The Corporations Act 2001 sets out a regime for the order in which certain debts and claims are to be paid in priority to unsecured creditors.

That's straightforward enough for a liquidator, right?

Unfortunately, matters are not that straightforward. In effect, there are two priority regimes under the Act for the preferential payments of particular creditors, each of which applies to a different "fund", and we've observed this has led to some liquidators being unsure of how to proceed – or even worse, using funds they should not.

This decision puts to rest some of the uncertainty which arose due to the NZCA's approach in Timberworld and helps to solidify liquidators' prospects of recovering maximum preferential payments. 

Preferential payments can be an important source of funding for liquidators – and the recent decision in Bryant in the matter of Gunns Limited v Bluewood Industries Pty Ltd [2020] FCA 714 is a source of some relief for liquidators.

Timberworld – uncertainty over the impact on Australian liquidators

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

There remain a number of issues in the proposed insolvency reforms that need careful deliberation, particularly where the Regulations have yet to be released for consideration.

The new debtor-in-possession model for small business restructuring is aimed at allowing viable small businesses to seize the initiative to quickly restructure to survive the economic impact of COVID-19, but we need greater clarity on key elements of the proposed insolvency framework.

Liquidators need to be mindful that a disclaimer of property may be challenged. The Supreme Court of Victoria underscored a key issue in establishing "prejudice" to creditors in a liquidation, holding that a disclaimer of property may be set aside where the liquidators are indemnified.

The "true employer" question is one which frequently arises in insolvencies of corporate groups, and it also arises in solvent workplace dispute scenarios. Answering it, however, is often hampered by inconsistent or incomplete records and very divergent returns for employees, depending on the outcome of the question.

The COVID-19 pandemic and the associated lock downs have led to a global economic slowdown, and Australia has been no exception. GDP fell by 0.3% in the March quarter, and on 3 June 2020 Treasurer Josh Frydenberg announced that Australia was officially in its first recession in 29 years.

While the Australian Government was quick to provide a range of economic support measures – having already spent $289bn or 14.6% of GDP in an attempt to keep the economy afloat – Treasury expects Australia's GDP will decline by 0.5% in 2019-20 and a further 2.5% in 2020-21.

A creditor with assets in England should refrain from involvement in a foreign insolvency proceeding if it is at risk of being sued in the foreign court.

Courts are willing, in certain circumstances, to consider the commercial realities of voluntary administrations, and can be flexible.