New Law to Encourage Informal Restructuring

On 28 March 2017, the Federal Government released its long awaited draft legislation that is designed to encourage restructuring of distressed businesses.

The proposed legislation is open for consultation with the finalised legislation expected to come into effect on 1 January 2018. There are two proposed changes:

This case provides some useful guidance on some key aspects of oppression claims, and also illustrates that courts will be reluctant to wind up solvent companies, even where the parties are in deadlock and oppression has been established, in this case preferring to make buy out orders at a price to be determined.

Australia Restructuring and InsolvencyAlert 

On 28 March 2017, the Federal Government released its long awaited draft legislation for reforms to insolvency laws in Australia. The changes focus on providing a safe harbour for directors of distressed companies and a stay on the enforcement of ipso facto clauses in contracts.

External administrators of companies can now assign any right to sue that is conferred on them by the Corporations Act, for example voidable transaction claims and insolvent trading claims. Previously these were considered rights that could only be utilised by the appointed liquidator and so could not be assigned. Now they can.

When did this start?

• This has already begun. It commenced on 1 March 2017.

What legislation brought this about?

On 28 March 2017, the Federal Government released draft reform legislation to Australia’s insolvency laws to promote a culture of entrepreneurship and help reduce the stigma associated with business failure.

The reforms, known as ‘safe-harbour’ provisions propose changes to directors’ personal liability for insolvent trading under the Corporations Act 2001 (Cth) (Act).

Background

Throughout 2016 a series of judgments were delivered that gave conflicting guidance to practitioners about what they should consider when accepting a voluntary administration appointment.

As part of the National Innovation and Science Agenda, Treasury has released an Exposure Draft Treasury Laws Amendment (2017 Enterprise Incentives No.2) Bill 2017 which seeks to amend the Corporations Act 2001 (Corporations Act) to implement 2 key changes which are designed to promote a culture of entrepreneurship and

On 28 March 2017, the Australian Federal Government (Government) released draft legislation in relation to two major reforms intended to encourage turnaround, restructuring and business rescue.

The draft legislation introduces a safe harbour for directors from liability for insolvent trading, and stays the operation of ipso facto clauses where a company enters into administration or proposes a scheme of arrangement.

EXECUTIVE SUMMARY

This week’s TGIF considers the case of In the matter ofCNL Transport Pty Ltd (in liq) [2017] NSWSC 291, where the New South Wales Supreme Court terminated a liquidation where the company was solvent and its debts had been paid.

Background

A company was wound up by the Court on 27 February 2017 following its failure to comply with a creditor’s statutory demand. The statutory demand had been issued by an insurer in respect of unpaid workers’ compensation insurance premiums.

The High Court of Australia recently dismissed an application brought by former Queensland Nickel Pty Ltd (QN) directors Mr Clive Palmer and Mr Ian Ferguson for a declaration that section 596A of the Corporations Act 2001 (Cth) is constitutionally invalid.