The process of bankruptcy or insolvency may involve a company selling business assets in order to pay creditors or simply to remain financially liable. In some cases, this may include selling distressed assets. This article explains what a distressed asset is, how to deal with such an asset, and what may be the ramifications of engaging in this process.

What is a distressed asset?

This week’s TGIF considers a recent decision of the Federal Court of Australia in which the Court relieved administrators of liability for entering a funding agreement with a major creditor in order to keep the company trading.

Key takeaways

Over the past decade, insolvency practitioners have developed an intrigue for the use of the creditors’ trust. Many have sought to structure their Deeds of Company Arrangement’s (DOCA) in a way that interfaces with a creditors’ trust through the mechanism of a creditors’ trust deed.  

This week’s TGIF considers the decision in Enares Pty Limited v Nimble Money Limited [2022] FCAFC 126, in which the Full Court considered shareholder information rights in the context of a dispute between Nimble’s board and its largest shareholder as to how to refinance Nimble’s debt.

Key takeaways

On 8 August 2022, the Australian Financial Security Authority (AFSA), Australian Securities and Investments Commission (ASIC) and Australian Restructuring Insolvency and Turnaround Association (ARITA) released a joint guide detailing how personal bankruptcy and the liquidation of a company can interact. The guide was first released in 2017 and has since been updated in July 2022.

This article was first published by the Financier World Wide.

Largely due to the worldwide economic turmoil caused by the global coronavirus (COVID-19) pandemic, recent years have seen global business disruption on a grand scale – a scorched corporate landscape ripe for distressed mergers and acquisitions (M&A) practitioners to pick over.

Trends in traditional M&A activity

This week’s TGIF considers In the matter of Nicolas Criniti Pty Ltd (In Liquidation) [2022] NSWSC 1149 which examined the intersection between the winding up provisions in the Corporations Act 2001 (Cth) and the Building and Construction Industry Security of Payment Act 1999 (NSW).

Key takeaways

This week’s TGIF considers Hill, in the matter of Ovato Limited (Administrators Appointed) [2022] FCA 903 in which the Federal Court approved the administrators’ proposal for the Ovato Group to continue trading in order to maximise the chances of a sale as a going concern. The proposal was dependent on ongoing funding from the Ovato Group’s financier and, in that context, the administrators were able to agree to have their personal liability limited to the assets subject to the financier’s security.

Key takeaways

This 2022 review provides an overview of recent Australian Restructuring and Insolvency activity along with the laws, their application and recent trends and development in restructuring and insolvency activity.

Chapters:

You should consider the possibility of placing a company into provisional liquidation if there is a risk that a company’s assets will be dissipated to the detriment of that company and a creditor or member of a company, a party can consider putting the company.

The power of a Court to appoint a provisional liquidator to a company stems from section 472(2) of the Corporations Act 2001 (Cth) (Act).

Pursuant to section 472(2) of the Act, a provisional liquidator of a company has either powers: