Mergers and Acquisitions

Russell Kennedy were involved in many significant mergers and acquisitions transactions in 2015.  The transactions covered many sectors including health care, aged care, professional services including legal and accounting, transport, insurance, manufacturing, retirement living, retail consumer goods, smash repairs and housing.  We are grateful for the opportunity to be involved in what are typically major events or milestones for our clients.

We expect that high levels of mergers and acquisitions activity will continue in 2016 and are already working on several new transactions.  These will continue to be driven by many factors.  At the forefront will be succession planning by retiring baby boomers, progressive businesses looking to implement growth strategies with business acquisitions, larger corporates looking to leverage economy of scale advantages, and conversely those smaller players who simply cannot afford the increasing cost of business compliance.  Others will be motivated by ever-changing economic conditions, both in Australia and overseas.

We are looking forward to what should be another busy year.

Federal Treasury plans to consolidate current ACN, TFN and ABN schemes from 1 July 2016

In August 2015, the Federal Treasury released an exposure draft of the Treasury Legislation Amendment (Repeal Day) Bill 2015. The Bill will make the Australian Business Number (“ABN”) the single numerical identifier for companies registered under the Corporations Act 2001 (Cth) from 1 July 2016.

Currently, businesses receive multiple identifiers for use with different agencies and for different types of business activities. These include an ABN from the Registrar of the Australian Business Register (“ABR”), a Tax File Number (“TFN”) from the Commissioner of Taxation and an Australian Company Number (“ACN”) from the Australian Securities and Investments Commission (“ASIC”).

The changes form part of the Federal Government’s Growing Jobs and Small Business package, announced in the 2015-2016 Budget, which aims to encourage business start-ups by simplifying the process to register a new business.

Specifically, the changes will consolidate the process of applying for registration as a company under the Corporations Act 2001 and applying to be registered with the ABR, thereby reducing the number of Commonwealth-issued business identifiers required. There will be no other identification requirements for registering a new company under the Corporations Act 2001. However, further identification requirements will apply as part of the application to be registered in the ABR.

From 1 July 2016, ASIC will no longer issue an ACN to a company upon registration. As such, new companies will not be allowed to use the ACN in their name. Instead, a new company will be given an ABN and be registered for ABN purposes when registered as a company under the Corporations Act 2001.

Accordingly, ASIC will only be able to register a company if:

  • an application for registration in the ABR has been lodged and an ABN has been allocated to the company; or
  • for an existing entity, the company already has an ABN.

Once a company is registered with ASIC, it may be issued with a certificate that includes its ABN. A company registered after 1 July 2016 must display its ABN on certain documents, including its common seal if it has one. Existing entities will retain all their current numerical identifiers and, if registered under the Corporations Act 2001 before 1 July 2016, may continue to use its ACN and will not be required to apply for an ABN if it does not have one.

Tax laws will also be amended to enable an existing entity with an ABN to use that ABN instead of a TFN; however, a TFN may still be requested. Entities with an ABN will be able to rely on this number to avoid tax consequences due to a failure to quote a TFN.

To view the exposure draft for the Bill, click here.

ASIC releases Corporate Plan and Focus

The Australian Securities and Investments Commission (“ASIC”) recently released its Corporate Plan for 2015-2016 to 2018-2019 and Focus for 2015-2016 (“Plan”).

The Plan summarises ASIC’s vision and focus over the next 4 years and highlights the key risks to be managed:

  1. Gatekeeper conduct – Poor culture and lack of transparency across responsible entities, lenders, markets, directors, auditors and insolvency practitioners.
  2. Financial product innovation and consumer understanding – Issues involving advertising practices of complex financial products and the associated lack of consumer understanding and financial literacy.
  3. Poor financial advice – Accessible and quality advice is of increasing importance, particularly in relation to superannuation and decisions affecting retirement savings.
  4. Cyber-attacks – The increasing incidence and severity of cyber-attacks presents major risk for all organisations, including ASIC.
  5. Globalisation – Both from the perspective of facilitating the free flow of capital across markets and the potential for misconduct across borders to undermine market integrity and stability.

ASIC intends to minimise the above risks in a number of ways, including:

  1. Taking action against gatekeepers who do not keep markets, investors and creditors properly informed.
  2. Improving the quality of information provided to investors and the market through enhancing audit quality, financial reporting and other disclosures.
  3. Improving the financial literacy of consumers.
  4. Reducing the sale of inappropriate products to vulnerable consumers.
  5. Enhancing professionalism and ethical standards of financial advisers.
  6. Improving awareness of cyber resilience.
  7. Co-operating with international regulators and implementing standards such as over-the-counter derivatives reforms.

