The severe restrictions imposed by State and Federal Governments on large gatherings due to the COVID-19 pandemic are inhibiting, and in some cases preventing, businesses from trading. Although the present circumstances may necessitate administration or lead to receivership for some businesses, many practitioners are wary of accepting an appointment where there is an inability to trade as a going concern, thereby preserving value and maximising sale prospects.

In recent years, unfortunately, illegal phoenix activity has become increasingly prevalent within Australia’s commercial landscape.

Despite its significant adverse effect on the nation’s economy, Australia’s statutory corporate insolvency laws have, to date, failed to adequately let alone comprehensively address, or even define, phoenix activity, or deter it.

In a recent decision of the New South Wales Supreme Court, Justice Black declined to provide Court approval to the provisional liquidators for payment of disbursements that contain a profit element.

His Honour observed that two fundamental questions arise when determining whether an external administrator may derive a profit from disbursements:

The eagerly anticipated judgment in Amerind (Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20) was handed down by the High Court yesterday after the High Court heard the matter in early February of this year. Mills Oakley acts for the Receivers who sought the directions given by the Court.

In three separate judgments, the High Court dismissed the appeal by Carter Holt Harvey, with the key findings as follows:

Introduction

The NSW Supreme Court has provided guidance on the scope and operation of ss 70-45, 70-55 and 70-90 of the Insolvency Practice Schedule (Corporations) (IPSC) in The Matter of 1st Fleet Pty Ltd (in liquidation) [2019] NSWSC 6.

Introduction

We recently acted for the Commonwealth (Represented by the Australian Government Department of Jobs and Small Business) in Re Stay in Bed Milk and Bread Pty Ltd  [2019] VSC 181, in which the Supreme Court of Victoria determined that a franchisor’s marketing fund was not subject to a trust (express or Quistclose) in favour of franchisees and therefore was available for distribution to the franchisor’s priority creditors, including the Commonwealth.

For a company that is in financial difficulty, but which is still ultimately a viable going concern, a debt for equity swap can be an effective way to restructure its capital and borrowings and, in doing so, strengthen its balance sheet and deal with issues such as over gearing.

A debt for equity swap involves a creditor converting debt owed to it by a company into equity in that company. The effect of the swap is the issue of the equity to the creditor in satisfaction of the debt, such that the debt is discharged, released or extinguished.

The economic and social upheaval stemming from the COVID-19 pandemic has left the Australian not-for-profit sector searching for practices to ensure its viability in these uncertain times. As charities experience both increased costs and demand for their services, they may need to seek new avenues to generate revenue or manage their operations. Charities may consider exploring mergers and collaborations, or evaluating new commercialisation opportunities. In the event that a charity determines its operations are unviable, it may be forced to dissolve.

In early June 2020, Social Ventures Australia (SVA) alongside the Centre for Social Impact (CSI), published a report (Report) detailing the likely impact of COVID-19 on the charity sector.

The judgment in RCR Tomlinson Ltd (Admins apptd) [2020] NSWSC 735 provides clarification regarding the classification of circulating and non-circulating assets for the purpose of section 561 of the Corporations Act 2001 (Cth) (Act). The decision provides useful guidance for insolvency practitioners classifying circulating and non-circulating assets.