Author: whiggs

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PPSA – intro to provisions and relevance in buying a business

This is a presentation delivered by Dr William Higgs (Barrister-at-Law, Elizabeth Street Chambers) and Alex Chernishev (Senior Associate, Mills Oakley) on the personal properties securities act (PPSA) and its relevance in buying and selling businesses.

The presentation provides an overview of the PPSA and PPSR and key issues in the PPS for the sale of business, such as.

-Does the transaction include personal property?
-What is (or are) the security interest/s relevant to the transaction?
-Who are the parties (in particular, who is the grantor, the debtor (if different from the grantor) and the secured party)?
-Has attachment occurred? (If so, the security agreement will generally be enforceable between the parties but not, without more, as against third parties).
-How might perfection be (best) achieved? Has perfection in fact occurred?
-How should these issues be addressed in the sale agreement

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The presentation was delivered as a CLE to the College of Law on 27 March 2015 as part of their Business Law Intensive “Uncovering critical issues with the PPSA: can you afford not to register?”.

PPSA Intro and Businesses

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Finance linked swaps in lending

This is a presentation delivered by Dr William Higgs (Barrister-at-Law, Elizabeth Street Chambers) and Alex Chernishev (Senior Associate, Clayton Utz) on finance linked swaps in lending.

The presentation provides an overview on the relevant issues in drafting a finance linked swap in a financing transaction including the following concerns:

-the issues pertinent to the integration of swaps into financing arrangements
-the key considerations for swap providers, lenders and borrowers
-the application or non-application of events of default
-consideration of termination (close-out events and calculations)
-priority and enforcement of security issues
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The presentation was delivered as a CLE to the College of Law as part of their Transactional Series entitled “Transactions Series Part 3: Complicated Financing Issues Demystified”.

Finance Linked Swaps

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Set-off in financing transactions

This presentation was delivered as a CLE by Dr William A.J. Higgs (Barrister at Law, Elizabeth St Chambers) and Alex Chernishev (Senior Associate, Mills Oakley)

The presentation provides an introduction to an advances topic called set-off.

The presentation was delivered as a CLE through the College of Law, Sydney.

Setoff

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Liability for aircraft components

This presentation was delivered by Dr WIlliam Higgs and Geoffrey Parker SC of Elizabeth Street Chambers to the NSW Branch Aviation Law Association of Australia and New Zealand on Thursday 16 July 2015.

The presentation is aptly entitled “Liability for aircraft components – including case studies – how not to get fatigued!” although it contains more aviation than law!

The hypothesis is that a little bit of aircraft engineering knowledge would assist in identifying the cause of the crash – specifically by shaping your preliminary thesis and identification of experts – ultimately to guide you in ascertaining the cause of the crash. This dictates case theory.

The presentation concludes with a Case study – Crash of Robinson R-22 Mariner II helicopter (VH-MIB) on 30 May 2004.

McDermott & Ors v Robinson Helicopter Company Incorporated – [2014] QCA 357

McDermott v Robinson Helicopter Company – [2014] QSC 34

The authors thank both (i) the ATSB for the images contained in the presentation: reference ATSB TRANSPORT SAFETY INVESTIGATION REPORT – Aviation Occurrence Report – 200401917 and others and (ii) the University of Delft for some images from their course in aviation structures.

Liability for aircraft components – including case studies.

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Translating into contract concepts

A presentation on the most important skill of a transactional lawyer – translating business goals into contract concepts. This presentation also explores the relevance of representations and warranties as giving rise to different remedies.

TL – translating

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22 Exercise – transfer of financial assets in transactions

  • Draw a structure diagram showing the parties and legal obligations for an
    • Assignment
    • Novation
    • Declaration of trust
    • Participation
    • Risk participation
  • Now draw another diagram showing how the party who now receives the benefit (from the modes above) would take legal action to enforce the debt against the debtor and whether it would have to join any other party?
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21 Risk Participation

  • Risk participation is similar to a funded participation discussed above but acts like a guarantee for the lender. The risk participant will not immediately place any deposit with the lender, but will agree to put the existing lender in funds in certain circumstances (typically on any payment default by the borrower).
  • The risk participant will charge the lender a fee for taking the risk of the borrower defaulting (bit like insurance but never say that !).
  • Like the case of a funded participation:
    • the consent of the borrower is not required
    • the risk participant has no direct contract against the borrower however the risk participant will ordinarily be granted a right of subrogation meaning it will be substituted for the lender and may pursue the borrower accordingly.
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20 Legal nature of funded participation

  • In conclusion the nature of the participation arrangement is that:
  • the participant is not a direct party to the loan agreement governing theunderlying loan;
  • the lender does not transfer or assign rights or obligations under the loan or loan documentation to the participant;
  • the participant has no proprietary interest in either the loan or the loan documentation. The participant therefore has a contractual nexus with the lender only, and has no direct rights against the borrower.
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19 Why you ask?

  • if the consent of the borrower is required for an assignment or novation;
  • if assignment or novation is permitted but is unlikely to be obtained (for example in the borrower’s insolvency);
  • if the proposed transferee is prohibited from being a lender of record because it is not a permitted transferee under the loan agreement (see previous discussion in section 4 above);
  • if the proposed transferee is prohibited from being a lender of record for regulatory reasons;
  • if the proposed transferee would give rise to a withholding tax liability ie it does not fall within the “qualifying lender” definition; or
  • remove the risk relating to the loan from the lenders balance sheet. However, whether a participation achieves off-balance sheet accounting treatment will depend on the application of the relevant accounting standards; or
  • if the transfer of a loan mid-interest period would trigger a break funding cost.
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18 The issue of set off in funded participation

  • Because the participation is a contractual arrangement an additional risk for the participant is if the borrower exercises a right of set off against the lender.
  • This could happen if the lender is a bank and the borrower has a deposit with the lender or if the lender has entered into a swap or derivative transaction with the borrower, as is often the case.
  • The participant will therefore want to ensure that the borrower has waived its rights of set off under both the loan with the lender and any derivative or other transaction entered into with the lender.
  • Remember that the funded participation is not like an assignment where the notice could be provide the borrower and therefore crystalise any set-off when the notice is delivered.
  • The participant may take some comfort by insisting that the lender represents that is the case. In any respect the participant may also find it prudent to undertake some due diligence to ensure the documentation (loan and derivative) between the lender and borrower does include a waiver of set off by the borrower.