On 11 July 2019, HMRC published its summary of responses to its “protecting your taxes in insolvency” consultation.
Following the consultation, the government will legislate in the Finance Bill 2019-20 to make HMRC a secondary preferential creditor for certain tax debts paid by employees and taxpayers. This change is intended to ensure that when a business enters insolvency, more of the taxes paid in good faith by employees and taxpayers go to the Exchequer, rather than being distributed to other creditors. Draft legislation and an explanatory note is also available.
On 11 July 2019, HMRC published a policy paper discussing measures which are aimed at those taxpayers who “unfairly seek to reduce their tax bill by misusing the insolvency of companies”. This will be achieved by making directors and other persons connected to those companies jointly and severally liable for the avoidance, evasion or “phoenixism” debts of the corporate entity.
An explanatory note and draft legislation set out the conditions that must be satisfied in order to enable an authorised HMRC officer to issue a “joint liability notice” to an individual.
On 19 June 2019, the much-anticipated High Court appeal in the matter of Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20 (also known as the "Amerind appeal") was handed down.
Liquidators are encouraged to seek advice or directions from the Court as to the discharge of their responsibilities. But who bears the costs of such proceedings, of the liquidator and of any contradictor involved?
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
Insolvency of the suspected fraudster may seem the end of the hunt, unless an egg-hunter can establish a proprietary interest in the assets (see our blog yesterday). But it can offer additional clues, or alternative pots of treasure, whether the fraudster is an individual or corporate entity.
On 26 February 2019, HMRC launched a consultation entitled “Protecting your tax in insolvency”, on the government’s proposal to make HMRC a secondary preferential creditor for taxes paid by employees and customers (the new powers are contained in the proposed Finance Bill 2019-20).
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