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10 October 2014


Question 1: Order, order

In order of precedence, if the constitution, shareholders agreement and replaceable rules say something different about the same scenario, which prevails in order? 1. shareholders agreement, 2. constitution, 3. rules? If so, I assume then that the shareholder agreement needs to be clear that it overrides the terms of the constitution?

Answer: You are correct. The constitution is an agreement that shareholders become parties to when they acquire shares. To the extent it deals with issues in the replaceable rules, it overrides them. It does not replace a rule that is capable of application without offending the constitution.

The shareholders agreement is a subsequent agreement so it overrides both. It is not necessary for the shareholders agreement to expressly provide it overrides inconsistent provisions of the constitution or rules because this is clearly inferred.

Question 2: Inspecting the shed

Hi, I am unsure of owner-builder requirements. My client was issued a building permit for a shed in October 2012 - cost stated at $18,000. Do we need to get a condition report and insurance for a shed? Also the building permit states a Certificate of Final Inspection is required, which hasn't been obtained yet. Should that be obtained to include it in the S32? (Victoria)

Answer: Building permit within last 7 years, therefore ‘prescribed period’ satisfied. You describe the works as construction of a ‘shed’.  That is most likely not domestic building work and therefore insurance is not required. However it is still ‘construction’, therefore a condition report is required.

The issue of a Certificate of Final Inspection is irrelevant to this question as the building permit is the trigger.  The Certificate of Final Inspection is only relevant from a defects point of view. Whilst not strictly necessary, it might be prudent to obtain to avoid future arguments.

Question 3 - MDs and modern awards

Dear Sir/Madam, I need guidance as to the following: Is there any modern award that applies to managing directors of a company knowing that they are paid less than the high income threshold. If the modern awards do not apply to them, would the National Employment Standards apply, knowing it is a small business. What benefit would the employee get if not covered by a modern award apart from protection from unfair dismissal? Thank you for your time.

Answer: A managing director is an employee of the company. Modern awards apply to all employees covered by the national workplace relations system and vary depending on the industry the employee works in. The following link will assist you in finding the applicable award:

Modern awards may not apply to some managers or high income employees who have an appropriate written guarantee of annual earnings. However, as your question states that the employee is paid less than the high income threshold, it would seem that this exclusion will not apply. Be aware that a business can be covered by more than one award. The National Employment Standards apply to all employees and make up the minimum employee entitlements. An award, registered agreement or employment contract can't provide for conditions that are less than the National Employment Standards.

We suggest that you read the commentary within our Employment Guide.

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