Doing Business in AustrAliA. Supported by

Doing Business in AustrAliA 2014 Supported by

Doing Business in Australia is designed for investors and businesses exploring commercial opportunities in Australia. In it, you will find an overview of all the relevant laws and regulations you need to be aware of to maximise your chances of making a successful investment into Australia. Given the changing landscape of laws and business practices, this publication should be used as a guide only, and professional advice should be sought prior to making specific investment decisions. If such advice is required, Clayton Utz is happy to provide you with support, assistance and guidance in relation to many areas of business. We hope you find this publication informative. If you would like more detailed information or advice on doing business in Australia, please contact us.

In this guide doing business in australia This guide Doing Business in Australia provides you with an overview of Australia s economy, legal and regulatory environment, and provides practical advice on doing business in Australia. A BRIEF LOOK AT AUSTRALIA All the facts and figures you need to get a quick understanding of Australia. REGULATION OF BUSINESS There are nine main regulatory bodies you ll deal with when doing business in Australia. BUSINESS STRUCTURES You can carry on business in Australia as a sole trader, a partnership, a joint venture, a trust or a company. FOREIGN INVESTMENT The Foreign Investment Review Board examines foreign investments proposals and makes recommendations to the Federal Government. FOREIGN INVESTMENT IN AUSTRALIA AUSTRALIAN GOVERNMENT SUPPORT The Australian Government is keen to attract and deepen productive foreign direct investment in Australia. CONTRACT LAW Australian contract law is based on the English common law, and the principle of freedom of contract. PROTECTION OF TECHNOLOGY & INTELLECTUAL PROPERTY Australia has a comprehensive legal framework to protect technology and intellectual property rights, whether the creator is Australian or not ELECTRONIC COMMERCE Electronic commerce in Australia has to comply with the Electronic Transaction Act and other general regulation. EMPLOYMENT & INDUSTRIAL RELATIONS Most employers in Australia are subject to the requirements of the Fair Work Act. BUSINESS MIGRATION There are a number of ways that international business people can enter Australia, but everyone must have a visa. FUNDRAISING LAWS Australia is generally regarded as having an issuer-friendly legal regime for fundraising.

In this guide TAKEOVER LAWS The Corporations Act regulates acquisitions of interests in Australian companies or trusts listed on the ASX and unlisted Australian companies with more than 50 members. GENERAL TAX ISSUES Different forms of direct and indirect taxes are levied by Federal, State and Territory Governments. NATURAL RESOURCES TAXATION The Petroleum Resource Rent Tax and Mineral Resources Rent Tax are resource rent taxes broadly similar to rent-type taxes in other countries. ANTI-TRUST, COMPETITION AND TRADE PRACTICES REGULATION The Competition and Consumer Act 2010 (Cth) is the Federal Act at the centre of Australia s competition law regime. PRODUCT LIABILITY Over the last two decades, Australia has seen a significant growth in the level of product liability litigation. CONSUMER PRODUCT REGULATION There are a number of controls at State, Territory and Federal levels on the composition, design and labelling of consumer products. PROPERTY LAW All acquisitions of Australian urban real estate by foreign interests should be submitted to the Foreign Investment Review Board in advance for approval, unless they fall within an exempt category. Environmental laws The impact of environmental, contamination and planning laws in Australia on businesses day-to-day operations has increased significantly. CLIMATE CHANGE Climate change has been the subject of a number of significant policy developments at the Federal level. FINANCIAL SERVICES Australia s sophisticated and stable banking and financial services system is regulated by the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission. AUSTRALIA S POSITION ON URANIUM Australia has the largest proportion of Known Recoverable Resources of uranium in the world. ANTI-BRIBERY AND CORRUPTION Implementing an appropriate antibribery compliance regime is critical to demonstrate a culture of compliance.

In this guide restructuring AND INSOLVENCY There are several forms of external administration to manage insolvent companies in Australia. ABOUT CLAYTON UTZ Clayton Utz is Australia s leading first tier independent law firm, with a confident approach to complex transactions and litigation.

