Part 5.3A of the Corporations Act (Act) provides a regime for a company that is insolvent or likely to become insolvent to maximise the chance of the company continuing to trade or a proposal which results in a better return to creditors rather than its immediate liquidation.  Part 5.3A sets out the requirements for the appointment of a voluntary administrator to the distressed company with a view to the company possibly executing a deed of company arrangement (DOCA) with its creditors.

Key Points:

The key to planning, devising and implementing a successful turnaround is having the right team in place to properly assess all relevant information, circumstances and risks.

Independent experts have become increasingly nervous on independence and process points since the Australian Securities and Investments Commission (ASIC) required a replacement independent expert in Billabong, apparently based on independence concerns raised by ASIC in that case.

The decision Akers as a joint foreign representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57 demonstrates that Australian Courts may be willing to depart from the philosophical basis for cross border insolvency in order to protect the interests of Australian based creditors.

Background

When the liquidator of a company comes knocking on a creditor’s door, it is to echoes of "Queue jumper!" reverberating in the background. 

Essentially, one of a liquidator's first tasks when appointed is to identify whether any creditors have been given 'preferential  treatment' - that is, whether they have been paid some or all of their debt just prior to the company's liquidation and at the expense of other creditors.

In Re John Pettit Pty Limited (Subject to a Deed of Company Arrangement) [2014] NSWSC 728, the Supreme Court of NSW considered an application by the deed administrators of John Pettit Pty Ltd (John Pettit) seeking directions to sell property potentially owned by third parties and orders which limited the Deed Administrators’ personal liability in relation to the sale.

BACKGROUND

The Supreme Court of Western Australia has recently held that a creditor’s claim against a guarantor was extinguished some years earlier, under the guarantor’s deed of company arrangement (DOCA).

The reasoning behind Le Miere J’s decision in Australian Gypsum Industries Pty Ltd v Dalesun Holding Pty Ltd is that a DOCA extinguishes future liabilities arising under an agreement made prior to the execution of the DOCA. This includes those arising under pre-existing guarantees.

Introduction

On Tuesday 10 June 2014 in the Australian Capital Territory Industrial Magistrates Court, an early mention in the Kenoss Contractors case was heard.  This case includes a prosecution of both an organisation for allegedly failing to meet the primary health and safety duty and an officer for allegedly failing to exercise due diligence under the Work Health and Safety Act 2011 (ACT) which commenced on 1 January 2012.  This case is ostensibly the first prosecution of an officer under the new harmonised WHS laws.

One of the many changes to be implemented as part of the Federal Budget delivered last night was a change to the Fair Entitlements Guarantee (FEG) (previously known as the General Employee Entitlements and Redundancy Scheme or GEERS), which  guarantees certain unpaid employee entitlements in the event of insolvency or bankruptcy of that person's employer.

A recent decision of the Supreme Court of Western Australia highlights the importance of properly registering security interests under the Personal Property Securities Act 2009 (Cth) (the Act).