Much has been written and discussed about Australia’s draconian insolvent trading laws and the Federal Government has taken note. It has released draft legislation seeking to amend the Corporations Act in a way that supports the restructuring of financially distressed companies. But do these amendments go far enough in providing companies with the time and space they require when they’re seeking to implement a financial restructuring plan?
BACKGROUND
It is common practice for company contracts to contain clauses, known as “ipso facto” clauses, which terminate or amend the contract (e.g. by accelerating payments) merely because a company has entered into a formal insolvency process.
The New South Wales Supreme Court has found that a secured party cannot rely on its own mistake when registering on the Personal Property Securities Register (PPSR) to claim that the defective registration “temporarily perfects” its security interest.
The facts
This week’s TGIF considers Linc Energy Ltd (in Liq) v Chief Executive Dept of Environment & Heritage Protection [2017] QSC 53, in which the Queensland Supreme Court directed that the liquidators of Linc Energy were not justified in causing it to fail to comply with an environmental protection order
BACKGROUND
Earlier this month, the High Court of Australia unanimously decided that a judgment creditor cannot apply for a certificate to effect enforcement overseas in circumstances where the judgment debtor is bankrupt.
The Background of the Case
In March 1992, several properties in central Prague, which had been seized by and vested in the state of Czechoslovakia after World War Two, were restored to one Jan Emil (the son of the owners of the properties), who resided in Melbourne, Australia.
For many Australians superannuation can be an individual’s largest asset, the feeling of losing it when filing for bankruptcy is a very authentic concern for most of our clients. With certain components of the economy doing considerably well and other components enduring difficult economic times, bankruptcy numbers in Australia still continue to increase. Economists don’t speak about Australia’s two-speed economy much anymore, but it definitely still is two-speed.
A recent Victorian Supreme Court decision has resulted in the Commonwealth losing priority status for some $3.8m paid to the employees of a collapsed company, due to an unusual gap in the priority regime created under the Corporations Act.
There are a number of reasons why liquidators might want to slow things down when it comes to commencing or prosecuting proceedings. A liquidator might want more time to fully investigate certain claims or secure appropriate funding before incurring substantial costs or adverse costs exposure. While there are options available to liquidators looking to delay either the commencement or service of a particular proceeding, each comes with its own risks.
This week’s TGIF considers a recent Federal Court decision in which relief was sought under section 588FM of the Corporations Act to ensure a security interest perfected after the ‘critical time’ did not automatically vest.
What happened?
On 7 April 2016, administrators were appointed to OneSteel. OneSteel, a member of the Arrium Group of Companies, subsequently entered into a deed of company arrangement.
The government has released draft legislation reforming insolvency laws to create a ‘safe harbour’ defence for directors faced with an insolvent trading claim, together with a statutory stay on the enforcement of ipso facto clauses when a party to a contract enters a formal administration process. This is good news for company directors and delivers on industry calls for law reform.
Background