Contents A BRIEF LOOK AT AUSTRALIA 9 Quality of life 9 FOREIGN Investment 14 Notification of Transactions to FIRB 14 ELECTRONIC COMMERCe 23 Electronic transactions legislation 23 Taxation of financial arrangements 38 Debt and equity classification 38 Investment landscape 9 FIRB examination of proposals 16 Contract law 23 Debt funding of an Australian company 39 Government 9 Foreign investment decisions 16 Privacy 24 Royalties payable to a foreign company 39 Legal system 9 Currency 9 Regulation of Business 10 The Australian Competition and Consumer Commission (ACCC) 10 The Australian Prudential Regulation Authority (APRA) 10 Australian Securities and Investments Commission (ASIC) 10 Australian Securities Exchange Limited (ASX) 10 Australian Taxation Office (ATO) 11 Foreign Investment Review Board (FIRB) 11 Reserve Bank of Australia (RBA) 11 FOREIGN INVESTMENT IN AUSTRALIA AUSTRALIAN GOVERNMENT SUpport 17 Austrade 17 Contact and further information 17 CONTRACT LAW 18 Parties 18 Security over, or title to, assets 18 Restrictions on penalties in contracts 19 Restrictions on restraints of trade 19 Limitations and exclusions of liability 19 Resolution of disputes 19 International contracts for the sale of goods 19 Communications interception 25 Spam 26 EMPLOYMENT & INDUSTRIAL RELATIons 27 Employment law in Australia 27 Employee-related taxes 28 Executive employment contract 28 BUSINESS MIGRATIon 29 FUNDRAISING LAWs 30 No offers without disclosure to investors 30 Exceptions 31 Liability 31 Transfer pricing 40 Tax administration 40 Fringe benefits tax 41 Payroll tax 41 Stamp duty 41 Customs and excise duty 41 Goods and services tax (GST) 41 GST on supplies 41 Input taxed and GST-free supplies 42 GST on imports 42 Alternative arrangements for GST 42 IP Australia 11.au Domain Administration (auda) 11 PROTECTION OF TECHNOLOGY & INTELLECTUAL property 20 TAKEOVER LAWs 32 Tax scrip relief 33 BUSINESS STRUCTUres 12 Sole trader / Sole proprietorship 12 Partnership 12 Joint venture 12 Trust 12 Australian company 13 Foreign company 13 Business names 13 Introduction 20 Patents 20 Designs 20 Trade marks 21 Copyright 21 Confidential information 21 Circuit layouts and mask works 22 Plant breeder s rights 22 GENERAL TAX ISSUes 34 Taxes 34 Taxation of income and gains 34 Taxation periods and scales 35 Business deductions 35 Capital gains tax 36 Taxation of business entities 36 Dividends paid by a company 37

NATURAL RESOURCES TAXATIon 43 Mineral Resources Rent Tax (MRRT) 43 Calculation of MRRT 43 Mining revenue 43 MRRT deductible expenditure 44 Administration and transfers of interests in mining projects 44 Petroleum Resource Rent Tax (PRRT) 44 Taxable profit 44 PRRT deductible expenditure 45 Administration and transfers of interests in petroleum projects 45 MRRT and PRRT considerations for liable entities 45 Summary of key features of resource taxes 46 Repeal of MRRT 46 ANTI-TRUST, COMPETITION AND TRADE PRACTICES REGULATIon 47 Competition provisions 47 Conduct which is prohibited absolutely 47 Conduct which has an anti-competitive purpose or effect 48 Merger regulation 48 Access regulation 49 Australian Consumer Law 49 Misleading or deceptive conduct and unconscionable conduct 50 Country of origin labelling 50 PRODUCT LIABILIty 51 How product liability litigation is conducted 51 Class actions 51 Litigation funding 52 Sources of liability 52 The Australian Consumer Law 52 The common law of contract 53 The common law of negligence 53 Remedies 53 Damages 53 Mandatory product reporting 54 Product recall 54 CONSUMER PRODUCT REGULATIon 55 Complexity of laws 55 Australian standards 55 Hazardous goods 56 Registration of certain goods 56 Food 56 Trade measurement 56 Advertising claims 56 PROPERTY LAW 57 Urban real estate acquisitions 57 Native title and cultural heritage 58 Property due diligence 59 Tips and traps of property purchase and disposal 59 ENVIRONMENTAL LAWs 60 Federal laws 60 State and Territory laws 61 State and Territory environmental laws 61 State and Territory contamination laws 61 State and Territory planning laws 62 Due diligence 62 CLIMATE CHANGe 63 Carbon Price Mechanism 63 Amendments to the CPM 64 New government policy 64 Other climate change initiatives 64 FINANCIAL SERVICes 65 Foreign currency/domestic currency reporting obligations 65 Financial Transaction Reports Act 1988 (Cth) 65 Anti-Money Laundering and Counter-Terrorism Financing Act 66 Superannuation 66 Insurance and risk management 67 Financial services regime 68 Investment products 68 AUSTRALIA S POSITION ON URANIUm 70 Federal laws 70 State and Territory laws 71 ANTI-BRIBERY AND CORRUPTION 73 Corruption risks in Australia 73 Law enforcement 73 Domestic bribery 74 Foreign bribery 74 Corporate liability 75 Gifts/hospitality to Australian public officials 75 What next for Australia? 75 RESTRUCTURING AND INSOLVENCY 76 Insolvency in Australia 76 Restructuring in Australia 76 External Administration 76 ABOUT CLAYTON Utz 79 International relationships offer global solutions 79 Foreign language capability 79 Providing the full spectrum of commercial legal services 80 Contacts 80 Useful Australian websites 81

