On 31 August 2012, the Full Federal Court handed down its much awaited decision in Commissioner of Taxation v Kassem and Secatore [2012] FCAFC 124 which provides clarification regarding third party preference payments received by the ATO and the practice of the ATO appropriating payments made by taxpayers from one account (ie the integrated client account) to another (ie the superannuation guarantee account - SGER).
Summary
The main points to take away from this case are as follows:
A case this week in New South Wales involving a dispute between the residents of a retirement village and the operator of a retirement village reminded us of some of the issues that can arise when a village goes into liquidation.
In May a Parliamentary Joint Committee on Corporations and Financial Services concluded its report into the collapse of Trio Capital Ltd which will have significant repercussions for financial lines insurers in Australia.
What distinguishes the Trio Capital collapse from the other major financial collapses in Australia in recent years, of Westpoint and Storm Financial, is that Trio involved a fraud. The enquiry adopted observations by Justice Peter Garling of the New South Wales Supreme Court describing the scheme as:
On 2 July 2012 the Australian Securities and Investment Commission launched a new website for the publication of insolvency and other notices.
The site provides a centralised and consolidated medium for the publication of insolvency related notices required by the Corporations legislation. Formerly, such notices were publicised through newspapers and other print media, and in some instances as this, systems transition continue to be published on both due to transactional issues.
The website was announced in late 2011, but only came in effect on 2 July 2012.
In Peter Grossman v Australian Securities and Investment Commission [2011] AATA 6, the Administrative Appeals Tribunal upheld a 5 year disqualification period against former director Mr Grossman who was at the helm of 3 companies that met financial demise. The Tribunal affirmed ASIC’s decision to grant the maximum disqualification period made pursuant to s 206F of the Corporations Act which was returned after finding Mr Grossman participated in phoenix activities deemed to lack commercial morality and blatantly disregard the interests of creditors.
The recent Victorian Supreme Court case of Grapecorp Management Pty Ltd (in liq) v Grape Exchange Management Euston Pty Ltd provided an interesting analysis of when set-off, pursuant to section 553C(1) of the Corporations Act 2001, may be claimed.
When can a set-off be claimed against debts owed to an insolvent company?
Facts
The Bridgecorp Group collapsed and receivers were appointed on 2 July 2007. The companies comprising the group were subsequently also placed in liquidation. The First and Second Defendants in the case were two of the Bridgecorp Group (Receivers and Managers appointed) (in Liquidation).
The directors faced numerous civil and criminal charges for alleged Wrongful Acts including alleged false statements in prospectuses, extension certificates and investment statements issued to prospective investors.
Air Australia has hit the news recently due to the appointment of voluntary administrators to the airline and the consequences this has had on the business, its customers, suppliers and staff.
Whilst Air Australia is not a franchise, it still offers a good case study for examining financial distress in the operation of a business and considering options that may be available.
This update considers what are indicators of financial distress and offers tips both for franchisors and franchisees in assessing developing situations and options for moving forward.
On 15 February 2012 the Commonwealth Government introduced the Corporations Amendment (Similar Names) Bill 2012.
Purpose
The purpose of this Bill is to amend the Corporations Act such that directors of failed companies can be jointly and individually liable for the debts of a company that has a similar name to a pre-liquidation name of a failed company.
The Bill itself is purportedly part of the Government’s election commitment from the Government’s Protecting Workers Entitlements Package announced in July 2010.
The Federal Government has introduced the Corporations Amendments (Similar Names) Bill 2012 which will be directed at companies that engage in ‘phoenix’-related activities through imposing personal liability on directors.
The Bill seeks to impose liability for payments on the director behind the failed company to ensure they do not exploit the concept of limited liability. These measures rely on the notion that many phoenix companies use similar trading names as the company that was liquidated.