Friday 22 September 2017

Three’s not always a crowd - three things you need to know about the new crowd-sourced funding regime

The new crowd-sourced funding (CSF) regime will officially come into effect at the end of this month.

As detailed in one of our earlier posts, the CSF regime allows eligible companies to make offers of fully paid ordinary shares to investors through a platform which must be operated by an intermediary who holds an Australian financial services licence from ASIC.

1. So what happens now? 

To facilitate implementation of the CSF regime as soon as possible, ASIC will begin accepting applications from potential CSF intermediaries from 29 September 2017.

In the meantime, if you are considering taking advantage of the CSF regime, you should consider what (if anything) you need to do to ensure you are eligible to do so.

2. How do I know if I am eligible?

The CSF regime is currently only available to Australian unlisted public companies with less than $25 million in gross assets and $25 million in annual turnover.

At the time of writing, a further bill has also been introduced to parliament which proposes to:
  • expand the eligibility for the CSF regime to proprietary companies that meet certain eligibility requirements including:
    • maintaining a minimum of two directors
    • preparing annual financial and directors’ reports in accordance with accounting standards
    • ensuring their financial reports are audited once they raise $3 million or more under the CSF regime, and
    • complying with the existing related party transaction rules that apply to public companies.
  • provide that proprietary companies with shareholders who acquire shares through a CSF offer are not subject to takeovers rules
  • add special investor protection provisions for proprietary companies accessing the CSF regime, and
  • remove the temporary corporate governance concessions detailed below.

Assuming the bill is passed, these changes will take effect six months after the bill receives royal assent.  Until then, the current legislation provides corporate governance concessions to new public companies or companies that have recently become public where the company has been established or converted for the purpose of utilising the CSF regime.  ASIC has released an updated Form 206 (Application for change of company type) which allows an existing company to be converted specifically to enable it to take advantage of the new CSF regime.

3. How much money will I be able to raise?

Eligible companies can raise up to $5 million, with a limited investment of $10,000 per investor, in any 12 month period.

However, you should also be aware that, in making an offer under the CSF regime:
  • you will need to use a specific offer document that complies with the CSF legislation
  • the offer can only remain open for a maximum of three months
  • the offer can only be published on one platform
  • you can only have one offer open at any one time, and
  • you may also make an offer relating to ordinary shares in the company outside of the CSF regime (bearing in mind the $5 million annual cap).

For more information, please contact:

Alex Hutchens
Reece Walker
Ben Wood
William McCullough
Kathryn Morgan



Friday 15 September 2017

ACCC not putting up with any rubbish in small business contracts

The Australian Competition & Consumer Commission (ACCC) has taken court action against JJ Richards & Sons Pty Ltd (JJ Richards), a major Australian waste collection business, alleging that a number of clauses in its standard form waste collection contracts with small businesses are unfair. This is the first time the consumer watchdog has taken action to enforce the new unfair contract terms provisions in the Australian Consumer Law (ACL) for a small business contract, since the law was extended to protect small businesses on 12 November 2016.

What happened?
On 6 September 2017, the ACCC initiated proceedings in the Federal Court against JJ Richards, one of Australia’s largest privately owned waste management companies. It alleges that eight clauses in JJ Richards’ standard form commercial waste collection contract are ‘unfair’ under the ACL and therefore void when contracting with small businesses. The clauses in question:
  • bind customers to subsequent contracts unless they cancel the contract within 30 days before the end of the term
  • allow JJ Richards to unilaterally increase its prices
  • exclude JJ Richards’ liability where its performance is “prevented or hindered in any way”
  • allow JJ Richards to charge customers for services not rendered for reasons outside the customer’s control
  • grant JJ Richards exclusive rights to remove waste from a customer’s premises
  • allow JJ Richards to suspend its service but continue to charge the customer if payment is not made after seven days
  • create an unlimited indemnity in favour of JJ Richards, and
  • prevent customers from terminating their contracts if they have payments outstanding and entitle JJ Richards to continue charging customers equipment rental after the termination of the contract.

