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.
Recently the Victorian Court of Appeal upheld a decision to deny liquidators approval of a proposed settlement in McDermott and Potts as liquidators of Lonnex Pty Ltd (in liquidation) [2019] VSCA 23. The creditors had been opposed to the settlement.
Background
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
This week’s TGIF considers a recent decision of the Federal Court where a special purpose liquidator was appointed to investigate suspected illegal phoenix activity.
WHAT HAPPENED?
The company formerly known as Intelara Pty Ltd (Intelara) was wholly owned by and had common directors with Intelara Holdings Pty Ltd (Holdings). The directors of both companies were also the shareholders of Holdings.
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11
The NSW Court of Appeal has decided that SOPA enforcement is available to claimants in liquidation in NSW, contrary to its equivalent Court in Victoria. The same statutory words now have consequences that differ north and south of the border.
Why does this matter?