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 January 17, 2019, the United States Court of Appeals for the Fifth Circuit (the “FifthCircuit”) issued a decision in In re Ultra Petroleum Corp. that could have significant implications for creditors seeking payment of contractual make-whole amounts and post-petition interest from chapter 11 debtors.[1]

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

Clarification by the Court of Appeal (England and Wales) on Contracts

Case: Leibson Corporation and Others v TOC Investments Corporation and Others [2018] EWCA Civ 763 (17 April 2018).

Summary

English law restructuring and insolvency tools are used to implement financial restructurings and the external administration of foreign companies. The attractiveness of the English tools and legal system is highlighted by the prevalence of companies incorporated abroad, especially companies incorporated in the EU, which avail themselves of those tools. English law in this area is impacted by much European law.

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

The last few years have seen the Commonwealth increasingly crack down on misuse of the Fair Entitlements Guarantee, or FEG, program. The cases that have resulted have led to various disputes in insolvency law about the priorities of different creditors. The priorities to be applied in insolvent trading trusts have been one issue recently puzzling lawyers and insolvency practitioners alike. Relief may well be around the corner, however, as the High Court is set to weigh in.

What the FEG?

Prior to March 2017, any right to sue that comprised an asset of a bankrupt’s estate could only be litigated by the trustee of the bankrupt. The inability of a trustee to assign a bankrupt’s cause of action resulted in many such actions not being litigated due to factors such as a lack of resources. This position changed through the insertion into the Bankruptcy Act 1966 (Cth) in Schedule 2 of the Insolvency Practice Schedule (Bankruptcy), which expressly permits a trustee to assign to a third party any right to sue that is held by of a bankrupt estate (see section 100-5).