Foreword by Clayton Utz It is my pleasure to be able to provide this document to you on behalf of Clayton Utz. Australia s attractiveness as a location for investors and business operators is the result of its strong economy, sophisticated and stable business and political environment and its highly skilled and multilingual workforce. Australia s legal system is mature and friendly to business. Its lawyers are known for their commercial approach and experience, much of which has been gained by working on some of the world s largest transactions. Australia s proximity to many of the world s fastest growing economies in the Asia-Pacific region, and its time-zone spanning the close of business in the United States and the opening of Europe s trading day, make it a prime location for doing global business. Australia has a booming resources sector, and is a major exporter of minerals and raw materials to the world. This resources boom is largely responsible for driving the Australian economy and market analysts anticipate this to continue for years to come. Other significant sectors in the Australian economy include Financial Services, Infrastructure, Information and Communication Technology, Agribusiness and Biotechnology. Significant growth has also occurred in tourism over the past decade. Australia is now one of the most popular tourist destinations within the Asia-Pacific region, attracting millions of international visitors every year with its unique natural beauty and relaxed lifestyle. Australia s sophisticated financial services sector, which operates in an efficient and transparent marketplace, is supported by a state-of-the-art market infrastructure and an advanced regulatory regime. Australia has liquid markets in equities, debt, foreign exchange and derivatives and is one of the key centres for capital markets activity in the Asia-Pacific. In addition, the flow of business activity between Australia and other nations in the Asia-Pacific region has been building for many decades. Our relationships with China, Japan, Indonesia and the United States are particularly positive and strong. With an excellent standard of living and efficient transport hubs in each of the major State capitals, Australia remains a highly desirable base for businesses operating through the region. As a result, it has become common practice for international businesses to locate their regional headquarters in Australia. Like Australia, Clayton Utz has a long and proud tradition. Clayton Utz was founded in 1833 and today is one of the largest and most successful commercial law firms in Australia. We have nearly 200 partners and 1,500 legal and support staff based in Sydney, Melbourne, Brisbane, Canberra (the Federal Capital), Darwin, Perth and Hong Kong. If you would like more detailed information or advice on doing business in Australia, please contact us. Rob Cutler Chief Executive Partner

Foreword by Austrade If you are looking to grow your business internationally, Australia s strong economic fundamentals and location in the Asia Pacific provide a wealth of opportunities. This guide Doing Business in Australia provides you with an overview of Australia s economy, legal and regulatory environment, and provides practical advice on doing business in Australia. Built on 22 years of uninterrupted annual growth, Australia s robust and diverse economy is underpinned by strong trade ties with Asia, Europe and the Americas. Projections of real GDP growth to 2018 suggest Australia is set to outperform every major advanced economy. Australia is rated triple A by all three major global rating agencies and enjoys one of the lowest levels of public debt in the OECD. Almost 80 percent of the economy is services-based and our strong financial services sector is the second largest contributor to Australia s gross value added revenue. Economic prosperity has created a market rich in opportunity. Australia has one of the highest median wealth levels in the world, driven in part by its proximity and connections to Asia s high growth economies. Our commercial environment is an easy place to conduct business in and our highly educated, multilingual workforce is familiar with both western and Asian cultures. All this makes Australia a great place to invest for future growth. Bruce Gosper CEO, Australian Trade Commission (Austrade) Austrade is the Australian Government s trade, investment and education promotion agency. Through our global network, we assist Australian companies to succeed in international business, attract productive foreign investment into Australia and promote Australia s education sector internationally. For more information on Austrade s investment services visit www.austrade.gov.au. Disclaimer Austrade cannot verify the accuracy of the content of this publication and as such accepts no liability for loss arising from its use. Any person intending to use this information should seek independent professional advice.

A BRIEF LOOK AT AUSTRALIA Australia has a fast-growing population of over 23 million, based mostly in coastal areas Quality of life Investment landscape Government Legal system Australia is an island continent of approximately 7.7 million square kilometres in the Asia-Pacific region. The climate is generally mild, ranging from temperate in the South to tropical in the North. Average temperatures range between 4 28 Celsius. Australia has a fast-growing population of over 23 million, based mostly in coastal areas. It is a culturally diverse country, with approximately one in five Australians born overseas, drawn from over 200 countries. The national language is English. With one of the highest standards of living in the world, Australia offers international business people a superb climate, a unique and beautiful environment, top international schools, excellent flight linkages, and a quality social and cultural infrastructure. Australia offers international investors a cost-effective and innovative place in which to do business and an attractive, low-risk destination. Australia has pursued Free Trade Agreements with many of its regional partners and has agreements in place with the ASEAN group of countries, Chile, New Zealand, Singapore, Malaysia, Thailand and the United States. Australia is also in negotiation with China, the Gulf Co-operation Council, Japan, Korea and the Trans Pacific Partnership and discussions are underway with India, Indonesia, and PACER Plus (the Pacific Agreement on Closer Economic Relations). These bilateral trade agreements can offer companies who set up in Australia a competitive advantage in servicing these markets. Australia is a stable democracy which maintains strong links with the United Kingdom. Queen Elizabeth II is the Head of State. Australia is a federation comprising six States and two self-governing Territories. Each has a legislature, an executive and judicial arm of government. The Federal Government has primary responsibility for defence, finance and taxation, post and telecommunications, administration of the national health system, immigration, tertiary education, aviation, and foreign affairs and trade. The general areas of responsibility of the six State Governments and two Territory Governments are primary and secondary education, roads and transport, police and health care. A third, local, tier of government generally has responsibility for planning and development and the provision of local services to communities. Australia has a common law system, which is based on the English system. The States and Territories have their own judicial systems and courts. Federal Courts deal with Federal matters and the High Court of Australia hears appeals in relation to Federal, State and Territory matters. Currency Australia has a decimal system of currency, with the dollar (A$) as the basic unit and 100 cents to the dollar. The exchange rate for one Australian dollar with major international currencies on 1 December 2013 was: USD: 0.91 Euro: 0.68 Pound Sterling: 0.56 Yen: 93 10 Doing Business in Australia

