The Federal Court has permitted administrators to give notice of creditors’ meetings electronically, and to hold creditors’ meetings and future meetings of any committees of inspection by video or telephone conference.

Key Takeaways

This week’s TGIF considers the Federal Court’s decision in Australian Securities and Investments Commission v Merlin Diamonds Limited (No 3)[2020] FCA 411, in which, consequent on finding a number of contraventions of the Corporations Act 2001 (Cth), the Court ordered the winding up of that company.

Background

This week’s TGIF considers a decision of the Federal Court which enabled administrators of Virgin to send electronic notices, conduct electronic meetings and absolved them from personal liability for leases for four weeks due to COVID-19.

Background

On 20 April 2020, administrators were appointed to Virgin Australia Holdings Ltd and 37 of its subsidiaries (together, the Virgin Companies).

This week’s TGIF considers the decision in Aardwolf Industries LLC v Riad Tayeh [2020] NSWSC 299, in which the Supreme Court of New South Wales refused an application for leave to sue court-appointed liquidators for damages for negligence and misleading and deceptive conduct.

Background

The impact of Covid-19 on businesses has already been significant, with several high-profile businesses in the UK and the Channel Islands ceasing to trade or entering administration. The sudden drop in custom as a result of restrictions imposed to protect the community from Covid-19 (the Restrictions) have resulted in businesses experiencing severe, if not crippling, cash flow issues.

In Autumn 2018 the States of Guernsey proposed changes to Guernsey’s corporate insolvency regime to come into effect in 2019.  On 15 January 2020 the States of Guernsey enacted these changes with the passing of the Companies (Guernsey) Law 2008 (Insolvency) (Amendment) Ordinance 2020 (the Ordinance).

The Ordinance brings into effect the proposed changes to create a structured, flexible and transparent regime for company insolvency procedures in Guernsey, as is required in a modern jurisdiction.  A summary of the main changes is set out below.

Administration

This week’s TGIF considers the decision in Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No 2) [2020] FCA 472 where the Federal Court made orders absolving the administrators of retailer Colette from personal liability for rent for a two week period, due to the COVID-19 pandemic.

This week’s TGIF examines the recent changes to Australia’s insolvency regime, the potential implications for business and considerations for creditors in light of the impact from COVID-19.

The Australian Government has now passed theCoronavirus Economic Response Package Omnibus Bill 2020. The bill was fast-tracked through both houses of parliament with bipartisan support on 23 March 2020 and makes significant changes to Australia’s insolvency regime over the next six months.

What happened?

This week’s TGIF considers the Coronavirus Economic Response Package Omnibus Act 2020, which was passed in response to the economic impact of the coronavirus. Amongst other things, the Act makes significant changes to creditor’s statutory demands and insolvent trading laws.

The Act

COVID-19 presents the greatest challenge a generation of corporate managers will see in their lifetime.

This is not the first time the Australian economy has stared down the barrel of a severe economic downturn, but it is the first time the economic conditions that previously underlined robust business models have evaporated overnight due to a public health crisis.