The persisting spectre of the pandemic continues to create uncertainty in the market. Over the last 18 months, insolvency figures remained consistently low due to the government support which has been in place. With the prospect of that support coming to an end there is likely to be a reckoning, but when that will begin is unclear. Overall, this next year is likely to be one of resolving loose ends and tidying up before the economy can take off afresh.

Market outlook

There were big changes in 2020 in the world of restructuring and insolvency legislation with the introduction of two new restructuring tools: the Moratorium and the Restructuring Plan, as well as the reintroduction of Crown preference.

The Judge in the Sunbird scheme of arrangement sanction hearing has declined to sanction the scheme due to the “paucity of information” provided by the company to the creditors ahead of the creditor vote.

The Judge criticised the company’s general approach to the way in which it engaged with creditors, particularly those whom the directors felt would be obstructive to the scheme’s progress. In general terms, the Judge commented on the practice of lock-up agreements and highlighted concerns with the payment of lock-up fees.

It seems that business disruption due to coronavirus is pretty inevitable. What should you as a company director be doing if the disruption means your business starts to suffer?

What changes for me as a director?

As a director, you know that you owe duties to the company. When the business starts heading towards insolvency, there is a change of emphasis and instead of doing what is best for the shareholders, you have to change and consider what the consequences of your actions will be for the company’s creditors.

This week’s TGIF takes a look at the recent case of Mills Oakley (a partnership) v Asset HQ Australia Pty Ltd [2019] VSC 98, where the Supreme Court of Victoria found the statutory presumption of insolvency did not arise as there had not been effective service of a statutory demand due to a typographical error in the postal address.

What happened?

This week’s TGIF examines a decision of the Victorian Supreme Court which found that several proofs had been wrongly admitted or rejected, and had correct decisions been made, the company would not have been put into liquidation.

BACKGROUND

This week’s TGIF considers Re Broens Pty Limited (in liq) [2018] NSWSC 1747, in which a liquidator was held to be justified in making distributions to creditors in spite of several claims by employees for long service leave entitlements.

What happened?

On 19 December 2016, voluntary administrators were appointed to Broens Pty Limited (the Company). The Company supplied machinery & services to manufacturers in aerospace, rail, defence and mining industries.

This week’s TGIF considers the recent case of Vanguard v Modena [2018] FCA 1461, where the Court ordered a non-party director to pay indemnity costs due to his conduct in opposing winding-up proceedings against his company.

Background

Vanguard served a statutory demand on Modena on 27 September 2017 seeking payment of outstanding “commitment fees” totalling $138,000 which Modena was obliged, but had failed, to repay.

The recent decision of the Court of Appeal of Western Australia, Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in Liquidation) (Receivers and Managers Appointed) [2018] WASCA 163 provides much needed clarity around the law of set-off. The decision will no doubt help creditors sleep well at night, knowing that when contracting with counterparties that later become insolvent they will not lose their set-off rights for a lack of mutuality where the counterparty has granted security over its assets.

This week’s TGIF considers the decision in Mujkic Family Company Pty Ltd v Clarke & Gee Pty Ltd [2018] TASFC 4, which concerns a rather novel issue – whether a solicitor acting for a shareholder might also owe a duty of care to the company in liquidation.

What happened?

In 2015, the Supreme Court of Queensland ordered that the corporate trustee of a family trust be wound up.