Section 90-15(1) of the Insolvency Practice Schedule (Corporations) (Cth) (IPSC) provides that the court may make such orders as it thinks fit in relation to the external administration of a company. It’s well recognised the broad power under that section extends to the making of judicial directions on the application of insolvency practitioners under section 90-20(1)(d) of the IPSC.

When to seek a judicial direction

The High Court of Australia has recently upheld a decision of the Full Federal Court in Metal Manufacturers Pty Limited and Gavin Morton as liquidator of MJ Woodman Electrical Contractors Pty Ltd (in liquidation) & Anor^[1], which confirmed that statutory set-off is not available to be offset against a liquidator’s claim for the recovery of an unfair preference.

On 28 September 2022, the Federal Government, through the Parliamentary Joint Committee on Corporations and Financial Services (PJC), began an inquiry into corporate insolvency in Australia.

The announcement follows calls from industry for a ‘root and branch’ review of corporate insolvency law in Australia.

Submissions are open until 30 November 2022 and the PJC intends to table a report to Parliament by 30 May 2023.

Key takeaways

The Bankruptcy Amendment (Service of Documents) Regulations 2022 came into effect on 6 April 2022. The regulations are intended to clarify that certain documents under the Bankruptcy Act 1966 (Cth), including a bankruptcy notice, can be given, sent, or served electronically without obtaining the prior consent of the recipient to receive the document electronically.

Brief background

When COVID-19 hit Australia in 2020, there were widespread fears about the economic impact of the health crisis, with a predicted avalanche of insolvencies. Many of us greeted 2021 with optimism, hoping for the world to open up as we adjusted to the ‘new normal’. Instead, the virulent Delta strain and snap state lockdowns are keeping the country on edge. While the health crisis continues, the economic crash has been largely avoided.

In another move to protect small business owners, the Federal Government has permanently raised the minimum debt required to serve a statutory demand from $2,000 to $4,000, effective today.

The increase was introduced by the Corporations Amendment (Statutory Minimum) Regulations 2021 (Cth) (Regulations). The new threshold applies to all statutory demands served on or after 1 July 2021. The 21-day period to comply with a statutory demand remains unchanged.

In this issue, we consider Qantas’ recent Full Federal Court win in its JobKeeper stoush with the union, and the interpretation of who is entitled to the COVID-19 cash flow boosts following on from the AAT’s decision in Slatter Building Group Pty Ltd and Commissioner of Taxation (Taxation) [2021] AATA 456. We also provide an update on the latest appeals, ATO guidance and rulings.

Buckle up, Qantas’ fight over JobKeeper entitlements isn’t over yet

Bankruptcy concerns are becoming very real for many clients in the succession planning space.

More clients are concerned with the risk of having their family assets exposed to a bankruptcy during their lifetime, or the risk that the beneficiaries of their estate may have an inheritance exposed to creditors.

This is a particular concern for clients with partners and children in high-risk occupations, such as professionals and directors of companies, as they can be personally liable for debts owed by their business or negligence claims.

The temporary safe harbour introduced by the Federal Government is not a panacea for directors of distressed businesses. It may be time to act now.

The Coronavirus Economic Response Package Omnibus Act 2020 introduced relief measures in the second stage of the Federal Government’s plan to 'cushion the economic impact of the coronavirus and help build a bridge to recovery'.^[1]

Despite the extension of the insolvent trading moratorium, directors should still satisfy the usual requirements of the safe harbour against insolvent trading if they can.