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The Federal Court of Australia rules that receivers appointed to a company in liquidation are entitled to pay employee entitlements and fees.

In Short

The Situation: The statutory moratorium period for voluntary administrators to restructure an insolvent company often is too short to find a solution. Administrators frequently utilise "holding" deeds of company arrangement ("DOCAs") to extend the moratorium and "buy" time to investigate potential restructuring opportunities. A creditor challenged this practice by arguing that holding DOCAs are invalid.

The Question: Are holding DOCAs valid under the Corporations Act 2001(Cth)?

In Short

The Background: The administrators of an Australian auction house and gallery business applied to the Federal Court of Australia for directions to recover in excess of $1 million in fees and costs incurred with respect to performing a stocktake of the auction house's inventory and returning consigned goods to owners.

The Issue: Did an equitable lien exist over the consigned goods in favour of the administrators for their fees and costs and, if so, could the administrators recover those fees and costs?

The Federal Court of Australia has provided judicial guidance about what constitutes taking possession by seizure under the Personal Property Securities Act 2009 (Cth) ("PPSA"). Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] FCA 866 indicates that a receiver taking possession of personal property in accordance with a valid security agreement will not perfect a security interest by way of possession.

Background

In Short

The Situation: Frequently, the statutory moratorium period provided to voluntary administrators to restructure an insolvent company is too short to find a solution. Administrators often utilise "holding" deeds of company arrangement to extend the period of moratorium and "buy" time to investigate potential restructuring opportunities for the future of the company. A creditor recently challenged this industrywide practice by arguing that holding DOCAs are invalid.

On July 6-7, 2017, Craig Jalbert, in his capacity as Trustee for F2 Liquidating Trust, filed approximately 187 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code (depending on the nature of the claims). In certain instances, the Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.

On June 15, 2017, Curtis R. Smith, as Liquidating Trustee of the Hastings Creditors’ Liquidating Trust, filed approximately 69 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code. The Liquidating Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.

On June 13, 2017, The Original Soupman, Inc. and its affiliates (collectively “Debtors” or “Original Soupman”) commenced voluntary bankruptcy proceedings under Chapter 11 of the Bankruptcy Code. According to its petition, Original Soupman estimates that its assets are between $1 million and $10 million, and its liabilities are between $10 million and $50 million.

On May 17, 2017, GulfMark Offshore, Inc. (“GulfMark” or “Debtor”) filed a voluntary petition for bankruptcy relief under chapter 11 of the Bankruptcy Code in the United States District Court for the District of Delaware.

Starting on April 28, 2017, Craig R. Jalbert, as Distribution Trustee of the Corinthian Distribution Trust, filed approximately 122 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548, 549 and and 550 of the Bankruptcy Code (depending upon the nature of the underlying transactions). The Distribution Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.