What you need to know
On 7 December 2018, amendments to the Australian Insolvency Practice Rules(Corporations) came into effect, which overhaul the manner in which assigned debts can be deployed in formal corporate insolvencies. These changes have the potential to significantly impact commonly used techniques for a solvent parent/group entity looking to control the formal insolvency of a subsidiary or affiliate.
What you need to know
The High Court has decided not to hear an appeal about the ability of the Linc Energy Limited (Linc Energy) liquidators to disclaim property of the company - this means the liquidators could disclaim that property, including any obligations under the specific environmental protection order (EPO) issued under Queensland's environmental legislation. The current position stands that the disclaimer notice had the effect of avoiding obligations of both the company and its liquidators under the EPO.
What you need to know
The High Court yesterday affirmed the flexibility of the purposes for Deeds of Company Arrangement (DOCA). In its reasoning, the Court placed very few limits on the use of what are commonly called "holding" DOCAs. It confirmed that a holding DOCA can be validly accepted by creditors to allow more time for an administrator to investigate the future options for an insolvent company.
Introduction
The concept of winding up does not exclusively apply to insolvent companies. Solvent companies can also be wound up, on the initiation of the company’s directors and shareholders (for example, as part of a corporate reconstruction or to close down non-operating or redundant entities).
An overview of the two key procedures to effect the dissolution of a solvent Australian company, being Members’ Voluntary Liquidation and Deregistration, is set out below.
Contracts, agreements, arrangements and rights to which the stay on enforcing ipso facto clauses does not apply; final Regulations and Declaration published
The reform and its progress
The Government has approved the drafting of the Courts and Land and Conveyancing Law Reform Bill 2018. The Bill is intended to give additional protection to home owners with mortgage difficulties.
The origins of the new Bill lie in the Keeping People in their Homes Bill, a Private Member’s Bill from early 2017. The new Bill will amend the Land and Conveyancing Law Reform Act 2013 to deal with circumstances where an insolvency remedy is not available to a borrower pursuant to the 2013 Act.
Proposed exceptions to the stay on enforcing ipso facto clauses now published; public consultation open
The reform
From 1 July 2018, the moratorium on reliance by solvent counterparties on “ipso facto” clauses in voluntary administration, certain receiverships and creditors schemes of arrangement will come into effect (unless it is proclaimed to commence earlier, which is not presently expected).
The Queensland Court of Appeal has unanimously allowed an appeal by the liquidators of Linc Energy Limited (Linc Energy), holding it was possible to use a disclaimer notice to avoid the consequences of an environmental protection order (EPO) issued under the Environmental Protection Act 1994 (Qld) (EPA).
Introduction – why does this matter?
The Court of Appeal has decided an important question affecting choices around methods of debt enforcement. In ACC Loan Management v Rickard,1 it looked at whether a receiver by way of equitable execution can be appointed to receive future sums to which the debtor may become entitled.