CCP T2 A1

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Australian National University *

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MISC

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Accounting

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Jan 9, 2024

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docx

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Uploaded by GeneralHummingbirdMaster1035

Warren Bedford Tuberight Manufacturing Pty Ltd 17 Spring Street Clyde NSW 2142 Dear Warren, Please see below, our responses to questions raised in your letter yesterday. Contract 1. To whom is the deposit payable and does it have to be paid by bank cheque? Since we are waiting for some funds to arrive from Singapore, would there be any problems if we delayed payment of the deposit until a few days after the actual date of exchange of the contracts? As per the contract, the deposit is to be paid to the vendor’s solicitor, Grant and Lawson. It is not essential that it is paid by bank cheque, but this is the standard practice. Regarding the date at which the deposit is paid, under the current contract the deposit is to be paid at exchange of contracts, under clause 2.2 the timing of the deposit payment is an essential condition. Therefore, under the current contract at 2.5, if you were to delay a few days you would risk the vendor terminating the contract. (93) 2. Can you advise us as from what date Tuberight should carry insurance to protect the business assets of Barriers2go we will be buying? Under point 4 of the warnings section, the vendor should continue to hold insurance until completion of the contract. At this point, the vendor’s lawyer is obligated to cancel any insurances held in the vendor’s name. Therefore, Tuberight should carry insurance from the date of completion, which is scheduled to be 28 days from exchange. (55) 3. Tuberight will be borrowing about $7.2 million to buy Barriers2go. Is it OK to give copies of certain Barriers2go business plans and other business documents (which were handed to our Managing Director, Patrizia, in strict confidence by the Metalwork’s General Manager) to our bank manager and our accountant soon after exchange? Under clause 6 of the contract, disclosure of information related to the contract is not permitted unless, as per clause 6.1 “the disclosure is to any of a financial adviser or lender to that party”. Given you intend to pass that information to a financial advisor and lender, it would be okay to pass on the documents given to you as part of the sale by Metalwork’s General Manager. It is worth noting that you can also disclosure any other confidential information if you obtain consent from the other party in writing as well (cl 6.3). (96)

4. I am unclear about the relevance of GST to the purchase. I need to know if it is applicable as 10% of the purchase price amounts to $1.25 million. Can we overcome this somehow as we haven’t budgeted for it? The applicability of GST is determined by whether or not the sale is nominated as a taxable supply or if the business is sold as a going concern. Looking at the contract, it has been selected that it is not a taxable supply, and that it is a going concern. The supply of a going concern is tax free under s38-325 of the GST act if: “(1) The *supply of a going concern is GST-free if: (a) the supply is for *consideration; and (b) the *recipient is *registered or *required to be registered; and (c) the supplier and the recipient have agreed in writing that the supply is of a going concern. (2) A supply of a going concern is a supply under an arrangement under which: (a) the supplier supplies to the *recipient all of the things that are necessary for the continued operation of an *enterprise; and (b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier)” Given the above, and the sale at hand, this purchase would be GST free. (195) 5. Schedule D to the contract (to arrive shortly from Grant & Lawson) will contain quite a number of expensive items of equipment that Tuberight has agreed to buy. What are our rights under the contract if we find out a few days before settlement that a particular piece of equipment is defective? Will it make any difference if the equipment in question was working well on the date of exchange but broke down a few weeks later prior to completion? Firstly, under clause 10.1.4, the vendor promises that the equipment is in proper working order and that if they become aware before completion that this information is incorrect, they must disclose that before completion (10.3). Should the vendor fail to do so, under clause 15.2, the purchaser can terminate the contract by serving a notice on the vendor. Under clause 9.1.3, the vendor is also obligated to maintain the equipment in the same state up to completion as it was at the date of exchange. (85) 6. Which party (ie seller or buyer) is going to be responsible to comply with, say, an order from Liverpool Council to fix up some particular problem with any of Barriers2go’s business equipment? Does it matter when that order was made? Work orders are covered by clause 16 of the contract. Usually, where an order is made on or before the contract date, the vendor must have complied with that order by the date of completion (cl 16.1). After completion, it becomes the responsibility of the vendor. If the purchaser must comply with the work order and the cost of compliance is greater than 10% of the purchase price, the purchaser can rescind provided it is before completion (cl

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