The Assistant Treasurer has announced 3 changes relating to capital instruments:

• the debt/equity transitional period for Upper Tier 2 instruments has been extended to 1 July 2010 to enable issuers sufficient time to amend their instruments to come within the terms of a final set of Upper Tier 2 regulations which are still the subject of consultation;
• new Regulations which apply to payments made under term subordinated notes on or after 1 July 2001. The Regulations will allow debt tax treatment of certain term subordinated notes by ensuring that certain clauses relating to solvency and capital adequacy do not preclude those notes being considered as debt interests for the purposes of the debt/equity rules;
• draft legislation is now available for Taxation of Financial Arrangements (TOFA) reforms.

Langes will hold a seminar in Sydney focussing on Banking, Finance and Insurance Award and enterprise agreement issues on Tuesday 18th May 2010, 9:30am – 12:30pm.

Labor’s new Fair Work Act has now been implemented with some major changes now in place.

• What does the new Act mean?
• How different is the new Banking, Finance & Insurance Award to the old Credit Union Award?
• Should you be using Individual Flexibility Agreements?
• Should you be entering into an Enterprise Agreement?
• What do you have to do?

Ron McCallum, Professor of Law at Sydney University, will provide an overview of the important parts of the new legislation. Donna Brown, Senior Lawyer at Abacus will talk about the new Banking, Finance and Insurance Award, how it differs from the Credit Union Award, and the things you should be doing as a result of the new Award.

Langes Partners Richard Farago and David Jacobson will also speak. Richard will talk about enterprise agreements and the pros and cons of having one.

Who should attend? CEOs, Senior Managers, HR Managers and Directors
When? Tuesday 18th May 2010, 9:30am – 12:30pm
Where? The Grace Hotel, 77 York Street, Sydney
Cost? $350 plus GST per delegate (including morning tea and light lunch)

Contact Elicia Rawlings at erawlings@langes.com.au or phone (02) 8234 4719 to register.

In its latest circular the Financial Ombudsman Service discusses the obligation of credit unions and mutual building societies to try to help small business customers overcome their financial difficulty.

The Mutual Banking Code of Practice specifically applies to “small business” customers which are defined as “a business having fewer than: a) 100 full-time (or equivalent) people if it involves the manufacture of goods; or, b) in any other case, 20 full time (or equivalent) people.”

Clause 24.1 of the MBCP states:

“We will work with you in a constructive way if you experience genuine difficulties meeting your financial commitments. With your agreement and commitment, we will try to assist you to overcome those difficulties. We will do this whether or not you have a right to seek hardship variation or change under consumer credit laws.”

Even though the FOS concedes it does not have the power to vary business loans it does require mutuals to show they have given genuine consideration to a small business’ financial difficulty. The same principle applies to guarantors.

The circular discusses the FOS’s options and gives some helpful case studies.

There are two types of member disputes: firstly, disputes over products and services and secondly, shareholder disputes.

The first type should be straightforward: by law you are required to have internal and external dispute resolution procedures relating to your financial products (and soon, credit products) escalating from internal customer service and complaints officers to external ombudsmen. Sometimes these are complex or relate to matters of general legal importance but most can usually be resolved by open communication and understanding.

Disputes with members relating to their position as shareholders (and not as customers) are harder to resolve. Shareholders have a contract with the company (the constitution) and this contract, together with the Corporations Act, determines the rights of members.

One of the fundamental rights of members is the right to participate in company matters including the right to vote at general meetings. So it is not unexpected that disputes occur in relation to the calling of meetings, proxies, meeting procedures and the election of directors.

McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488 dealt with a challenge to a company announcement that its general meeting would be postponed by the chair opening and adjourning it straight away. Not all the directors had agreed.

Justice Barrett of the NSW Supreme Court decided that:
1. ” the general power of directors, under the constitution, to manage the company and to exercise its powers does not allow the directors to postpone a duly convened general meeting. For the directors to be able to do that, there must be some express power given to them by the constitution.”
2. The person who presided as chairman of the proposed meeting could not, consistently with the duties of a chairman, give effect to the postponement.
3. “It will be the duty of the person who presides as chairman of the meeting to consider any question of adjournment of the meeting according to:
(a) the circumstances existing at and in relation to the meeting when it occurs; and
(b) a genuine appraisal of those circumstances made in good faith and in light of the purposes for which the power to adjourn exists.”

As you prepare for your next general meeting it is always wise to have a “run sheet” dealing with these types of issues.

If you need assistance in preparing for your meeting, call one of the Langes partners.

Compliance officers should note the following dates:

1 April 2010

• New APS 510 remuneration standards commence
• Consumer credit provider registration starts (registration closes 30 June 2010)

30 June 2010

• Transition for old APS 120 Securitisation ends

1 July 2010

• National Credit Code commences; Suitability assessments required for non-ADI’s or RFC’s
• Applications for Australian Credit Licence (ACL) open (applications close 31 December 2010)

LCAP Members can download an audio walk-through of the ASIC online credit registration form here.