It’s a tough time for Australian businesses. This is evident by the uplift in insolvencies, approximately 1,100 insolvencies occurred in March 2024 – the highest monthly figure since 2015[1]. Now more than ever, it is crucial for businesses to implement effective debt recovery practices to maximise cashflow.
Anti-phoenix laws were introduced in 2020, however, it wasn’t until last week that a judgment enforced these laws in Court, setting out clear precedent for future cases. In the case of Intellicomms Pty Ltd (in Liquidation) (Intellicomms) & Ors v Technologie Fluenti Pty Ltd (Technologie Fluenti), Associate Justice Gardiner observed that the case had “all the classic hallmarks of a phoenix transaction” before handing down his decision.
The recent decision of Quin v Vlahos [2021] VCSA 205 (Quin) in the Victoria Supreme Court of Appeal has provided important commentary on when third party funds can be considered in determining a company’s solvency, as well as relying upon unreconciled accounts to prove solvency.
In the recent decision of Badendoch Integrated Logging Pty Ltd v Bryant, in the matter of Gunns Limited (in Liquidation) (receivers and managers appointed) [2021] FCAFC 64 (Badendoch) the Full Court of the Federal Court of Australia effectively abolished the “peak indebtedness” rule for liquidators pursuing unfair preference claims.
As part of the Federal Government’s suite of reforms to insolvency laws in response to the COVID-19 pandemic, directors of insolvent companies with total debts not exceeding $1 million are eligible to appoint a Small Business Restructuring Practitioner (SBRP).
This new regime allows directors of eligible companies to retain control of their business while working alongside an SBRP to develop a proposed restructuring plan for approval by the company’s creditors.
The Federal Government recently made changes to insolvency law which removed the insolvency moratorium and returned most limits back to pre-COVID-19 levels. The below sets out the new limits and discusses how to utilise them to enforce your debts.
insolvency moratorium
On 24 September 2020 the Federal Government announced, as part of its JobMaker plan, a package of reforms directed at streamlining insolvency processes for small businesses.
The reforms draw on key features of the US Chapter 11 bankruptcy process and include:
In a significant win for insolvency practitioners, the liquidators of ‘wine-in-a-can’ business Barokes Pty Ltd (In Liquidation) have successfully fended off fierce opposition to its remuneration for work performed in winding up the Company.
The case, in which Macpherson Kelley acted for the liquidators, serves as a reminder that, in considering section 60-12 of the Insolvency Practice Schedule (Corporations) (IPS), the Court will not hastily “punish” external administrators for actions that creditors dislike.
Background
On 22 March 2020, the Federal Government announced a raft of proposed temporary changes to insolvency laws which increased the threshold and time limit for compliance for statutory demands and bankruptcy notices (see our original article). The temporary measures also provided relief for directors from any personal liability for trading while insolvent.