As participants in the Australian debt restructuring market continue to innovate we expect to see an increase in these control transactions, testing further again the Australian statutory regimes.
The Virgin sale shows the flexibility of Australia's restructuring regime and sets a significant judicial precedent for future control transactions.
Virgin Airlines restructured through voluntary administration
On 20 April 2020, Virgin Australia and a number of its subsidiaries were placed into voluntary administration owing $7 billion of debt to around 12,000 creditors with partners at Deloitte Australia being appointed as joint and several voluntary administrators of Virgin. Clayton Utz was appointed to act for the Administrators.
It is important for a receiver or voluntary administrator to ensure that a proper sales process is undertaken relevant to the circumstances as there is no "one-size-fits-all" approach.
The latest decision in the Arrium collapse should give some encouragement to Australia's restructuring sector.
Following a lengthy trial of 38 days in the NSW Supreme Court in March and April 2021, Justice Michael Ball (no relation) has handed down the decision in the two proceedings, Anchorage Capital Masters Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2) [2021] NSWSC 1025.
In dismissing these proceedings, Justice Ball has given some comfort to restructuring in Australia,
More Australian businesses in financial difficulty are embracing a ‘turnaround’ culture, but further structural reforms are needed to shift attitudes towards the use of turnaround professionals, according to Clayton Utz Restructuring & Insolvency partner, Cameron Belyea.
The first reported decision on the ipso facto stay provisions of the Corporations Act provides clarity that they operate as intended in voluntary administration – leaving the trickier issues for another day.
Before embarking on any litigation, or continuing any litigation that is on foot at the time of the liquidator's appointment, a liquidator should carefully weigh up the benefits and risks of pursuing a particular course of action.
A liquidator can be exposed personally in litigation. We discuss the risks to a liquidator associated with litigation by examining some recent cases where liquidators have been ordered to pay costs personally. We provide guidance on ways to mitigate this risk.
Balancing risk – weighing up competing priorities
Externally-administered companies will have 24 months to comply with financial reporting and AGM obligations, if ASIC's proposal goes ahead.
ASIC relief defers obligations to lodge financial reports and hold annual general meetings for companies in external administration by 6 months. Companies in liquidation (other than AFS licensees) do not have to comply with financial reporting or AGM obligations at all.
Directors will soon be free to make decisions to trade on even insolvent entities, and incur debts in the ordinary course of business, with the passing of the Coronavirus Economic Response Package Omnibus Act 2020 last night and Royal Assent today. The Act is intended to encourage business to continue trading free of risk that insolvent trading laws – which prevent directors of insolvent companies incurring fresh debt – would impose a personal civil and criminal liability on them. There are also changes to statutory demands and debtor's petitions.
ASIC is becoming more serious and more active and will take action against directors if there is su cient reason to, so insolvency practitioners should consider all possible actions/recoveries fully in any report to ASIC.
A company's financial distress presents a challenge for its directors and officers of large and complex financial services companies and can raise a range of difficult issues, including potential liability for insolvent trading, which potentially exposes directors both to civil and criminal consequences under the Corporations Act 2001(Cth).