As New Zealand inches sloth-like toward a more regulated regime through the Insolvency Practitioners Bill, introduced in April 2010 and yet to have its third reading, Australian court decisions may become more relevant here.
After regulation, our two systems will still be different but less so than they are now, and already Australia provides a pointer to some of the issues which may arise here.
With that in mind, we have identified the top six insolvency law developments in Australia as we see them.
In brief
The recent decision of Divitkos, In the matter of Ex DVD Pty Ltd (In liquidation) has paved the way for secured creditors who pay employee entitlements out of secured assets to receive a priority for that payment from preference claims recovered in a subsequent liquidation.
Summary
The statutory demand is one of the most frequently used (and misused) tools utilized by companies and other persons to obtain payment of debts owed to them by a company. Service of a statutory demand can be the first step towards placing insolvent companies into liquidation.
The consequences for a company that does not respond to the service of a statutory demand can be severe.
One of those consequences is that the company may find itself in the position where it is required to prove solvency before a court, in order to avoid a winding up.
The Financial System Inquiry was formed on 20 November 2013 by our Federal Treasurer to examine how our financial system could be positioned to best meet Australia’s evolving needs and support economic growth. The Inquiry received over 280 first round submissions and released it’s Interim Report earlier this week. [1]
Last Friday, the Full Court of the Federal Court of Australia handed down its decision in ASIC’s case seeking the removal and replacement of the liquidators of the Walton Constructions group, on the grounds of a perceived lack of independence.
Key Points:
Provided a liquidator is acting properly in conducting proceedings or realising assets, he or she is entitled to be paid fees in priority to a secured creditor.
The High Court has recently reaffirmed the principle that a liquidator is entitled to be paid his or her costs and expenses properly incurred in realising assets of a company in priority to a secured creditor. This is so even if the fund realised was derived from an action brought against a secured creditor (Stewart v Atco Controls Pty Ltd (in Liquidation) [2014] HCA 15).
Key points
First occasion where a deed administrator has sought leave under section 444GA of the Corporations Act 2001 (Cth) (theAct) in respect of a publicly listed company. The Court granted leave for 98.2% of each shareholders’ holding in Mirabela Nickel Limited (Mirabela) to be transferred to certain unsecured creditors as part of a broader recapitalisation, under a deed of company arrangement (DOCA), without shareholder approval.
The High Court recently delivered judgment in the matter of Stewart v Atco Controls Pty Ltd (In Liquidation).[1] The case turned on the application of the well-known principle in Universal Distributing
The Federal Court affirms that a secured creditor may be subrogated to the entitlements of priority creditors, to the extent that the Receivers’ payments to priority creditors have diminished its security.
In the decision Equititrust Limited (In Liq) (Receiver Appointed) (Receivers and Managers Appointed) in its capacity as responsible entity of the Equititrust Income Fund v Equititrust Limited (In Liq) (Receiver Appointed) (Receivers and Managers Appointed) in its own capacity [2014] FCA 692,the Federal Court of Australia considered an application to set aside or stay indefinitely liquidator examinations of former auditors under s596B of the Corporations Act 2001 (Cth).