Debts claimed in statutory demands must be due and payable to the creditor named in the statutory demand.
When disputing statutory demands it is common for debtor companies to argue an offsetting claim, so as to reduce or extinguish the amount claimed in the statutory demand.
For there to be a valid offsetting claim there must be ‘mutuality’, meaning that the legal capacities in which both the offsetting claim and the statutory demand debt are each claimed and owed must align.
A recent Victorian case has worrying implications for financiers and creditors.
A decision of the Victorian Court of Appeal in Vasudevan v Becon Constructions (Australia) Pty Ltd [2014] VSCA 14 has the potential to significantly broaden the power of a liquidator to attack a company transaction under section 588FDA of the Corporations Act 2001 (Act) where there are ‘indirect benefits’ to a director or close associate of a director of the company.
Obtain advice before you lodge a proof of debt or vote in a liquidation
Secured creditors should remember that submitting a proof of debt and voting in a liquidation may result in the loss of their security if they get it wrong.
The Supreme Court of New South Wales has delivered a timely reminder to secured creditors of a company in liquidation, where the secured creditor lost its security because it submitted a proof of debt for the full amount of its debt and voted on a poll at a creditor’s meeting for its full debt.
Liquidators are commonly appointed to a company where, prior to liquidation the company was a trustee of a trust. Often when the liquidators are appointed, the company has ceased to be the trustee and a replacement trustee has not been appointed.
In these circumstances, the company in liquidation is a bare trustee in relation to the trust assets and the liquidator will assume this role until a replacement trustee is appointed. Often a replacement trustee is not appointed.
Does the liquidator as bare trustee have a power to sell trust assets?
Secured creditors should not allow a liquidator to sell a secured asset without first:
The insolvency of the borrower is a standard event of default in facility agreements. As well as covering the borrower's cash flow insolvency, these clauses also often cover other, earlier signs of distress. Two recent cases have seen lenders try to exploit these outer reaches of their insolvency event of default clauses. Hayley Çapani and Adam Pierce explain why these cases are significant for parties negotiating new deals, and for lenders considering their enforcement options on existing deals.
Negotiations with creditors for rescheduling
In Re JT Frith Limited [2012] EWHC 196 (Ch):
- the terms of an intercreditor agreement; and
- some unwitting help from the junior creditors,
enabled a senior secured lender to benefit indirectly from the prescribed part on the insolvency of its debtor.
Existing law at a glance
The Enterprise Act 2002 introduced the prescribed part under a new section 176A(2) of the Insolvency Act 1986. It reserves part of the floating charge recoveries for unsecured creditors.
Since then, the courts have held that: