In any economic downturn, there is usually an increase in the number of demands made throughout supply chains and in particular by owners / employers on project securities (e.g. for performance issues, upon termination or following insolvency) and the recent global economic slowdown caused by the coronavirus pandemic is no different.

The real lesson from Debut Homes – don't stiff the tax (wo)man

The Supreme Court has overturned the 2019 Court of Appeal decision Cooper v Debut Homes Limited (in liquidation) [2019] NZCA 39 and restored the orders made by the earlier High Court decision, reminding directors that the broad duties under the Companies Act require consideration of the interests of all creditors, and not just a select group. This is the first time New Zealand’s highest court has considered sections 131, 135 and 136 of the Companies Act, making this a significant decision.

The Federal Government recently made changes to insolvency law which removed the insolvency moratorium and returned most limits back to pre-COVID-19 levels. The below sets out the new limits and discusses how to utilise them to enforce your debts.

insolvency moratorium

The COVID-19 temporary relief measures which applied to insolvency have largely ceased as of 31 December 2020 and now is the perfect opportunity for you to reassess your debt recovery options.

There are a number of debt recovery options available to you, depending on whether you are collecting an outstanding debt from an individual or a company.

Individual

Some private providers may face pressure in coming months, now that the temporary changes to insolvent trading laws and the statutory demand regime have come to an end. This may particularly be the case if challenges to the international student regime continue.

Key takeouts

On 24 December 2020, the Federal Court of Australia published reasons for a decision in which I appeared for the liquidators of two related companies, Bestjet Travel Pty Ltd (in liq) and Wynyard Travel Pty Ltd (in liq). The decision can be accessed here.

As directors consider how to meet their duties during the COVID-19 pandemic, the safe harbour provisions may provide some protection from insolvent trading liability.

Introduction

A recent judgment of the Supreme Court of Western Australia, Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia [2020] WASC 132 (available here), demonstrates that the use of interim measures to provide security for an amount in dispute can be a very powerful remedy when structured through the creation of a trust.

Trusts are established for many reasons. One of the most common is asset protection.

The recent decision of Boensch v Pascoe [2019] HCA 49 from the High Court gives some insight into how that asset protection could be undone in the event of the bankruptcy of an individual trustee.

Facts

Introduction

The concept of winding up does not exclusively apply to insolvent companies. Solvent companies can also be wound up, on the initiation of the company’s directors and shareholders (for example, as part of a corporate reconstruction or to close down non-operating or redundant entities). 

An overview of the two key procedures to effect the dissolution of a solvent Australian company, being Members’ Voluntary Liquidation and Deregistration, is set out below.