
ISR or Business Pack to respond, usually
In addition to this, Scott Morrison announced
there first needs to be ‘damage’ to insured
on 29 March 2020 that the National Cabinet
property. There are limited extensions of
had agreed on a set of principles relating to
this requirement for damage and two of
leases, both commercial and residential, to
those are closure by regulatory authority
protect renters during the COVID-19 pandemic.
and closure by infectious diseases.
These included a moratorium on evictions for
32unpaid rent if it was a result of severe financial
distress due to the coronavirus.
We recognise that things are moving quickly
and we encourage you to keep following our
updates as we will share further information
when known.
NEED HELP?
We are advising a number of landlords and
tenants in relation to COVID-19 and its impact
on their leasing arrangements. If you would
like us to give your lease a review so you can
better understand your rights and obligations
during these precarious times, please contact
us.
Key Contact Kristan Conlon | Partner | Real
Estate | T +61 7 3233 8848 |
E kconlon@mccullough.com.au
33Banking and Finance
COVID-19: Update
O
VERVIEW other advisers early if you require assistance
in reviewing and assessing the terms and
Australia saw its first case of
your legal and financial position.
COVID-19 on 25 January 2020.
Since then, Australia’s interest rate has Generally, the key areas to consider are as
been cut twice to 0.25%, the lowest in follows:
Australia’s history. The AUD has sunk to a
17-year low. The ASX has seen its largest • Payment defaults – the most obvious
daily percentage fall on record. Australia’s effect is that the disruption of payment
unemployment rate is expected to soar in flows arising from the business
the coming weeks. Notwithstanding the interruption events (such as forced
promise of emergency packages to be closure of business, disruption of supply
injected into the economy, the impacts of to the business and reduced revenue
COVID-19 have created unprecedented (such as sales or rental income)) will
challenges for financiers and their lead to cash flow issues for borrowers,
borrowers arising from the disruption being impacting their ability to make
caused to workforces, service providers, scheduled repayments of principal and
supply chains and customers. / or interest. Payments may also be
missed simply because staff making or
For corporate borrowers, it is prudent to authorising payments are absent due to
manage and mitigate the potential impacts illness or required self isolation.
of COVID-19 on your existing financing
arrangements by revisiting the terms of • Financial covenants:
the relevant finance documents, identifying • which rely on earnings such as
any areas of potential non-compliance and interest cover and debt service cover
engaging with your lenders and advisers or minimum EBITDA tests – as the
early to agree how to deal with the relevant business of a borrower is disrupted,
issues. its earnings are likely to decline in
Identify any potential defaults the short to medium term. This
means that its ability to comply with
If you are a borrower, anticipate where look back and look forward financial
the challenges will lie for your particular covenants based on those earnings
business, revisit the terms of your existing may begin to come under pressure;
loan documents and underlying material and
documents – the terms of which are critical
to your financing arrangements – and • which rely on equity values such
determine which provisions are at risk of as net worth or funds under
non-compliance. Engage your lawyers and management tests – as share values
plummet in the wake of the economic
3435
uncertainty caused by the outbreak, material adverse effect (MAE) to be able to
the value of portfolios will have enforce rights against particular borrowers
decreased and it will be harder for – however, if they do decide to go down
borrowers to comply with financial that route, they will need to consider the
covenants tested by reference to the drafting of the relevant MAE provisions
value of those equities. On the other in their facility agreements to determine
hand, the volatility of the markets whether the circumstances are such that
will be attractive for speculators, they are able to do so.
notwithstanding the risk the current
market position poses for potential • Cessation of business clauses – the
margin calls. majority of financing arrangements include
undertakings and defaults regarding a
• Project delays – the real estate sector borrower ceasing to carry on its business
relies heavily on imported goods and or a material part of it. Government
materials for use in the construction of mandated closures of types of businesses
large scale commercial and residential will mean some businesses, particularly in
projects. Developers and builders service industries, may face prolonged or
are already experiencing delays in undefined periods of closure.
this supply chain and are concerned
about the impact that this will have • Cross defaults and breach of material
on their ability to deliver construction documents – even if a borrower is able to
works on time and on budget. Both of comply with its obligations to its financiers,
these factors are tested in construction business and / or cash flow disruption may
finance agreements and we expect that lead to defaults under its obligations to
developers are already speaking to other counterparties. For example, a supply
financiers about requests for extensions agreement to supply certain goods to
of time for the completion of separable China may be unable to be fulfilled due to a
portions due to complete shortly. ban on entry with no defined end date.
In the longer term, ‘Sunset Dates’ in • Others provisions – consider any facility
contracts with purchasers of the finished specific provisions. For example, ‘key
product – again the subject of tests in person’ review events may be triggered if a
construction financing agreements - named key person falls ill and is forced to
may also soon be tested. resign.
• Material adverse change – aside from • Maturity of facility – if your facility matures
payment defaults and financial covenant or is due for renewal in the near future,
breaches, the economic impacts of consider your ability to extend or refinance
the disruption may lead to material that debt with the same or a different
adverse impacts on a borrower’s lender.
business or prospects and / or its ability
to comply with its obligations under Engage with your counterparts early
its financing arrangements. In the Having identified the potential breaches under
current circumstances, we expect that the financing documents, engage and discuss
financiers will be reluctant to rely on a them with your lender as soon as possible.
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