The Plan provides guidance regarding emerging risk and compliance issues which all organisations should consider at upcoming board, risk or compliance meetings.

To view the Plan, click here.

ACNC launches Australian Charities Report 2014

How does your not-for-profit organisation compare to the sector?

On 4 December 2015, a group from Russell Kennedy attended the launch of the Australian Charities Report 2014 (“Report”) by the Australian Charities and Not-for-profits Commission (“ACNC”) in conjunction with the Centre for Social Impact and the Social Policy Research Centre at the University of New South Wales.

The Report is the first of its kind, analysing data submitted through the 2014 Annual Information Statements, meaning statements that were submitted before 31 July 2015, collected from approximately 38,000 charities registered with the ACNC across Australia.

Some of the key findings of the Report include:

  • Size and income: The Report emphasised that charities and the not-for-profit sector represent a significant portion of the Australian economy. Charities have a combined total income in excess of $103 billion, with the largest 5% of charities receiving 80% of that income. Charities employ over 1 million staff and 1.8 million volunteers, with large charities (defined as those with over $1 million revenue) employing 93% of staff whilst smaller charities employ 63% of volunteers.
  • Income sources: Of the $103 billion income, the majority ($54.5 billion) is from sources other than government grants, donations or bequests, such as capital gains. At the launch of the Report, Commissioner Susan Peacock AM commented that this is a significant statistic because, whilst donations and grants are important, charities and not-for-profits are becoming increasingly financially independent. It is also clear from the Report that the smaller the charity, the more likely it will be to rely on donations, with donations making up 32% of income for small charities but only 13% for large charities.
  • Sectors: Religious charities make up the largest sector of registered charities (30%), whilst education and research related charities are the second most common (18%).
  • Deductible gift recipient (“DGR”) status: 40% of charities have DGR status with 66% of large charities and 30% of small charities having DGR status.
  • Conclusion: The Report highlights the increasing size and complexity of the sector. Discussions at the launch of the Report also noted that increased regulation of inactive charities sitting on dormant funds will be a priority for the ACNC moving forward. This confirms the need for charities and not-for-profits to be structured in the correct way in order to benefit from the full range of concessions available and to ensure proper compliance.

To download the full Report, click here.

To view Russell Kennedy’s Not-for-Profit Benchmark Survey Report produced with Pitcher Partners, click here.

Melbourne Co-operative Book Shop’s liquidator ordered to distribute surplus on winding up to charitable purposes

What are your obligations when distributing surplus assets upon winding up?

The Supreme Court of Victoria last year approved the distribution of surplus assets of a co-operative being wound up to charitable purposes rather than to the members of the Co-Operative.


The Melbourne Co-operative Book Shop Ltd (“Company”) operated the RMIT Bookshop and had over 40,000 members who paid a fee in exchange for an entitlement to purchase books at a discount. When the Company was wound up, $280,000 in surplus funds remained after all creditors had been repaid. The Company’s liquidator sought a direction from the Court that she be permitted to pay these surplus funds to RMIT University for the provision of scholarships and assistance for disadvantaged RMIT students. This purpose was consistent with the Company’s constitution, which permitted the distribution of up to 10% of the Company’s surplus each year to a charitable purpose benefitting RMIT University students, however the Constitution did not stipulate how surplus was to be distributed in the event of a winding up.

The Court’s decision

The Court accepted submissions from the liquidator that the Company’s membership base was so large and uncontactable that equal distribution of the surplus funds to members was impractical. The costs of seeking to do so would likely exceed the amount of surplus remaining for distribution. Whilst 53 members had sought return of the surplus assets from the liquidator, the Court acknowledged that distribution to these members only would be unjust given that the remaining members would not receive any distribution. Accordingly, Sifris J held that the distribution proposed by the liquidator was just and beneficial in the circumstances and that the Court was empowered to make directions approving this distribution under section 479(3) of the Corporations Act 2001 (Cth).

The Court also approved the distribution of the liquidator’s costs.

To view the Court’s full decision, click here.

Does your business involve a trading trust? Beneficiaries’ rights could be affected by proposed reforms!

Earlier in 2015, the Victorian Law Reform Commission (“VLRC”) proposed a range of legislative reforms to offer greater protection to beneficiaries of trading trusts. Whilst members of companies subject to oppressive conduct are entitled to a range of remedies under the Corporations Act 2001 (Cth), equivalent remedies are only available to beneficiaries of trading trusts in limited circumstances.


