While funds management is one of the most dynamic components of the Australian financial services industry there are issues that must be considered before establishing your fund.
Personal Property Securities Registration (PPSR) requirements
Apart from state-based land registration systems, there is an Australia-wide system for registration of security interests in personal property under the Personal Property Securities Act (PPSA). A person who has a security interest in personal property under the PPSA must register (on the Personal Property Securities Register (PPSR)) or otherwise perfect the security interest to ensure that it has priority over competing interests. If the person does not do so, among other things, another security interest may take priority or the person may not be able to enforce the security against a grantor who becomes insolvent.
Financial assistance prohibition
The Corporations Act generally stops the target (or a subsidiary) from providing security interests or guarantees for financing acquisition of the target. Financiers do not in general rely on the “no material prejudice” exception. Hence, the shareholder approval process becomes important and the timeline may need to accommodate the process.
Interest withholding tax
Where lenders/noteholders are non-Australian, one issue is the imposition of interest withholding tax. An exemption exists for certain publicly offered debentures/syndicate loans, the main requirement of which is satisfaction of the “public offer test”.
State-based stamp duty
Various different state/territory laws impose stamp duty on various transactions. For example, transfer duty is payable in various Australian jurisdictions on transfers/assignments of assets. The law is different in each jurisdiction, and also depends on the assets being transferred/assigned. In the secured financing context, mortgage duty on security interests is payable in NSW. You may wish to consult with your tax advisor further on these.
Exemptions may apply depending on the circumstances – eg mortgage-backed securities exemptions or asset-backed securities exemptions in certain states. We have experience in issuances of mortgage-backed securities and asset-backed securities.
We can help you deal with the legal aspects of these issues, and draft and negotiate the relevant legal documentation – loan or facility, note issuance, security and/or disclosure documentation.
We can provide general advice and draft and/or negotiate legal documentation including:
- Loan Agreements/ Facility Agreements
- Note Issuance Deeds
- General Security Agreements
- Deeds of Guarantee
- Security Trust Deeds
- Priority Deeds
- Subordination Deeds
- Disclosure documentation such as information memoranda or prospectuses.