When a corporate trustee goes into liquidation, there is often uncertainty about how it is to be wound up which requires Court intervention. On 15 October 2021, the Federal Government initiated a consultation process relating to trusts and insolvency, which looks to consider, amongst other things, what powers an external administrator has to administer trust property.

With ongoing restrictions affecting the community as a result of the COVID-19 pandemic, insolvency practitioners will be required to consider how best to facilitate meetings of creditors of companies in external administration and execution of documents by companies with which they deal. The Commonwealth Government has issued a determination relaxing some of the formal requirements set out in the Corporations Act 2001 (Cth) and Insolvency Practice Rules.

As the Australian Restructuring Insolvency and Turnaround Association (ARITA) has recently noted, the insolvency profession has been under significant strain in recent years and may not be equipped for a bushfire and COVID-19 led surge in liquidations, particularly assetless liquidations. Liquidators may take some comfort that, notwithstanding the increased scrutiny and potential criticism, courts will support their appointees.

Yesterday, the Federal Government announced the following temporary measures for financially distressed businesses:

Liquidators are often in a position where they have information which might be subject to the Australian Privacy Principles (APP) and may need to use or exchange that information in performing their duties. Under the Insolvency Law Reform Act 2016 (Cth), liquidators are also obliged to send initial reports to creditors within tight timeframes and potentially in circumstances where they may have limited contact details for creditors.

Whilst Australia navigates the effects of COVID-19 including health authorities advising people to stay home to contain the spread of COVID-19, people are likely to consume less and spend differently. The ultimate impact on Australian businesses may be significant.

Government Economic Stimulus Package

The appointment of special purpose liquidators (SPLs) has become increasingly common, with Courts now readily agreeing to appoint a liquidator who is nominated and funded by a creditor. Those appointments increasingly occur in circumstances where there is no direct conflict or criticism of the general purpose liquidator (GPL), and can be frustrating for the GPL.

The Insolvency Law Reform Act 2016 (Cth) (ILRA) introduced a range of measures intended to better inform and arm creditors in relation to external administrations and bankruptcies generally, but also specifically in the contentious area of practitioner remuneration. Although many of the reforms do appear to be changing the dynamics in disputes about remuneration, it is far less clear that the reviewing liquidator position is being utilised in corporate insolvency.

In the liquidation of corporate groups it is not uncommon for liquidators to be confronted by inter-company claims, including a multitude of potentially voidable transactions. Adjudicating on proofs of debt from related parties can be complicated, particularly where the liquidator is appointed to both parties.

After two recent judgments, liquidators should be aware that:

Liquidators have a limited time in which to bring proceedings in respect of voidable transactions, generally three years from the relation back day (Limitation Period).[1] However, a Court may grant liquidators a longer period to bring a voidable transaction claim provided the liquidator makes an application for this extension within the Limitation Period itself.