As challenging trading conditions in the UK economy persist, insolvency is a real prospect facing many companies. Businesses are increasingly likely to find themselves dealing with other businesses that are in financial difficulties or even insolvent. In such cases, the need to plan ahead, develop strategies to minimise problems and manage relationships with customers and suppliers should not be underestimated.
This article looks at some of the issues to consider when dealing with companies that are either insolvent or on the brink of insolvency and how to protect your business.
In a recent case involving a former financial services provider in liquidation, thousands of pending claims from former customers and a letter of comfort with a looming expiry date, the Liquidators appointed to wind up Forex Capital Trading Pty Limited successfully applied to the Federal Court of Australia for orders permitting them to conduct an expedited process for the adjudication and admission of claims.
Background
Four directors have been disqualified for abusing the dissolution process pursuant to powers introduced by the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (the Act). In each case, the director secured a bounce back loan on behalf of their company before taking steps to dissolve the company in an attempt to avoid repaying liabilities under the scheme.
Courts Now Have More Discretion Regarding Plans of Arrangement Under Alberta's Amended Business Corporations Act
The International Risk Management Institute defines a Third-Party Administrator (TPA) as a firm that handles various types of administrative responsibilities, on a fee-for-services basis.1 These responsibilities are generally executed for insurance carriers and typically include claims administration, loss control, risk management information systems, and risk management consulting.
The Supreme Court in its recent judgement Kotak Mahindra Bank Limited v. Kew Precision Parts Private Limited & Others1, has held that an application to initiate corporate insolvency resolution process (“CIRP”) against a corporate debtor is maintainable in respect of a time barred debt, if the debtor has after the expiry of the limitation period, agreed to repay the same.
Brief Facts
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
Debt recovery can often be a tricky exercise, as debtors are adept at avoiding and/or delaying payment where there is a debt outstanding.
A cost-effective avenue for debt recovery, where the debtor is a company, is by way of a statutory demand.
The European Union (Preventive Restructuring) Regulations 2022 have amended the Companies Act 2014 so as to require for the first time in statute that directors of companies unable, or likely to be unable, to pay their debts, must have regard to the interests of creditors.
Part 1 of this two-part series explored potential legislative changes which could impact the Australian insolvency landscape in 2022 and beyond. Part 2 addresses the recent major developments in case law that have the potential to shape the insolvency landscape in Australia for many years to come.