The Insolvency Law Reform Bill 2015 has been introduced into Parliament as part of the Australian Government's strategy to modernise and strengthen the nation's insolvency and corporate reorganisation framework.

The Australian Government has accepted certain recommendations of the Productivity Commission's long-awaited Report on Business Set-up, Transfer and Closure, in an attempt to change the focus of Australia's insolvency laws from "penalising and stigmatising business failure”, according to the Minister for Small Business and Assistant Treasurer, the Hon Kelly O'Dwyer MP.

It has expressed a willingness to legislate to introduce at least two main changes:

Key Points:

It's unclear that safe harbours by themselves will provide genuine opportunities for restructuring distressed businesses.

The Productivity Commission's upcoming report on corporate insolvency will address two burning issues: ipso facto clauses and how to encourage directors to save financially-stressed companies.

Freezing orders and the Foreign Judgments Act

Freezing orders (also known as Mareva orders or Mareva injunctions) are oft-used tools available to a plaintiff to preserve the assets of a defendant, where there is a danger of the defendant absconding or of the assets being removed from the jurisdiction or otherwise diminished. Such dangers put in peril the ability of a plaintiff to recover any favourable judgment against that defendant.

Introduction

The Full Court of the Federal Court has given some important guidance on the calculation of remuneration for court appointed receivers.  In its decision in Templeton v Australian Securities and Investment Commission the Court has highlighted the importance of proportionality in determining reasonable remuneration.

General Position

There's been a drop-off, but Peter Bowden says things might be about to change.

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Key Points:

A section 439A report must contain all material information which is known or reasonably ascertainable by administrators.

Key Points:

A DOCA can extinguish claims under a guarantee, even where those claims arise following the DOCA's termination.

If the underlying debt has already been extinguished by a DOCA, can a secured creditor still enforce the charge? A recent case explored the role of section 444D(2) of the Corporations Act in this situation, with implications for parties seeking to rely on guarantees from companies that have been through a DOCA (Australian Gypsum Industries Pty Ltd v Dalesun Holdings Pty Ltd [2015] WASCA 95).

Key Points:

Section 562A of the Corporations Act does not apply where liquidator realises a sum of money by assigning the proceeds of the reinsurance claim to a third party.

Liquidators of insurance companies face a major quandary when assessing reinsurance recoveries.

A new Court decision may undercut the legislative policy that reinsurance proceeds should be quarantined from the normal rules for paying out creditors of insolvent companies.

Key Points:

These three cases illustrate that strict compliance with legislative requirements continues to be imperative when serving statutory demands.

Despite what appears to be a fairly straightforward legislative regime, creditors' statutory demands appear to generate an entirely disproportionate volume of litigation in the courts. The drastic consequences of failing to comply with a creditor's statutory demand warrant very strict compliance by creditors with the technical requirements of the regime.