In October 2013, the Attorney-General asked the VLRC to consider whether introducing remedies for beneficiaries of trading trusts was desirable. The question arose because minority shareholders of companies subject to oppressive conduct can usually sell their shares or obtain a remedy under the Corporations Act 2001 in order to extricate themselves from that company. On the other hand, beneficiaries attempting to dispose of their interests in trust assets are usually subject to other beneficiaries’ or unit holders’ approval or first right of purchase under the provisions of the trust deed. The VLRC was of the view that other trust remedies in equity and under the Trustee Act 1958 (Vic) (“Trustee Act”) were insufficient to protect these beneficiaries from oppressive conduct.

For the purpose of the reforms, “trading trusts” include all trusts where property held by the trustee is employed under the terms of the trust in the conduct of a business.

Managed investment schemes, charitable trusts and superannuation trusts are excluded from the operation of the proposed reforms as beneficiaries of these funds are deemed to be sufficiently protected under Victorian and Commonwealth legislation.

Proposed reforms

The VLRC’s central recommendation was that the Trustee Act should allow beneficiaries of trading trusts subject to oppressive conduct to apply to the Supreme Court of Victoria for a remedy, notwithstanding anything contained in the trust deed.

Courts should be given similar powers to those under section 233 of the  Corporations Act 2001  in relation to companies, which will allow it to, amongst other orders:

  1. terminate the trust;
  2. modify the terms of the trust deed;
  3. regulate the conduct of the trading trust; and
  4. order the purchase of, or payment for the renunciation of, a right under the trading trust.

The Trustee Act will also contain a provision that the courts’ new powers regarding oppression do not limit any existing powers.

In determining whether to grant an oppression remedy, courts will be required to consider the interests of affected third parties, including directors, trustees, shareholders, employees and creditors.

VLRC’s conclusion

The VLRC concluded that these reforms are necessary to offer beneficiaries a fairer and more certain avenue for redress when faced with oppressive conduct given that trust law has failed to keep pace with present commercial realities and the current remedies under the Corporations Act 2001 are unclear.


The amendments to the Trustee Act are only in draft form and it remains to be seen whether they will be passed into legislation and, if so, when the reforms will take effect.

To view the VLRC’s full report, click here.

Federal Government to adopt the majority of the Harper Review Panel’s recommendations

In 2014, we published information about the draft report of the Competition Policy Review Panel. The Review was led by Professor Ian Harper and was the first major review of Australia’s competition laws and policy in over 20 years.

The Harper Review made 56 recommendations to reinvigorate competition policy at State and Federal levels, restructure competition institutions such as the Australian Competition and Consumer Commission (“ACCC”) and modernise and simplify Australia’s competition laws.

On 24 November 2015, the Federal Government released its response to the Harper Review and announced it would support 39 of the Review’s recommendations in full or in principle and five in part. The Government remains open to the remaining 12 recommendations following further review and consultation.

Recommendations (and the Government’s response to these) of particular interest include recommendations concerning intellectual property (“IP”), mergers and small business remedies.

Harper Review Recommendation 6: Intellectual property

The Review recommends that the Productivity Commission undertake a 12-month review of IP in Australia and IP provisions in international trade agreements. The Review also recommends that a separate independent review be conducted into how the Federal Government negotiates IP provisions in international trade agreements. The Government’s response has been to support this recommendation in principle. The Treasurer commissioned an inquiry into Australia’s IP arrangements on 18 August 2015. The Government is expected to receive the report in August 2016. However, the Government did not accept a separate independent inquiry into how it negotiates IP provisions in international trade agreements. Rather, the Government believes it has sufficiently robust negotiating mechanisms in place.

Harper Review Recommendation 7: Intellectual Property Exception

The Review recommends repealing section 51(3) of the Competition and Consumer Act 2010 (Cth) (“CCA”) which provides an exception to some restrictive trade practice law in relation to IP licensing. The Review considered it appropriate that commercial transactions involving IP be subject to the CCA in a similar way to other transactions involving other types of property and assets. The Government has acknowledged this recommendation and will make a formal response after receiving the findings of the Productivity Commission’s inquiry into Australia’s IP arrangements.

