This week’s TGIF covers the Federal Court’s refusal in Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 2) [2019] FCA 93 to validate creditors’ resolutions fixing $5m+ of remuneration where creditors were given insufficient information; reduced remuneration to be fixed.
11 February orders refusing validation
A recent NSW Court of Appeal decision has re-enlivened the possibility of insolvent construction companies successfully recovering debts via the Security of Payment legislation. Insolvency practitioners appointed to construction companies should seek advice promptly following their appointment.
On 12 February 2019, the New South Wales Court of Appeal handed down its decision in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liquidation) [2019] NSWCA 11.
The Federal Court of Australia in Kaboko Mining Limited v Van Heerden (No 3) [2018] FCA 2055 handed down a significant decision which clarified the operation of "insolvency exclusion" clauses in a D&O liability insurance policy. The issue arose after Administrators commenced proceedings against four former directors of the company, and the insurer relied on an insolvency exclusion to decline to indemnify the former directors in respect of the claims made in the proceedings.
The facts
The recent decision of the Federal Court (Besanko J) in Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 2) [2019] FCA 93 illustrates the critical importance for administrators and liquidators of complying with the requirements in relation to remuneration reports to creditors, and the severe adverse consequences which may flow if they fail to do so.
Background facts
Australia’s corporate insolvency laws are in a process of significant change.
The latest proposed reform concerns the controversial practice of “phoenixing”. In recent months and years, phoenixing has attracted attention from a wide band of Australian regulators.
The Phoenixing Bill
This week’s TGIF considers a recent Federal Court decision which validated dispositions of property made by a company after the winding up began.
WHAT HAPPENED?
On 8 May 2017, Bond J ordered that a coal exploration company (the Company) be wound up on just and equitable grounds following a shareholder oppression claim. So as to avoid the consequences of a liquidation, his Honour immediately stayed that order for a period of 7 days to enable the warring parties a final chance to resolve their differences.
Insolvency – every director’s biggest nightmare. Under the Corporations Act s 459C, when a creditor serves a statutory demand on a company for an outstanding debt, the company will be presumed insolvent if it fails to comply with, or set aside, the demand. But what happens when the creditor is also a director of the company? This was an issue recently considered by the Supreme Court of Queensland in Re CSSC (QLD) Pty Ltd [2018] QSC 282.
The facts
In business it is not uncommon for a director of a company to be owed money by that company.
If the commercial relationship breaks down, the director may think it is an option to serve a creditor’s statutory demand on the debtor company.
However, recent court decisions demonstrate that issuing a creditor’s statutory demand is not a sure fire method of obtaining payment where the director is owed the debt personally or is a director of both the creditor and debtor companies.
Cases where statutory demands have been successfully challenged
This week’s TGIF considers Re Legend International Holdings Inc (In liq) [2018] VSC 789, the next chapter in the story of Legend International Holdings Inc, where the Court found a company to be insolvent on the basis of a foreign debt.
What you need to know
The Federal Court – in a much-litigated wider contest about the ownership of the luxury yacht, “Dragon Pearl” drifting in an intriguing cross-border insolvency – has clarified the limitations for foreign entities and their insolvency appointees in pursuing action in Australia to un-wind antecedent transactions (by attempting to use the voidable transaction provisions of the Australian Corporations Act).
Insolvency and restructuring professionals need to know: