When company directors breach the law they can be personally liable for the company’s debts and regulatory action can be taken against them.

In Australia, the agency responsible for enforcing such breaches is the Australian Securities and Investments Commission (ASIC).

ASIC outlines the key liabilities company directors need to be aware of when things go wrong.

Following Treasury’s announcement on 24 September 2020 that it will introduce a suite of reforms to Australia’s insolvency framework, the Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 (Cth) (Draft Bill) was released for public consultation between 7 and 12 October 2020, providing much needed clarity as to the practical effect of the insolvency reforms, which are expected to commence on 1 January 2021.

In the course of antecedent transaction proceedings, particularly for unfair preferences, arguably the most contentious and critical question to be determined is the date of insolvency. Although that question predominantly involves an accounting exercise, it also includes an assessment of the commercial, financial and trading realities of the relevant company and a consideration of legal principles.

This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.

There remain a number of issues in the proposed insolvency reforms that need careful deliberation, particularly where the Regulations have yet to be released for consideration.

Paul Apáthy and Angus Dick, Herbert Smith Freehills

This is an extract from the 2021 edition of GRR's the Asia-Pacific Restructuring Review. The whole publication is available here.

In summary

This TGIF considers Tayeh v Commonwealth of Australia [2020] FCA 1323, where the Federal Court found that irregularities in the formation of a Committee of Inspection rendered invalid resolutions of the committee, including resolutions concerning liquidator remuneration.

Key takeaways

On 29 September 2020, the Federal Court of Australia published its much anticipated decision in Habrok (Dalgaranga) Pty Ltd v Gascoyne Resources Ltd [2020] FCA 1395, dismissing Habrok’s attempt to set aside a Deed of Company Arrangement (DOCA). The DOCA had been the culmination of a 15 month administration, and facilitated the recapitalisation, refinance, and relisting of the gold miner Gascoyne Resources Ltd (GCY) and its subsidiaries (together with GCY, the GCY Group).

Businesses experiencing financial distress as a result of COVID-19 will continue to receive financial relief until 31 December 2019.

What does this mean for businesses?

The extension predominantly impacts companies in relation to statutory demands and insolvent trading.

Statutory Demands

This week’s TGIF considers the case of Australian Securities and Investments Commission v Bettles [2020] FCA 1568, where the Federal Court of Australia confirmed the need for precision in making allegations of illegal phoenix activity.

Key takeaways