Is your right to compensation for resource activities adversely affected by estate and succession planning?

02 November 2017 Topics: Agribusiness

Family owned agribusiness properties often comprise a number of different lots and businesses, with the whole run as one enterprise.

For succession and estate planning purposes, the legal ownership of the property may have been divided between some or all of the children and entities. However, the business is still run as one enterprise with little or no regard to the separate legal ownerships.

However, these estate planning practices are likely to have significant consequences for compensation and conduct agreements (CCAs) that have already been entered into or that may be entered into in the future.

Unfortunately, mining and petroleum companies often fail to recognise these intricacies. This results in CCAs offered by companies failing to address the practical realities of agribusinesses.

A landowner will be compensated for impacts caused not only on the lot that has the physical mining or gas infrastructure, but also for the impacts suffered due to those activities on other lots owned by that same landowner.

For example, if the resource activity on Lot A affects breeding and stocking programs on Lot B and the landowner is the same for Lot A and Lot B the landowner will be entitled to compensation for the impacts on both Lot A and Lot B.

However, if the landowner is not the same for Lot B due to estate planning or other reasons, it is irrelevant that the property is run as an aggregate and no compensation will be payable for the adverse impacts on Lot B.

This issue raises a whole new level of complexity when negotiating CCAs.

Landowners undertaking estate and succession planning should obtain legal advice as to the implications that this may have for existing and future CCAs.

Before entering into a CCA, landowners should always obtain expert legal, valuation and accounting advice to ensure they receive compensation that is fair, equitable and properly reflects the long term impacts the resource holder’s activities will have on their business and succession plans.



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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.