Regulation of Business The Australian Competition and Consumer Commission (ACCC) The ACCC administers the Competition and Consumer Act 2010 (Cth) (which incorporates the Australian Consumer Law, see page 47 for more information). In broad terms, the objectives of the Act are to promote competition and, together with similar provisions in State and Territory legislation, fair trading, and provide for consumer protection. It covers anti-competitive and unfair market practices, company mergers or acquisitions, product safety and product liability, and third party access to facilities of national significance. The Australian Prudential Regulation Authority (APRA) APRA is a statutory authority which was formed in 1998 to promote the prudent management of financial institutions. Its regulatory function extends to the supervision of banks, life insurers, building societies, credit unions, friendly societies and superannuation funds. APRA has the power to require financial organisations to observe prudential standards, and may intervene, where necessary, to protect the interests of depositors, policy-holders or members. In addition, APRA has far-reaching powers of investigation, intervention and administration. Australian Securities and Investments Commission (ASIC) ASIC is the sole regulator of Australian registered companies and one of three Federal Government bodies that regulate financial services. ASIC administers the Corporations Act 2001 (Cth), the law regulating the incorporation, operations and management of companies. ASIC is therefore primarily responsible for regulating the conduct of corporations in Australia, and is also responsible for supporting the integrity of and fairness in company affairs and in financial markets. ASIC s consumer protection function extends to the financial system by regulating the advising, selling and disclosure of financial products and financial services to consumers. Australian Securities Exchange Limited (ASX) The ASX was formed in 1987 and is the second largest securities exchange in the Asia-Pacific region. The ASX has markets trading in equities, derivatives, futures and fixed interest securities. There are branches of the ASX in Sydney, Melbourne, Perth, Chicago and London. The ASX listing rules ensure that the constitutions of listed companies include provisions regarding shareholder rights, such as the necessity of consulting shareholders over major transactions, and also ensure that listed companies observe certain standards with respect to market awareness and the provision of information. 11 Doing Business in Australia

The ASX was formed in 1987 and is the second largest securities exchange in the Asia-Pacific region. Australian Taxation Office (ATO) The Commissioner of Taxation has the overall responsibility for administering the Australian income tax system. The ATO, under the Commissioner of Taxation, is the statutory authority responsible for administering Australia s Federal taxation system and is also the primary collection agency for the Australian Government. Australia s income tax law consists primarily of the Income Tax Assessment Act 1936 (Cth), the Income Tax Assessment Act 1997 (Cth) and the Taxation Administration Act 1953 (Cth), as well as ATO administrative taxation rulings and court decisions. Fringe benefits provided to employees are subject to a separate taxation regime under the Fringe Benefits Tax Assessment Act 1986 (Cth). Australia s goods and services taxation law consists primarily of A New Tax System (Goods and Services Tax) Act 1999 (Cth). The current income tax system involves taxation of income and capital gains of individuals and businesses. Australia has recently introduced a Mineral Resource Rent Tax (MRRT) which seeks to impose a tax on certain iron ore and coal mining operations. Another recent change has the been the extension of the Petroleum Resource Rent Tax (PRRT) regime. However, as at the date of publication, the newly elected Federal Government has legislation to repeal the MRRT before the Senate. The ATO administers the process of annual taxation self-assessment and conducts random audits to verify individual and company assessments. The ATO also collects excise on tobacco, fuel and petroleum products and alcohol, administers the Higher Education Loan Programme and the Private Health Insurance rebate, and has responsibility for the fiscal regulation of Australia s superannuation system. Foreign Investment Review Board (FIRB) The FIRB is a non-statutory organisation formed in 1976 within the Federal Treasury to provide foreign investment policy advice to the Treasurer and the Australian Federal Government. The FIRB s function is to assess investment proposals submitted by foreign interests and to make recommendations to the Treasurer on the compatibility of those proposals with Government policy and the Foreign Acquisitions and Takeovers Act 1975 (Cth). FIRB also provides information on the Government s policies to prospective foreign investors and potential investors alike. Reserve Bank of Australia (RBA) The RBA is a statutory authority performing the country s central banking functions. The Bank is wholly owned by the Australian Federal Government and maintained assets of more than A$57,177 million as at October 2013. The RBA has two broad areas of responsibility: monetary policy and financial stability. The RBA s monetary policy is primarily directed at maintaining inflation rates at the level most conducive to sustainable growth. The RBA s financial stability policy aims to prevent excessive risks in the financial system and to limit the effects of financial disturbances when they occur. Within this role, the RBA has a particular responsibility for maintaining the efficiency of the payments system. The RBA is governed by the Reserve Bank Board and the Payments System Board. The RBA plays an active role in financial markets and the payments system and is responsible for issuing Australian currency notes. The Banking (Foreign Exchange) Regulations 1959 (Cth) confer upon the RBA responsibility for foreign exchange control. IP Australia IP Australia is the Federal Government agency that grants rights in patents, trade marks and designs in Australia. IP Australia is a division of the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education but operates independently. It incorporates the Patent, Designs and Trade Marks Offices. The Plant Breeder s Rights Act 1994 (Cth) system is administered by the Plant Breeder s Rights Office within IP Australia..au Domain Administration (auda) The.au Domain Administration is an Australian non-profit company formed in 1999 as the policy authority and industry self-regulatory body for the.au domain space. 12 Doing Business in Australia

