Released in April 2016 the Turnbull Government proposed significant reforms to Australia’s insolvency laws, as part of its National Innovation Science Agenda - designed to strike a balance between encouraging entrepreneurship and protecting creditors, and to reduce the stigma associated with business failure.

This week’s TGIF considers the decision of Deputy Commissioner of Taxation v BE100 Property Investments Pty Ltd [2016] FCA 597 where the court found that a deed administrator acted unreasonably by attempting to terminate a deed of company arrangement immediately before a meeting of creditors.

Legislation and proposed legislation

Government consults on proposals for technology neutrality in the distribution of company meeting communications

The Government has proposed a technology neutral mode of distributing company meeting notices and materials which aims to facilitate innovation and reduce economic and time costs for companies, while maintaining an appropriate level of shareholder engagement.

The recent decision of the New South Wales Supreme Court in Independent Contractor Services (Aust) Pty Limited ACN 119 186 971 (in liquidation) (no 2) [2016] NSWSC 106 found that the statutory scheme of priority does not apply to realisations from circulating trust assets. This decision has potentially profound impacts for both employees and secured creditors in the context of both liquidations and receiverships.

A summary of the case

Insolvency reform: let’s not forget about the scheme of arrangement regime (again!)

In brief

On 23 February 2016, Justice Brereton of the Supreme Court of New South Wales handed down a decision In the matter ofIndependent Contractor Services (Aust) Pty Limited ACN 119 186 971(in liquidation) (No 2) that may significantly impact the economics of winding up of corporate trustees and the return to priority creditors such as employees.

In summary, the Court held that:

Background

On 7 December 2015, the Australian Government released its "National Innovation and Science Agenda" ("Agenda"). In the Agenda, the Government outlined its intention to make three significant reforms to Australia's insolvency laws, adopting the recommendations of the Productivity Commission ("Commission") in its report, "Business Set-Up, Transfer and Closure" ("Report"), released on the same day as the Agenda:

Key Points:

While shareholders may only need to establish indirect market causation, there are still significant obstacles for establishing shareholder claims.

Do plaintiffs in a shareholder class action have to show they relied upon misleading or deceptive conduct, or is it enough that the market in general relied upon them, which then affected the share price?

This week’s TGIF considers the decision of In the matter of THO Services Limited [2016] NSWSC 509 in which the Court exercised its general power to extend the voluntary administration moratorium period to a commercial arbitration.

BACKGROUND

The increasing trend to use Third Party Declaratory Relief Applications against Insurers

Overview

A third party claimant, not a party to a policy of insurance, can seek recourse to the proceeds of that policy, through the application of either the Corporations Act (ss 562 and 601AG), the Bankruptcy Act (s117) or the Insurance Contracts Act (s 51).