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    Bank Guarantees

    Debt Instruments

    Mortgage Broking

    Financing

    Credit Matters

    Securities

    Financial Planning

Bank Guarantees

A bank guarantee is a guarantee from a lending body that ensures the liabilities of a debtor will be met. If the debtor fails to cover a debt, the lending body guarantees to cover it. This enables the debtor to purchase goods and equipment and obtain loans.

A bank guarantee is important in business activity, as it allows for the expansion of a business. The benefit of a bank guarantee is that you don’t need to affect other business activities while expanding and it enables businesses to create strong relationships with security.

If you are thinking of obtaining a bank guarantee, consider whether or not you are promising payment to a third party and whether you are in an industry such as property or development. These are the most relevant situations in which a bank guarantee may be required.

To obtain a bank guarantee, you need to be approved by the lending institution. Furthermore, you will need to see a lawyer who can review your documents and advise you on your obligations before you sign. Provided that everything is in order, we will issue a solicitor’s certificate to the lender.

A solicitor’s certificate is important to ensure guarantors know their obligations under a guarantee. Obtaining credit or becoming a guarantor is always risky if you are unaware of your rights and obligations. Therefore, we recommend you speak to one of our lawyers before making this financial move.

Debt Instruments

A debt instrument is documented financial obligation that describes the a debt that is assumed by the issuing party. It ensures the issuer will repay the debt according to the terms agreed on between the debtor and the lender. They are also useful to transfer debt between parties, which facilitates trading. Types of debt instruments are loan agreements, promissory notes, convertible notes, financial agreements, hire purchase and finance leasing.

Loan agreements are the contract between a debtor and lender that sets out the terms of the loan. These are usually written contracts and can include the parties’ information, the purpose of the loan, repayment conditions and provisions, security interest amounts, default, termination and remedies.

Promissory notes is essentially a note where the issuer makes an unconditional promise to pay a sum of money to the other party, who receives the money. A promissory note is similar to a colloquial IOU, but doesn’t simply acknowledge the debt. It sets out a promise to pay the debt and by which time such promise will be fulfilled. This is very similar to a loan agreement.

Convertible notes are a type of convertible interest. Commonly, a party makes an investment into a company or a unit trust. A convertible note earns interest on the amount paid to acquire the note until it expires. Once the convertible note has expired, the purchaser may request the money is returned or converted into shares or units. If the convertible note is converted into shares, there may be applicable taxes.

Financial agreements are commonly used in family law matters, for example a binding financial agreement. They outline how to divide property and financial resources in event of a relationship breakdown. A financial agreement is not just for married couples; they are important for de facto couples as well. As we cannot see into the future of our relationships, financial agreements are important to avoid potential divisive issues that may occur if a relationship breaks down. Without an agreement, dividing assets can become complex, difficult and very personal.

A hire purchase is a type of contract in which one party agrees to pay for goods in parts at a time. Essentially, the buyer hires the goods for rent. Once the full price, plus interest, has been paid the buyer then becomes the owner. These are common for cars and other large retail items.

A finance lease occurs in a commercial relationship where the borrower chooses an asset, a finance company purchases the asset, and the borrower uses the asset and pays instalments for the use of the asset. The finance company, or lender, recovers the costs of the asset plus interest. The borrower has the option to obtain ownership of the asset. The lender is the legal owner of the asset for the duration of the finance lease. These are similar to hire purchases, but involve a financial institution.

The most important part of any debt instrument is to know your rights and obligations before signing any documents. If you need legal advice on these elements, please contact Avon Legal. We have a plethora of experience in sighting and advising our clients on various debt instruments.

Mortgage Broking

A mortgage broker is a professional who can advise their clients upon obtaining a new home loan or refinancing their existing loan. They work with their clients to determine their borrowing needs, their borrowing capacity and available loans suited to their circumstances.

The benefits of using a mortgage broker is that they are usually free, because they are paid commission from the lending institution you decide to obtain a loan through. The broker does all the research for you, and has access to a wider range of loans. They are experienced in this type of work, so can create a flexible and suitable home loan according to your circumstances.

In order to act as a mortgage broker, or to undertake any business in which you arrange loans or credit, you need to be licensed to do so. The penalty for acting this way without a licence is $50,000 and can prevent you from trading in the future. Aggregators and loan writers are also required to be licenced. There are different classes of licences, and you may need assistance determining which one is suitable for your finance activities.

There are a number of institutions that are exempt from obtaining a licence, such as banks, insurance companies, pastoral companies and lawyers.

