Voluntary administration is Australia’s primary business rescue regime. This article is Part 2 of a two-part series. In this article, we highlight the impact of voluntary administration on various stakeholders and the potential outcomes for a company in voluntary administration. It is not intended to be used as an exhaustive guide to Australia’s voluntary administration regime and its many nuances.

Voluntary administration is Australia’s primary business rescue regime. This article is Part 1 of a two-part series. This article provides an introductory overview of voluntary administration in Australia, explaining what it is, why entities might enter it and its processes. It is not intended to be used as an exhaustive guide to Australia’s voluntary administration regime and its many nuances.

In Anchorage Capital Master Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2),[1] the NSW Supreme Court handed down judgment in two proceedings (which were heard together) arising from the failure of Arrium and its broader corporate group.

In Australia, public companies are required to have at least three directors (s 201A(2) of the Corporations Act 2001 (Cth) (Act)). However, in exceptional circumstances, a public company might find itself with fewer than three directors – for example, where the other board directors resign because of some disagreement.

The peak indebtedness rule employed by liquidators to maximise recovery of unfair preference claims is abolished

In LCM Operations Pty Ltd, in the matter of 316 Group Pty Ltd (In Liquidation) [2021] FCA 324, the Federal Court considered whether a third party who has been assigned a company’s claim by a liquidator breached the Harman undertaking with respect to documents obtained through public examinations.

What happened?

Section 440A(2) of the Corporations Act 2001 (Cth) (the Act) requires the Court to adjourn a winding up application if it is satisfied that it would be in the best interest of creditors for the company to continue under administration rather than be wound up.

Hughes, in the matter of Substar Holdings Pty Ltd (in liquidation) (No. 2) (Substar No. 2) considers the Court’s discretionary power to terminate the winding up of a company pursuant to s 482(1) of the Corporations Act 2001. Substar No. 2 follows the decision of Hughes, in the matter of Substar Holdings Pty Ltd (in liquidation) [2020] FCA 1863(Substar (No. 1), which considered the extent to which liquidators can realise trust assets when a corporate trustee enters into liquidation.

In Re Dessco Pty Ltd, the Victorian Supreme Court adjourned a winding up application for 50 days to allow time for creditors to vote on a restructuring plan.

Whilst the adjournment was opposed by the Plaintiff, the Judicial Registrar of the Court accepted the assessment formed by the Small Business Restructuring Practitioner that the company was eligible to avail itself of the new regime having regard to the criteria that must be satisfied (and the ‘just estimate’ approach adopted in respect of contingent liabilities) and the interests of the company’s creditors.

A mortgagee may be faced with a situation where the mortgagor becomes bankrupt and the trustee, in which the property then vests, disclaims the mortgaged property. By force of a trustee’s disclaimer, the bankrupt’s fee simple estate escheats to the Crown in the right of the State. When the Registrar of Titles receives a notice of disclaimer from a trustee, a Registrar’s caveat will be recorded over the property.