Courts are willing, in certain circumstances, to consider the commercial realities of voluntary administrations, and can be flexible.

Liquidators need to be mindful that a disclaimer of property may be challenged. The Supreme Court of Victoria underscored a key issue in establishing "prejudice" to creditors in a liquidation, holding that a disclaimer of property may be set aside where the liquidators are indemnified.

Australian banks have historically relied on formal liquidation, voluntary administration and receivership processes available under the under the Corporations Act 2001 (Cth) and under general law where informal restructurings have failed. There has been little appetite for exploring alternative methods to exit distressed situations by debt trading.

The Corporations Act 2001 sets out a regime for the order in which certain debts and claims are to be paid in priority to unsecured creditors.

That's straightforward enough for a liquidator, right?

Unfortunately, matters are not that straightforward. In effect, there are two priority regimes under the Act for the preferential payments of particular creditors, each of which applies to a different "fund", and we've observed this has led to some liquidators being unsure of how to proceed – or even worse, using funds they should not.

Key Points:

What the protracted negotiations surrounding Nine Entertainment have demonstrated is the importance of an interested party being able to assert they have an economic interest in the company.

Directors will soon be free to make decisions to trade on even insolvent entities, and incur debts in the ordinary course of business, with the passing of the Coronavirus Economic Response Package Omnibus Act 2020 last night and Royal Assent today. The Act is intended to encourage business to continue trading free of risk that insolvent trading laws – which prevent directors of insolvent companies incurring fresh debt – would impose a personal civil and criminal liability on them. There are also changes to statutory demands and debtor's petitions.

On 17 October 2012, Nine Entertainment announced that it had reached an agreement with representatives of its senior and junior lenders with respect to a restructuring of its financing arrangements. Prior to the announcement, recent business press had been dominated by reports of Nine Entertainment's potential insolvency.

Last Thursday's decision in the WA Supreme Court to allow a sale to insiders of a company subject to a deed of company arrangement will make the restructuring process smoother for administrators, who can now negotiate with a wider pool of potential purchasers, as Chapter 2E of the Corporations Act 2001 (Cth), which deals with related party transactions, will not apply (Mighty River International v Bryan Hughes and Daniel Bredenkamp as Deed Administrators of Mesa Minerals Ltd (Subject to Deed of Company Arrangement) [No 2] [2018] WASC 368; Clayton Utz acted for the deed administrators of Mes

Some 25 years after Harmer promised a faster, more efficient and commercial approach for dealing with failed and failing companies, Australia's highest court has this morning confirmed that creditors can contractually bind a company and all stakeholders to a moratorium extension via a properly formed holding DOCA (Mighty River International Limited v Hughes [2018] HCA 38; Clayton Utz acted for the successful Deed Administrators of Mesa Minerals Limited).

The updates to the Guidance Note provide useful guidance on disclosure requirements in the context of the safe harbour reforms but ultimately, the status quo continues.

The ASX has updated its continuous disclosure guidance for entities in financial distress to address uncertainty following the recent introduction of the insolvent trading safe harbour provisions into the Corporations Act. While the ASX has provided useful guidance, unsurprisingly, the position has not changed and directors must continually assess compliance with continuous disclosure requirements.