BUSINESS STRUCTURES A person may carry on business in Australia as a sole trader, a partnership, a joint venture, a trust or a company. Sole trader / Sole proprietorship An individual may carry on a business on his or her own behalf as a sole trader, also commonly called a sole proprietorship. A sole trader is relatively simple to establish; there is no separate legal entity other than the individual. A sole trader is therefore personally liable for all obligations incurred in the course of the business and income from the business is taxed at the personal rate of the sole trader. Unlike other business structures, there is no specific legislation regulating sole traders however they may be liable to comply with other legislation specific to their business. Partnership Two or more individuals or companies may carry on a business as a partnership. Partnerships (other than certain professional partnerships) are limited in size to 20 partners. Most partnerships are established by a partnership agreement, which defines the rights and obligations of the partners between themselves, subject to applicable legislation. A partnership is not a separate legal entity and, as such, the assets of the partnership are owned by the partners jointly or in such proportions as set out in the partnership agreement. Partners share profits and are jointly and separately severally liable for the obligations of the partnership. However, in some Australian States, a limited partnership may be established under which some (but not all) partners have liability limited to the extent of their capital contribution. However, limited liability partners must take no part in the management of the partnership. Joint venture Two or more individuals or companies may also carry on a business as a joint venture. A joint venture describes the relationship between multiple parties entering into an agreement to work towards the same strategic goals while remaining separate entities. A joint venture differs from a partnership in that it is often formed for a particular project or business goal, or where the contributions of the venturers are different in type, amount or timing. Joint ventures usually have a defined end. Joint ventures may be incorporated (as a separate legal entity) or unincorporated (a purely contractual arrangement). The rights and liabilities of the respective venturers will depend upon the terms of the joint venture. Joint ventures are governed by the common law, contract law and, in the case of incorporated joint ventures, the Corporations Act. Trust A business may be carried on by a trust. The trustee owns the trust property and carries on the business on behalf of the beneficiaries of the trust. The trustee will be liable for the obligations of the trust, but will typically have rights of recourse against the trust property in respect of those obligations. The rights of beneficiaries will depend upon the terms of trust. The beneficiaries entitlements may be in a fixed proportion or variable at the discretion of the trustee. Trusts are governed by common law and contract law. Partnerships are largely governed by Australian State laws, common law and contract law. 13 Doing Business in Australia

A person may carry on business in Australia as a sole trader, a partnership, a joint venture, a trust or a company. Australian company A business may be conducted through an Australian company. A company is a separate legal entity capable of holding assets in its own name and is liable for its own obligations. The two main types of company in Australia are proprietary and public companies. A public company may also be listed on the Australian Securities Exchange. A proprietary company is limited to 50 non-employee shareholders and cannot engage in fundraising activities in Australia. A proprietary company can, however, be simpler and cheaper to administer from an Australian regulatory point of view. An Australian company must have a registered office within Australia, have Australian resident directors (two for public companies, one for proprietary companies) and an Australian resident company secretary (optional for proprietary companies). There are no residency restrictions on shareholders and no general minimum capital requirements for an Australian company. A company is managed by its directors, but owned by its shareholders (also commonly referred to as members.) Shareholders make a number of decisions on special issues that affect the company by passing ordinary resolutions or, if required by the company s constitution or the Corporations Act, special resolutions. The liability of shareholders will generally be limited to the unpaid amount on any shares held. Directors are the individuals responsible to manage the company s day-to-day business and affairs. There are a number of common law and statutory duties and obligations imposed on their position, such as the duty to act with care and diligence. These duties may continue even after deregistration of the company. A director who fails to perform these may be guilty of an offence. The primary duty of directors is to act in the best interests of the company. However, if the company is insolvent, or there is a real risk of insolvency, their duty expands to the company s creditors. In such circumstances, directors have a positive duty to prevent the company trading and incurring further debt. Contravening the insolvent trading provisions of the Corporations Act can result in both civil and criminal charges against a director. Australian companies are governed by the Corporations Act, their constituent documents and common law. Foreign company A foreign company may carry on business in Australia either as an Australian branch or through an Australian subsidiary company. To carry on business as an Australian branch, the foreign company must register as a foreign company with ASIC. Whether a foreign company carries on business in Australia is defined by certain legal principles. It is generally not sufficient that it merely engages in certain activities in Australia such as becoming a party to legal proceedings, holding director or shareholder meetings, maintaining a bank account, or holding any property. A foreign company wishing to apply for registration should reserve the company s name to ensure that it is available in Australia and must lodge an application form with ASIC, together with a certified copy of the company s certificate of registration and constituent documents. If any document is not in English, the foreign company should also provide a certified translation of that document. The foreign company must also have a registered office in Australia and appoint a local agent to represent the company in Australia. Once registered, the foreign company is required to lodge copies of its financial statements and comply with various notification obligations under the Corporations Act. A registered foreign company must notify ASIC when company details change (such as a change in officeholders or registered address). ASIC must also be notified in circumstances where the foreign company ceases to carry on business in Australia, is wound up, dissolved or deregistered in its place of origin. A foreign company can establish an Australian subsidiary by registering the new company with ASIC. Business names ASIC is responsible for registering, renewing and administering business names for all Australian businesses. If a person carries on business in an Australian State (other than under their own individual or a company name), that person is required to register the business name on ASIC s Business Name Register which is accessible online. 14 Doing Business in Australia

