June 1 is an important day in the dairy farming calendar, particularly for farms that are changing hands on that date or for sharemilkers moving on that date.
As June 1 normally coincides with the Queen's Birthday public holiday, the settlement date in Agreements for Sale and Purchase of dairy farm properties is often adjusted, either to the last working day in May, or the Tuesday following Queen's Birthday.
On settlement day the farm will be a hive of activity. The vendor will be packing up and moving out household furniture, together with any plant, equipment and machinery that is not part of the sale. As most dairy farm sales do not include the sale of the dairy herd, rural transport operators are often involved in shifting the dairy herd to another property.
The vendor will usually have been required to close up saved pasture; to store an agreed quantity of hay on the property for the purchaser; to have applied spring and autumn fertiliser (and to have made the receipts available to the purchaser for inspection); to have had the tanker track inspected by the dairy company; and to have ensured that all of the farm plant, equipment and machinery that is changing hands has been tested and is in good working order for the purchaser. This will normally involve rubberware as well as the milking plant itself.
In addition, the vendor will have obtained repayment statements for loans secured by the mortgagee over the property and releases of any charges on the PPSR register. Commission will be payable on settlement day to the rural real estate agent who was involved in selling the farm property.
The main purchaser obligation on settlement day is to make payment of the balance of the purchase price owing under the sale agreement. This will involve drawing down loan moneys and completing lenders' security requirements as well as taking out comprehensive insurance cover over the land and buildings, plant, equipment and machinery that form the subject of the transaction.
Transfer of Dairy Shares
The date of June 1 holds no magic for the dairy companies. It is not a milestone date in their processing cycle.
The purchaser should have completed and lodged with the dairy company an Application to Supply (generally, this will be done during the application period - December 15 to February 28).
The End of Season Movements Statement is not issued by the dairy company until around June 7. This statement will indicate to the person named on the register on June 1 how many shares are required for the recent season.
Change of legal ownership of the shares occurs upon the dairy company registering a share transfer. If the share registry receives the transfer before 5pm on May 31, then the purchaser is registered owner and responsible for end of season adjustments. If the share transfer is received after May 31, the vendor is responsible for end of season adjustments and the registration of the share transfer will occur after the end of season adjustments are made.
Once the share transfer has been registered by the dairy company, both vendor and purchaser will receive a statement of holding outlining the share transfer transaction.
Whilst many of the obligations between vendor and purchaser will have been performed, lawyers and accountants are involved in the settlement process so that there is no room for misunderstanding.
In that way, the settlement can proceed smoothly without either of the parties encountering any surprises.