The UNCITRAL Model Law on Cross-Border Insolvency is designed to supplement States' insolvency laws with a framework to address cross-border insolvency proceedings.

Defects in statutory demands have regularly prevented creditors from obtaining winding up orders against debtor companies.

The recent decision in Poolrite Australia Pty Ltd (In Liq) v Structural Pools Aust Pty Ltd [2013] FCA 1100 (Poolrite) confirms the Courts’ inclination to facilitate the efficiency of the winding up process by disregarding technical deficiencies in statutory demands where no substantial injustice is caused.

Facts

The Corporations Act 2001 (Cth) (Act) and the Corporations Regulations 2001 (Regulations) contain various rules regulating the lodgment of Proofs of Debt by creditors. Often Proofs of Debt are lodged by creditors to entitle them to vote at a second meeting of creditors convened by an Administrator under section 439A of the Act.

On 21 February 2014, the Federal Court handed down its decision inAustralian Building Systems Pty Limited v Commissioner of Taxation [2014] FCA 116 (Australian Building Systems). The Court found that a liquidator was not legally required to retain an amount out of the proceeds on disposal of assets as part of the winding up of a company to pay tax which is or will become due in respect of a capital gain.

Introduction

Does the ATO have priority over secured creditors in a liquidation? Is a receiver required to account to the ATO for any tax payable out of funds received on the sale of an asset before accounting to the secured creditor? Are receivers and liquidators personally liable for the tax payable from funds received by them? Can receivers and liquidators avoid such personal liability by distributing funds received to creditors before a tax assessment arises? These issues were at the centre of a Federal Court judgment handed down on 21 February 2014.

Two days before Christmas, the Supreme Court of New South Wales delivered a bonus for the general unsecured creditors of the collapsed discount giant Retail Adventures, and confirmed the requirements for deeds of company arrangement.

Deeds of Company Arrangement

Introduction

Early in his or her appointment a liquidator in a creditors' voluntary liquidation (CVL) should consider applying to the Court to convert the CVL to a Court ordered winding up in insolvency.  Conversion may benefit the unsecured creditors, in whose interests the liquidator acts, by enabling the liquidator to pursue claims and make recoveries not available in a CVL. 

The reasons liquidators have applied for conversion include:

In brief - Your actions will depend on whether you acknowledge or dispute the debt

If you are contacted by a debt collector, you should be frank about what you plan to do. If you dispute the debt, you should get legal advice as quickly as possible.

Debt collectors don't go away if you ignore them

Key Points

The High Court in Willmott Growers Group¹ has upheld a Victorian Court of Appeal decision that a lease can be disclaimed by the liquidator of a landlord. The decision will have very significant implications for tenants including:

A Deed of Company Arrangement (DOCA) is essentially the equivalent of a PIA for a corporation. However, a company must be in administration for a DOCA to be proposed.