This quick guide summarises the duties that directors of companies incorporated in Australia are subject to, and how those duties change when a company is insolvent or at risk of being insolvent.

It also gives an overview of the personal risk to directors when a company is in financial difficulty.

This note is intended as an overview and should not be relied on as legal advice. Should you require legal advice in relation to your specific circumstances, please contact the Restructuring & Insolvency team member whose contact details are at the end of this note.

In our 25 March 2020 Alert titled COVID-19 Insolvency Update: Temporary Relief for Financially Distressed Businesses we highlighted the then proposed urgent amendments to the Corporations Act 2001 (Cth) (Corporations Act) and the Bankruptcy Act 1966 (Cth), which the Federal Government was has now passed into law, to provide temporary relief to individuals a

This week’s TGIF considers the decision in Aardwolf Industries LLC v Riad Tayeh [2020] NSWSC 299, in which the Supreme Court of New South Wales refused an application for leave to sue court-appointed liquidators for damages for negligence and misleading and deceptive conduct.

Background

Personal bankruptcy can significantly impact a family law matter and it is important that parties are aware of the potential consequences. By way of general summary only:

What are the implications of bankruptcy?

If you or your former spouse / former de facto partner become bankrupt:

In what has been Australia’s largest corporate scalp in the wake of the COVID-19 pandemic, Virgin Australia has appointed partners from Deloitte as voluntary administrators. The decision to appoint administrators reportedly arose from the Federal government’s refusal to inject $1.4b as part of a recapitalisation proposal.

On 15 April 2020, the Federal Court provided the Administrators of Colette with relief from personal liability with respect to the company’s lease obligations.

Colette entered administration in February 2020, prior to the Coronavirus pandemic in Australia. In early March 2020, Administrators noticed sales had begun to substantially decline which had resulted in the company operating at a loss. The decline in sales dropped even further following the Government’s announcements regarding social isolation measures.

On 23 March 2020, the Australian Parliament passed the Coronavirus Economic Response Package Omnibus Act No. 22 of 2020 (the Act), which is designed to provide an economic response to the effect, on Australia, of the coronavirus pandemic sweeping the world by stimulating and supporting economic activity.

In relation to the Australian insolvency regime the Act made some significant changes to the relevant laws as follows.

Temporary relief for financially distressed individuals and businesses

An edited version of this article first appeared in Smart Company. By Special Counsel Katherine Payne and partners Mark Petrucco and

The BLG Monthly Update is a digest of recent developments in the law which Neil Guthrie, our National Director of Research, thinks you will find interesting or relevant – or both.

In summary

In our previous alert we discussed how Justice Markovic in the Federal Court of Australia had granted the administrators of retailer Colette Group relief from personal liability for rent in respect of 93 stores.