This Part of the 2023 edition of R+I In Brief provides key industry and sector insights relating to the restructuring space over the past year. These hot topics include:

In recent times, the corporate landscape has witnessed a significant shift as Environmental, Social, and Governance (ESG) initiatives gain traction among investor and consumer groups. Companies operating in carbon-centric industries, particularly those involved in fossil fuel extraction, are experiencing challenges in securing new funding. One such company, Nashville-based driller Alpine Summit Energy Partners, has made headlines by seeking bankruptcy protection, citing the lack of funding in the oil and gas industry due to growing ESG and sustainability concerns.

After a 10-month inquiry process, on 12 July 2023 the Parliamentary Joint Committee on Corporations and Financial Services (PJC) delivered its final report on the effectiveness of Australia’s corporate insolvency laws.

In this alert, we distil some of the key findings from the almost 400-page report and consider what future law reforms might look like.

A COMPLEX AND INEFFICIENT SYSTEM

The Parliamentary Joint Committee on Corporations and Financial Services inquiry into corporate insolvency in Australia tabled its final report to the Australian Parliament on 12 July 2023.

Key takeouts

In this week’s TGIF, we consider the recent case of Vita Group Ltd, in the matter of Vita Group Ltd [2023] FCA 400, in which his Honour Justice Jackman outlined practical changes to the way schemes of arrangement should be implemented through the Federal Court to make them simpler, faster and more cost efficient.

Key takeaways

The Australian Government introduced two significant new insolvency solutions following the enactment of the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth), as part of the federal government’s JobMaker Plan in response to the COVID-19 pandemic. The first of these solutions is the Simplified Liquidation Process (SLP) which allows eligible small companies to participate in a faster and more financially commercial liquidation process.

The benefits of the process, compared to traditional liquidation, include:

As stated in our previous article, a statutory demand must be addressed to the proper entity (including the correct ACN number) at the registered office address of the debtor company (which can be searched by an ASIC search of the debtor company) in order for it to be considered valid. This statutory demand can be left at or posted to the debtor company’s registered office address or delivered personally to a director of the debtor company who resides in Australia: see section 109X(1) of the Corporations Act 2001 (Cth) in this regard.

A members voluntary winding up (MVWU) is implemented in circumstances where the company’s members no longer wish to retain the company’s structure because its existence is no longer required or useful. It is only available if the company in question is solvent.

A MVWU is the only way to fully wind up the affairs of a solvent company. All outstanding creditors are paid in full, and any surplus assets are distributed to its members. A MVWU also ensures that the interests of the company’s members are protected while the company structure is dismantled.

Restructuring and insolvency professionals are showing real ingenuity when restructuring insolvent businesses, and landlords need to keep up.

Economic downturns create opportunities for the restructuring or acquisition of challenged assets, and we anticipate increased activity in this space in 2023. The indicators pointing in that direction are:

Liquidators accepting a new appointment will have to think carefully if there's a possibility of disclaiming onerous property as part of that appointment.