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Reminder – The Whistleblower Policy Deadline is 1 Jan 2020

Recap

By way of refresher from our article earlier this year:

  • new whistleblower legislation commenced on 1 July 2019
  • it modified laws relating to corporations, the banking industry and insurance companies in order to:
  • provide significantly stronger protections to whistleblowers who make disclosures about matters such as corporate misconduct (e.g. fraud), criminal activity, or any other conduct that represents a danger to the public or financial system
  • expand the scope of persons who may make protected whistleblower disclosures and the circumstances in which these disclosures may be made
  • permit and protect anonymous disclosures
  • impose substantial civil and criminal penalties on any breaches of whistleblower protections (such as disclosing the whistleblower’s identity and/or causing the whistleblower detriment through victimisation)
  • the protection obligations apply to all disclosures made on or after 1 July 2019 even if the disclosure relates to suspected conduct occurring prior to that date

Mandatory Policy

Critically, the legislation requires that all public companies and large proprietary companies MUST have in place a compliant whistleblower policy by 1 January 2020 with a “large proprietary company” being a proprietary company that satisfies 2 of the following 3 criteria:
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Beware of Personal Guarantees

A director or shareholder of a company is often asked to provide a personal guarantee of a company’s obligations.

Any person who is considering giving a personal guarantee must be aware of the risks and pitfalls of doing so.

Types

An agreement based personal guarantee is usually either:

  • set out in a separate document (eg, a deed of guarantee and indemnity)

 

  • incorporated into the main document

Traps

Whilst in the first category above it will be obvious that a personal guarantee is requested, in the second we have reviewed many contracts where the guarantee clause is ‘buried’ in the fine print of the document.

For example, we have seen clauses in supply contracts which in effect state ‘the person signing this document on behalf of the company is giving a personal guarantee’.

Therefore, a director may sign a contract on behalf of a company and unknowingly be giving a personal guarantee at the same time!

Risks

The obvious risk in giving a personal guarantee is that the assets of the individual (which may include the family home) could be at risk if the company defaults on its obligations under the relevant contract.
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New Australian Consumer Law Warranty Requirements

If you run a business that supplies goods to a “consumer” within the meaning of the Australian Consumer Law (ACL) and you also provide an express warranty against defects in respect of those goods, then you will be aware that the ACL imposes mandatory wording that must accompany that warranty.

New Requirements

Changes to the ACL now mean that if you supply “services” or “goods and services” to a “consumer” within the meaning of the ACL and you provide an express warranty against defects in respect of same, then new mandatory wording applies.

Mandatory Wording – Services

The new mandatory wording is:

Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the services, you are entitled to cancel your service contract with us and to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to be compensated for any other reasonably foreseeable loss or damage. If the failure does not amount to a major failure you are entitled to have problems with the service rectified in a reasonable time and, if this is not done, to cancel your contract and obtain a refund for the unused portion of the contract.
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Workplace Update: New Whistleblower Laws

Recent events such as the raids on the ABC and other journalists have brought into focus the risks faced by whistleblowers who leak evidence of corruption or other serious crimes.

It is therefore somewhat timely that the federal parliament recently passed the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2019, which substantially bolsters whistleblower protections within the private sphere.

Who do the new laws apply to?

The Bill amends the Corporations Act and other legislation (new laws) by imposing strict whistleblowing protection obligations on the following regulated entities:

  • companies or constitutional corporations
  • certain financial institutions
  • insurers (including life insurance companies)
  • superannuation entities and trustees
  • any associated entities of the above

The new laws do not apply to government departments, nor do they increase the whistleblower protections for commonwealth employees.

Key Effects

In essence, the new laws:

  • allow the making of protected disclosures about a wider range of misconduct such as corporate corruption, fraud, bribery and money laundering, as well as other serious criminal offences that pose a danger to the public or financial system
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Fines and Prison – Tougher Personal & Company Penalties

The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act came into effect on 13 March 2019.  It is a response to the Banking Royal Commission which called for increased penalties for corporate wrongdoing.

The new Act amends the Corporations Act, the National Consumer Credit Protection Act, the Australian Securities and Investments Commission Act and the Insurance Contracts Act 1984.  Below we focus on the changes to the Corporations Act.

What are the new maximum penalties for individuals?

The new maximum pecuniary penalty for individuals is the greater of:

  • $945,000; or
  • 3 times the benefit gained/detriment avoided.

The new maximum prison penalties for serious criminal offences (including breaches of director’s duties) have been increased to 15 years.

The new maximum civil penalty for individuals is the greater of:

  • $1.05 million; or
  • 3 times the benefit gained/detriment avoided.

What are the new maximum penalties for companies?

The new maximum pecuniary penalty for companies is the greater of:

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Franchising – Is It For Me?

Franchising has been in the news a lot lately and not always for the right reasons.

Is a franchised business a good investment, and is it right for you?

A franchise means you are not required to build up a business from scratch and the franchisor will take care of a lot of marketing and training.

However, there are often many costs in acquiring a franchised business, such as:

  • an initial upfront franchise fee payable to the franchisor
  • ongoing royalty fees, which are usually a percentage of gross revenue
  • training fees
  • marketing and advertising fees
  • fit-out costs for any premises, plus rent and outgoings
  • costs of acquiring stock, plant and equipment, and inventory (such as uniforms, training manuals, marketing materials etc.)

Franchise agreements typically include many restrictions on your right to operate the business. For example:

  • you must comply with their operations manual and directions (such as pricing and services offered)
  • your right to operate the business will be for a limited period of time and restricted to a certain geographical area
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New Laws to Punish ‘Shady’ Employers

The Federal Government has passed news laws designed to punish employers (and their directors) who evade their employer obligations by engaging in shady business practices such as ‘phoenixing’ and asset-shifting.

The laws also seek to curb ‘corporate misuse’ of the Fair Entitlements Guarantee scheme (FEG) and thereby reduce the ballooning financial burden on taxpayers arising from it.

The Fair Entitlements Guarantee

The FEG is a legislative safety net designed to provide statutory employment benefits to employees (eg, unpaid wages, payment in lieu of notice, redundancy and leave entitlements) who lose their job as a consequence of the liquidation or bankruptcy of their employer.

Increased reliance on the FEG has resulted in the scheme’s costs more than tripling from $70.7 million in the four year period ending 30 June 2009, to $235.3 million in the four year period ending 30 June 2018.

The New Legislation

The new laws which came into effect on 6 April 2019 amend the Corporations Act to:
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New laws to limit non-disclosure agreements in consumer disputes

Businesses often require customers who make a complaint about their products or services to sign a non-disclosure agreement as a precondition to receiving compensation or a refund.

However, legislative changes in New South Wales have imposed greater restrictions on businesses which use such non-disclosure agreements.

What is a non-disclosure agreement and why do businesses use them?

Non-disclosure agreements are used by parties to settle disputes and to prevent disclosure of confidential or sensitive information.

In the context of consumer disputes, they typically provide that, in return for the payment of a sum of money, the consumer will not disclose information about the product or service to any person (such as other consumers) or make disparaging remarks about the business. The business is essentially buying the silence of the consumer to protect its brand name and reputation.

What are the new changes?

Section 86AB of the Fair Trading Act 1987 (NSW) came into effect on 28 February 2019 (Commencement Date).
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