This week’s TGIF considers the circumstances in which a resolution passed at a creditor’s meeting will be set aside on the basis that it is contrary to the interests of creditors as a whole.

Background

BACKGROUND

Administrators were appointed to a company and as a result, the company entered into a Deed of Company Arrangement (DOCA). 

After the DOCA had been entered into, a secured creditor who had abstained from voting on the decision of whether the company should enter into the DOCA, purported to appoint an administrator under its security. 

The deed administrators sought a declaration from the Court that the second administration should be terminated (amongst other things). 

DECISION

In March 2015, the High Court delivered its judgment in Grant Samuel & Ors v Fletcher & Ors[2015] HCA 8, and unanimously overturned the decision of the New South Wales Court of Appeal, in holding that liquidators cannot rely on the procedural court rules of a State or Territory, to extend the time within which to commence voidable transaction proceedings, under section 588FF(3)(a) of the Corporations Act 2001 (“the Act”).

HOW THE GAME UNFOLDED

The Federal Court’s decision in Commissioner of Taxation v Warner [2015] FCA 659 has clarified that the Australian Taxation Office’s (ATO) coercive powers requiring a taxpayer to produce documents and information to the ATO prevail over section 486 of the Corporations Act 2001 (Cth) (CA) (section 486 provides that a Court order must first be obtained before a creditor is authorised to inspect the books of a company).

This week’s TGIF considers a decision in which the court appointed an additional liquidator to conduct further investigations alongside the incumbent liquidators in a creditors’ voluntary winding up.

WHAT HAPPENED?

On 18 July 2014, liquidators were appointed to Ambient Advertising Pty Ltd (Ambient) pursuant to the resolution of creditors under section 439C(c) of the Corporations Act 2001 (Cth).

In Austcorp Project Number 20 Pty Ltd v The Trust Co (PTAL) Limited, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (in liq) [2015] FCA 850, the Federal Court of Australia had to determine whether to dismiss the proceedings for failure to comply with previous orders for security for costs, or vary those orders for security. The basis upon which the Court made the orders for security in the first place is set out in Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd [2014] FCA 1371, and was canvassed in an ear

Update: Re CMI Industrial Pty Ltd (In Liq); Byrnes & Ors v CMI Limited [2015] QSC 96

Receivers do not have to distribute profits from the sale of inventory acquired by them during their appointment to priority creditors.

The question of whether priority creditors have a statutory entitlement to receivers’ inventory trading profit has largely been left unanswered until the decision handed down by Justice Mullins on 27 April 2015. 

We have heard it many times: “the only people who win when a company goes into liquidation are the lawyers and the accountants”. 

Whether that is true or not, certainly it is the case that having a corporate customer go into liquidation can cause significant damage to your cash flow, your morale and ultimately your business.

YOU MIGHT NEED TO REPAY MONEY TO YOUR DEFUNCT CUSTOMER’S LIQUIDATOR

Introduction

On 1 July 2015, the Commonwealth Government launched the Fair Entitlements Guarantee Recovery Programme for an initial period of two years. The purpose of the Recovery Programme is to increase the prospects of the Commonwealth recovering amounts it has paid to former employees of companies in liquidation pursuant to the Fair Entitlements Guarantee Scheme[1]. 

There has been some recent discussion around the use by insolvency practitioners of the security of payment legislation. The benefits of engaging this process are obvious – there is an opportunity to secure payment for the insolvent company in a quick and cost efficient manner while also avoiding the financial burden of a security for costs order which the insolvent company (and hence insolvency practitioner) is likely to face in court proceedings.