For some time now, there has been uncertainty in Australian insolvency law about whether or not insolvency practitioners should apply the statutory priority regimes established by sections 433, 566 and 561 of the Corporations Act 2001 (Cth) when distributing the assets of a “trading trust”. The decision of the New South Wales Supreme Court in Re Independent Contractor Services (Aust) Pty Ltd (In liq) [No 2] (2016) 305 FLR 222, and the myriad of cases that followed it, suggested that the answer was “no”.

Last Thursday's decision in the WA Supreme Court to allow a sale to insiders of a company subject to a deed of company arrangement will make the restructuring process smoother for administrators, who can now negotiate with a wider pool of potential purchasers, as Chapter 2E of the Corporations Act 2001 (Cth), which deals with related party transactions, will not apply (Mighty River International v Bryan Hughes and Daniel Bredenkamp as Deed Administrators of Mesa Minerals Ltd (Subject to Deed of Company Arrangement) [No 2] [2018] WASC 368; Clayton Utz acted for the deed administrators of Mes

Some 25 years after Harmer promised a faster, more efficient and commercial approach for dealing with failed and failing companies, Australia's highest court has this morning confirmed that creditors can contractually bind a company and all stakeholders to a moratorium extension via a properly formed holding DOCA (Mighty River International Limited v Hughes [2018] HCA 38; Clayton Utz acted for the successful Deed Administrators of Mesa Minerals Limited).

The two limbs of the defence to an unfair preference claim under section 588FG(1)(b) and (2)(b) of the Corporations Act have separate work to do.

In a useful decision for liquidators and the insolvency industry, the WA Court of Appeal has clarified the nature of the tests creditors need to satisfy to maintain a defence to a liquidator's unfair preference claim in section 588FG(1)(b) or (2)(b) of the Corporations Act (White & Templeton v ACN 153 152 731 Pty Ltd (in liq) & Anor [2018] WASCA 119). 

The special purpose liquidators of Queensland Nickel Pty Ltd (in liq) have been successful in their application in the Supreme Court of Queensland for freezing orders against Mr Clive Palmer and several companies which he controls.[1]

Background

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 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.

The Turnbull Government’s much-heralded ‘Innovation Statement’ was released yesterday. It contained wide-ranging statements on reforms aimed at fostering innovation across a number of sectors in the Australian economy.

One important reform area is in Australian corporate insolvency law.

Corporate insolvency law reform timetable

The Innovation Statement includes important content for the reform of Australia’s corporate insolvency laws. It is part of an ongoing reform exercise which has followed this timetable to date:

The Australian Government has accepted certain recommendations of the Productivity Commission's long-awaited Report on Business Set-up, Transfer and Closure, in an attempt to change the focus of Australia's insolvency laws from "penalising and stigmatising business failure”, according to the Minister for Small Business and Assistant Treasurer, the Hon Kelly O'Dwyer MP.

It has expressed a willingness to legislate to introduce at least two main changes:

Key Points:

A forbearance arrangement is a useful instrument to ensure that both the lender and the customer are aligned on the proposed turnaround or workout.