FOREIGN INVESTMENT In Australia, foreign investment is generally encouraged but approval is required for certain types of investments. Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and the Federal Government s Foreign Investment Policy. The Foreign Investment Review Board (FIRB) examines foreign investments proposals and makes recommendations to the Federal Government on those proposals. The Federal Government minister responsible for foreign investment decisions is the Australian Treasurer. The Treasurer can block proposals that are contrary to the national interest or apply conditions to the way proposals are implemented to ensure they are not contrary to the national interest. Compliance and enforcement of foreign investment rules in regards to residential real estate is administered by the Australian Taxation Office. Australia s foreign investment legislation applies to investment proposals by foreign interests. A foreign interest means an individual who is not ordinarily resident in Australia and any corporation or trust in which there is a substantial (15 percent or more) foreign interest (even if it is not actually foreign controlled) or where several foreigners have a 40 percent or more interest in aggregate. Notification of Transactions to FIRB Whether notification is required is determined by reference to the type of investor, the type of investment, the industry sector in which the investment will be made and the value of the proposed investment. Notifications involve lodging a statutory form and certain additional information. The amounts listed in the table are indexed annually on 1 January (where indicated). With effect from 1 December 2015, application fees will apply to foreign investment notifications and increased penalties will apply for breaches of the foreign investment rules. Nature of investment 1 Direct investments or new businesses by foreign governments or their agencies 3 Acquiring a substantial interest 4 in an Australian corporation or assets of Australian business Acquiring a substantial interest in an offshore takeover of a company with assets or business in Australia 5 Acquiring an interest of 5 percent or more in the media sector Acquiring vacant non-residential land Acquiring residential real estate US, Japanese, NZ, Korean and Chilean investors 2 All investments must be notified Private investors (sensitive sector 6 ) A$252 million (indexed annually) or above should be notified Private investors (other sectors) A$1,094 million (indexed annually) or above should be notified All acquisitions must be notified All acquisitions must be notified All acquisitions must be notified 7 Other foreign investors All investments must be notified A$252 million (indexed annually) or above should be notified All acquisitions must be notified All acquisitions must be notified All acquisitions must be notified 15 Doing Business in Australia

Nature of investment 1 Acquiring shares or units in Australian urban land corporations or trusts 8 Acquiring developed non-residential commercial real estate subject to heritage listing US, Japanese, NZ, Korean and Chilean investors 2 All acquisitions must be notified Other foreign investors All acquisitions must be notified enterprises outside of those countries. It is expected that China will benefit from similar higher monetary thresholds upon implementation of the Free Trade Agreement between Australia and China. 3 Direct investments comprise 10 percent or more of the target investment or which provide the investor with influence or control over the target investment. Related entities are entities in which there is 15 percent foreign government investment or foreign government control. 4 A substantial interest exists when a single foreigner (and any associates) has 15 percent or more of the ownership or several foreigners (and any associates) have 40 percent or more in aggregate of the ownership of any corporation or trust or where such a foreigner, or in the case of a business the foreigner or several foreigners (and any associates) are in a position to determine the policy of the business. 5 Or for takeovers of offshore corporations with Australian business or assets, 50 percent of global assets. 6 Sensitive sectors are media, telecommunications, transport, military, encryption / security technology and communications, uranium / plutonium extraction, nuclear facilities. 7 Some (non-monetary) exemptions apply. 8 Urban land corporations and trusts are those whose Australian non-rural land is >50 percent of its total assets by value. The 15 percent individual / 40 percent aggregate foreign interest threshold (as described in note 4) applies to most acquisitions of shares and units in such land rich corporations and trusts. 9 Commercial real estate includes vacant and developed property such as offices, factories, warehouses, hotels, shops, and certain mining tenements and operations.where a mining tenement is developed to an operational mine, it will then be considered developed commercial property. 10 Foreign investment approval will be required for the acquisition of mining tenements, minerals rights, mining leases and production licences involving acquiring an interest in a lease or licence giving rights to occupy Australian urban land where the term of the lease or licence (including any extension) is likely, at the time the interest is acquired, to exceed five years, or an interest in a profit-sharing arrangement from the use of Australian urban land. An exploration licence is generally not considered to create an interest in urban land, since it does not give the holder the exclusive right to occupy land, and is generally for a period of less than 5 years. 11 Rural land is land used wholly or exclusively for carrying on certain types of primary production businesses. An agricultural land register will be established and administered by the ATO from 1 July 2015. Acquiring developed non-residential commercial real estate 9 not subject to heritage listing 10 Acquiring interests in rural land 11 Acquiring primary production business Private investors A$1,094 million (indexed annually) or above should be notified Government investors all acquisitions must be notified A$1,094 million (indexed annually) or above should be notified Government investors all acquisitions must be notified Private investors (US, NZ and Chilean only) A$1,094 million (indexed annually) or above should be notified Government investors all acquisitions must be notified Private investors (US, NZ and Chilean only) A$1,094 million (indexed annually) or above should be notified Government investors all acquisitions must be notified Private investors A$5 million or above should be notified Government investors all acquisitions must be notified A$55 million (indexed annually) or above should be notified Government investors all acquisitions must be notified Private investors (including Japanese and Korean) A$15 million 12 or above should be notified Government investors all acquisitions must be notified Private investors (including Japanese and Korean) A$252 million 12, 13 (indexed annually) or above should be notified Government investors all acquisitions must be notified 12 Singaporean and Thai private investments in an Australian primary production business is subject to 1 The FATA applies to all foreign investments irrespective of the way they are structured (for example, quasi debt (such as convertible notes) are treated as equity for foreign investment law purposes). 2 As at 15 January 2015, investors from these 5 countries have the benefit of higher monetary thresholds under Australia s foreign investment rules. They include certain nationals, enterprises and branches of screening where the business is valued at A$50 million. 13 From 1 December 2015, investments in an Australian primary production business will be subject to screening where the business is valued at A$55 million. 16 Doing Business in Australia

