Welcome to the 2023 edition of "From Red to Black", our annual review of significant developments and topical issues in the Australian restructuring and insolvency market.
Insolvency practitioners and creditors facing voidable transaction claims will need to reassess the value of any potential or threatened unfair preference claims or other voidable transaction claims, following two important insolvency decisions in the High Court yesterday (Metal Manufactures Pty Limited v Morton [2023] HCA 1 (Metal Manufactures); Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2 (Badenoch).
It held that:
A comprehensive review has begun into the effectiveness of Australia’s corporate insolvency laws in protecting and maximising value for the benefit of all interested parties and the economy. Undertaken by the Federal Government’s Parliamentary Joint Committee on Corporations and Financial Services, the review is seeking submissions by 30 November 2022.
The High Court today gave the first decision, globally, of a Court of ultimate appeal on the question of the construction of Article XI(2) of the Cape Town Convention's protocol on Matters Specific to Aircraft Equipment (Aircraft Protocol), which is of seminal importance for financiers and lessors of aircraft property, insolvency administrators globally.
It is important for a receiver or voluntary administrator to ensure that a proper sales process is undertaken relevant to the circumstances as there is no "one-size-fits-all" approach.
It is important for a receiver or voluntary administrator to ensure that a proper sales process is undertaken relevant to the circumstances as there is no "one-size-fits-all" approach.
As participants in the Australian debt restructuring market continue to innovate we expect to see an increase in these control transactions, testing further again the Australian statutory regimes.
The Virgin sale shows the flexibility of Australia's restructuring regime and sets a significant judicial precedent for future control transactions.
Virgin Airlines restructured through voluntary administration
On 20 April 2020, Virgin Australia and a number of its subsidiaries were placed into voluntary administration owing $7 billion of debt to around 12,000 creditors with partners at Deloitte Australia being appointed as joint and several voluntary administrators of Virgin. Clayton Utz was appointed to act for the Administrators.
Unusual circumstances have spurred innovation and ground-breaking responses which will reshape restructuring and insolvency.
Just when you thought it was safe to return to your favourite local restaurant and that COVID-19 had exclusive rights to 2020, we find ourselves once again working from home and having to cope with the lingering effects of the virus. Unfortunately for corporate Australia, the COVID virus is as contagious as it always was for your business… but there is a light at the end of the tunnel for some.
Directors will soon be free to make decisions to trade on even insolvent entities, and incur debts in the ordinary course of business, with the passing of the Coronavirus Economic Response Package Omnibus Act 2020 last night and Royal Assent today. The Act is intended to encourage business to continue trading free of risk that insolvent trading laws – which prevent directors of insolvent companies incurring fresh debt – would impose a personal civil and criminal liability on them. There are also changes to statutory demands and debtor's petitions.