The High Court has further clarified the law regarding the effect of section 260-5 notices served by the Commissioner on third parties who are required to make payments to a company in liquidation.
The effect of the decision is that the Commissioner cannot issue such a notice after a company has gone into liquidation in order to give himself a priority over other creditors for payment of a tax debt. Such a notice is void.
The different types of insolvency
When a corporate tenant becomes insolvent, the landlord's rights depend upon the type of insolvency administration to which the tenant is subjected. Being familiar with the different options and the ways in which they are administered will enable property owners to act early and put themselves in the best possible position when faced with an insolvent (or potentially insolvent) tenant.
The three most common forms of insolvency administration which may affect corporate tenants are discussed below.
On 9 April 2018 Linc Energy Ltd (in liquidation) was convicted of causing serious environmental harm at its pilot underground coal gasification facility near Chinchilla, Queensland.
Administrators were appointed to the company on 15 April 2016. On 23 May they were appointed liquidators after creditors resolved that the company be wound up.
The Court will closely examine the relevant transactions involving the accounts and form a view – which may be an impressionistic one – as to the likely extent of the interest of each client (or each client group) in those accounts.
The updates to the Guidance Note provide useful guidance on disclosure requirements in the context of the safe harbour reforms but ultimately, the status quo continues.
The ASX has updated its continuous disclosure guidance for entities in financial distress to address uncertainty following the recent introduction of the insolvent trading safe harbour provisions into the Corporations Act. While the ASX has provided useful guidance, unsurprisingly, the position has not changed and directors must continually assess compliance with continuous disclosure requirements.
The High Court will consider the validity of “holding” deed of company arrangements (commonly known as “holding DOCAs”) under the Part 5.3A of the Corporations Act (theAct).
When Michael Howard invested in the Great Southern 2006 Organic Olives Income Project, he was confident it would prove to be a fine investment. So confident, that he borrowed the total cost from Great Southern Finance (GSF).
Little did he expect that 12 years later he would be defending a loan recovery action by the Bendigo and Adelaide Bank Limited (Bendigo Bank) for a large debt in a project which never paid a return and was wound up early because it had run out of funds.
Court of Appeal Clarifies the Tension Between Disclaimed Property and State Based Laws
On 9 March 2018, the Queensland Court of Appeal overturned the controversial first instance decision of the Supreme Court in the matter of Linc Energy Pty Ltd (In Liquidation).[1]
The Court of Appeal’s judgement is significant, as it clarifies the position regarding:
It may now be easier for Australian insolvency practitioners to carry out investigations and recover assets located in Hong Kong and in mainland China. On 8 February 2018, and for the first time, the High Court of Hong Kong granted an application for recognition and assistance in that jurisdiction for voluntary liquidators of an entity incorporated in the British Virgin Islands.