On 28 March 2017, the Australian Federal Government (Government) released draft legislation in relation to two major reforms intended to encourage turnaround, restructuring and business rescue.
The draft legislation introduces a safe harbour for directors from liability for insolvent trading, and stays the operation of ipso facto clauses where a company enters into administration or proposes a scheme of arrangement.
EXECUTIVE SUMMARY
This week’s TGIF considers Fordyce v Ryan & Anor; Fordyce v Quinn & Anor [2016] QSC 307, where the Court considered whether a beneficiary’s interest in a discretionary trust amounted to ‘property’ for the purposes of the Bankruptcy Act 1966 (Cth).
BACKGROUND
The recent Federal Court of Australia decision of The Owners – Strata Plan No 14120 v McCarthy (No 2) [2016] FCCA 2017, demonstrates the dangers of errors in a bankruptcy notice.
In McCarthy, the Court found that when a debtor disputes the validity of a bankruptcy notice on the ground of a misstatement of the amount claimed, the debtor’s notice does not need to identify the misstatement with complete precision to render the bankruptcy notice invalid.
Winding up a company when you are the trustee in bankruptcy of the sole director and shareholder can be more complicated than you think.
If you’re a creditor and for some reason, your debtor is showing no signs of repaying what they owe, what are your options? In some cases, you may be able to bankrupt your debtor. Once a court judgment has been entered against your debtor, you are entitled to take steps to have them declared bankrupt. Your judgment debtor must be an individual (not a company), and the judgment debt must be $5,000 or more. But is it worth it?
In December 2015 the Federal Government announced proposed reforms to insolvency laws as part of its National Innovation Statement (NIS).
When an individual becomes bankrupt, the bankrupt’s property vests in the bankruptcy Trustee with a number of exceptions. One exception is in respect of the bankrupt’s interest in a regulated superannuation fund, an approved deposit fund or an exempt public sector superannuation scheme.
Legend International Holdings Inc (in Liquidation) v Indian Farmers Fertiliser Cooperative Limited [2016] VSCA 151
The Australian Court of Appeal refused an appeal against a winding up order made in relation to Legend in Australia where Chapter 11 proceedings were on foot in the United States.
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This week’s TGIF considers the case of Compton v Ramsay Health Care Australia Pty Ltd [2016] FCAFC 106, where the Court exercised its power to “go behind” a judgment upon which a petitioning creditor relied as proof of a debt that was owed.
WHAT HAPPENED?
The Australian government is working to significantly reform Australia’s current insolvency laws by mid-2017.
The reforms are intended to achieve greater likelihood of business preservation by introducing the flexibility to achieve real turnaround of businesses in crisis.
The proposed changes include: