On 22 August 2019, the Federal Court of Australia (FCA) held that it could make a request to the New Zealand High Court (NZHC) that there be a joint hearing of those courts in respect of applications relating to the pooling of various funds held by companies subject to Australian and New Zealand liquidations, respectively.

Such a ‘letter of request’ could be issued by the FCA to a foreign court in the context of an Australian insolvency process pursuant to section 581 of the Corporations Act 2001 (Cth) (Corporations Act).

A recent decision of Justice Rees of the Supreme Court of New South Wales confirms the importance of keeping proper financial books and records in the context of insolvency.

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.

Who should read this eBrief:

• Company directors
• Accountants
• Financial Advisors

Proposed changes to Commonwealth legislation could have a significant impact on the potential for transferring assets out of one company into a new company to avoid paying liabilities.

If enacted, the changes will give liquidators, ASIC, and the ATO new powers to prosecute culpable directors and associated persons.

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.

A key part of the international scheme landscape

The use of creditors' schemes of arrangement is on the rise in Australia (as we discussed in our previous article - Update on Creditors Schemes of Arrangement in Australia). Along the way the Australian courts have made valuable contributions to international scheme jurisprudence. In this article we look at some of these contributions and then explore how Australian law might be further developed to remain a leading jurisdiction for creditors' schemes.

This week’s TGIF considers a recent insolvent trading claim involving novel questions in relation to privilege against self-incrimination and the apportionment of liability between successive directors.

Background

Key takeaways

Liquidators are encouraged to seek advice or directions from the Court as to the discharge of their responsibilities. But who bears the costs of such proceedings, of the liquidator and of any contradictor involved?