Introduction

In December 2024, Australian Securities and Investments Commission (ASIC) released an updated version of Regulatory Guide RG 217. The guidance is designed to assist directors in complying with their duty to prevent insolvent trading. It sets out four key principles for directors to avoid insolvent trading, explains the safe harbour defence (which offers protection from personal liability), and clarifies ASIC’s approach to assessing breaches of duty and the application of the safe harbour defence.

In Arab v Pan, in the matter of Pan (No 3) [2024] FCA 563, the Federal Court of Australia addressed critical issues concerning the scope and compliance of summonses for production in bankruptcy, which will also impact corporate insolvency proceedings and such proceedings in other common law jurisdictions.

Following on from the UK Supreme Court decision in Sequana (discussed here), the recent UK High Court (UKHC) decision in Hunt v Singh [2023] EWHC 1784 (Ch), further considered the duty of directors to take into account the interests of creditors in certain circumstances.

The High Court (Court) recently dismissed a petition seeking the winding up of a biofuel company (Company).

The ex tempore judgment is of note because it considers the standing of the Petitioner to bring the application and the consequences of a relevant witness not being cross-examined by the Petitioner on his affidavit evidence regarding the solvency of the Company.

Background

In FamilyMart China Holding Co Ltd (Respondent) v Ting Chuan (Cayman Islands) Holding Corporation (Appellant) (Cayman Islands) [2023] UKPC 33, the Privy Council has provided useful guidance about the interplay between an arbitration agreement and exercise of the Cayman court’s powers and discretion to wind up a company on just and equitable grounds.

This article considers the New South Wales Supreme Court’s decision to grant leave to proceed against non-appearing foreign defendants, which were in foreign insolvency proceedings.

There has been a significant growth of litigation in Australia where there is at least one foreign defendant. This is unsurprising given the growing number of international agreements under which the parties govern their contract under Australian law and expressly agree to Australian court jurisdiction, and the volume of global trade with Australia and foreign direct investment.

Understanding whether a company is insolvent, and the date of insolvency, is essential for directors and accountants who advise companies, as well as liquidators and other parties bringing insolvency-based claims. In understanding these issues, the analysis may need to go beyond establishing present-day liquidity – for example, what impact do long term-debts have on a company’s solvency and how are they used to prove insolvency? Which debts are relevant to the cashflow test? Whether a company is ‘able to pay all its debts’ as and when they become ‘due and payable’?

A recent Court of Appeal decision held that receivers are statutorily obliged to discharge preferential costs from assets available after deducting costs and expenses of a receiverirst line

The issue

On 8 February 2023, the High Court of Australia (being Australia’s highest court) simultaneously handed down two highly anticipated insolvency law decisions:

In the recent case of LMN v Bitflyer Holdings Inc & Ors [2022] EWHC 2954, the High Court of England and Wales made orders directed at a number of cryptocurrency exchanges requiring them to provide information in relation to misappropriated crypto assets.