Under the Insolvency Act 1986 (IA 1986), office-holders are given wide powers but they are subject to the control of the court. In order to allow insolvency practitioners to carry out their duties efficiently and without having constantly to look over their shoulders, this control has always been exercised with a light touch. In recent years there have been several important cases examining these issues.[1]

After the tumult of the past few years, with emergency legislation being introduced to mitigate the impact of the Covid-19 pandemic, the last few months have felt relatively quiet in terms of new legislation. That said, there have been a number of important government publications in relation to the insolvency industry, and it appears that change is on the horizon.

Insolvency practitioners and other potentially affected stakeholders, such as company directors and corporate trustees, should watch this space carefully to keep abreast of any changes to their obligations.

Restructuring & Insolvency analysis: Upon an application for an administration order the court exercised its discretion and concluded that a winding up order was more appropriate. The court was satisfied that the Respondent company was insolvent but could not see why administration would fulfil one of the statutory purposes.

Re Aartee Steel Group Ltd [2023] EWHC 1701 (Ch)

What are the practical implications of this case?

Dispute Resolution analysis: In a case where a bankruptcy was annulled on the basis that the alleged tax liability was ill-founded and misconceived, HMRC has been ordered to bear the OR’s and the trustees’ costs of the bankruptcy.

Re Adjei [2023] EWHC 1553 (Ch)

What are the practical implications of this case?

The Commonwealth Parliamentary Joint Committee on Corporations and Financial Services Corporate insolvency in Australia was released on 12 July 2023.

The Report states that the construction industry is experiencing one of the highest rates of insolvencies compared to other sectors. The Report cited ASIC data which shows that the number of companies entering external administration has increased relative to the same month in the previous two financial years, with the construction industry being the most highly represented.

In a recent decision, Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88, lenders to the Arrium Group, a company that collapsed, have lost their appeal regarding the personal liability of the Chief Financial Officer and Group Treasurer. The NSW Supreme Court had previously dismissed the lenders' claims, and the Court of Appeal has now affirmed that decision.

Current economic conditions and market instability are likely to see more Australian companies fall into distress in 2023 — creating both opportunities for proactive restructuring as well as distressed asset sales.

That's one of the predictions in this year's edition of From Red to Black, Clayton Utz's annual review of the dynamics of Australia's Restructuring and Insolvency (R&I) market.

Dispute Resolution analysis: Following a liability trial, an unfair prejudice petition under section 994 of the Companies Act 2006 has been dismissed. None of the alleged instances of unfair prejudice directed against the Respondents was made out.

Pickering v Hughes and ors [2022] EWHC 3359 (Ch)

What are the practical implications of this case?

Welcome to the 2023 edition of "From Red to Black", our annual review of significant developments and topical issues in the Australian restructuring and insolvency market.