The ACCC is seeking a declaration that the terms are unfair and therefore void, as well as an injunction to prevent JJ Richards from relying on such terms in small business contracts in the future. If the relevant contracts are capable of operating without the unfair terms, they will remain on foot and bind the parties.

Why is this important?
The ACCC Deputy Chair Dr Michael Schaper believes that this should be a reminder to large businesses to review their standard form contracts to ensure the terms are not unfair to small businesses. If a court finds key terms of your standard form contracts to be unfair, they will not be binding, which may leave your business open to significant risk.  For example, if a liability or indemnity is struck down, you may be left without any limitation of liability or indemnity against your losses.

Many of the clauses the ACCC alleges are unfair are the kinds of clauses the ACCC has flagged it considers are likely to be unfair.  However, it is interesting that the ACCC has also alleged that an exclusivity clause is unfair.  Normally, exclusivity clauses would be attacked as anti-competitive under the competition law, but only if they substantially lessen competition in the overall market.  Here, the ACCC is saying that even if they are not anti-competitive, it thinks they may still be unfair.  If successful on this point, this will be a further major restriction on the kinds of clauses that can be imposed on consumers and small businesses.

A term will be considered unfair if it:
  • would cause significant imbalance in the rights and obligations of the parties
  • is not reasonably necessary to protect the legitimate interests of the business advantaged by the term, and
  • would cause detriment to a party if applied or relied upon.

The ACCC has released a Report which identifies terms that are likely to be considered unfair across a range of industries, and provides guidance for how businesses can minimum risks of infringing the unfair contract terms regime.

If you have any questions about these proceedings or how to ensure your business is compliant with the unfair contract terms regime please contact Paul McLachlan, Alex Hutchens or Belinda Breakspear.  We have been assisting a number of our clients to review and rewrite their standard form consumer and small business contracts to remove unfair terms.

Paul McLachlan
Alex Hutchens
Belinda Breakspear
Eliza Humble


Thursday 14 September 2017

New Balance Chinese trade mark win – kicking a goal for damages in China

A Chinese court recently ruled three local shoemakers have infringed the New Balance ‘NB’ logo and must pay US $1.5 million in damages and legal costs.  The case is significant as it is reportedly the largest amount awarded to a foreign business in a Chinese trade mark dispute.  The infringing shoemakers manufactured shoes under a brand called ‘New Boom’ and were found by the court to have damaged the reputation of New Balance and confused consumers due to the high similarity of their logos to the New Balance ‘NB’ logo and brand.

Critics have often maintained China’s intellectual property system does not sufficiently protect foreign brands; however this recent decision is certainly a step in the right direction.

Under the Chinese system, the first party to file for a trade mark is awarded protection.  In Australia, on the other hand, the first party to use the trade mark is awarded protection (unless there is no prior use, in which case registration is awarded on a first come first served basis).  The way the Chinese system operates means it is vital brands register the trade mark in China as soon as possible, before expanding into the Chinese market.  Otherwise, the brand may find the trade mark has already been registered to a trade mark squatter, or to a party producing imitation goods.

In recent months, the Chinese Government has vowed to tackle the issue of intellectual property infringement caused by the legions of fake goods produced and offered for sale in the country. There have also been changes to Chinese trade mark law over the past few years to take on trade mark abuse.  This decision indicates steps are being made to support foreign rights holders.  It also provides reassurance for foreign brands looking to expand into the Chinese market and pursue an active brand protection strategy.

Friday 1 September 2017

Mandatory Data Breach Notification scheme - 6 months to go!

The much-anticipated mandatory data breach notification scheme will take effect in February 2018. Under this new legislation, all organisations and federal agencies that are subject to the Privacy Act will need to promptly notify the OAIC and any affected individuals of any unauthorised access to, or unauthorised disclosure of, personal information that is likely to result in serious harm i.e. “eligible data breach”.  Failure to do so may result in fines of up to $1.8 million.

Are you prepared?  With just 6 months to go, you should be reviewing your data security processes and procedures to ensure they are adequately protecting the personal information you hold. You should also implement a data breach response plan, and educate relevant people in your organisation accordingly, to ensure you respond promptly to any data breach with minimal impact on your business operations.


For enquiries, please contact: