In the recent case of In the matter of Gondon Five Pty Limited and Cui Family Asset Management Pty Limited [2019] NSWSC 469, the New South Wales Supreme Court (Brereton J) considered the purpose and scope of an appointment as receiver to a company, and came down particularly hard on an insolvency practitioner for performing work and incurring expenses which were determined to be outside, or not incidental to, the scope of his appointment.

Background

The Federal Court of Australia in Kaboko Mining Limited v Van Heerden (No 3) [2018] FCA 2055 handed down a significant decision which clarified the operation of "insolvency exclusion" clauses in a D&O liability insurance policy. The issue arose after Administrators commenced proceedings against four former directors of the company, and the insurer relied on an insolvency exclusion to decline to indemnify the former directors in respect of the claims made in the proceedings.

The facts

Insolvency – every director’s biggest nightmare. Under the Corporations Act s 459C, when a creditor serves a statutory demand on a company for an outstanding debt, the company will be presumed insolvent if it fails to comply with, or set aside, the demand. But what happens when the creditor is also a director of the company? This was an issue recently considered by the Supreme Court of Queensland in Re CSSC (QLD) Pty Ltd [2018] QSC 282.

The facts

The recent decision of the Federal Court (Besanko J) in Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 2) [2019] FCA 93 illustrates the critical importance for administrators and liquidators of complying with the requirements in relation to remuneration reports to creditors, and the severe adverse consequences which may flow if they fail to do so.

Background facts

On December 13, the U.S. Bankruptcy Court for the Southern District of Florida ruled that the operator of a computer-financing scheme cannot use his bankruptcy to discharge a $13.4 million judgment entered in 2016 for violating a 2008 FTC order.

In a recent case, Emmett AJA of the Supreme Court of New South Wales refused to make an order to terminate the winding up of an incorporated association. In this article, we re-examine the principles with which the Court will have regard when determining whether to exercise its discretion to terminate the winding up of a company or incorporated association.

Background

Receiverships usually arise from a secured creditor exercising their rights under a loan contract or mortgage following a default. But even where no default occurs, the Supreme Court of New South Wales has jurisdiction to appoint a receiver to preserve the property of an association pending the resolution of a dispute about the management of the association’s property.

Jurisdiction

On October 26, the U.S. District Court for the Eastern District of Wisconsin denied a plaintiff’s motion for summary judgment and instead entered judgement in favor of two creditors and two consumer reporting agencies (collectively, “defendants”), holding that the debtor failed to show a factual inaccuracy in the credit reporting of a debt.

On November 8, a federal jury for the U.S. District Court for the District of Minnesota awarded the ResCap Liquidating Trust, the post-bankruptcy successor-in-interest to Residential Funding Company, LLC (RFC), a $27.8 million verdict in an indemnity case against a correspondent lender.

A company’s non-compliance with a statutory demand is the most common method of proving its insolvency in any winding up proceedings. Generally, if it does not make good the debt under the statutory demand within 21 days of service, the company will be presumed to be insolvent. What can a company do if it disputes the legitimacy of the debt?

The basics – compulsory winding up and statutory demands