Key Points:

For a company to be entitled to subrogation under section 560, it must ensure that it meets the strict requirements of section 560 and does not pay entitlements directly to the relevant company's employees.

A particular focus of the inquiry will be the consequences of such insolvencies for sub-contractors.

In the wake of a recent spate of contractors becoming insolvent, the NSW Government has announced an inquiry into insolvency in the construction industry and is seeking submissions from interested parties. Submissions to the inquiry are due by 14 September 2012.

The law of "shadow directors" means that a person who effectively controls a board of a company, even though that person is not a director, may find himself being legally classified as a director of the company. That carries with it the threat of legal liability for the company's insolvent trading debts in the event that the company goes into liquidation.

Property claims, especially lien claims, are common in the current environment of supply chain disruption and delay. Most contractual, statutory and common law lien claims, including where the Personal Property Securities Act 2009 (Cth) is involved, will turn on timing, scope and quantum arguments. In this article, we outline the usual levers in a lien dispute from the debtor and creditor perspectives and make some suggestions for getting to a commercial resolution.

Companies post-restructuring are not subject to the rules protecting creditors of insolvent companies in section 588FL of the Corporations Act 2001.

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.

While much attention earlier this year was paid to the introduction of the safe harbour for directors, the second element in Australia's major reforms to insolvency laws ‒ the moratorium on the enforcement of ipso facto clauses (including self-executing clauses) ‒ is now in effect.

With the enactment of the ipso factoreform in September this year (which commences operation on 1 July 2018), it is the genuine hope of many insolvency practitioners and others in the market that voluntary administration will become a less value-destructive and, therefore, a more useful tool for company restructures.

The decision in In the matter of Independent Contractor Services (Aust) could mean more reliance upon fair entitlements guarantee funding provided by the Commonwealth in relation to the liquidation of trading trusts.

Key Points:

These three cases illustrate that strict compliance with legislative requirements continues to be imperative when serving statutory demands.

Despite what appears to be a fairly straightforward legislative regime, creditors' statutory demands appear to generate an entirely disproportionate volume of litigation in the courts. The drastic consequences of failing to comply with a creditor's statutory demand warrant very strict compliance by creditors with the technical requirements of the regime.