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

In yet another example of the Dubai International Financial Centre (DIFC) making its company and insolvency law even more versatile, the DIFC has introduced a mechanism which will operate in a similar manner to a scheme of arrangement under English law. The law came into effect on 12 November 2018.

Key terms

In September 2018 the Dubai International Financial Centre Authority (“DIFCA”) announced that it proposes to replace its current insolvency law with a new law to update the insolvency regime in the Dubai International Financial Centre (“DIFC”) and that it has launched a consultation in relation to the same.

Why are changes proposed?

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).

In the recent decision of Michael J Lonsdale (Electrical) Limited v Bresco Electrical Services Limited (In Liquidation) [2018] EWHC 2043 (TCC), Fraser J found that parties cannot resolve their disputes by means of adjudication where a company in liquidation and its counterparty both claim a pre-liquidation entitlement to payment of money by the other.

The Limitations Act 1969 (NSW) (Limitations Act) establishes time limits within which plaintiffs must commence civil proceedings, including for the recovery of a debt. A failure to bring a claim within the relevant time period results in the claim lapsing, and the creditor losing its rights to enforce its debt. Accordingly, it is critical that creditors understand how the law restricts their ability to collect debts and any exceptions that they may rely upon as the limitation date approaches.

The question in Pleash (Liquidator) v Tucker [2018] FCAFC 144 (29 August 2018) was whether financial documents of a discretionary trust ought to be produced for the purpose of a liquidator investigating the ability of an examinee (and former director of the company) to satisfy any judgment debt that may be obtained against him.

Over the Bank holiday weekend, the UK government announced that it intends to introduce new legislation to implement certain measures (detailed below) as soon as parliamentary time permits.