In brief

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act ("Act") received royal assent on 15 December 2021.

The Act extends the scope of powers available to the Insolvency Service to address the issue of directors dissolving companies to avoid paying their liabilities.

Financial Assistance (1)

[UPDATE] Which government support schemes are in place? 

The Federal Government has set up a fund of initially EUR 4 billion by establishing financing companies. With the third 3rd COVID-19 Act, which was passed in the National Council on 03 April, the Federal Government is increasing the fund's resources to up to EUR 28 billion.

An additional financial aid package of up to EUR 34 billion shall consist of

Background

Directors of Australian companies face significant personal monetary – and potential criminal and adverse professional – consequences if they allow the company to trade whilst insolvent.

Australian insolvent trading laws are harsher, and more frequently utilised to prosecute directors personally, than in many other jurisdictions including in the US and the UK.

Accordingly, frequent assessment of a company’s solvency by its directors is crucial, particularly in financially difficult times, as are active steps to address any potential insolvency.

This week’s TGIF examines a recent NSW Supreme Court decision that illustrates the circumstances in which a person will be regarded as a ‘de facto director’ and the duties owed to creditors when facing insolvency.

Key takeaways

This week’s TGIF considers a decision of the Federal Court which enabled administrators of Virgin to send electronic notices, conduct electronic meetings and absolved them from personal liability for leases for four weeks due to COVID-19.

Background

On 20 April 2020, administrators were appointed to Virgin Australia Holdings Ltd and 37 of its subsidiaries (together, the Virgin Companies).

This week’s TGIF considers the case of In the matter of Specialist Australian Security Group Pty Ltd (in liq) [2018] VSC 199 in which the Court considered the priority of administrators' right to an indemnity out of company property.

Background

This week’s TGIF considers the decision of Deputy Commissioner of Taxation v BE100 Property Investments Pty Ltd [2016] FCA 597 where the court found that a deed administrator acted unreasonably by attempting to terminate a deed of company arrangement immediately before a meeting of creditors.

This week’s TGIF considers Krejci, in the matter of Union Standard International Group Pty Limited (in liq) (No 7) [2022] FCA 890, in which the Federal Court gave liquidators approval to conduct extensive and expensive public examinations despite there being limited expected return to creditors, in part to try and uncover the truth behind $585 million that cannot be accounted for in the company’s dealings.

Key takeaways

COVID-19 presents the greatest challenge a generation of corporate managers will see in their lifetime.

This is not the first time the Australian economy has stared down the barrel of a severe economic downturn, but it is the first time the economic conditions that previously underlined robust business models have evaporated overnight due to a public health crisis.