Voidable transactions When a company becomes insolvent, sections 588FA and 588FB of the Corporations Act 2001 (Cth) (Corporations Act) empower liquidators to investigate voidable transactions, including unfair preference and uncommercial transactions as well as unreasonable director-related transactions.
Australia has an Insolvency Law Reform Bill in Parliament and plans for more change further down the track in the form of recommendations from the Australian Productivity Commission, which the Australian Government has signalled it will adopt.
These developments will be of interest to New Zealand insolvency practitioners, company directors and creditors. We summarise the proposed changes and comment briefly on the possibility of similar reform in New Zealand.
Insolvency Law Reform Bill
With the number of companies entering external administration on the rise and the crucial post-Christmas retail trading period nearing an end, it is important for owners to ensure that they fully understand what rights they have to terminate a lease and recover unpaid rent if a tenant goes into external administration and its creditors then vote to enter into a Deed of Company Arrangement (DOCA).
If a tenant is in arrears and a DOCA is in place, can an owner exercise its contractual right to terminate the lease?
Late last year, the High Court handed down its decision in Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) [2015] HCA 48. The High Court held (by a majority of 3:2) that, in the absence of an assessment, a liquidator is not required to retain funds from asset sale proceeds in order to meet a tax liability which could become payable as a result of a capital gain made on the sale.
Simona Kornhaas v Thomas Dithmar (Case C-594/14)
The ECJ have ruled that a director of an English company that had entered into insolvency proceedings in Germany is liable to reimburse the company under German law for payments made after the company became insolvent.
The facts
The Plaintiffs were appointed joint and several liquidators to three separate companies (“Companies”) which were being wound up in insolvency.
The three companies had previously traded in partnership (“Partnership”) in an accounting practice.
The decision in Adhesive Pro Pty Ltd v Blackrock Supplies Pty Ltd [2015] ACTSC 288 reinforces the strict rule that an application to set aside a statutory demand must be filed and served within 21 days of receiving the demand.
Statutory demands are a common and useful tool for many unsecured creditors seeking payment of a debt. Non-compliance with a statutory demand results in a presumption of insolvency and the possibility that a creditor can apply to wind up a company debtor.
When a company is deregistered, it ceases to exist.[1] So what happens when a person has a genuine claim against that company but fails to commence proceedings before it is deregistered?
The High Court of Australia in CGU Insurance Ltd v Blakeley & Ors [2016] HCA 2 unanimously confirmed that a third party can join a defendant’s insurer to a proceeding and seek a declaration of rights under the insurance agreement, provided that third party has a ‘real interest’ in the performance of the agreement and that there is practical utility in the court providing that declaration.
On 1 December 2015, we wrote about the decision of His Honour Judge Chivell of the District Court of South Australia in Matthews v The Tap Inn Pty Ltd [2015] SADC 108.