Background

The Insolvency Practice Schedule (Corporations) (“IPS”) was inserted into the Corporations Act 2001 (“Act”) by the Insolvency Law Reform Act 2016 (Cth). Under section 70-45 of the IPS, a creditor can request an external administrator of a company to give company information to the creditor. The impetus behind introducing this section was trying to achieve greater transparency for creditors who, through their inspection of the administrator’s files, can monitor the external administrator’s conduct.

Introduction

The Federal Court decision of Copeland in his capacity as liquidator of Skyworkers Pty limited (in Liquidation) (Skyworkers) v Murace [2023] FCA 14 stresses the importance of liquidators adequately particularising claims in a Statement of Claim (SOC). In particular, the liquidator in this case was unable to identify the specific dates that the debts were incurred and how these debts arose.

The Bankruptcy Amendment (Discharge from Bankruptcy) Bill 2023 (“Bill”) has been agreed to by both the House of Representative and the Senate and will now be presented to the Governor-General.

The Bill seeks to amend the Bankruptcy Act 1966 (Cth) (“the Act”) to provide legal certainty on the calculation of bankruptcy discharge dates, aligning the Act with current practices, by confirming that the discharge date is determined from when the Statement of Affairs is accepted, rather than when it was initially presented.

Why the change?

Introduction

In a recent case, the early restructuring was proven as a useful tool for practitioners in circumstances where there is value in moving quickly to affect the restructure prior to the first meeting of creditors.

Case Analysis: Re Richstone Plumbing Pty Ltd (Administrators Appointed) [2023] VSC 112

Facts

Richstone Group was a large plumbing contractor, who, due to matters including the economic conditions of the construction industry, earlier this year sought to implement a restructure to continue trading.

What is a Bankruptcy Notice?

In a case that unfolded on May 1, 2018, the Supreme Court of New South Wales ordered the winding up of Day & Night Online Transport Pty Ltd. This was ordered because of the company’s failure to comply with a statutory demand from a creditor, as outlined in section 459C(2)(a) of the Corporations Act 2001 (Cth). However, what followed was a legal journey that ultimately resulted in the rescission of the winding-up order, shedding light on critical aspects of corporate insolvency and the legal processes involved.

Background: The Winding-Up Order

Under sections 90-15 and 90–20 of Schedule 2 of the Insolvency Practice Schedule (Corporations) (Practice Schedule) of the Corporations Act 2001 (Cth) (the Act), a liquidator may apply to the court for directions and judicial advice in winding up.

Purpose of Judicial Advice

The purpose of judicial advice was to give the liquidator advice as to the proper course of action to take in the liquidation, as noted by Goldberg J in Re Ansett Australia Ltd and Korda [2002] FCA 90 (Ansett).

What is the Doctrine of Exoneration?

The doctrine of exoneration concerns the issue of a loan against a jointly-held property. It will apply when the borrowed funds secured against the property are only for the benefit of one party. Thus, this doctrine is able to change the respective interests in property ownership when an interest in the asset is created by one party.

Fact Scenario Example

Liquidation is the process of winding up a company’s financial affairs. The assets of the company are collected and realised, the resulting funds are applied to discharging the company’s liabilities and debts, and any residual funds are redistributed to the company’s members. Liquidation is the only way to fully wind up the affairs of a company and end the existence of the company.

The chief purposes of liquidation are threefold: