There is growing concern in business news and media about the increase in insolvency appointments. Many experts are warning that the country is going to see a significant rise in insolvencies following the pandemic.

What’s the cause?

Re Intellicomms Pty Ltd (in liq) [2022] VSC 228

The proceeding was brought by the liquidators of Intellicomms Pty Ltd (the Company) seeking relief in relation to a Sale Agreement dated 2021 between the Company and the defendant, Tecnologie Fluenti Pty Ltd (the Purchaser), involving the sale of certain business assets of the Company to the Purchaser.

The NSW Supreme Court considered the application of the ‘Universal principle’ in Volkswagen Financial Services Australia Pty Ltd v Atlas CTL Pty Ltd (Receivers and Managers Appointed) (In Liquidation) [2022] NSWSC 573, dismissing a claim for an equitable lien made by administrators and liquidators for trading costs and remuneration.

Key takeaways

In Short

The Situation: In February 2020, amendments to the Corporations Act 2001 (Cth) expanded the kinds of transactions that may be voidable if a company is being wound up to include asset disposals undertaken as part of illegal phoenixing schemes. Such disposals are termed as "creditor-defeating dispositions" in the legislation.

Public examination can be a useful tool for parties in a liquidation to obtain information about matters relating to a company’s affairs. In the matter of Jewel of India Holdings Pty Ltd ACN 141 963 813 (in liquidation) [2022] NSWSC 356, the Court considered whether summonses for public examination, that were issued by the former owner of the business to the liquidators and former administrators of Jewel Holdings, constituted an abuse of process.

The Supreme Court of Victoria has considered the viability of allowing a company to enter a second voluntary administration after going into liquidation following a failed DOCA. The Court considered that rather than maintain a state of liquidation, the secondary voluntary administration process would better serve the best interests of creditors and optimise the efficiency of the restructuring process. The decision serves as a useful guide to the considerations and orders appropriate for successfully arguing a company out of liquidation.

Background

Family law processes cannot be used to defraud creditors. In Re ZH International Pty Ltd (in liq), the Supreme Court of New South Wales held that transfers of property from a company to the directors and shareholders of that company as part of family law proceedings were voidable transactions under section 588FF of the Corporations Act 2001 (Cth) where the company was not a party to the orders and the orders did not require the company to make the transfers.

Background

The Corporations Act is slowly catching up to modern technology.

Cathro (liquidator), in the matter of Petsamo No 14 Pty Ltd [2022] FCA 399

Bioaction Pty Ltd v Ogborne, in the matter of Bioaction Pty Ltd [2022] FCA 436