In brief
The Treasurer, the Honourable Josh Frydenberg MP, has today announced proposed temporary changes to Australian corporate insolvency laws which will vary the minimum requirements for statutory demands and provide some relief for directors from insolvent trading. These announcements form part of the Australian Government's measures to support otherwise profitable and viable businesses due to the economic impacts of COVID-19.
In brief
Creditors commonly find that their applications to wind up a company are suddenly deferred at the last minute by the appointment of a voluntary administrator. Now, in the early days of the small business restructuring (Part 5.3B) process, the courts are already grappling with those circumstances in the context of that new regime. At the time of writing1, only four restructuring appointments under Part 5.3B have been notified to ASIC. Two of them have been the subject of court proceedings.
The resulting decisions reveal:
What a director wanting to enter the safe harbour must do
Directors in Australia have long had a statutory duty to prevent insolvent trading. The duty is engaged where:
In brief
The new small business insolvency reforms enacted by the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth) (Corporations Amendment Act) - which inserts a new Part 5.3B into the Corporations Act 2001 (Cth) (Corporations Act) - are due to come into effect on 1 January 2021.
What you need to know
The Court of Appeal – Supreme Court of Western Australia has confirmed that the existence of a general security interest does not of itself destroy mutuality between a company in liquidation and its creditors and as a consequence section 553C of the Corporations Act 2001 (Cth) (Corporations Act) can apply to allow a creditor to set-off its debts against amounts owed to the company in liquidation.
In a comprehensive unanimous decision, the Court of Appeal confirmed the following propositions:
In brief
The new small business insolvency reforms enacted by the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Corporations Amendment Act) - which inserts a new Part 5.3B into the Corporations Act 2001 (Cth) (Corporations Act) - are due to come into effect on 1 January 2021.
In brief
The Federal Court has ordered that an insolvency professional be appointed to act as a referee and to decide questions of insolvency in relation to a series of alleged unfair preferences, rather than have the judge undertake that task.
Contents
In brief
We update our earlier client alert with a version including additional details that are available.
In brief
On 24 September 2020, the Treasurer announced that the Australian Government would introduce new legislation to give effect to: