FINANCIAL INSTITUTIONS                                       ENERGY                                       INFRASTRUCTURE, ...
Australian legal environment• Democratic country, 6 states and 2 territories• State and Federal laws    – States have gene...
Setting up – Business entities• A wide range of business structures to choose from• Choice depends on investors needs – fi...
Business entities – Representative office• Usually used by foreign entity to assess Australian market• Can promote goods a...
Business entities – Branch office• To carry on business a foreign company must establish a branch  office• Registration un...
Business entities – Australian subsidiary• Liability limited to operations in Australia• Allow more flexibility for tax pu...
Joint venturesUnincorporated joint ventures• Common for the upstream E&P sector• Created by agreement, not a legal entity•...
Business acquisitionsShares                                  Asset• Easier to implement – transfer of     • More complicat...
FIRB approval?Regulated transactions include:• acquisitions of shares in prescribed corporations  above $248 million• acqu...
Foreign persons and notifiable interests• Substantial interests in companies  – a single foreign person (and any associate...
Services contracting• Services agreements similar to that in the UK• Contracts interpreted in accordance with similar prin...
Tendering - Types of selection processes                Process           Description               Usually used forOpen  ...
Typical tender documents          Document                             DescriptionGeneral notice          Summary of proje...
Tendering – Things to out look for• Risk allocation• Special conditions that are unique to the project (particularly if  d...
Our international practice15 12996984_2
DisclaimerThe purpose of this presentation is to provide information as todevelopments in the law. It does not contain a f...
ContactAny queries please contact:Jehann Mendis | PartnerNorton Rose AustraliaLevel 39, 108 St Georges Terrace, Perth, Aus...
Norton Rose - Jehann Mendis
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Norton Rose - Jehann Mendis

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Legal Considerations for setting up in Australia

