In August 2012 the NSW Government commissioned an Independent Inquiry into Construction Industry Insolvency. The Inquiry was asked to assess the causes and extent of insolvency in the building and construction industry and to recommend measures to better protect subcontractors from the effects of insolvency.

The recent decision of the Federal Court in Carter in the matter of Damilock Pty Ltd (Damilock) highlights the need for liquidators to review current practices when paying priority creditors (e.g. employee entitlements).

Facts

The plaintiffs were appointed as administrators of Damilock on 26 June 2007 and subsequently appointed as liquidators by creditors’ resolution at a meeting on 7 September 2007.

In the recent decision of Oswal v Burrup Fertilisers Pty Limited (Receivers and Managers Appointed) [2013] FCAFC 9, the Full Court of the Federal Court of Australia recently confirmed that receivers and managers will be justified in refusing to allow a director access to books and records of the company where access may adversely impact on the realisation of the secured assets.

THE FACTS

In brief - Bill implements reforms proposed in options paper

Introduction

On 29 January 2013, the Federal Court of Australia made orders approving the creditors’ scheme of arrangement between Nine Entertainment Group Pty Limited (NEG) and its senior and mezzanine lenders (Nine Scheme).

The Nine Scheme, made under Part 5.1 of the Corporations Act, follows Alinta and Centro as the third debt for equity restructuring of a major Australian company in as many years.

The recent Supreme Court of New South Wales decision in Re V & M Davidovic Pty Limited [2012] NSWSC 1598 clarifies where the directors of a company in receivership will be authorised to defend a winding up application and confirms that Courts will be reluctant to adjourn such applications in order to allow the directors to gather evidence of solvency.

The Facts

The PPSA (Personal Property Securities Act) will celebrate its first birthday on 30 January 2013.

The PPSA introduced fundamental changes for business structuring arrangements. Assets that are subject to non-arms’ length lease or hire arrangements can be at risk if the entity that has possession of the property under the lease or hire agreement is placed in liquidation or receivership.

What is a PPS lease?

A ‘PPS lease’ is the lease or hire of property for a period (including options):

Although section 443A(1) of the Corporations Act ("the Act") provides that Administrators are liable for the debts they incur in the performance of their functions as Administrators, a recent Western Australian judgment discusses how orders under section 447A of the Act can limit that liability.

In that case the Administrators needed funds to pay operating costs and wages, in order to maintain the business for sale as a going concern and/or to give the Administrators time to investigate alternative restructuring options.

In brief - Employees made redundant by insolvency event entitled to generous payout

Changes to the General Employment Entitlements and Redundancy Scheme (GEERS) mean that employees are probably better off being made redundant by an insolvency event rather than as a result of a normal workplace restructure.

Act puts existing GEERS scheme into legislative form

The following article outlines a number of ways to help business owners safeguard their business from sustaining losses during tough economic conditions throughout 2013.

Identify & Manage Risks