Agribusiness

What are agribusiness projects?

Agribusiness projects are established to enable the public or wholesale investors to participate in rurally-based enterprises.

The types of activities agribusiness projects are set up to accomplish / complete include—

• viticulture (wine and grapes)
• forestry
• horticulture
• livestock breeding programs, and
• aquaculture.

Why are agribusiness projects popular?

Agribusiness projects are business or enterprise-based.  The structure of  projects usually means investors in the projects are not passively investing, but are engaging in some active primary production business.  The investors usually enter into a contract with another company to carry on the day-to-day activities, but in a legal sense, it is the investor who is carrying on the business.

Projects like this are attractive to investors who wish to diversify their portfolios by taking some primary production business risk.  Other benefits include the following:

• Often projects can revitalise rural communities through large scale investment in primary production activities.

• Investors can gain access to burgeoning export markets, such as in the wine, fruit and timber industries.

Invariably, projects have tax advantages associated with them which are supported by rulings issued by the Australian Taxation Office.

In February 2007 the ATO changed its interpretation of the tax treatment of investment in such schemes. This view will not apply until 1 July 2008 but is subject to testing in the courts.

Who is the agribusiness promoter or manager?

The promoters of these enterprises usually have a special mix of expertise which covers both the particular business activities that the project is established to conduct, as well as the business skills needed to manage an investment vehicle.

Agribusiness publications

• Papers: Addressing topical Agribusiness issues

• Book: ‘Everything you need to know about agricultural and investment prospectuses’ author Langton Clarke

• E-newsletter: McMahon Clarke Legal Growing Wealth –– a guide to fundraising for agricultural and investment projects

Putting together an agribusiness project

McMahon Clarke Legal has expertise in assisting promoters of agribusiness projects aiming to take their projects to the investment market.

• Several consultants contribute to the offer document and our legal team coordinates the input from each consultant leading up to the issue of the offer document.
  
  
• The structure of the offer is critical to the ability to get into the marketplace and to enter quickly to gain maximum benefit.
  
  
• The need for an Australian financial services licence and product ruling are critical but also the most time consuming.
  
  
• If the legalities are left too late, there may not be sufficient time to market your project.
  
  
• The more time available, the better-placed the promoter is to consider the options available for structuring the project and the consequences of making particular choices.
  
  
• The promoter usually comprises a number of people and to keep everyone fully informed there needs to be enough time to allow proper consideration of the documents and particularly the final offer document before it is issued in the market.
  
• Planning the establishment and launch of the project is vital and to ensure you know what steps are required in the order in which they need to be taken, we will provide you with a project management chart detailing the key delivery dates for those important steps.

Promoter's Checklist

If you would like to see us about establishing a new project then use the following check list to gather information we will need to commence work.

This list will help you save time and money in the briefing process.

• Where are you planning to establish the farm/plantation?
   
• Do you have the land under contract or option? If not, then this is something our property team can assist with.
   
• Have you ever issued an offer document for this or a similar operation?
   
• Are you currently farming the product, or have you had any experience?
   
• If you are currently farming, what sort of infrastructure do you have?
   
• Have you read any other offer documents to gain some idea about what is required for these projects?
   
• Do you have a public company established which can issue the offer document?
   
• Who do you have as the directors (there must be at least three)?
   
• You must have a licence to operate a scheme such as the agricultural scheme you wish to promote.
   

• This is fundamental as it is illegal to operate a new scheme without one. Applying for a licence is the first thing we will need to do for you if you become a client. There are strict financial, educational and experience-based qualifications required by ASIC before such a licence will be granted.
   

• What educational qualifications and experience do the directors of the promoter have?
   
• Is the promoter capitalised at this stage or is it a new company?
   
• If capitalised, to what extent? There are minimum capitalisation requirements.
   
• Have you contacted any other consultants? Here are some examples: 
  
  Taxation adviser—this person is very important to have on board early because the tax deductibility of the investment is crucial.
  
  Agricultural consultant.
  
  Compliance committee members—you must have such a committee where there is no independent board of directors.  You must have a majority of independent members on this committee. There are strict requirements in the new law to determine whether the board or compliance committee are independent.
   
• Do you also want to offer equity in a vehicle which will own the project land and certain infrastructure?
   
• How long did you want the project to run for? Most schemes run for 12 to 15 years, except some of the timber schemes, which may run for as long as 25 years.
   
• What is your timetable for issuing the offer document?
  
  Note: The prime selling season for tax-driven schemes like this is March to June. Promoters usually aim to be in the market by January or February.
   
• Do you have a marketing plan?

Recent projects

Click to view a list of recent projects in which McMahon Clarke has written or reviewed the offer document.

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