Cai (Migration) - [2017] AATA 416

Cai (Migration) [2017] AATA 416 (9 March 2017)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANT:  Ms Jinhong Cai
CASE NUMBER:  1504215
DIBP REFERENCE(S):  BCC2014/856305
MEMBER:Rania Skaros
DATE:9 March 2017
PLACE OF DECISION:  Sydney
DECISION:The Tribunal remits the applications for Business Skills - Business Talent (Permanent) visa for reconsideration, with the direction that the applicant meets the following criterion for the visa:
·cl.132.225 of Schedule 2 to the Regulations.

Statement made on 09 March 2017 at 9:19am

CATCHWORDS
Migration – Business Skills Business Talent (Permanent) visa – Subclass 132 Business Talent – Significant Business History stream – cl 132.225 – Annual turnover for 2 years before application – Beneficial ownership – Notarised entrustment agreements – Applicant’s indirect shareholding in the company – Ownership control – Qualifying business – Providing goods and services
LEGISLATION
Migration Act 1958, ss 65, 134(10)
Migration Regulation 1994, Schedule 2 cl 132.225, r 1.11A(2)
STATEMENT OF DECISION AND REASONS
APPLICATION FOR REVIEW

This is an application for review of a decision made by a delegate of the Minister for Immigration on 9 March 2015 to refuse to grant the visa applicant a Business Skills - Business Talent (Permanent) Class EA under s.65 of the Migration Act 1958 (the Act).
The visa applicant was invited to apply for the Subclass 132 visa in the Significant Business History stream on 27 March 2014 which she applied for on the same day.
The delegate refused to grant the visa on the basis that cl.132.225 of Schedule 2 had not been met. The delegate was not satisfied that for at least 2 of the 4 fiscal years immediately before the time of invitation to apply for the visa, the applicant’s main business, or the applicant’s main businesses together, had an annual turnover of at least AUD 3 000 000.
The applicant appeared before the Tribunal on 30 November 2016 to give evidence and present arguments. The Tribunal also received oral evidence from Mr Su (CPA), an Australian certified practicing accountant who has been providing professional assistance to the applicant.
The applicant was represented in relation to the review by her registered migration agent.
For the following reasons, the Tribunal has concluded that the matter should be remitted for reconsideration.
CONSIDERATION OF CLAIMS AND EVIDENCE
The issue in the present case is whether the applicant meets the requirements in cl.132.225.
The applicant is 48 years of age. She was born in Fujian Province in the PRC. She is a national of Nauru.
When applying for the visa the applicant nominated Qinhuang Fisheries (Shanghai) Co. Ltd. (the Company) as the main business. The application form incorrectly indicated that the applicant held 100% of the shares in the Company. The applicant nominated 2012 and 2013 as the 2 fiscal years to be considered.
The Company is a sino-foreign joint venture approved in accordance with the Establishment of Enterprises with the investment of Taiwan, Hong Kong, Macao and overseas Chinese in the PRC. The approval was granted on 12 October 2004.
The applicant was not a shareholder in the Company but claimed to have an ownership interest in the business through her interest in Global Team (Asia Pacific) Group Limited, a Hong Kong based company (HK Global Team), in which she held 40% of the shares, and beneficially through Foshan Shunde Xinruixian Fisheries Co. Ltd. (Foshan Xinruixian), and Xiamen Gaobatian Computer and Internet Ltd. (Xiamen Gaobatian).
As the Company operating the business was not publicly listed and had an annual turnover of least AUD 400 000 for the nominated periods, the applicant was required to demonstrate that the value of her ownership interest in the business was at least 30% of the total value of the business: r.1.11(1).
The application was refused because the delegate was not satisfied that the applicant had demonstrated, through acceptable evidence, that she had the required ownership interest in the nominated years in the main business as required by r.1.11A(2).
