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

An exposure draft of the long anticipated Insolvency Law Reform Bill 2013 has been released for public comment. The Bill aims to:  

The Federal Court in Lucas, in the matter of Queensland Maintenance Services Pty Ltd (in liq) (Receivers and Managers appointed [2012] FCA 1451, has held that voluntary liquidators (previously administrators) applying to wind the company up in insolvency and be appointed as liquidators did not create ‘cause’ for disqualifying them from appointment by their dealings with the Australian Taxation Office (ATO), the largest creditor of the company.  

The final report of the independent inquiry into insolvency in the NSW construction industry was released on Tuesday for public comment.

The report is lengthy and addresses a wide variety of potential causes of contractor insolvency. It makes 44 recommendations, including reforms of the NSW construction industry to reduce both the incidence of contractor insolvency and its impact on other participants in the industry.

The recent collapses of major builders St Hilliers, Kell & Rigby and Reed Constructions have caused such concern that the New South Wales Government has launched a public enquiry into the issue.

Given the tough economic conditions, it is timely to review your corporate obligations and the risks involved in managing debts, consider how to protect your business if a contractor or principal encounters financial difficulty, and what you can do to minimise damage to your business.