The Australian Government has accepted certain recommendations of the Productivity Commission's long-awaited Report on Business Set-up, Transfer and Closure, in an attempt to change the focus of Australia's insolvency laws from "penalising and stigmatising business failure”, according to the Minister for Small Business and Assistant Treasurer, the Hon Kelly O'Dwyer MP.
It has expressed a willingness to legislate to introduce at least two main changes:
With the release of its much anticipated National Innovation and Science Agenda (the NISA), the Federal Government has committed more than $1 billion over the next four years to turning around Australia’s innovation performance.
Australia’s poor record in translating research to commercial products and services is well known. We rank last amongst OECD countries for collaboration on innovation between industry and higher education and public research institutions.
The Australian government has announced a 'National Innovation and Science Agenda' to be introduced by the middle of 2017, which includes providing a defence to protect directors from liability for insolvent trading where restructuring advice is obtained in an attempt to turn around a company's financial position. The government has also released the Productivity Commission Report on 'Business Set-up, Transfer and Closure' which contains recommendations on how the defence will operate.
The Productivity Commission published its final report on Business Set-up, Transfer and Closure on 7 December 2015. A copy of the final report is available here.
The final report recommends a number of changes to Australia's corporate insolvency laws and follows public consultation on the Productivity Commission's draft report released in May 2015.
The Turnbull Government’s much-heralded ‘Innovation Statement’ was released yesterday. It contained wide-ranging statements on reforms aimed at fostering innovation across a number of sectors in the Australian economy.
One important reform area is in Australian corporate insolvency law.
Corporate insolvency law reform timetable
The Innovation Statement includes important content for the reform of Australia’s corporate insolvency laws. It is part of an ongoing reform exercise which has followed this timetable to date:
The Need for Reform
Insolvency figures bring into stark light the reality of business in the construction industry. In the last financial year, 13% of companies entering external administration in the Northern Territory were from the construction sector.
Significant causes of contractor failure include inadequate cash flow, poor strategic management of the business, inadequate contract administration skills and a lack of working capital to see a project or a dispute through.
Where a court has ordered the winding-up of a company, a shareholder may be able to have the winding up terminated under section 482 of the Corporations Act 2001.
Relevant factors
The power of the court to terminate a winding-up is discretionary. Relevant factors to be considered, which are not exhaustive, include the following:
On 14 July 2015, the South Australian District Court in Matthews v The Tap Inn Pty Ltd [2015] SADC 108 handed down a decision whose underlying reasoning could, if applied by superior courts around Australia, broaden the scope for liquidators to pursue unfair preference claims against secured creditors.
The decision
This week’s TGIF considers the recent NSW Supreme Court decision of Westpac Bank v Raflick Sayah [2015] NSWC 1167, provides comfort to banks and their receivers in that it validated the actions of a Receiver who had obtained expert advice on a sale process and had undertaken a thorough process.
THE FACTS
The "running account" defence to an unfair preference claim is a fragile flower. In a recent decision, the Queensland Court of Appeal has reminded solvent counterparties that suspension of a customer's trading account will probably break the "running account", exposing a solvent counterparty to greater unfair preference risk.
Need to know