Much has been written and discussed about Australia’s draconian insolvent trading laws and the Federal Government has taken note. It has released draft legislation seeking to amend the Corporations Act in a way that supports the restructuring of financially distressed companies. But do these amendments go far enough in providing companies with the time and space they require when they’re seeking to implement a financial restructuring plan?

BACKGROUND

BACKGROUND

A fruit and vegetable supplier supplied the defendants’ company with fruit and vegetables over a number of years.  The defendants, who were brothers, were the directors of the company to whom the fruit and vegetables were supplied.

The company fell behind in its payments to the fruit and vegetable supplier.  A guarantee was provided by the brothers in order to secure the payment of debts owed by their company and ensure further supply.

This week’s TGIF considers a recent case where the Supreme Court of Queensland rejected a director’s application to access an executory contract of sale entered into by receivers and managers on the basis it was not a ‘financial record’

Key Takeaways

The introduction of a safe harbour protection for company directors was one of a number of generational reforms to the restructuring landscape throughout late 2017 and 2018 aimed at relaxing Australia’s unforgiving insolvency laws.

Now that more than a year has passed, have the safe harbour reforms been a success? And what steps can directors take to ensure they obtain the protections they afford?

A recent Victorian Supreme Court decision has resulted in the Commonwealth losing priority status for some $3.8m paid to the employees of a collapsed company, due to an unusual gap in the priority regime created under the Corporations Act.

Background

In In the matter of Nexus Energy Ltd (subject to a deed of company arrangement) [2014] NSWSC 1910, the deed administrators of Nexus Energy Limited (subject to a Deed of Company Arrangement) (Nexus) sought leave of the Court to transfer all ordinary shares in Nexus to SGH Energy (No 2) Pty Ltd (SGH2). SGH2 was the proponent of the Deed of Company Arrangement (DOCA) and was also associated with the secured lender.

This week’s TGIF looks at the decision of the Federal Court of Australia in Donoghue v Russells (A Firm)[2021] FCA 798 in which Mr Donoghue appealed a decision to make a sequestration order which was premised on him ‘carrying on business in Australia' for the purpose of section 43(1)(b)(iii) of the Bankruptcy Act 1966 (Cth) (Act).

Key Takeaways

This week’s TGIF considers a recent decision of the Victorian Court of Appeal where a company’s creditors successfully opposed an application by the company’s liquidators to compromise proceedings commenced on the company’s behalf.

This week’s TGIF considers a recent Federal Court decision in which relief was sought under section 588FM of the Corporations Act to ensure a security interest perfected after the ‘critical time’ did not automatically vest.

What happened?

On 7 April 2016, administrators were appointed to OneSteel. OneSteel, a member of the Arrium Group of Companies, subsequently entered into a deed of company arrangement.

The recent Supreme Court of NSW decision In the matter of Anglican Development Fund Diocese of Bathurst Board (recs and mgrs apptd) [2015] NSWSC 6, confirms that a board of directors’ residual powers in receivership include consenting to judgment in favour of a creditor.   

BACKGROUND