The bar for recovering assets that have been dubiously transferred out of an insolvent company may not be as high as one might think.

Background

On 14 June 2016, in its judgment delivered in Great Investments Ltd v Warner [2016] FCAFC 85, the Full Court of the Federal Court of Australia confirmed that a benefit transferred from a company without authority can only be retained by the recipient in very limited circumstances.

Summary

Third parties associated with an employer may find themselves liable to contribute to the employer's occupational pension scheme. Where a pension scheme is in deficit, the Pensions Regulator has powers - so-called 'moral hazard' powers - that can require a third party to give financial support or a specific payment to the pension scheme.

Section 440D imposes a stay on “proceedings in a court” against a company whilst it is in administration under Part 5.3A of the Corporations Act. It is well established that the term “proceedings in a court” does not include an arbitration proceeding: see Larkden Pty Limited v Lloyd Energy Systems Pty Limited [2011] NSWSC 1305 at [42] (Hammerschlag J). Notwithstanding this, can the Court use its general power to make orders under s447A to extend the reach of s440D in order to impose a stay on an arbitration against a company in administration?

The recent Full Court of the Federal Court of Australia decision of Templeton v Australian Securities and Investment Commission [2015] FCAFC 137 has considered the application of 'proportionality' in determining receivers' remuneration.

Update on McCabes' article " 'Are we there yet' - When are proceedings over for the purposes of enforcement"

The High Court of Australia has refused an application for special leave to appeal the decision of the Full Court of the Federal Court of Australia in Sarks v Cassegrain [2015] FCAFC 38, confirming that a judgment issued by the Court on the basis of filing of a certificate of costs assessment is a "final judgment" for the purposes of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) and can therefore ground a bankruptcy notice.

It is not uncommon for companies served with wind up proceedings to appoint external administrators for the purposes of investigating the affairs of the company and so that recommendations can be made to creditors to either have the company wound up, execute a deed of company arrangement or hand the company back into the control of directors.

In circumstances where the administrators conclude that the company should be wound up, it is common for the administrators to seek to be appointed as the official liquidators of the company.

In so far as they relates to creditor's statutory demands, the provisions of the Corporations Act 2001 (Cth) are construed by the courts particularly prescriptively.

On 5 June 2015, His Honour Justice Brereton delivered judgment in In the matter of Unity Resources Group Australia Pty Limited [2015] NSWSC 1174. This is another example of the technical application of these sections by the court.

The Fair Entitlements Guarantee Act 2012 (Cth) requires the Commonwealth Government to pay outstanding superannuation, annual leave, redundancy and wages entitlements for eligible employees who have lost their jobs due to the liquidation or bankruptcy of their employers. It is generally recognised as an important safety net for employees, so that their superannuation is guaranteed.

The Bankruptcy Act 1966 (Cth) (the Act) provides a regime by which a debtor can compromise with his/her creditors outside formal bankruptcy. The provisions are found in Part X (Personal Insolvency Agreements) and Part IX (Debt Agreements) of the Act.

DEBT AGREEMENTS

Summary

We reported in December 2014 that the amendments to the EC Regulation on Insolvency Proceeding (the Recast Regulation) were virtually finalised and agreed between the various legislative organs of the European Union.

Finally after several years, the debate is now over and the European Parliament has now approved the final text – broadly as it was in December 2014. The outcome is good news for cross border corporate restructurings and insolvencies around Europe, but it will not come into force for over two years.

Next steps