The Treasurer has announced the most consequential changes to Australia’s insolvency laws in 30 years.
The changes are styled on the Chapter 11 regime utilised in the United States. It represents a significant shift from the current ‘creditor-in-possession’ regime to a ‘debtor-in-possession’ system. Incorporated entities with liabilities of less than $1 million will be able to access the scheme.
Some of the key features of the proposed scheme are:
In March 2020, the Australian Government introduced new measures to relax the laws relating to insolvency and bankruptcy to assist businesses and individuals who may be facing financial distress.
Today, the Federal Government confirmed that these protections will now remain in force until 31 December 2020. We summarise the safeguards below:
In a recent decision[1] the Supreme Court of Western Australia was asked, pursuant to section 447A of the Corporations Act 2001 (Cth), to appoint a special purpose administrator to cure a perceived conflict of interest between a company (in administration) and the original administrator appointed to the company.
In the recent Court of Appeal decision of Re Willmott Forests Ltd [2012] VSC 29, the Court held that a lessee’s leasehold interest can be extinguished by a liquidator appointed to a lessor company using the disclaimer power in s 568 of the Corporations Act 2001 (Act).
Facts
From 1 July 2012, all insolvency notices must be registered with the Australian Securities and Investments Commission (ASIC) on its new online register at www.insolvencynotices.asic.gov.au. Consequently, ASIC’s online register now serves as a comprehensive noticeboard of companies’ affairs in relation to insolvency. More importantly, it provides important information for creditors.
As part of broader reforms to Australia’s corporate insolvency laws, new laws will restrict the ability of a party to enforce a right to terminate a contract in the case where the counterparty suffers an insolvency event (commonly known as ‘ipso facto’ clauses).
What are ‘ipso facto’ clauses?
The Farm Debt Mediation Act 2011 (Vic) (the Act) has been in operation for some two years and is in large part modelled on New South Wales legislation which has been operative since 1994. Since the commencement of the Act in Victoria, over 180 mediations have taken place with 95% of those mediations resulting in a settlement agreement between the parties.
The recent Federal Court decision of ASIC & Franklin & Ors [2014] FCA 68 represents, respectfully, a noteworthy exercise by the Court in applying the law in a commercial common sense manner.
Justice Davies was asked to consider ASIC’s application for disqualification of the Liquidators of Walton Construction Pty Ltd (in liq) and Walton Construction (Qld) Pty Ltd (in liq) (the Companies). The Liquidators were appointed the Administrators of the company having been referred to the directors of the Companies by Mawson Group.
The recent collapses of major builders St Hilliers, Kell & Rigby and Reed Constructions have caused such concern that the New South Wales Government has launched a public enquiry into the issue.
Given the tough economic conditions, it is timely to review your corporate obligations and the risks involved in managing debts, consider how to protect your business if a contractor or principal encounters financial difficulty, and what you can do to minimise damage to your business.