A foreign interest means an individual who is not ordinarily resident in Australia and any corporation or trust (a) National interest considerations The Federal Government determines national interest concerns on a case-by-case basis and typically considers the following factors when assessing foreign investment proposals: (i) national security: the extent to which the investment affects Australia s ability to protect its strategic and security interests; (ii) competition: whether the investment may result in an investor gaining control over market pricing and production of a good or service in Australia or allow an investor to control the global supply of a product or service, and whether the investment may impact Australia s competition policy regime; (iii) Australian Government policies: whether the investment may impact on Australian Government tax revenue or other policies, such as environmental objectives; (iv) impact on the Economy and Community: whether the investment (including any proposed post-investment restructure) may impact on the Australian general economy and ensure a fair return for the Australian people; and (v) character of the investor: whether the investor operates on a transparent commercial basis and is subject to adequate and transparent regulation and supervision. In assessing foreign investment applications in agriculture, the Federal Government typically considers the effect of the proposal on: the quality and availability of Australia s agricultural resources, including water; land access and use; agricultural production and productivity; Australia s capacity to remain a reliable supplier of agricultural production, both to the Australian community and our trading partners; biodiversity; and employment and prosperity in Australia s local and regional communities. (b) Foreign government investment The Federal Government considers the following additional factors when considering investments by foreign governments and related agencies: (i) whether the foreign government investor is wholly or partly foreign government owned, and whether it operates on a fully arm s length and commercial basis; (ii) whether the investment is commercial in nature or is the investor potentially pursuing broader political or strategic objectives that may be contrary to Australia s national interest; and (iii) the size, importance and potential impact of the investment. (c) Special industry sectors Specific additional restrictions on foreign investment apply to the industry sectors of banking, telecommunications, shipping, civil aviation and airports. (d) Foreign custodians Foreign custodians are exempt from the Australian foreign investment laws in relation to proposed acquisitions of interests in shares of an Australian corporation and Australian real estate investments where the custodian exercises the voting rights attaching to the shares or the rights associated with the interest in land in accordance with the directions of another custodian or the beneficial owners of the shares or interest. FIRB examination of proposals The formal notification activates a time clock so that if the Australian Treasurer does not take action against the proposal within 30 days, the Australian Treasurer loses the ability to block or impose conditions on the transaction under the foreign investment law. In most cases, a decision is made within 30 days of lodgement of a notification and a decision to not object to the transaction is normally granted unless the proposal is judged to be contrary to the national interest. In some cases, approval of the transaction may be made subject to certain conditions and, in these cases, compliance with the conditions imposed is compulsory. Foreign investment decisions A foreign investment decision under the FATA is normally only given for a specific transaction. If an approved transaction does not proceed at that time and/or the parties enter into new agreements at that time and/or at a later date, or if a transaction is not substantially completed within 12 months, further notification will need to be made for the transaction. 17 Doing Business in Australia

FOREIGN INVESTMENT IN AUSTRALIA AUSTRALIAN GOVERNMENT SUPPORT Working in partnership with business and Government, Austrade provides a central point of contact Austrade The Australian Government is keen to attract and deepen productive foreign direct investment in Australia. The Australian Trade Commission (Austrade) is the Australian Government s trade, education and investment promotion agency. Austrade helps international companies establish and build their business in Australia by providing the information required to make good investment decisions and a co-ordinated approach that saves investors time and money. Working in partnership with business and Government, Austrade provides a central point of contact to navigate investment services available in Australia. Austrade s network of offices in over 50 countries also means it can often provide support and guidance in investors home markets and in their own language. Austrade can provide international investors with: initial co-ordination of all investment enquiries and assistance; information on the Australian business and regulatory environment; market intelligence and investment opportunities; identification of suitable investment locations and partners in Australia; and advice on Australian Government programs and approval processes. Austrade can also help identify investment potential in particular sectors and strategic alliance partners, provide detailed cost information and help to establish research collaborations. Importantly, Austrade s services to international investors are free, confidential and tailored to the needs of the individual business. There are strong opportunities for direct investment in infrastructure, tourism, mining and resources, clean energy and environment, food processing and agribusiness, advanced manufacturing, ICT and life sciences, as well as more broadly in R&D and innovation centres. There are a range of Australian Government policies and programs in place to support foreign direct investment into Australia which enhance Australia s attractiveness as a destination for investment. In addition, the State and Territory Governments have a range of programs relevant to investors. Austrade can assist investors to access this information. Contact and further information To learn more about what Austrade can do to help you, or to contact an investment specialist, call: 13 28 78 (in Australia), email invest@austrade.gov.au, visit www.austrade.gov.au/invest, or subscribe to the Investment Update at investmentupdate@austrade.gov.au. 18 Doing Business in Australia