In relation to the applicant’s ownership interest in the Company through Foshan Xinruixian and Xiamen Gaobatian, the applicant provided ‘Entrustment Agreements’ indicating that those companies were entrusted to acquire and hold shares in the Company on the applicant’s behalf. Regulation 1.11A(2) requires that to evidence beneficial ownership of an ownership interest in the main business, where the ownership is held through a trust instrument, contract or other document capable of being used to enforce your rights in relation to the ownership interest, it must have been stamped or registered by an appropriate authority under the law of the jurisdiction where the ownership interest is located. The applicant indicated that the agreements were private in nature and had not been stamped or registered by the relevant Authority for Industry and Commerce in the PRC (AIC). On review, the Tribunal received various document which the representative argued is sufficient to meet the requirement in r.1.11A(2). They included notarised entrustment agreements, approval from the local municipality about the transfer of shares in the Company from one entity to another, articles of association and registration documents. The Tribunal had regard to the documents, however, they primarily related to the approval for the transfer of shares from other entities to Xiamen Gaobatian and Foshan Xinruixian. The documents did not make any reference to the shares having been held on behalf of the applicant and were not stamped or registered by the AIC, as such the Tribunal was unable to be satisfied that the applicant had demonstrated her beneficial ownership, through Xiamen Gaobatian and Foshan Xinruixian, of an ownership interest in the Company, as required by r.1.11A(2).
In relation to the claimed ownership interest through HK Global Team the delegate noted that although the certificates of approval for the Company indicated that HK Global Team held 85% of the shares between January 2009 and January 2013 and 48% as at 1 February 2013, the applicant had not provided a complete set of business documents, including the Articles of Association of the Company, evidence of the injection of the registered capital and the capital verification reports to establish the ownership structure of the Company throughout the nominated years of 2012 and 2013.
The delegate further noted that even if it did accept the applicant’s indirect ownership interest in the Company through her 40% ownership in HK Global Team, the applicant did not maintain at least 30% ownership interest in the Company in 2013 as the shares held by HK Global Team in the Company was 51.1% (as per annual report) or 48.3% (as per certificate of approval), which meant that the applicant’s share in the Company was 19.21% (report) or 20.6% (certificate).
While the Tribunal agrees with the delegate’s assessment that the applicant did not maintain an ownership interest of at least 30% in the Company in 2013, the Tribunal is satisfied, for the reasons that follow, that the applicant had an ownership interest, of at least 30%, in the Company in 2011 and 2012, indirectly through her ownership interest in HK Global Team.
On review, the Tribunal received considerably more evidence than was before the delegate, including the following documents:
·     Articles of Association for the Company, together with amendments and resolutions of the board of directors.
·     Certificate of Incorporation, Memorandum and Articles of Association for HK Global Team.
·     Certificate of Incorporation and Memorandum and Articles of Association for Global Team Holdings Limited.
·     Certificate of Incumbency for Global Team Holdings Ltd dated 22 June 2000 indicating that the applicant was allotted 50% of the shares in that company on 5 May 1999.
·     Annual returns – Form AR1, for the periods ended 30 June 2010 to 30 June 2013, for HK Global Team. Relevantly, the Annual Returns for 30 June 2011 to 30 June 2013 indicate that the applicant held 40% of the shares in HK Global Team. They also indicate that Global Team Holdings Ltd held 20% of the shares in HK Global Team.
·     Stamped Certificate of Approval for the Company issued on 14 January 2009, noting the total investment of US$25 million, with registered capital of US$21 million. The investors are noted as HK Global Team - US$17.85 million and Shanghai Niufulai investments development - US$3.15 million.
·     Stamped Certificate of Approval for the Company issued on 28 January 2011, noting the total investment of US$25 million, with registered capital of US$21 million. The investors are noted as HK Global Team - US$17.85 million and Shanghai Yinfu Venture Investment Co. Ltd - US$3.15 million.
·     Stamped Certificate of Approval for the Company issued on 17 January 2013, noting the total investment of US$25 million, with registered capital of US$21 million. The investors are noted as HK Global Team - US$17.85 million and Xiaomen Global - US$3.15 million.
·     Stamped Certificate of Approval for the Company issued on 1 February 2013, noting the total investment of US$25 million, with registered capital of US$21 million. The investors are noted as HK Global Team - US$10.09 million, Xiaomen Global - US$3.15 million and Foshan Xinruixian US 7.76 million.
