The innocuously named Treasury Laws Amendment (2017 Enterprise Incentives No 2) Bill 2017 (Cth) (the Bill) makes only a small number of amendments to the Corporations Act 2001 (Cth) insofar as the safe harbour reforms of Australia’s insolvent trading law are concerned.
Restructuring: Rollovers, Small business restructure rollovers and small business CGT concessions
July 2017
Linda Tapiolas Partner
T 61 7 3231 2562 M 0437 200 334
Level 21, 400 George Street Brisbane 4000 Australia
GPO Box 834, Brisbane 4001 www.cgw.com.au
The Queensland Supreme Court in the case of Scott & Ors v Port Hinchinbrook Services Limited & Ors [2017] QSC 92 has again confirmed the utility of a Deed of Company Arrangement (DOCA) in respect of director appointments and members’ rights as part of a restructure.
Issues
The Court was asked to consider the following issues:
Section 477(2B) of the Corporations Act 2001 (Cth) provides that a liquidator must not enter into any sort of agreement that may last longer than three months without first obtaining approval of the Court, of the committee of inspection or by a resolution of the creditors.
Typically, a litigation funding agreement will be caught by this section because it will last more than three months.
The reference to ‘enter into an agreement’ could also catch a novation, and potentially a variation, to an agreement.
A recent court decision is a timely reminder of the limitations that can affect a person’s ability to rely on set-off rights when a debtor or contract counterparty becomes insolvent.
It is not uncommon for administrators to be appointed in the period between a company being served with a creditor’s winding up application and the date on which that application is to be heard. Despite their appointment, and unless the administrator attempts to intervene, the Court can and often will hear the winding up application and, if appropriate, order that the company be wound up and terminate the administration.
The Part 5.3A administration regime was introduced to facilitate orderly and timely outcomes for creditors. This is clearly evidenced by the relatively short time frame stipulated by the Corporations Act 2001 (Cth) (the Act) between when the first and second creditors’ meetings are to be held.
All Australian states have sale of goods legislation that, in certain circumstances, allows an unpaid seller to retain possession of goods in transit where the buyer becomes insolvent. The statutory right, called stoppage intransitu, is a useful remedy to obtain payment.
A registered security interest on the PPSR is not required to exercise the statutory right. Administrators and liquidators may be trumped by a notice under the stoppage in transitu provisions.
However, the sale of goods legislation is not identical in each state.
On 1 June 2017 a new law came into effect in New South Wales relevant to liquidators’ rights to directly pursue the insurer of a proposed defendant, taking away significant uncertainty which existed previously because of antiquated provisions in a 1946 act relating to charges over and priorities to those insurance monies.
The new law now provides greater certainty for liquidators in deciding whether to bring proceedings directly against the insurers of directors and officers or indeed of other third parties against whom the liquidators may have claims.
The recent decision of the Supreme Court of Western Australia in Mighty River International Ltd v Hughes & Bredenkamp [2017] WASC 69 (Mighty River v Hughes) has confirmed the legality and the utility of ‘holding’ deeds of company arrangement (colloquially referred to as ‘Holding DOCAs’).
Hold what?