Introduction
Current turbulent times and the onset of recession are likely to result in an increase in the number of distressed sales and ultimately insolvencies. For those who are fortunate to be in the market as buyers, there may be considerable opportunities but equally there are significant traps for the unwary. This briefing examines some of the key issues which should be considered by prospective buyers of businesses in financial difficulties which are not in formal insolvency proceedings.
Introduction
New Zealand liquidators have had their powers recognised in Australia in a series of recent ground-breaking judgments.
These decisions in respect of Northern Crest Investments Limited, a New Zealand registered company listed on the ASX, demonstrate the broad powers which the courts are willing to provide to foreign representatives under the Cross-Border Insolvency Act 2008 (Cth) (the CBIA).
Obtaining powers of Australian liquidators
Few now remember that Chapter 5C of the Corporations Act can trace its origins to the afternoon of 23 July 1991. For the past year, the unlisted property trust industry had been in meltdown. The value of the assets held by the industry had fallen over 20%. Investors were scrambling to get out, and collapses seemed imminent.
Amaca Pty Ltd v McGrath & Anor as liquidators of HIH Underwriting and Insurance (Australia) Pty Ltd [2011] NSWSC 90
Following the 2011/2012 Federal Budget announcement that directors will be made personally liable for any unpaid superannuation guarantee contributions, Treasury has released the Tax Laws Amendment (2011 Measures No. 7) Bill 2011 (Bill).
The legislation extends the current director penalty regime for unpaid PAYG. Whilst the announcement from Bill Shorten MP on 5 July 2011 highlights the need to prevent companies engaging in phoenix activities, the legislation will have a much broader impact.
Key Points: The High Court held there was no variation in the terms of the Charge and therefore no registration was required.
On 1 September 2010 the High Court handed down its much anticipated decision in the appeal from the Queensland Court of Appeal in Re Octaviar Ltd (No 7) [2009] QCA 282, unanimously dismissing the appeal in Public Trustee of Queensland v Fortress Credit Corporation (Aus) 11 Pty Ltd [2010] HCA 29.
The fixed and floating charge
Introduction
By unanimous decision in Bruton Holdings Pty Limited (in liquidation) v Commissioner of Taxation1, five members of the High Court have reversed a controversial decision of the Full Federal Court to confirm that the Commissioner of Taxation (Commissioner) cannot ‘leap-frog’ other creditors in a liquidation.2
Introduction
The New South Wales Supreme Court has found a solicitor liable for facilitating unlawful ‘phoenix’ activity.1 Phoenix activity consists of transferring business assets out of an old debt-laden company (which subsequently goes into liquidation) to a new debt free company. The new company carries on the business of the old company; but the assets are put beyond the reach of the creditors of the old company.
There have recently been a number of significant developments in relation to schemes of arrangement. These include:
- the Federal Court refusing to make orders convening a meeting of CSR’s shareholders to vote on a demerger proposal by way of scheme, on public policy and commercial morality grounds relating to CSR’s potential asbestos liabilities
- the Government’s corporate law advisory body recommending significant reforms to the scheme regime, and
- developments regarding ‘hostile schemes’.
Each of these developments is discussed below.
MCGRATH AND ANOTHER v RIDDELL, House of Lords, 9 April 2008
The liquidators of the HIH group of Australian insurance companies appealed against the decisions of the High Court and the Court of Appeal that certain assets of the HIH group, mostly reinsurance claims on policies taken out in the London market, should not be remitted to Australia. The courts instead ordered that the assets should remain in England and be distributed to creditors in accordance with English insolvency laws.