·     Stamped Certificate of Approval for the Company issued on 29 April 2014, noting the total investment of US$25 million, with registered capital of US$21 million. The investors are noted as HK Global Team - US$10.09 million, Xiaomen Global - US$3.15 million and Foshan Xinruixian US 7.76 million.
·     Audited Financial Report for the Company for the fiscal years ended 31 December 2011 and 31 December 2012 relevantly indicating the following:
§ Revenue in 2011: CNY 33.9 million (AUD 5.28 million)[1]
§ Revenue in 2012: CNY 28.3 million (AUD 4.3 million)[2]
§ Percentage of paid up capital by HK Global Team as at 31 December 2011: 77.00%
§ Percentage of paid up capital by HK Global Team as at 1 January 2012: 77.00%
§ Percentage of paid up capital by HK Global Team as at 31 December 2012: 77.61%
·     Letter from Mr Su providing clarification on information in the financial reports which was discussed at the hearing. Relevantly, Mr Su explained that discrepancy in the percentage of ownership between the certificate of approval and the financial reports is because certificates of approval show shares that have been issued but may not have been full paid whereas the audited financial reports show shares that have been issued and fully paid. Mr Su also referred the Tribunal to the correct figures for the profit and loss statement (form 02) in relation to the revenue for 2010 and 2011, which had been incorrectly noted on one of the pages in the 2011 audited report. On the information contained in the audited reports, Mr Su calculated the percentage of paid up capital by HK Global team as at 1 January 2011 as being 74.7%. The Tribunal is satisfied that Mr Su’s explanations were supported by other documents before the Tribunal, including the figures on the 2012 financial report and the capital verification reports.
·     Capital verification reports for the Company from 2009 to February 2013. The reports note that the Company was previously named Chenzhou Golden Coast Ecological Fishery Co. Ltd.).
·     Resume for the applicant.
[1] based on exchange rate of 6.42 as at 31/12/2011: based on exchange rate of 6.53 as at 31/12/2012: >
The Tribunal has considered the evidence before it as follows.
The applicant is required to demonstrate that for at least 2 of the 4 fiscal years immediately before the time of invitation to apply for the visa, the applicant’s main business, or the applicant’s main businesses together, had an annual turnover of at least AUD 3 000 000.
The invitation to apply was 27 March 2014, the applicant now seeks to satisfy the requirements in the 2 fiscal years ending 31 December 2011 and 31 December 2012, which the Tribunal is satisfied fall within the 4 fiscal years immediately before the time of invitation to apply for the visa. The Tribunal will hereafter refer to the 2 fiscal years ending 31 December 2011 and 31 December 2012 as the relevant periods.
Regulation 1.11(1) provides that a business is a main business in relation to an applicant for a visa if the applicant has had an ownership interest in the business, which relevantly in this case, is to the value of at least 30% of the total value of the business, and has maintained, direct and continuous involvement in management of the business from day to day and in making decisions affecting the overall direction and performance of the business, and the business is a qualifying business.
The documentary evidence before the Tribunal, including the audited financial reports, capital verification reports and certificates of approval indicate the following; that up until February 2013, the Company had, at any one time, two investors; the Hong Kong based company, HK Global Team, and a Chinese enterprise, Shanghai Nuifulai Investments Development Pty Ltd and from about August 2011 Shanghai Yinfu Venture Capital Investment and Management Ltd. From 1 February 2013, a number of other Chinese enterprises made investments in the Company, including Foshan Xinruixian and Xiamen Xiamen Gaobatian.
From 2009 up to 1 February 2013, the HK Global Team was the majority shareholder in the Company, which, according to the certificates of approval and capital verification reports, was 85%. According to the audited financial reports the percentage of paid up capital by HK Global Team’s was between 74.78% as at 1 January 2011 and 77.61% as at 31 December 2012. As indicated above, the discrepancy in the percentages is due to the certificates/reports calculating the shareholding on the basis of shares issued whereas the audited financial reports are calculated on the basis of the shares issued and fully paid. The Tribunal considers the capital verification report to be more appropriate when determining the percentage of the applicant’s ownership interest of the total value of the business because it subscribes the proportion of the total registered capital that is required to be contributed by the shareholder as set out in the articles of association. The Tribunal accordingly finds that HK Global Team’s shareholding throughout the relevant periods was 85%.
