We are again reminded that the clear terms of a written contract—even if they might yield a surprising result—will govern. For those who don’t bother to read the “clickwrap” terms and conditions when, for example, signing up for the new online game or entrusting millions in crypto currency, those controlling terms may surprise. Parties in any transaction cannot just assume that the “boilerplate”—whether a make-whole in a note, a subordination provision in a credit agreement, or terms and conditions in a customer agreement—will be acceptable.
In previous alerts in this series, we have discussed how transformative DAOs can be for corporate formation and tax status. We have discussed how determining a DAO’s classification—whether a DAO is a legal entity and, if so, what type—is vital before any legal proceeding.
With priming transactions experiencing a resurgence over the past few years, there have been a number of different routes taken by lenders with one goal in mind - Assemble a majority position and exchange, refinance or otherwise abandon their existing positions to move up the capital structure, which in turn helps increase their blended return on their exposure to a borrower and prevents a different configuration of investors from grabbing the “high ground” above them.
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.
In brief
Even with the fiscal stimulus and other measures taken by the Federal and State governments in Australia, corporate insolvencies are likely to increase in coming months.
Under Australia's insolvency regimes, a distressed company may be subject to voluntary administration, creditor's voluntary winding up or court ordered winding up (collectively, an external administration). Each of these processes raises different issues for the commencement and continuation of court and arbitration proceedings.
In summary
In our previous alert we discussed how Justice Markovic in the Federal Court of Australia had granted the administrators of retailer Colette Group relief from personal liability for rent in respect of 93 stores.
The Australian Federal Court has made orders relieving the administrators of retailer Colette from personal liability for rent in response to the COVID-19 crisis and the current uncertainty in respect of government policy about rent relief for tenants: see
What you need to know
Amendments to the Corporations Act 2001 (Cth) (Corporations Act) to implement the measures announced by Treasurer Josh Frydenberg on Sunday, 22 March 2020 to provide temporary relief for financially distressed businesses due to COVID-19 have now come into effect.
The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (CERPO Act) amendments were passed by the Parliament on 2 March 2020. They will apply for a 6 month period, but may be extended or have impacts beyond that timeframe.
The Treasurer, the Honourable Josh Frydenberg MP, has today announced proposed temporary changes to Australian corporate insolvency laws which will vary the minimum requirements for statutory demands and provide some relief for directors from insolvent trading. These announcements form part of the Australian Government's measures to support otherwise profitable and viable businesses due to the economic impacts of COVID-19.
What a director wanting to enter the safe harbour must do
Directors in Australia have long had a statutory duty to prevent insolvent trading. The duty is engaged where: