On 29 April 2016, the Australian Government Treasury released a proposal paper that, among other things, proposed reforms to introduce an ipso facto moratorium (Proposal). This reform was foreshadowed in as part of the Australian Government’s National Innovation and Science Agenda.
On 29 April 2016, the Australian Federal Government (Government) announced three major insolvency law reform proposals in its Improving Bankruptcy and Insolvency Laws Proposal Paper1 (Proposal). The Government has invited submissions from stakeholders and given this is a rare opportunity to undertake substantial reform, we strongly encourage involvement.
Summary
The recent New South Wales Supreme Court decision in Re HIH Insurance Ltd (In Liquidation)1 has potentially significant implications for securities class actions where there are allegations that a listed company has failed to disclose material information to the market and/or engaged in misleading and deceptive conduct causing the company's shares to trade at an inflated price.
The Australian Government is proposing to constrain certain "ipso facto" clauses ‒ a move which could make flip clauses void. The closing date for submissions is Friday 27 May 2016.
How would changes to ipso facto clauses affect securitisation?
This week’s TGIF considers the recent NSW Court of Appeal decision of Commissioner of Taxation of the Commonwealth of Australia v 4 Doonan Street Collinsville Pty Ltd (in liq) [2016] NSWCA 69 in which the Court considered the validity of the Commissioner of Taxation’s treatment of debits and credits in an insolvency context.
FACTS
WHO SHOULD READ THIS
- Industry participants in the construction sector.
THINGS YOU NEED TO KNOW
- The deadline for comments on the Improving Bankruptcy and Insolvency Laws Proposals Paper is 27 May 2016.
WHAT YOU NEED TO DO
The NSW Supreme Court recently handed down its decision in Re HIH Insurance Limited (In Liq)[1]. This long-running saga began with the collapse 15 years ago of Australia’s (then) second largest insurance company, HIH Insurance Limited, and has since seen a royal commission, the imprisonment of various senior management figures, and losses totalling more than $5 billion.
The decision in Re Forge Group Construction Pty Ltd (in liq) (Receivers and Managers appointed); ex parte Jones [No 2] [2016] WASC 87 confirms that while some communications between liquidators, receivers and their respective solicitors can be privileged, it is not necessarily always the case. Critical factors include the purpose of the communication in question and whether there is a sufficient commonality of interest between liquidators and receivers in relation to the communication’s subject matter.
Facts
Introduction
In most cases, the precondition for the appointment of a liquidator and the winding up of a company by a court is that a company is insolvent. However, in some cases courts will make these orders in the context of a shareholders dispute where there is a management deadlock or a breakdown in trust and confidence between shareholders. Additionally, a court may make these orders where there has been serious fraud or mismanagement in the conduct of a company’s affairs.
Relevant law
A party to arbitration or court proceedings in Australia can obtain a freezing order in advance of obtaining a domestic court judgment or arbitration award, in prescribed circumstances. In PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015]1 the High Court of Australia has confirmed that Australian courts have the same power to grant freezing orders prior to a judgment or award being obtained in respect of proceedings commenced outside of Australia, provided that judgment or award would be enforceable in Australia.