The applicant relied on her ownership in HK Global Team to establish her ownership interest in the Company for the relevant period. The Tribunal is satisfied on the evidence before it, including the Annual Returns for HK Global Team, that the applicant held 40% of the shares in that company in the relevant periods.
The applicant claims to have also held a further 10% of the shares in HK Global Team through her 50% ownership in HK Global Team Holdings, which held 20% of the shares in HK Global Team, which would mean that she indirectly held a total of 50% of the shares in the Company. The Tribunal was somewhat concerned that the applicant had made no mention of her shareholding in HK Global Team Holdings until after the hearing. It also notes that the certificate of incorporation and incumbency certificate were dated 1999 and 2000 respectively. No supporting evidence was provided, such as company annual returns, to substantiate the applicant’s claim that she held 50% of the shares in HK Global Team Holdings in the relevant periods. For these reasons the Tribunal has decided not to include the applicant’s claimed shareholding in HK Global Team Holdings in its calculations.
Section 134(10) of the Act defines an ‘ownership interest’, in relation to a business, as an interest in the business as either a shareholder in a company that carries on the business, a partner in a partnership that carries on the business or the sole proprietor of the business - including such an interest held indirectly through 1 or more interposed companies, partnerships or trusts. As the Tribunal is satisfied that the applicant held 40% of the shares in HK Global Team for the relevant period, and as HK Global Team held shares in the Company, the Tribunal is satisfied that the applicant had an ownership interest in the Company, held indirectly through HK Global Team.
As found above, HK Global Team’s shareholding in the relevant period was 85%. The applicant’s indirect shareholding in the Company for the relevant period was therefore 34% for the fiscal years ending 31 December 2011 and 31 December 2012. As indicated above, the annual turnover of the Company for the relevant period was in excess of AUD 400 000. The Tribunal accordingly finds that the applicant meets r.1.11(1)(a) and (c) as she had an ownership interest in the business and the total value of the applicant’s ownership interest in the business, which was not a publicly listed company and had an annual turnover of at least AUD 400 000, was at least 30% of the total value of the business.
A number of the supporting documents for the Company refer to the applicant as the Company’s legal representative. At the hearing the applicant provided a brief history of her employment indicating that she had held several management positions since 1995 in both public and private companies in China. She gave evidence that she wanted to invest in China but the policy at the time required her to establish a company in Hong Kong and it was for this reason that HK Global Team was established. She invested funds into the Company through HK Global Team. She indicated in her resume that she was Chairman of the Board and was in charge of operations. The applicant provided evidence regarding the activities of the business, the different departments within the business and the employees of the business. When asked about her day to day management, the applicant stated that she was in charge of operations and ensuring that regular checks were undertaken regarding the health and condition of fish products, storage and the level of stock. She stated that she overlooks the sales and determines if further stock needs to be purchased and arranges funding if required. Overall the Tribunal was satisfied that the applicant demonstrated that she had maintained direct and continuous involvement in management from day to day and making decisions that affected the overall direction and performance of the business. The requirement in r.1.11(1)(b) is therefore met.
The business is involved in the production and sale of fisheries products, which include raw fish material, production and processing of aquatic products. It was indicated in the independent review report undertaken by the Christian Fox Accountants that the business has a broad range of customer/ supplier base and there was no economic dependency on any one customer or supplier. The Tribunal is satisfied on the evidence that the business provided goods and services for the relevant period and was not primarily or substantially a vehicle for speculative or passive investment The Tribunal is satisfied that the business was a qualifying business. The requirement in r.1.11(1)(d) is therefore met.
Given the above, the Tribunal finds that the requirements in r.1.11(1) have been met and that the business nominated by the applicant is a main business.
