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A Senate Committee has said amendments to Australia's corporate insolvency laws should be considered to encourage and facilitate corporate turnarounds.

The Senate Economics References Committee called for a review of Australia's corporate insolvency laws to ensure they facilitate corporate turnarounds. One suggestion was for the implementation of certain features of the US' Chapter 11 regime into Australia's insolvency laws.

The arguments for changing the insolvency regime

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A forbearance arrangement is a useful instrument to ensure that both the lender and the customer are aligned on the proposed turnaround or workout.

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Provided a liquidator is acting properly in conducting proceedings or realising assets, he or she is entitled to be paid fees in priority to a secured creditor.

The High Court has recently reaffirmed the principle that a liquidator is entitled to be paid his or her costs and expenses properly incurred in realising assets of a company in priority to a secured creditor. This is so even if the fund realised was derived from an action brought against a secured creditor (Stewart v Atco Controls Pty Ltd (in Liquidation) [2014] HCA 15).

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The key to planning, devising and implementing a successful turnaround is having the right team in place to properly assess all relevant information, circumstances and risks.

One of the many changes to be implemented as part of the Federal Budget delivered last night was a change to the Fair Entitlements Guarantee (FEG) (previously known as the General Employee Entitlements and Redundancy Scheme or GEERS), which  guarantees certain unpaid employee entitlements in the event of insolvency or bankruptcy of that person's employer.

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The NSW Supreme Court says it can provide directions on an administrator's commercial decision on the basis of the liability assumed by administrators and their partners.

The UNCITRAL Model Law on Cross-Border Insolvency is designed to supplement States' insolvency laws with a framework to address cross-border insolvency proceedings.

The High Court has ruled that liquidators of lessors can disclaim leases, thus terminating the leasehold interests of tenants.

However, yesterday's High Court decision in Willmott Growers Group Inc. v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) [2013] HCA 51 leaves open another issue: do liquidators need to get Court approval before exercising this power, and, if so, how easy or difficult would it be to get that approval?

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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.

The recent decision of Modcol Pty Ltd v National Buildplan Group Pty Ltd ^[1] addressed whether leave should be granted to a subcontractor to allow it to commence proceedings against a contractor in administration in respect of the subcontractor's rights under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act).