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

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

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.

Belinda Breakspear

Alex Hutchens

Paul McLachlan

Danielle Jepson

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:

Alex Hutchens

Belinda Breakspear

Paul McLachlan  

Will McCullough 

Life’s not a beach in Bondi Beach trade mark dispute

The news broke this month that multinational retail giant Abercrombie and Fitch has trade marked the name ‘Bondi Beach’ in the US.  It was discovered by the Sydney-based toiletries company Bondi Wash who filed a trade mark to protect its name in the US, but was initially blocked because it was too similar to Abercrombie and Fitch’s trade mark.  The US retailer has no presence in, or connection with, the iconic beach or Australia generally, but allegedly had a beauty range which it named “Bondi Beach”.

Bondi Wash challenged the trade mark on the basis that it was no longer in-use, but the cancellation action has since been withdrawn after Abercrombie and Fitch refused to back down.

Why is this an issue?

This has sparked concern in Australia, as many people were previously unaware that foreign companies could obtain exclusive rights to use Australian words and the names of iconic Australian places in overseas jurisdictions. This is not the only iconic Australian place name that has been trade marked by foreign companies in the US. Uluru is registered to a carpet company and Kakadu is registered to a cosmetics company.

In Australia common place names, such as iconic beaches or cities, will be rejected as trade marks because they should be available for all traders to use to describe their goods and services. Companies may however, in some circumstances, successfully register trade marks including common place names if the names are combined with something more distinctive such as another word or a logo, or the trade marks have been extensively used.  As a result, there are a broad range of Australian companies that incorporate ‘Bondi’ into their brand names and trade marks.

While under US law geographical names can be refused registration if the location is known and understood by the relevant segment of US consumers, the United States Patent and Trademark Office examiner presumably took the view that ‘Bondi Beach’ was not of sufficient significance to US consumers, or that the mark had acquired a secondary meaning.  Australian businesses such as Bondi Wash or Bondi Sands may therefore find difficultly operating under their brand names without infringement claims, and incur significant legal costs when they look to expand overseas.         

   

Waverly Mayer Sally Betts has said that “it’s an Australian beach so I don’t believe anyone in another country should be able to trade mark it.” The Waverly Council has since brought this to the attention of the Federal Trade Minister’s office, and while they have no legal standing, a letter is reportedly being drafted to Abercrombie and Fitch asking them to voluntarily relinquish its trade mark on Bondi Beach. At this stage however, their only chance is to appeal to the retailer’s good will. 

Belinda Breakspear

Alex Hutchens

John Kettle

Paul McLachlan

Scammers hit ASIC customers

Small businesses are a ready target for scammers, with the latest scam targeting innocent companies trying to do the right thing.

‘ASIC’ email scam
ASIC announced today that scammers pretending to be from ASIC have been contacting Registry customers by email, requesting that they pay fees and provide personal information to renew their business or company name (click here to view an example of a scam email).  It has also been reported that these phishing emails may contain malware and links to invoices with false payment details.

ASIC has advised that emails are most likely to be a scam if they ask you to:

• make a payment over the phone
• make a payment to receive a refund, or
• provide your credit card or bank details directly by email or phone. 

If you think you have received a scam email, ASIC has requested recipients to immediately forward the entire email to ReportASICEmailFraud@asic.gov.au or contact ASIC on 1300 300 630.

Trade mark scam
Similar phishing emails are often sent to trade mark registrants asking them to provide personal information and pay fees associated with trade marks or domain names.  Further information is contained in our previous article on this scam (please click here to read).

Small business
The ACCC Scamwatch website contains useful information on common scams and steps you can take to protect your small business.

For enquiries, please contact:

Belinda Breakspear

Reece Walker

Ben Wood

Plant breeder's rights now apply in Norfolk Island

As of 1 July 2017, the Plant Breeder’s Rights Act 1994 (Cth) (PBR Act) now applies in Norfolk Island.  The PBR Act provides a system of registration and exclusive commercial rights for new plant varieties.

Norfolk Island is a small island off the coast of Australia, located approximately 1,600km northeast of Sydney between Australia, New Zealand and New Caledonia.  The island is part of the Australian Commonwealth and has many unique historical relics and native flora and fauna species.

Norfolk Island previously had no system for protecting new plant varieties; however Australia’s other intellectual property systems applied there.

The change is part of the Australian Government’s reforms in Norfolk Island and aims to provide residents with the same rights as those in other parts of Australia.  The application of the PBR Act will assist with fostering plant breeding and innovation on the island.

For enquiries please contact:

Belinda Breakspear

Alex Hutchens

John Kettle

Paul McLachlan