The profit and loss statement, a/c form 2, and cash flow statement in the audited financial reports indicate that in the years ending 31 December 2011 and 31 December 2012 the Company’s revenue was CNY 33.9 million (AUD 5.28 million) and CNY 28.3 million (AUD 4.3 million) respectively. The Tribunal is satisfied on this basis that the annual turnover of the main business for the relevant period was at least AUD 3 000 000.
Given the above, the Tribunal is satisfied that for at least 2 of the 4 fiscal years immediately before the time of invitation to apply for the visa, the applicant’s main business, or the applicant’s main businesses together, had an annual turnover of at least AUD 3 000 000 .

The applicant therefore meets the requirement in cl.132.225.
Give the above findings, the appropriate course of action is to remit the matter to the Department for its consideration of the remaining criteria for the visa.
DECISION
The Tribunal remits the applications for Business Skills - Business Talent (Permanent) visa for reconsideration, with the direction that the applicant meets the following criterion for the visa:
·cl.132.225 of Schedule 2 to the Regulations.
Rania Skaros
Member

Relevant law
Clause 132.225 requires that for at least 2 of the 4 fiscal years immediately before the time of invitation to apply for the visa, the applicant’s main business, or the applicant’s main businesses together, had an annual turnover of at least AUD 3 000 000.
According to r.1.11(1) a business is a main business in relation to an applicant for a visa if:
(a) the applicant has, or has had, an ownership interest in the business; and
(b) the applicant maintains, or has maintained, direct and continuous involvement in management of the business from day to day and in making decisions affecting the overall direction and performance of the business; and
(c) the value of the applicant’s ownership interest, or the total value of the ownership interests of the applicant and the applicant’s spouse or de facto partner, in the business is or was:
(i) if the business is operated by a publicly listed company — at least 10% of the total value of the business; or
(ii) if:
(A) the business is not operated by a publicly listed company; and
(B) the annual turnover of the business is at least AUD400 000;
at least 30% of the total value of the business; or
(iii) if:
(A) the business is not operated by a publicly listed company; and
(B) the annual turnover of the business is less than AUD400 000;
at least 51% of the total value of the business; and
(d) the business is a qualifying business.
…
Reg 1.11A Ownership for the purposes of certain Parts of Schedule 2
(1) Subject to subregulation (4), for Parts 132, 188, 888, 890, 891, 892 and 893 of Schedule 2,ownership by an applicant, or the applicant's spouse or de facto partner, of an asset, an eligible investment or an ownership interest, includes beneficial ownership only if the beneficial ownership is evidenced in accordance with subregulation (2).
[(1) amended by SLI 2012, 82 with effect from 01/07/2012 - LEGEND note]
(2) To evidence beneficial ownership of an asset, eligible investment or ownership interest, the applicant must show to the Minister:
(a) a trust instrument; or
(b) a contract; or
(c) any other document capable of being used to enforce the rights of the applicant, or the applicant's spouse or de facto partner, as the case requires, in relation to the asset, eligible investment or ownership interest;
stamped or registered by an appropriate authority under the law of the jurisdiction where the asset, eligible investment or ownership interest is located.
(3) A document shown under subregulation (2) does not evidence beneficial ownership, for subregulation (1), for any period earlier than the date of registration or stamping by the appropriate authority.
(4) Beneficial ownership is not required to be evidenced in accordance with subregulation (2) if the person who has legal ownership of the asset, eligible investment or ownership interest in relation to which the applicant, or the applicant's spouse or de facto partner, has beneficial ownership:
(a) is a dependent child of the applicant; and
(b) made a combined application with the applicant; and
(c) has not reached the age at which, in the jurisdiction where the asset, eligible investment or ownership interest is located, he or she can claim the benefits of ownership of the asset, eligible investment or ownership interest.
A ‘qualifying business’ means an enterprise that is operated for the purpose of making profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public and is not operated primarily or substantially for the purpose of speculative or passive investment.
Ownership interest has the meaning given to it in s.134(10) of the Act, which states:
"ownership interest"
in relation to a business, means an interest in the business as:
(a) a shareholder in a company that carries on the business; or
(b) a partner in a partnership that carries on the business; or
(c) the sole proprietor of the business;
including such an interest held indirectly through one or more interposed companies, partnerships or trusts;