The Bank of Mum and Dad Needs A Paper Trail

The Australian Financial Review recently reported (8-9 May 2021) that parents are now among the nations’ top 10 lenders for home loans with data showing more than 60% of first home buyers are receiving assistance from their parents to purchase their first home.

Unsurprisingly with the world in the middle of a pandemic and the economy in recession, now more than ever, children are turning to their parents for financial assistance. It is incredibly important that prior to parents providing financial assistance to children, parents must first be clear on whether the assistance is to take the form of a gift or loan.

The distinction between the financial assistance provided being a gift or loan becomes incredibly important in the following scenarios:

  • the child’s relationship breaks down and their spouse alleges that the financial assistance was a gift rather than a loan;
  • the parents pass away and their Executor is left to determine whether or not the financial assistance is to be repaid to the Estate;
  • a sibling makes a claim for further provision from the parents’ Estate on the basis that the child has already received financial assistance during their lifetime;
  • the child becomes bankrupt and the trustee in bankruptcy classes the financial assistance as an asset as opposed to a liability;
  • the relationship between the parents and child breaks down;
  • the parents are receiving a Centrelink pension which may be affected by providing the financial assistance to the child.

In the above scenarios, it is generally the parents or their Executor who bear the onus of proving that the financial assistance was a loan rather than a gift. Often the only written evidence available is the bank transfer, with the only other evidence being verbal communications resulting in a “he said, she said” argument.

Disputes of this nature can so easily be avoided by first consulting with a Solicitor to create a paper trail and have a properly prepared and executed loan agreement in place.

If you or someone you know of are considering providing financial assistance to a child or any other person, please contact our office to make an appointment to meet with one of our experienced Solicitors. We are also able to advise on any existing arrangements that have not yet been documented. 

When Does Your Resignation As A Director Become Effective?

Can A Director’s Resignation Be Backdated?

There are over 2000 laws and regulations in Australia that impose personal liabilities on Directors of both private and public companies.  These laws and regulations range across areas as diverse as taxation, superannuation, occupational health and safety, insolvency and consumer law.

For these reasons, it is important that when a person resigns as a Director of a company for whatever reason, such resignation is done properly in order to be effective.  Failing which a Director can remain personally liable for a range of obligations and liabilities even after they believe they have resigned their position.

Recent amendments to the Corporations Act which came into effect on 18 February 2021 have put into sharp focus the need for resigning Directors to ensure that the appropriate paperwork is prepared and that the Australian Securities and Investments Commission (ASIC) is properly and promptly notified. 

Under the recent amendments a Director’s resignation will now take effect on:

  • The date that the person ceased to be Director (which requires a formal letter of resignation) if ASIC receives notice of the resignation within 28 days of it occurring; or
    • The date the notice is received by ASIC, if ASIC receives notice of the resignation more than 28 days after it has occurred.

It is also worth noting that if the resignation of a Director will leave the company without at least one Director it will not take effect.

When a Director resigns the company is required to notify ASIC within 28 days of the resignation occurring.  This is done by filing with ASIC an appropriate Form 484 which can be completed online.  This is normally attended to by the company secretary or the external accountants of the company.  Prior to the amendments coming into effect, if the company failed to lodge the notification with ASIC within 28 days it was liable only to pay a late lodgement penalty, however, the resignation was still effective from the date of the letter of resignation irrespective of when ASIC was formally notified. 

Now, a resignation as a Director will not take effect unless and until ASIC is notified.  This prevents the improper backdating of Director resignations and ensures companies are not improperly left without Directors. 

Importantly, persons who resign as Directors remain exposed to liability after their resignations unless ASIC are notified within 28 days.  Until ASIC are notified the Director resignation is not effective and the exposure continues.

For these reasons the importance of proper company processes which include the prompt notification to ASIC cannot be underestimated.

For professional advice from our team of Commercial Lawyers in Perth, please contact David Vilensky, Les Buchbinder or Alana Shaddick on 9325 9644.