The regulation of mortgage brokers ensures they comply with licence conditions and extends to maximum commission payable, disclosure in advertisements, trust accounts, and provision of loan agreements. A mortgage broker must comply with the Finance Brokers Code of Conduct and the Finance Brokers Control Act 1975 (WA). 

Financing

Financing is required in all facets of life. For example; fundraising, property finance and project finance.

Fundraising bodies require efficient finance management to ensure funds are utilised to their optimum potential. Fundraising can refer to a business’ profitability, charitable donations and political campaigns. If you are looking for a business structure to optimise your business’ fundraising potential, then have a chat to one of the lawyers at Avon Legal.

As the property market has grown over past decades, the complexity of financial structuring has also increased. Both lenders and borrowers are requiring more and more assistance in setting up financial agreements for property purchases. Avon Legal can assist you with planning a transaction, the rights and obligations under an agreement and any relevant regulatory bodies. Purchasing property involves risk, so it is important to seek advice before obtaining or providing finance.

Project related financing is a part of corporate financing. In order to undertake a new project, for example a mining exploration project, a business is likely to require financing. This may be via lending or investment. Once finance is gained, a project asset can be developed and exploited, while repayment is made out of revenue that the project produces. The transaction may involve valuation of the project, determining potential profits and considering any uncertainties. Businesses therefore need to analyse the possibilities, and make a financial decision to move forward with their project.  

Credit Matters

Management of credit is integral for individuals to ensure sustained economic viability. Consumer credit and disputes with credit providers account for many disputes within Western Australia’s economy. It is necessary to be aware, as both a lender and a borrower, of the relevant obligations for credit licensing and under the Banking Code of Practice.

Consumer credit refers to debt that is accumulated by consumers for purpose other than home loans. Consumers can borrow money from lenders via a number of different facilities, namely credit cards, lines of credit, loans against insurance policies, personal loans and auto loans. This is for individuals only, rather than businesses. A credit provider, on the other hand, is an institution that provides this facility.

As of the 1 January 2011, if you want to engage in credit activities you must be a credit licence holder or a credit registered person who has submitted a licence application to ASIC. There are strict penalties for those who undertake credit activities without being lawfully allowed to do so. For more information regarding obtaining a credit licence, visit http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Credit%20homepage

The Code of Banking Practice is the banking industry’s charter on best practice standards. This Code sets out obligations to both personal and business customers. For more information, visit the Australian Banker’s Association at http://www.bankers.asn.au/

If you are a credit provider, Avon Legal can assist you with licencing and advise you on complying with regulations.

If you are experiencing financial hardship, or need to know the terms of your credit facility, it is important to speak to one of the Lawyers at Avon Legal. We can assist you in changing the terms of your contract if you are no longer able to meet your obligations. However, these issues must be dealt with as soon as possible to ensure minimum loss.

Securities

A security is a negotiable instrument that represents financial value. These can be debt securities, such as bank notes and debentures, or equity securities, such as stocks and options. Securities can be traded on the market.

Legal advice is often required for drafting security instruments and understanding their contents. Avon Legal can assist you with drafting the following documents:

a)     mortgages;

b)     charges;

c)      guarantees;

d)     personal property securities,

and many more.

It is equally important that the relevant parties understand the contents of these documents, so they can conduct themselves accordingly. If you think that a party you have contracted with for a security document has failed to fulfil their obligations, we can also assist you in enforcing the terms of the agreement.

Financial Planning

Financial planning involves many aspects of finances. This can be reaching your goals, improving your budget, saving money, investing, or simply organising your finances a little more effectively.

If you are a financial planner, you need to ensure that you are licensed appropriately and that you are compliant with regulatory obligations and requirements. Financial planners in Western Australia are required to meet the minimum training requirements and either obtain an AFS License as stipulated by ASIC or work with a license holder who can supervise their work.

This license allows a person to deal in securities or advise their clients on investments. This is a highly regulated industry and ASIC is responsible for ensuring that financial planners adhere to their license conditions, the Corporations Act 2001 (Cth) and Rules of Professional Conduct. For more information on licensing and regulation, visit ASIC at http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Financial%20Services%20home%20page

Further information is available from the Financial Planning Association of Australia, which can be found at http://www.fpa.asn.au/

Like any other industry, financial planning is also subject to disputes. If you have been working with a financial planner who has caused you damage, or you think they may not have fulfilled their regulatory obligations, please contact Avon Legal so we can assist you with the dispute.