On 28 March 2017, the Turnbull Government released draft legislation which would implement wide-ranging reforms to Australia’s corporate restructuring laws. The draft legislation focuses on reforms to the insolvent trading prohibition (Safe Harbour) and introducing a new stay on enforcing “ipso facto” clauses during certain restructuring procedures (Ipso Facto).
The insolvent trading "safe harbour" and "ipso facto" clause reform
The key points
Last week, the federal government circulated an exposure draft of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill (the Bill). The Bill is intended to promote entrepreneurship and innovation among directors of companies facing insolvency - this is to be achieved through two fundamental changes to existing insolvency laws.
Court of Appeal sets the record straight
The key point
On March 9, 2017, a full bench of the New South Wales Court of Appeal handed down a significant decision affecting approach to judicial review and approval of liquidator remuneration. Significantly, existing tension between decisions of different judges at first instance, and between NSW and Federal courts, has been resolved.
Court of Appeal sets the record straight
The key point
Earlier today, a full bench of the New South Wales Court of Appeal handed down a significant decision affecting approach to judicial review and approval of liquidator remuneration. Significantly, existing tension between decisions of different judges at first instance, and between NSW and Federal courts, has been resolved.
With the Australian Taxation Office very active in winding up companies for unpaid taxes, it is now commonplace for insolvency professionals to be faced with pending winding up petitions when considering an appointment as voluntary administrator. Obtaining an adjournment of the petition is often the first critical task in an administration.
The recent decision in Re Swan Services Pty Limited (in liq)
The High Court of Australia in CGU Insurance Ltd v Blakeley & Ors [2016] HCA 2 unanimously confirmed that a third party can join a defendant’s insurer to a proceeding and seek a declaration of rights under the insurance agreement, provided that third party has a ‘real interest’ in the performance of the agreement and that there is practical utility in the court providing that declaration.
High Court says "Yes"
Need to know
In a win for creditors of insolvent companies, on 10 December 2015 the High Court determined that the obligation of a liquidator under section 254(1)(d) of the Income Tax Assessment Act 1936 (Cth) (1936 Act) to retain sufficient funds to pay tax on assets realised during the winding up only arises after a tax assessment has been made. If the funds are distributed prior to a tax assessment being made, then the obligation does not arise.
The "running account" defence to an unfair preference claim is a fragile flower. In a recent decision, the Queensland Court of Appeal has reminded solvent counterparties that suspension of a customer's trading account will probably break the "running account", exposing a solvent counterparty to greater unfair preference risk.
Need to know