When COVID-19 hit Australia in 2020, there were widespread fears about the economic impact of the health crisis, with a predicted avalanche of insolvencies. Many of us greeted 2021 with optimism, hoping for the world to open up as we adjusted to the ‘new normal’. Instead, the virulent Delta strain and snap state lockdowns are keeping the country on edge. While the health crisis continues, the economic crash has been largely avoided.

The recent weeks have seen a number of major corporates enter voluntary administration, including Virgin Australia, Techfront Australia, Collette by Collette Hayman and Carriageworks Sydney, as a result of pre-existing distressed financial positions that were exacerbated by the consequences of the COVID-19 pandemic. The uncertainty that COVID-19 has brought, particularly the restriction on gatherings and the shutdown of non-essential services, created challenges for administrators looking to restructure businesses and maximise returns for creditors.

In what has been Australia’s largest corporate scalp in the wake of the COVID-19 pandemic, Virgin Australia has appointed partners from Deloitte as voluntary administrators. The decision to appoint administrators reportedly arose from the Federal government’s refusal to inject $1.4b as part of a recapitalisation proposal.

The Federal Government has announced a package of changes to Australian insolvency and bankruptcy laws to provide some relief to businesses and individuals who may face financial distress from the economic impacts of the current health crisis.

The package is expressed to provide a safety net to ensure that when the crisis has passed, profitable and viable businesses can resume normal operations. This is in the form of changes to the Corporations Act to provide temporary relief to assist companies to manage through the current economic climate.

Upon being appointed, insolvency practitioners are often faced with existing litigation involving the company or person they have been appointed to.

There are a multitude of factors that the practitioner needs to consider in relation to existing litigation. This article sets out some key considerations for administrators, liquidators, receivers and trustees in bankruptcy, as well as the practical steps a practitioner should follow. Although the article refers to practitioners appointed to companies, the principles are also generally applicable for Bankruptcy Trustees.

On 19 June 2019, the High Court delivered its judgment in one of the most hotly anticipated insolvency judgments this year, the Amerind appeal: Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth.

The High Court unanimously dismissed the appeal, upholding the Victorian Court of Appeal’s decision and confirming (although for differing reasons) that:

Bankruptcy concerns are becoming very real for many clients in the succession planning space.

More clients are concerned with the risk of having their family assets exposed to a bankruptcy during their lifetime, or the risk that the beneficiaries of their estate may have an inheritance exposed to creditors.

This is a particular concern for clients with partners and children in high-risk occupations, such as professionals and directors of companies, as they can be personally liable for debts owed by their business or negligence claims.

Despite the extension of the insolvent trading moratorium, directors should still satisfy the usual requirements of the safe harbour against insolvent trading if they can.

The Federal Government today announced the temporary six-month moratorium from insolvent trading liability has been extended until 31 December 2020. Temporary changes to statutory demands and bankruptcy notices requiring a debt of $20,000 and allowing six months to pay the amount demanded will also be extended to this date. These measures had otherwise been due to expire later this month.

The announcement gives much-needed clarity and certainty for the remainder of 2020.

On 11 September 2017, the Commonweath Parliament passed the Treasury Law Amendments (2017 Enterprise Incentives No.2 Bill). The new legislation: