On 11 September 2017, the Commonweath Parliament passed the Treasury Law Amendments (2017 Enterprise Incentives No.2 Bill). The new legislation:
This week’s TGIF considers whether, in a voluntary administration, a report to creditors constituted sufficient disclosure and whether the proponent of a DOCA should be allowed to vote as a creditor in favour of that DOCA.
WHAT HAPPENED?
- On 18 September 2017 the Treasury Law Amendment (2017 Enterprise Incentives No. 2) Act 2017 (the Safe Harbour and Ipso Facto Act) became law.
- The Safe Harbour reforms introduced in the Safe Harbour and Ipso Facto Act create a safe harbour for company directors from personal liability for insolvent trading if the company is undertaking a restructure outside formal insolvency processes.
Division 65 and the New Strict Liability Regime
The reforms introducing a safe harbour for directors of insolvent companies and, from 1 July 2018, a limited stay on the operation of ipso facto clauses have been passed by both Houses of the Australian Parliament and will likely be enacted by month end. Late on Monday evening, after some debate, the Senate passed the reforms with only minor amendments. The Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 then returned to the House of Representatives who formally passed the amended Bill last night.
Safe harbour
In the recent decision of Lane (Trustee), in the matter of Lee (Bankrupt) v Deputy Commissioner of Taxation [2017] FCA 953, Cooper Grace Ward acted for the trustee in bankruptcy, who sought directions from the Court regarding the administration of a trading trust where the bankrupt was the trustee.
Facts
In a big 24 hours for restructuring and insolvency, the safe harbour reforms were passed by the Senate late last night, and anti-phoenixing reforms were announced this morning.
Safe harbour reforms
The safe harbour laws will commence operation the day after the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 receives Royal Assent, with the ipso facto provisions set to commence on 1 July 2018 (or earlier by proclamation).
On 12 September 2017, some of the most significant reforms of Australia’s corporate insolvency laws in recent years were passed by both Houses of the Australian Federal Parliament. These reforms will introduce:
Yesterday in Canberra, a significant step forward for Australian insolvency law reform was taken: Parliament passed the much anticipated "safe harbor" for directors in relation to insolvent trading liability and moratorium on reliance by solvent counterparties on “ipso facto” clauses in voluntary administration and creditors schemes of arrangement.
Key Points
On the key points:
In a wide-reaching judgment concerning an appeal by Mighty River International in the administration of Mesa Minerals, the Western Australian Court of Appeal, has recognised that “holding” Deed of Company Arrangement (DOCA) is permissible under Part 5.3A of the Corporations Act.
The key points – Holding DOCAs as a flexible framework
The key points for insolvency and turnaround professionals to take from Mighty River International v Hughes are: