This is an important update in the Australian corporate and insolvency law context because, in BTI 2014 LLC v Sequana SA and others [2022] UKSC 25, the UK Supreme Court (being the UK’s highest court) confirmed the existence of a duty owed by directors to creditors in certain circumstances (creditor duty). Under the common law and equity (together, general law), there is a gateway to applicability of the creditor duty in Australia.

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.

Financial support for businesses impacted by COVID-19, legislative provisions (such as the statutory relaxation to insolvent trading liability) and general creditor leniency have resulted inhistorically low insolvency appointments during the last two years.

The High Court has handed down the long-awaited decision of Stubbings v Jams 2 Pty Ltd [2022] HCA 6, unanimously overturning the decision of the Victorian Court of Appeal. In so doing, the Court held that enforcement of rights under a personal guarantee was unconscionable.

In Walton v ACN 004 410 833 Limited (formerly Arrium Limited) (in liquidation) [2022] HCA 3, the High Court extended the purpose for which, and incidentally parties by whom, public examinations may be used.

For some time, controversy has surrounded the question as to whether unsecured creditors of an insolvent company can utilise set-off under s 553C of the Corporations Act 2001 (Cth) (Act) against unfair preference claims.

Public examinations are a powerful process for a liquidator to explore the reasons for a company’s failure, identify any claims the liquidator or the company might have and assess recoverability prospects following any successful claim.

In a similar vein, liquidators might also obtain document production orders against natural persons and corporate entities. Such document production orders are often obtained in advance of examinations, and can assist the liquidator in its investigations and preparation for the examinations.

The court’s power to overturn the decisions of insolvency practitioners in a company’s external administration was highlighted in the recent case of Tuscan Capital Partners Pty Ltd v Trading Australia Pty Ltd (in liq), in the matter of Trading Australia Pty Ltd (in liq) (Proof of Debt) [2021] FCA 1061 (Tuscan).

In Australia, s 436A of the Corporations Act 2001 (Cth) (Act) provides for the circumstances in which a company may appoint a voluntary administrator. This provision requires the company’s board to resolve that: (a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and (b) an administrator of the company should be appointed.

Voluntary administration is Australia’s primary business rescue regime. This article is Part 2 of a two-part series. In this article, we highlight the impact of voluntary administration on various stakeholders and the potential outcomes for a company in voluntary administration. It is not intended to be used as an exhaustive guide to Australia’s voluntary administration regime and its many nuances.