CONTRACT LAW Australian contract law is based on the English common law, rather than on any codified or statute law. The basic principle of Australian contract law is freedom of contract, under which parties are at liberty to strike whatever bargain they choose. It is good practice to record the terms of a contract in writing no special forms or procedures are required and Australian courts will give considerable weight to the expression of the parties intentions evidenced in documentary form. These broad statements of principle are affected by some important legislation, notably, the Competition and Consumer Act 2010 (Cth), which cannot be contracted out of and may result in legislative rights which override contractual rights in certain circumstances. See our chapter on Anti-trust, Competition and Trade Practices Regulation from page 47, for more information on the Competition and Consumer Act 2010 (Cth). Parties Under Australian contract law, with certain limited exceptions, those who are not parties to a contract cannot be bound by it. This is known as the privity rule. If a corporation which is registered under the Corporations Act is a party, its registered number an Australian Company Number (ACN), Australian Registered Business Number (ARBN) or Australian Business Number (ABN) must also be cited for that party in all public documents. Security over, or title to, assets If a security interest is created over any assets which are personal property then the Personal Property Securities Act 2009 (Cth) (PPSA) will apply. To preserve the interest of the security holder, the interest should be registered on the Personal Property Securities Register within the applicable time period. Personal property includes all property that is not land, or certain rights granted by Commonwealth or State Governments (for example, a mining licence). The PPSA covers a broad range of security interests, including traditional forms of security as well as interests created under retention of title provisions, hire purchase agreements and certain leasing arrangements. The registration of security interests is governed by the PPSA, relevant provisions of the Corporations Act 2001 (Cth) and associated subsidiary legislation. 19 Doing Business in Australia

The basic principle of Australian contract law is freedom of contract, under which parties are at liberty to strike whatever bargain they choose. Restrictions on penalties in contracts Under the general law of contract, it is permissible for parties to agree upon a sum of liquidated damages, or the method of calculation of such a sum, payable by one party to the other in the event of defined breaches of contract. This may be useful where monetary damages may be difficult to calculate, and the parties wish to avoid the cost of dispute resolution or litigation. Such an agreement on liquidated damages must represent a genuine attempt to estimate the likely damages which may be suffered. If it is imposed by one party merely as a threat to enforce compliance, is excessive, or is specified to arise in circumstances which are vague, or may be triggered arbitrarily, then the provision may be regarded as a mere penalty and not enforced by a court. Restrictions on restraints of trade Any restriction upon the dealing by a party to a contract (or deed) with third parties, including employment by a third party, directly or indirectly, whether during or after the term of a contract: may constitute exclusive dealing, conduct regulated by the anti-trust provisions of the Competition and Consumer Act 2010 (Cth), discussed in detail from page 47; or may be a restraint of trade at common law, which if unnecessarily broad in the conduct restrained, the time period of the restraint or the area over which the restraint operates, will be void, and unenforceable by a court. In the State of New South Wales (only), the Restraints of Trade Act 1976 (NSW) permits the Supreme Court of New South Wales to limit the operation of a restraint to the extent that the court considers reasonable. Limitations and exclusions of liability Subject to the operation of the Competition and Consumer Act 2010 (Cth) and the equivalent sale of goods and fair trading legislation of the States and Territories, parties to a contract are free to limit or exclude liability for breaches of contract, or in other circumstances. The party seeking to rely on an exclusion or limitation of liability clause will, however, need to convince the court that the clause in question, properly construed, is as that party contends. Resolution of disputes Australia is a party to the New York Convention on the recognition and enforcement of Foreign Arbitral Awards. Accordingly, the award of an arbitrator (which can usually give any legal, equitable and statutory remedies) will be recognised and enforced in the Federal Court or any of Australia s State or Territory Courts as if it were a judgment of that Court. International contracts for the sale of goods Australia is a signatory to the Vienna Convention on Contracts for the International Sale of Goods. This provides for uniform rules which govern the formation and performance of contracts for the international sale of goods and sets up a framework of rules specifying the obligations of parties to them. The parties to a contract for the international sale of goods may agree that the Convention is not to apply, and may select the laws of one of the parties home jurisdictions as the governing law of their contract. If they do not do so, however, then the Convention will apply, and incorporate into the contract the rules set out in the Convention. 20 Doing Business in Australia