On 12 September 2017, some of the most significant reforms of Australia’s corporate insolvency laws in recent years were passed by both Houses of the Australian Federal Parliament. These reforms will introduce:
The Senate Economics Legislation Committee has recommended that the Treasury Laws Amendment (2017 Enterprise IncentivesNo. 2) Bill 2017 (Bill) which provides a ‘safe harbour’ defence and automatic stays on certain ipso facto clauses be passed. We expect that the Bill will be passed by Parliament this year, giving company directors more flexibility when dealing with financial distress.
History
This update deals with “onerous property” and the issues involved when a trustee in bankruptcy disclaims onerous land, including the potential impact on lenders.
Disclaimer of onerous land by a trustee in bankruptcy
At any time, the trustee of a bankrupt estate may disclaim land which is burdened with onerous covenants or is unsaleable or not readily saleable (s 133 of the Bankruptcy Act 1966 (Cth)).
The NSW Supreme Court has given a Landlord leave to commence proceedings against a company for rent and make good costs arising after the date of the DOCA.
BACKGROUND
On 22 August 2017, the Supreme Court of New South Wales approved the Boart Longyear creditor schemes of arrangement following substantial alterations to the terms of the schemes after clear messaging from the Court that it was unlikely to approve the schemes as originally formulated, on fairness grounds. In this article, we discuss some of the implications of this important judgment, which advisers will need to take into account when devising restructuring plans involving creditors’ schemes of arrangement.
In brief
Summary
It is now commonplace for large, complex, and distressed companies to engage insolvency practitioners to assess the company and provide a contingency plan for possible future administration in the event that restructuring is unsuccessful. A common term for these practitioners is "potential administrators".
To perfect a security interest by possession, a secured party must have actual or apparent possession of the property. A contractual right to possess is not enough.
We now have the first judicial guidance in Australia on the concept of "perfection by possession" under the Personal Property Securities Act 2009 (PPSA) (Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2017] FCA 866).
What is "perfection by possession"?
In a wide-reaching judgment concerning an appeal by Mighty River International in the administration of Mesa Minerals, the Western Australian Court of Appeal has recognised that a "holding" Deed of Company Arrangement (DOCA) is permissible under Part 5.3A of the Corporations Act.
The key points - Holding DOCAs as a flexible framework
The key points for insolvency and turnaround professionals to take from Mighty River International v. Hughes are:
Restructuring: Rollovers, Small business restructure rollovers and small business CGT concessions
July 2017
Linda Tapiolas Partner
T 61 7 3231 2562 M 0437 200 334
Level 21, 400 George Street Brisbane 4000 Australia
GPO Box 834, Brisbane 4001 www.cgw.com.au
This week’s TGIF considers the decision of EH 2015 Pty Ltd (in liq) v Caratti (No 3) [2017] WASC 210 which concerned the rights of a liquidator to funds paid into court as security by a company which subsequently became insolvent.
What happened?
On 20 January 2016, a liquidator was appointed to a trustee company pursuant to an order of the Federal Court.