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.
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
For many Australians superannuation can be an individual’s largest asset, the feeling of losing it when filing for bankruptcy is a very authentic concern for most of our clients. With certain components of the economy doing considerably well and other components enduring difficult economic times, bankruptcy numbers in Australia still continue to increase. Economists don’t speak about Australia’s two-speed economy much anymore, but it definitely still is two-speed.
WHO SHOULD READ THIS
- Restructuring and insolvency professionals.
THINGS YOU NEED TO KNOW
- Understanding liabilities from a payroll tax perspective can be complex, particularly due to the broad nature of the grouping provisions.
- Unless care is taken situations may arise where restructuring and insolvency professionals will be grouped with client entities, potentially exposing personal entities to joint and several liability for client entity debts.
WHAT YOU NEED TO DO
Year in Review - Australia Law in 2016
The recent decision of the New South Wales Supreme Court in Independent Contractor Services (Aust) Pty Limited ACN 119 186 971 (in liquidation) (no 2) [2016] NSWSC 106 found that the statutory scheme of priority does not apply to realisations from circulating trust assets. This decision has potentially profound impacts for both employees and secured creditors in the context of both liquidations and receiverships.
A summary of the case
On 23 February 2016, Justice Brereton of the Supreme Court of New South Wales handed down a decision In the matter ofIndependent Contractor Services (Aust) Pty Limited ACN 119 186 971(in liquidation) (No 2) that may significantly impact the economics of winding up of corporate trustees and the return to priority creditors such as employees.
In summary, the Court held that:
BACKGROUND
The statutory order of priority as it relates to a superannuation guarantee charge liability was considered in the New South Wales Supreme Court proceeding In the matter of Independent Contractor Services (Aust) Pty Limited ACN 119 186 971 (in liquidation) (No 2)[2016] NSWSC 106.
The Fair Entitlements Guarantee Act 2012 (Cth) requires the Commonwealth Government to pay outstanding superannuation, annual leave, redundancy and wages entitlements for eligible employees who have lost their jobs due to the liquidation or bankruptcy of their employers. It is generally recognised as an important safety net for employees, so that their superannuation is guaranteed.
The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 (Regulations) to amend the structure of UK annual reports have been published and laid before Parliament.