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

The Australian Government introduced two significant new insolvency solutions following the enactment of the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth), as part of the federal government’s JobMaker Plan in response to the COVID-19 pandemic. The first of these solutions is the Simplified Liquidation Process (SLP) which allows eligible small companies to participate in a faster and more financially commercial liquidation process.

The benefits of the process, compared to traditional liquidation, include:

If a debtor company receives a statutory demand, it has 21 days to file an application (along with a supporting affidavit) with the Court to set aside that statutory demand. The Court may set aside this statutory demand if:

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:

The Australian government introduced two significant new insolvency solutions following the enactment of the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth), as part of the federal government’s JobMaker Plan in response to the COVID-19 pandemic. The second of these solutions is the Small Business Debt Restructure Process (SBDRP).

The benefits of entering a SBDRP include:

As stated in our previous article, a statutory demand must be addressed to the proper entity (including the correct ACN number) at the registered office address of the debtor company (which can be searched by an ASIC search of the debtor company) in order for it to be considered valid. This statutory demand can be left at or posted to the debtor company’s registered office address or delivered personally to a director of the debtor company who resides in Australia: see section 109X(1) of the Corporations Act 2001 (Cth) in this regard.

A members voluntary winding up (MVWU) is implemented in circumstances where the company’s members no longer wish to retain the company’s structure because its existence is no longer required or useful. It is only available if the company in question is solvent.

A MVWU is the only way to fully wind up the affairs of a solvent company. All outstanding creditors are paid in full, and any surplus assets are distributed to its members. A MVWU also ensures that the interests of the company’s members are protected while the company structure is dismantled.

If you are a creditor who is owed money by a company that has gone into voluntary administration, you will receive reports and notifications of meetings from the voluntary administrators.  Chamberlains can advise you on your rights and what to do in this situation.  In this case update, we look at one issue that may come up in such a scenario – when more time is needed before the second meeting.

What is Illegal Phoenix Activity?

The Australian Securities & Investments Commission (ASIC) defines illegal phoenix activity as activity that occurs when a new company, for little or no value, continues the business of an existing company that has been liquidated or abandoned to avoid paying outstanding debts, including taxes, creditors and employee entitlements.

You should consider the possibility of placing a company into provisional liquidation if there is a risk that a company’s assets will be dissipated to the detriment of that company and a creditor or member of a company, a party can consider putting the company.

The power of a Court to appoint a provisional liquidator to a company stems from section 472(2) of the Corporations Act 2001 (Cth) (Act).

Pursuant to section 472(2) of the Act, a provisional liquidator of a company has either powers: