The Federal Court of Australia has recently exercised its powers to:

The Commodity Futures Trading Commission proposed its first comprehensive overhaul of its bankruptcy rules since 1983. The recommended new rules do not substantively change anything but codify many CFTC interpretations and views developed over 40 years and refresh references to means of communication and recordkeeping practices to reflect current norms.

At the Commodity Futures Trading Commission (CFTC) open meeting on April 14, the CFTC unanimously approved proposed amendments to Part 190 of its rules governing bankruptcy proceedings of commodity brokers, including futures commission merchants (FCMs) and derivatives clearing organizations (DCOs). The proposed amendments are intended to comprehensively update Part 190 to reflect current market practices. Among other revisions, the proposed amendments to Part 190 would:

Background

In the 2018 Autumn Budget, the Chancellor announced his intention to reintroduce Crown Preference with effect from 6 April 2020. Due to the attempts to prorogue Parliament and the General Election last year, the necessary legislation was not passed. However, it has now been introduced in the Finance Bill 2020, with the later start date of 1 December 2020.

Cash flow and current and future liquidity are now real concerns for many businesses during this COVID-19 pandemic. Increasingly, the attention of directors and the wider economic ecosystem is turning to consider the issues of approaching insolvency and the duties of directors.

In line with the current approach of the UK Government to support businesses, on Saturday, 28 March, the Business Secretary, Alok Sharma, announced that UK wrongful trading insolvency laws are to temporarily change to help give businesses and directors some "breathing space".

The economic impacts of COVID-19 are unexpected and significant. While the Australian Government has announced a number of temporary reforms to address these impacts, there remains risk for directors of companies that are unable to pay their debts as and when they are due. 

The Government has announced significant temporary measures to ensure that our insolvency laws and processes do not expose companies and individuals to undue risk. This will hopefully avoid a potentially unprecedented wave of insolvencies. 

Key takeouts

The Government announced a six month suspension of insolvent trading laws.

The relevant debts will still be due and payable by the company in the normal way. 

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was passed by both houses of Parliament on 5 February 2020, with an amendment made by the Senate to review the operation and effectiveness of the legislation after five years accepted by the House of Representatives.

There is no doubt Australia has done well in its response to the COVID-19 pandemic. Many companies and individuals have been able to obtain some economic relief through a range of Government policies and initiatives, and some generous concessions in relation to financing arrangements, which may have otherwise crippled some businesses.

In this technical update we discuss several points of principle from the recent High Court decision in Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20 (Carter).