As the social and economic disruption caused by coronavirus (COVID-19) continues to rapidly evolve, the boards of Australian companies are facing solvency related issues. These issues extend to the solvency of suppliers and customers, and the potential consequences of the appointment of a voluntary administrator.

In September 2017, the Commonwealth Parliament passed the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth) to amend and reform the insolvency and external administration provisions of the Corporations Act 2001 (Cth).

One of the main changes implemented by these reforms was the introduction of a ‘safe harbour’ protection for company directors.

Victorian Supreme Court rules that the appointment of an administrator was invalid, void and of no effect because the directors did not genuinely believe the company was insolvent and appointed the administrator for an improper purpose.  

BACKGROUND

This week’s TGIF examines the decision of the Supreme Court of New South Wales in In the matter of Jana Pty Ltd [2022] NSWSC 112, considering whether a ‘genuine dispute’ exists  in relation to a debt claimed in a statutory demand where the debt arises from a poorly drafted deed.

Key Takeaways

During the second half of 2019, it was generally accepted that the US/China trade war was the most likely macroeconomic event that would precipitate a global slowdown. Even then, given the enormous amount of ‘dry powder’ capital that was available in the market, the downturn, if any, was expected to be mild.

This week’s TGIF considers In the matter of SurfStitch Group Limited [2018] NSWSC 164, where the Court refused to allow administrators to value claims of class action group members at a nominal $1 for voting at the second creditors’ meeting.

What happened?

On 11 December 2017, the administrators of SurfStitch filed an application seeking orders:

This week’s TGIF considers the decision of Crowe-Maxwell v Frost [2016] NSWCA 46 in which the Court held that a liquidator did not discharge his onus of proving relevant transactions were unreasonable director-related transactions.

BACKGROUND

This week’s TGIF considers the recent High Court decision in Walton v ACN 004 410 833 Limited (formerly Arrium Limited) (in liquidation) [2022] HCA 3, which provides guidance on the range of potential purposes for which an examination of company officers may be legitimately pursued by ‘eligible applicants’.

Key Takeaways

During the second half of 2019, it was generally accepted that the US/China trade war was the most likely macroeconomic event that would precipitate a global slowdown. Even then, given the enormous amount of ‘dry powder’ capital that was available in the market, the downturn, if any, was expected to be mild.

As part of the implementation of the Turnbull government’s National Innovation and Science Agenda, a suite of insolvency reform laws have been introduced, aimed at encouraging entrepreneurship rather than punishing corporate failure. The objective of these new laws is to provide viable but underperforming companies an opportunity to implement a turnaround strategy or sale of the business.