The recent weeks have seen a number of major corporates enter voluntary administration, including Virgin Australia, Techfront Australia, Collette by Collette Hayman and Carriageworks Sydney, as a result of pre-existing distressed financial positions that were exacerbated by the consequences of the COVID-19 pandemic. The uncertainty that COVID-19 has brought, particularly the restriction on gatherings and the shutdown of non-essential services, created challenges for administrators looking to restructure businesses and maximise returns for creditors.
In the decision of Goyal [1] handed down on 7 April 2020, Justice Markovic of the Federal Court has given approval to liquidators to enter into a litigation funding agreement under section 477(2B) of the Corporations Act 2001 (Cth).
In what has been Australia’s largest corporate scalp in the wake of the COVID-19 pandemic, Virgin Australia has appointed partners from Deloitte as voluntary administrators. The decision to appoint administrators reportedly arose from the Federal government’s refusal to inject $1.4b as part of a recapitalisation proposal.
An edited version of this article first appeared in Smart Company. By Special Counsel Katherine Payne and partners Mark Petrucco and
The impact of COVID-19 on businesses will undoubtedly require directors to consider formal restructuring and insolvency options, including the appointment of administrators. Administrators are faced with the challenge of assessing a company’s options and forming a recommendation in an era of high market uncertainty. Both proposing a holding Deed of Company Arrangement (DOCA) and extending the convening period are being discussed as options to provide administrators with more time to undertake these tasks. In this article we consider the scope and limitations of each strategy.
The Federal Government has announced a package of changes to Australian insolvency and bankruptcy laws to provide some relief to businesses and individuals who may face financial distress from the economic impacts of the current health crisis.
The package is expressed to provide a safety net to ensure that when the crisis has passed, profitable and viable businesses can resume normal operations. This is in the form of changes to the Corporations Act to provide temporary relief to assist companies to manage through the current economic climate.
A new 'safe harbour' regime was implemented in September 2017 to provide directors who were trying to save a business with protection from future insolvent trading claims. No one could have predicted how important that regime is about to become. Given the escalating stress that is being placed on businesses because of COVID-19, many otherwise successful businesses may risk meeting the definition of insolvency.
Introduction
Christmas came early last year for certain creditors of Glenfyne Farms International AU Pty Ltd (Glenfyne Farms), when the NSW Court of Appeal quashed the casting vote made by the outgoing voluntary administrator and gifted those creditors with the appointment of their preferred liquidators.
In Sergienko v AXL Financial Pty Ltd[1], a recent win for an insurer, the NSW Supreme Court confirmed the importance of precise and well-constructed pleadings when determining whether leave will be granted pursuant to Section 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the ‘Act’).
Upon being appointed, insolvency practitioners are often faced with existing litigation involving the company or person they have been appointed to.
There are a multitude of factors that the practitioner needs to consider in relation to existing litigation. This article sets out some key considerations for administrators, liquidators, receivers and trustees in bankruptcy, as well as the practical steps a practitioner should follow. Although the article refers to practitioners appointed to companies, the principles are also generally applicable for Bankruptcy Trustees.