Harper Review Recommendation 35: Mergers

Currently, the CCA provides for both informal and formal merger review processes. The Review concludes that there should be further consultation between the ACCC and businesses to deliver more timely decisions in the informal merger review process. Additionally, the formal merger exemption processes (consisting of the formal merger clearance process and the merger authorisation process) should be combined or reformed to remove unnecessary requirements and restrictions. The Government supports this recommendation in full, including the Review’s proposals for the ACCC to make all merger decisions in the first instance and that the new merger exemption process should be subject to strict timelines and be reviewable by the Australian Competition Tribunal.

Harper Review Recommendation 53: Small business access to remedies

The Review advises that the ACCC should be more proactive in referring small business to alternative dispute resolution (“ADR”) schemes where complaints have merit but are not a priority for public enforcement. It has also suggested that small business commissions, small business officers and ombudsmen should work with business stakeholder groups to raise awareness of their advice and dispute resolution services. The Review has endorsed the recommendations regarding small business remedies made by the Productivity Commission’s Access to Justice Arrangements Report. The Government’s response to this initiative has been to support it in principle. The Government supports the ACCC improving its communications with small business. The ACCC will be asked to consider how it can better connect small business to ADR schemes where appropriate and to introduce changes to better explain to small business why it cannot pursue certain complaints. The Government will work with the ACCC to improve public disclosure of the ACCC’s operational and decision making processes in an effort to improve transparency.

For a copy of the Access to Justice Arrangements Report, click here.

To view our previous article, click here.

To access the Harper Review, click here.

To access the Australian Government’s Response, click here.

Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (No 4) [2015] FCA 1408

The Federal Court has handed down an order in relation to Nurofen’s specific pain products being misleading or deceptive conduct.

The Australian Competition and Consumer Commission (“ACCC”) launched an action in March 2015 against Reckitt Benckiser (Australia) Pty Ltd (“Reckitt Benckiser”) alleging misleading conduct in relation to its Nurofen specific pain products. The Nurofen range included products allegedly “targeting” back pain, period pain, migraine pain and tension headaches. The ACCC was concerned that consumers were paying double the price, when compared with Nurofen’s standard ibuprofen products, in the belief that the alternative products were treating specific pain, based on the representations on the packaging.

The Court found that Reckitt Benckiser had made misleading representations that each product:

  1. was specifically formulated to treat a particular type of pain specified on the packaging; and
  2. solely or specifically treated a particular type of pain specified on the packaging relevant to that product,

when in fact the active ingredient in all products was exactly the same, namely ibuprofen lysine 342mg.

On 11 December 2015, the Federal Court ordered that all Nurofen specific pain products be removed from sale within 3 months and that Reckitt Benckiser post corrective notices in newspapers and on its website. Reckitt Benckiser must also cease further shipment, distribution and sale of all Nurofen specific pain products in the relevant packaging. Reckitt Benckiser will also have to implement a consumer protection compliance program, pay the ACCC’s costs and potentially pay penalties to be determined at a date to be fixed by the Court.

Reckitt Benckiser admitted that it engaged in misleading conduct in contravention of the Australian Consumer Law and consented to the orders made by the Federal Court.

To view the decision, click here.

Federal Government releases exposure draft of long-awaited mandatory data breach notification bill

The Federal Government released an exposure draft of the Privacy Amendment (Notification of Serious Data Breaches) Bill 2015 on 3 December 2015. Draft Bills concerning mandatory data breach notification were introduced to Parliament in 2013 and 2014 and we reported on a draft Bill in our June 2013 edition. The current draft Bill bears many similarities to its predecessors. If passed, the Bill would require entities subject to the Privacy Act 1988 (Cth), such as private sector organisations with an annual turnover exceeding $3 million, Federal Government agencies and certain foreign companies, to notify the Federal Privacy Commissioner and take reasonable steps to notify affected individuals following a serious data breach. The test for a “serious data breach” is “unauthorised access to, unauthorised disclosure of or loss of personal information” held by an entity and as a result there is a “real risk of serious harm”.

The Australian Law Reform Commission reported on the effectiveness of the Privacy Act 1988 in May 2008 and found that, with advances in technology, agencies and organisations were storing large amounts of identifying information electronically. The increased use of the internet and other technologies posed new challenges for privacy protection.

The Government’s Regulatory Impact Statement in relation to the draft Bill states that “Personal information such as medical records, bank account details, photos, videos and details about individuals’ personal preferences and occupational history is increasingly transitioning to web pages and data centres, with varying degrees of accessibility and security”.

The Bill is intended to balance the significant public support for improving the privacy of Australians with the regulatory burden on businesses.

The Government has invited public comment on the draft Bill and submissions can be made until 4 March 2016.

To view the exposure draft, click here.

To view the explanatory memorandum, click here.