No Comments

Don’t Go Chasing Waterfalls – COVID-19 Safe Harbour is (still) not Safe

The temporary safe harbour protection from director liability for insolvent trading expires on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading .

The temporary protection is found in section 588GAAA of the Corporations Act 2001 (Cth). There has been some recent debate about whether the words “before any appointment during that period” of an external administrator, mean what they appear to say, namely that any appointment must take place “during that period” of the temporary safe harbour expires.

Our Stephen Mullette has recently responded to the alternative view – that an appointment can be delayed until the new year. Unfortunately, the conclusion is that the better view is still that to take advantage of  the safe harbour defence, the directors must have appointed an external administrator before 1 January 2021. You can read the further consideration here, and make up your own mind.
Continue reading…

No Comments

Danger – COVID-19 Safe Harbour STILL Requires Early External Administrator Appointment

The Government has recently extended COVID-19 business protection measures introduced in March, including the temporary safe harbour protection from director liability for insolvent trading. These protections will now expire on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading.

In March Parliament passed a raft of legislative reforms in an attempt to provide protections for businesses an ameliorate the economic effects of the coronavirus in Australia. One of these amendments was temporary legislation to protect directors from liability for insolvent trading during the global COVID-19 pandemic. This temporary protection is found in section 588GAAA of the Corporations Act 2001 (Cth). This safe harbour protection from insolvent trading will mean that directors will not be personally liable for debts incurred in the ‘ordinary course of business’, provided those debts were incurred during the operation of the temporary legislation, presently which will now expire at the end of 31 December 2020.
Continue reading…

No Comments

Danger – COVID-19 Safe Harbour Flaw Requires URGENT External Administrator Appointment

A fatal flaw exists in the government’s COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 24 September 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading.

At the beginning of the global pandemic the Australian Federal Government introduced temporary legislation to protect directors from liability for insolvent trading during the global COVID-19 pandemic. This safe harbour protection from insolvent trading will excuse directors for liabilty in respect of debts incurred in the ‘ordinary course of business’ during the operation of the temporary legislation, presently due to expire at the end of 24 September 2020.

However, for reasons which are not clear, but possible linked to the urgency with which the legislation was passed, the drafters included an additional fundamental and crucial requirement to gain the benefit of this COVID-19 safe harbour protection from insolvnt trading. That requirement is that in order to gain this COVID-19 safe harbour protection, an external administrator (either a voluntary administrator or a liquidator), must have been appointed before the legislation expires at the end of 24 September 2020.
Continue reading…

No Comments

New! Key Changes to the Covid Leasing Rules for Landlords and Tenants

The Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020 (NSW) (the Amendment) commenced on 3 July 2020 and changes some of the rules affecting retail/commercial landlords and tenants when it comes to the impact of COVID-19.

 

Background

The Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (the Regulation) commenced operation on 24 April 2020.  The Regulation gave effect to the National Cabinet Mandatory Code of Conduct for Commercial Leases (the Code).

Key aspects of the Regulation include:

  • an “impacted lessee” (that is, a tenant under a retail or commercial lease in NSW who qualifies for JobKeeper and has turnover of less than $50 million for FY18/19) is, amongst other things, entitled to re-negotiate the rent payable under their lease
  • a landlord cannot take any “prescribed action” against an impacted lessee (such as eviction, termination of the lease, or calling on any security provided by the tenant) due to non-payment of rent or outgoings during the “prescribed period” (ie, a period of 6 months commencing on 24 April 2020)
  • Continue reading…

No Comments

Impacts for Commercial Leases & Commercial Contracts

COVID-19 – Impacts for Commercial Leases & Commercial Contracts

Commercial Leases

The Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (the Regulation) commenced on 24 April 2020.  The purpose of this Regulation is to give effect to the National Cabinet Mandatory Code of Conduct for Commercial Leases (the Code) which was announced by the National Cabinet on 7 April 2020.

Key aspects of the Regulation include:

  • the Regulation applies to both retail leases and commercial leases
  • to qualify for relief, the tenant must be an “impacted lessee” – that is, they qualify for the JobKeeper program and have turnover of less than $50 million for the 2018-2019 financial year
  • a landlord cannot take any of the “prescribed actions” against an impacted lessee (such as evicting the tenant, terminating the lease, re-entering the premises, or calling on a security bond or guarantee given by the tenant) due to non-payment of rent or outgoings during the “prescribed period” (ie, 6 months after the commencement date of the Regulation which is 24 April 2020)
  • Continue reading…

No Comments

COVID-19 – What do Force Majeure and Frustration mean for contracts?

Due to the economic downturn caused by COVID-19,  Matthews Folbigg Lawyers has been receiving a lot of enquiries from clients seeking advice in relation to contracts with a view to either getting out of their contracts or alternatively, seeking to enforce their contracts.

Two relevant legal concepts in this landscape are force majeure and frustration.

Force Majeure

Force majeure is a French term meaning “superior force”.

Many contracts contain a force majeure clause, the key features being:

  • a set of defined events referred to as an “event of force majeure” – this could include war, terrorism or natural disasters, but could also include events relevant to COVID-19, such as epidemic, pandemic, or acts or restraints by government authorities

 

  • typically, the force majeure clause will provide that where a force majeure event is preventing, restricting or delaying performance under the contract, the parties that are affected by the force majeure event will be excused from performing under the contract for the duration of the force majeure event
  • Continue reading…

No Comments

Code of Conduct for Commercial Tenancies – Released

By Anica Cunanan, Law Clerk at Matthews Folbigg Lawyers

Undeniably, the financial impact of COVID-19 has triggered a myriad of changes to the laws. The National Cabinet has released a mandatory Code of Conduct in relation to the commercial property sector. This sets out the principles to be applied to adjustments to rent during the COVID-19 pandemic.

The Code is based upon a series of good faith principles to be applied to commercial tenancies during this unprecedented time. It will apply to those tenants who are eligible for the JobKeeper programme, with annual turnover of up to $50 million (“SME Tenants”).

The Code of Conduct includes the following:

  • Landlords should not terminate due to non-payment of rent during the COVID-19 pandemic period;
  • Proportionality to rent reductions based on the tenant’s decline of turnover;
  • ‘Tailored’ and ‘bespoke’ solutions to be negotiates between landlords and SME Tenants; and
  • A mix of at least 50% waivers and the balance of deferrals in respect of rent obligations.
  • Continue reading…

No Comments

Critical Covid Response Items for EVERY Business and Employer

COVID-19

Critical Covid Response Items for EVERY Business and Employer

Business Contracts and Leases

Key questions to ask yourself in an effort to reduce losses being suffered:

  • can I use contractual and leasing force majeure provisions due to events beyond my reasonable control to cancel, suspend or renegotiate my contracts and leases?
  • what happens if I don’t have a force majeure provision?
  • can I use the “frustrated contracts” regime to my advantage?
  • is Covid a “material adverse event” for contractual purposes?
  • what time limits apply to exercise my rights and are there any mandatory procedural requirements I must follow to do so?

As the interaction between contractual wording, legal considerations, and the outcome sought are inherently fact specific, if you would like to discuss your options we invite you to contact a member of our Commercial Law Team on 9635 7966.

Staff

Does your contingency planning take into account these fundamental matters: