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Case Study: How Did Our Lawyers Handle Complex Case involving Commercial Transactions & Migration Law?

Blog & Articles, Business Disputes Perth, Business Migrants, Commercial Disputes, Commercial Law, FIRB, Immigration Law, Migration Law, Perth Immigration Lawyer, Tang Legal, Visa 132

The Story

Mr Lee and his family was granted permanent resident visa.  To get the grant of the visa, Mr Lee entered into an agreement with the State that he will, amongst other conditions:

11) Invest at least $1,500,000 into an “Eligible Business” in the State;  and
22) The “Eligible Business” must employ at least five (5) full time employees who are either citizen or permanent residents of Australia.
Mr Lee looked at many possible investments in the State but repeatedly encountered these problems:
1.       Language barrier – Mr Lee does not speak or understand English.  Communication was a huge barrier.
2.       Cultural difference – Mr Lee operates a large enterprise in Asia and he has many personnel under him to manage and run his businesses for him. He was surprised to learn that owner of the business here is very often key person to the business.  He will not be able to commit 100% into the business due to his other commitments.  Mr Lee is also concerned about the safety of his investment.
3.       Constant uncertainty as to whether the business is in fact an “Eligible Business” and whether it can help him satisfy the migration requirements.

 

Mr Lee finally decided to invest with a property developer.  Mr Lee’s instructed us to advise and represent him.

 

Solution

We advised Mr Lee that his proposed venture and transaction must be structured to achieve the overarching purposes of:
11) Complying with Commonwealth migration requirements and Mr Lee’s Agreement with the State; and
22) Securing his commercial interests and his capital.
In terms of Commercial Law, Mr Lee took the following steps with our advice:
1.       Formation of legal structures for Mr Lee to undertake the investment.
Amongst other issues, segregation of risk, protection of personal assets, complying with migration requirements, and tax implications are important considerations in undertaking this task.
2.       Negotiation and formulation of the transaction structure with the property developer.
Amongst other considerations: 
·         Specific focus on ownership structure, investment vehicle, investment structure, key personnel required, role and obligations of Mr Lee and the property developer is important for migration compliance. 
·         Control of project and funds, security or collaterals, timing of project, possible variations, and terms and conditions of investment are important considerations for protection of capital.
·         Transfer duty and tax implications must be considered PRIOR TO entering into formal agreements.
3.       Prepare and advice on the formal agreements required in order to put together the transaction.
4.       Carried out due diligence on the proposed investment and the property developer.
5.       Completion and settlements of the agreed transactions.

In Migration Law:

 

11) We conducted a full review of Mr Lee’s initial business plan and Agreement with the State, and we advised Mr Lee that given the changes to his agreement with the State, he needs to notify and obtain approval from the State for the variation.  Note:  The formal agreements between the parties were made subject to Mr Lee obtaining an approval to amend Agreement with the State.
22)  IMPORTANT issue to overcome: Investment in property is very often seen as a passive investment and does NOT qualify as an “Eligible Business”.   Special attention must be given to how the transaction is structured to avoid complications.
33) Also given his increase in the amount of investment into the “Eligible Business”, we advised that he could negotiate with the State for a more lenient requirement on the number of full time employees.

Outcome

Mr Lee and the property developer were successful in reaching an agreement.   We strategically structured mechanism into the transaction to achieve the overarching purposes of satisfying the migration requirements and protecting his commercial interests.

Upon our conduct of legal due diligence and comprehensive checks on the proposed investment and the property developer, Mr Lee was satisfied with the results.
Mr Lee also obtained approval and a more favorable agreement with the State for the proposed investment, as we were successful in negotiating with the State in reducing the number of employee from five (5) to two (2).  

The property project has since commenced.

About The Writer 

Kelvin Tang has over 14 years’ experience practising law in Western Australia. He is the founder and Principal Partner of Tang Law based in Perth, Western Australia. Kelvin is a Registered Migration Agent (MARN: 1386452) and has extensive experience in providing migration advice to clients, advising on “Eligible Businesses” within the definition of the Migration Regulations, assisting migrants (investor of the business) with satisfying migration requirements, making visa applications and appealing cancelled or refused visas in the Federal Court of Australia, Administrative Appeals Tribunal and Migration Review Tribunal. Kelvin also has extensive experience in civil litigation, commercial and corporate law matters.
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biz migrates

BUSINESS MIGRANTS BEWARE: Do you really have the ownership in the “Eligible Business”!?

Blog & Articles, Business Migration Australia, Business Visa, Chinese migrates in Australia, IMMI, Immigration Department of Australia, Immigration Law, Perth Immigration Lawyer, Perth Lawyers, Visa 132, Visa 890, Visa 892

This article will talk about the requirement that the business migrant must have “substantial ownership interest” in the “eligible business”.

The general rule to meet this substantial ownership requirement is that if the business turnover is less than AUD$400,000, fifty-one percent (51%) is required.  If more than AUD$400,000, thirty percent (30%) is required.  If the business is a listed company, at least ten percent (10%) is required.   This is the simple part.  The complicated part is where a business is owned by a trustee company of a trust.  It is quite common in Australia that investments and businesses conducted through a trust vehicle. There have been past cases where migrants have failed the “substantial ownership” requirement due to legal technical difference between ownership interest and beneficial interest.

Section 134(1) of the Migration Act provides that “ownership interest” includes interest in the business as a shareholder in a company that carries on the business, a partner in a partnership that carries on the business, or a sole proprietor.  This definition seems simple enough, but in reality, it is not as simple as it seems.

But what about a trust structure?   Trust has many forms – fixed or unit trust, discretionary trust, special purpose trust, bare trust and hybrid trust.   How do you know your “ownership” meets the migration requirements?

Let’s take for instance the business is carried on through a unit trust and the migrant owns units in the unit trust.  I must emphasis that many property development projects are conducted using unit trust.  As a unit holder, you may have certain legal entitlements.  But does this satisfy the “substantial ownership” requirement?  The answer is, NO!  As a unit holder of a unit trust, you merely have a beneficial interest in the “eligible business”, NOT a legal ownership interest.  The Court in the Zhonghua’s case (which we looked at last week) found that having beneficial interest as a beneficiary of a trust does not meet the “substantial ownership” requirement.   

Now, let’s consider the flipside and say you own shares in the trustee company but the trust is a discretionary trust, or more commonly known as a family trust, where you do not have any fixed entitlements? In fact, under a discretionary trust, the beneficiary only has a “mere hope or expectancy” to receive benefits from the trust asset, there is not definite entitlement to distribution.  In this instance, even if the migrant has shareholding in the trustee company, will the migrant still meet the “substantial ownership” test?  A further question for business migrant to consider – although you may be a shareholder of a company, how do you know whether the company is actually a trustee company of a discretionary trust?  This is problematic.

The migration regulations may appear straight forward, but in reality, it may not be as straight forward as it seems.   Please beware of legal technicality!

Writer:

KELVIN TANG is the Principal Partner of TANG Legal.   His areas of practice include Investment Law, Commercial and Corporate Law, Property Law and Immigration Law.  Relevant to this article, his experties, knowledge and experience include representing property developers and new migrants with acquisition of property, structuring of investment vehicle, joint venture transaction, and advice on commercial transactions.
Email:                     [email protected]
Telephone:           +618 9328 7525



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