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Norton Rose - Jehann Mendis

  1. 1. FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE, MINING AND COMMODITIES TRANSPORT TECHNOLOGY AND INNOVATION PHARMACEUTICALS AND LIFE SCIENCESLegal considerationsfor setting up and contracting in AustraliaJehann Mendis18 February 2013
  2. 2. Australian legal environment• Democratic country, 6 states and 2 territories• State and Federal laws – States have general power – Certain powers given to Federal government• Head of State is UK monarch, represented by – Governors in each State – Governor-General at a Federal level• Legal system based on English common law system with slight differences• Much of the law is embodied in State-based legislation2 12996984_2
  3. 3. Setting up – Business entities• A wide range of business structures to choose from• Choice depends on investors needs – financial and tax considerations• Common types of entities – Representative office – Branch office – Australian subsidiary – Partnerships – Joint ventures3 12996984_2
  4. 4. Business entities – Representative office• Usually used by foreign entity to assess Australian market• Can promote goods and services of foreign entity• Cannot conduct business on its own and is subject to several restrictions• Cannot contract• Can be viewed as a permanent establishment for tax purposes4 12996984_2
  5. 5. Business entities – Branch office• To carry on business a foreign company must establish a branch office• Registration under Corporations Act 2001 – ARBN (Australian Registered Body Number)• Local agent – We can help• Not subject to limitations on scope of activities• Income and capital gains tax in Australia levied at corporate rate (30%)• Some deductions may be allowed5 12996984_2
  6. 6. Business entities – Australian subsidiary• Liability limited to operations in Australia• Allow more flexibility for tax purposes• Corporate tax is at 30% on worldwide income of subsidiary• Proprietary companies – Limited to maximum of 50 non-employee shareholders – At least one Australian resident director – Generally cannot raise equity capital from the public• Public companies – Can raise equity capital, subject to disclosure rules – At least two Australian resident directors – ASX listing rules compliance if listed6 12996984_2
  7. 7. Joint venturesUnincorporated joint ventures• Common for the upstream E&P sector• Created by agreement, not a legal entity• Usually structured so as not to create a partnership - avoids joint and several liability• Each joint venturer taxed individuallyIncorporated joint ventures• Joint venture company• Separate legal entity from JV participants• Subject to the Corporations Act• Liability of participants is limited to capital contributions (subject to certain exceptions)• Shareholders’ agreement7 12996984_2
  8. 8. Business acquisitionsShares Asset• Easier to implement – transfer of • More complicated – transfer title to title to shares assets and liabilities• More comprehensive due • Buyer can chose assets and carve diligence out liabilities• Target’s shareholders as the • Business carried on by new entity Sellers • Stamp duty will likely apply• All assets and liabilities transfer • Buyer unlikely able to use• Business carried on by same entity tax losses• Stamp duty?• Use of tax losses by Buyer?8 12996984_2
  9. 9. FIRB approval?Regulated transactions include:• acquisitions of shares in prescribed corporations above $248 million• acquisitions of assets of Australian businesses worth more than $248 million that result in foreign control• acquisitions of non-rural land (irrespective of value)• investments by foreign governments or their agencies (irrespective of value)9 12996984_2
  10. 10. Foreign persons and notifiable interests• Substantial interests in companies – a single foreign person (and any associates) has 15% or more ownership; or – several foreign persons (and any associates) have 40% or more in aggregate ownership• Controlling interests – exists re a company where a substantial interest exists, unless the Treasurer is satisfied that the person is not in a position to control the policies of the company or business• An entity with the above foreign ownership is considered a foreign person10 12996984_2
  11. 11. Services contracting• Services agreements similar to that in the UK• Contracts interpreted in accordance with similar principles• Standard form documents – AS2124 general conditions of contract• Key provisions – Liability provisions and risk allocation – Scope of work and variations – Liability caps – Latent site conditions – Liquidated damages for late completion – Termination and suspension rights – Force majeure and extensions of time – Defects liability period – Payment terms and interest on late payment – Rise and fall11 12996984_2
  12. 12. Tendering - Types of selection processes Process Description Usually used forOpen Open to general public by Simpler lower cost, lower way of public advertising risk projectsMinimum capability Principal invites contractors Routine projects, although based on minimum not always low cost capability. Principal usually chooses from selection of approved contractorsPre-qualified Initial expressions of More complex projects interest for pre-qualification followed by formal invitation to tender for those who pre- qualifyInvited Principal invites tenders More specialised projects from recognised contractors with specific project capability12 12996984_2
  13. 13. Typical tender documents Document DescriptionGeneral notice Summary of project and work required, including key dates, contact details and tender submission timingIM setting out tender Including delivery method, selection criteria, evaluationinformation process etcTender form For completion by tenderers. Usually needs to provide overall cost, cost breakdown, works programme and details of personnel, equipment and subcontractorsGeneral conditions of Main contractual terms for work performance (usuallycontract containing conditions as per previous slide). Note that special conditions may be includedSpecification and Sets out technical criteria. May contains drawings andscope additional information (e.g. terms of relevant environmental or development approvals)13 12996984_2
  14. 14. Tendering – Things to out look for• Risk allocation• Special conditions that are unique to the project (particularly if different from client’s usual practice)• Special conditions required by third parties (e.g. compliance with environmental or development approvals)• Third party agreements contractor must comply with or take a novation of• Tenderers should: – ensure they promptly advise principal of errors, omissions, ambiguities or discrepancies – obtain clarification from principal where there is ambiguity to ensure full and complete understanding – make sure they understand the risk allocation14 12996984_2
  15. 15. Our international practice15 12996984_2
  16. 16. DisclaimerThe purpose of this presentation is to provide information as todevelopments in the law. It does not contain a full analysis of the law nordoes it constitute an opinion of Norton Rose Australia on the points of lawdiscussed.No individual who is a member, partner, shareholder, director, employeeor consultant of, in or to any constituent part of Norton Rose Group(whether or not such individual is described as a “partner”) accepts orassumes responsibility, or has any liability, to any person in respect of thispresentation. Any reference to a partner or director is to a member,employee or consultant with equivalent standing and qualifications of, asthe case may be, Norton Rose LLP or Norton Rose Australia or NortonRose Canada LLP or Norton Rose South Africa (incorporated as DeneysReitz Inc) or of one of their respective affiliates.16 12996984_2
  17. 17. ContactAny queries please contact:Jehann Mendis | PartnerNorton Rose AustraliaLevel 39, 108 St Georges Terrace, Perth, AustraliaTel +61 8 6212 3409 | Mob +61 412 920 136 | Fax +61 8 6212 3444jehann.mendis@nortonrose.com17 12996984_2

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