It’s a tough time for Australian businesses. This is evident by the uplift in insolvencies, approximately 1,100 insolvencies occurred in March 2024 – the highest monthly figure since 2015[1]. Now more than ever, it is crucial for businesses to implement effective debt recovery practices to maximise cashflow.
In the last few years, case law has established several important key principles in trust law in the context of insolvent trustees.
It is now well established that:
On 28 September 2022, the Parliamentary Joint Committee on Corporate and Financial Services (“Committee”) began an inquiry into corporate insolvency in Australia, the first of its kind in over 30 years. The Committee invited submissions from interested persons and stakeholders to provide recommendations on how best to improve Australia’s corporate insolvency framework. Submissions have now closed, with contributions from over 50 industry bodies, government bodies and various representative bodies and groups.
The law can be slow to adapt to emerging technologies such as cryptocurrency. However, with a thorough knowledge of existing legal avenues, adaptation is not always necessary. Macpherson Kelley recently acted in a case that demonstrates how trustees in bankruptcy can use existing tools at their disposal to investigate, and ultimately recover, cryptocurrency held by bankrupts.
Identifying and locating cryptocurrency
If a trustee becomes aware that a bankrupt has owned or traded in cryptocurrency assets, the trustee will normally:
The first major review of Australia’s corporate insolvency in more than 30 years is underway with public submissions now closed. The review is broad in its scale, considering the entirety of Australia’s corporate insolvency regime and its related practices and procedures.
While the review is relevant to anyone conducting business in Australia, any developments or changes to corporate insolvency laws are particularly important for businesses in financial distress or creditors looking to recoup debts they are owed.
The corporate insolvency review to date
When a company is being wound up, it can be daunting when you’re on the receiving end of liquidator demands but attaining legal advice can mitigate the inevitable pressure. When responding to a letter of demand from a liquidator for the repayment of sums received in the lead up to the winding up of a company it is important to seek legal advice.
liquidator demands: the process
Anti-phoenix laws were introduced in 2020, however, it wasn’t until last week that a judgment enforced these laws in Court, setting out clear precedent for future cases. In the case of Intellicomms Pty Ltd (in Liquidation) (Intellicomms) & Ors v Technologie Fluenti Pty Ltd (Technologie Fluenti), Associate Justice Gardiner observed that the case had “all the classic hallmarks of a phoenix transaction” before handing down his decision.
In a win for liquidators, the Full Court of the Federal Court of Australia this week found that a creditor cannot rely on set-off under the Corporations Act 2001 to reduce an unfair preference claim under section 588FA of the Corporations Act 2001 (Act).
The insolvency moratorium the government put in place in 2020 kept insolvency numbers low. Once this was lifted on 1 January 2021, we all expected a wave of insolvencies, however, the various business support packages and lack of pressure from banks and the Australian Tax Office (ATO) gave businesses breathing room.
The new 2021 year brought in various changes to insolvency laws, which included the introduction of the Small Business Restructuring (SBR) process to assist small businesses in restructuring their debts. This new regime provides an opportunity for eligible small businesses which are financially distressed, but otherwise viable, to continue trading into 2021 and beyond. However, a question that we have recently been faced with is whether a company that is a corporate trustee of a trust, also known as a trustee company, is able to avail itself of the SBR process.