In a significant win for insolvency practitioners, the liquidators of ‘wine-in-a-can’ business Barokes Pty Ltd (In Liquidation) have successfully fended off fierce opposition to its remuneration for work performed in winding up the Company.
The case, in which Macpherson Kelley acted for the liquidators, serves as a reminder that, in considering section 60-12 of the Insolvency Practice Schedule (Corporations) (IPS), the Court will not hastily “punish” external administrators for actions that creditors dislike.
Background
The Australian federal government has announced that the temporary changes it enacted in March to the Corporations Act (Cth) (Act) concerning insolvent trading laws and the creditor’s statutory demand regime (Insolvency laws) have been extended to 31 December 2020. The changes were due to expire on 25 September.
Economic Fallout Continues
COVID-19 Key Developments __ Top Story | COVID-19:Temporary amendments to insolvency laws extended to 31 December 2020 On 7 September The Treasurer and the Attorney General issued a joint statement announcing that the government plans to extend temporary insolvency and bankruptcy protections for businesses impacted by the COVID-19 pandemic until 31 December 2020. MinterEllison's Michael Hughes has released an article providing an expert summary of the changes. This can be accessed on our website here.
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.
Please note: Pursuant to the Corporations and Bankruptcy Legislation Amendment (Extending Temporary Relief for Financially Distressed Businesses and Individuals) Regulations 2020 which commenced on 22 September 2020, the Australian Government has extended the temporary insolvency relief measures (which came into force on 25 March 2020 in response to the coronavirus (COVID-19) pandemic) to 31 December 2020.
The Australian Government has announced that the operation of temporary COVID-19 relief measures for businesses in the hope of aiding distressed companies and preventing further economic breakdown will be extended until 31 December 2020.[1]
On 22 March 2020, the Federal Government announced a raft of proposed temporary changes to insolvency laws which increased the threshold and time limit for compliance for statutory demands and bankruptcy notices (see our original article). The temporary measures also provided relief for directors from any personal liability for trading while insolvent.
The Federal Government today announced the temporary six-month moratorium from insolvent trading liability has been extended until 31 December 2020. Temporary changes to statutory demands and bankruptcy notices requiring a debt of $20,000 and allowing six months to pay the amount demanded will also be extended to this date. These measures had otherwise been due to expire later this month.
The announcement gives much-needed clarity and certainty for the remainder of 2020.
The Federal Government will extend the temporary relief measures for financially distressed individuals and businesses to 31 December 2020.
The measures include:
1. The period within which a statutory demand must be complied is extended from 21 days to 6 months.
2. The minimum amount for a statutory demand is $20,000
3. The period within which a bankruptcy notice must be complied is extended from 21 days to 6 months
4. The minimum amount for a bankruptcy notice is $20,000
In March, we reported that, as part of a suite of legislative and economic responses to COVID-19 the Commonwealth Government had announced a range of temporary amendments to certain insolvency laws. The amendments were aimed at temporarily amending insolvency laws, affecting in turn corporate governance, and directors’ duties.