In December 2015, the Federal Government proposed changes to its insolvency laws as part of its National Innovation and Science Agenda (NISA). Changes included a proposal to reduce the minimum bankruptcy period from three years to one year, with the aim of encouraging innovation and risk taking by reducing the consequences associated with bankruptcy.
Bicheno Investments Pty Ltd v David John Winterbottom [2017] NSWSC 536 has confirmed that the completion of a stocktake does not necessarily require a full physical stocktake. Rather insolvency practitioners may satisfactorily complete a stocktake by reviewing a business’ records, provided they are satisfied that those records are accurate and complete.
On 2 May 2017, the Supreme Court of New South Wales handed down its decision refusing an application to extend time to register a security interest in Production Printing (Aust) Pty Ltd (in liquidation)[2017] NSWSC 505.
The world of insolvency is currently undergoing serious review, with potential reforms flying around thick and fast. But talk of safe harbours and unenforceable ipso facto clauses (see our update here) have overshadowed a significant development that commenced on 1 March 2017: the ability for external administrators1 to now assign their rights to sue under theCorporations Act 2001 (Cth) (Corporations Act).
The government has released draft legislation reforming insolvency laws to create a ‘safe harbour’ defence for directors faced with an insolvent trading claim, together with a statutory stay on the enforcement of ipso facto clauses when a party to a contract enters a formal administration process. This is good news for company directors and delivers on industry calls for law reform.
Background
An insured company provided management consultancy services to Akron Roads Pty Ltd. In addition, the managing director of the insured company – Mr Crewe – acted as a director and as chairman, and sometimes as managing director, of Akron.
Before the Swan Group was placed into liquidation on 27 June 2013, it was the fifth largest cleaning contract business in Australia. It held significant contracts with major corporate groups, shopping centres, universities, airports and other public facilities.
In December 2015 the Federal Government announced proposed reforms to insolvency laws as part of its National Innovation Statement (NIS).
The High Court of Australia has now had the final say in the ongoing saga of the restaurant tenant who leased premises at Crown and was told that if it carried out high quality refurbishments of the premises, then it would be ‘looked after at renewal time’. When it came to the expiry of the term of the lease, the landlord required the tenant to vacate the premises.
Legal principles
The importance of security holders accurately registering their interest on the Personal Property Securities Register (PPSR) to create a valid, enforceable interest is constantly emphasised in commentary and cases. It is accepted that an error in a grantor’s identifier is likely to be fatal to a PPSR registration1, often resulting in a creditor’s unperfected interest vesting in a company upon it entering administration or liquidation. However, a recent decision of the New South Wales Supreme Court illustrates that a defective registration may be cured without losing priority.