The equitable doctrine of marshalling can protect the security interests of subordinate secured creditors when a debtor becomes insolvent.

Marshalling is a neglected tool in the insolvency toolbox, but it can play an important role in protecting the security interests of subordinate secured creditors.

Payment of priority creditors under section 561 of the Corporations Act 2001 (Cth) is an activity conventionally performed by liquidators, albeit the section is silent as to the holder of the relevant payment obligation. The Federal Court of Australia has recently confirmed that distributions to priority (employee) creditors are not the exclusive purview of liquidators (where receivers are appointed contemporaneously); receivers may exercise the powers contained in section 561 to distribute certain funds to such priority creditors.

Forum bias, along with some technical issues, are still challenges in cross-border insolvencies in Australia

Just over ten years ago, Lehman Brothers filed for bankruptcy in the US, which turned out to be one of the largest cross-border insolvency cases in history.

Last year also marks:

It is inevitable that companies will face periods of financial distress during their corporate lives. During these times, it is incumbent on the directors and management to seek to maximise the company's chances of survival and preserve value for stakeholders. Certainly it has not been uncommon for directors to use the threat of voluntary administration as a part of their stakeholder management strategy during these times.

Creditors' rights to information and records

While the High Court has provided some clarity on the operation of the statutory priority regime, insolvency practitioners will still need to tread carefully when dealing with corporate trustees.

For insolvency practitioners who need clarity on how receivers and/or liquidators should pay, out of trust assets, priority employee claims arising from trust liabilities, the High Court's decision in Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth of Australia & Ors [2019] HCA 20 (Amerind) is a welcome result.

A recent Full Court decision is a win for directors who hold D&O insurance policies, as well as those seeking to bring proceedings against directors of an insolvent company – probably to the dismay of insurers.

Directors are first and foremost responsible to the company as a whole and must exercise their powers and discharge their duties in good faith in the best interests of the company and for a proper purpose. The reference to "acting in the best interests of the company" has generally been interpreted to mean the collective financial interests of the shareholders.

Increasingly, formal restructures, whether solvent or insolvent in nature, are closely aligned to court-supervised processes, adding certainty and transparency to the restructuring process.

The decision in the Go Energy Group is an important one for insolvency practitioners, who now have guidance on how to manage the conflicts that can arise when acting as liquidator to multiple companies within a corporate group.