During the administration of a company, liquidators may identify creditors who have received payments in preference to other creditors, and apply to the court pursuant to section 588FF of the Corporations Act 2001 (Act) to recover those payments in order to achieve a more equitable distribution amongst all creditors.

What constitutes a preferential payment?

Statutory Demands pursuant to the Corporations Act are a mechanism available to creditors for the payment of debt. Upon the expiry of a Statutory Demand, the Corporations Act presumes that the company is insolvent and allows the entity making the demand to apply to the court for their winding up on grounds of insolvency.

The Government has passed amendments to the Corporations Act 2001 (Cth) and the Corporations Regulations 2001 (Regulations) to overturn the impact of the decision in Sons of Gwalia v Margaretic (2007) 231 CLR 160 (Sons of Gwalia) and reinstate the longheld convention that creditors’ rights take precedence over shareholders’ rights in the instance of a winding up.

What was the outcome of Sons of Gwalia?

Everything or Nothing! That is what the Queensland Court of Appeal has told us recently when it comes to assessing what a creditor is really owed for the purposes of standing to wind up a company

Background

A dispute arose between two parties involved in the management of Treadtel International Pty Ltd (Treadtel) whereby a Mr Cocco asserted that one of the two issued shares in Treadtel was held on trust for his benefit by the sole director’s wife, Mrs Crosher, because of an alleged share sale agreement.

CGU Insurance Limited v Blakeley [2016] HCA 2

Background

The High Court recently heard an appeal brought by CGU Insurance from a decision in the Supreme Court of Victoria, challenging a declaration that CGU was liable to indemnify Akron Roads Pty Ltd (in liquidation) (“Akron”) in interrelated proceedings.

Two critical components affecting liquidators have come out of Tuesday’s decision by Brereton J in the NSW Supreme Court.

When a company is deregistered, it ceases to exist.[1] So what happens when a person has a genuine claim against that company but fails to commence proceedings before it is deregistered?

The latest wave of reforms to hit the construction industry in Queensland is causing more than just a ripple. You can now be automatically excluded from acting as a director or senior manager of a construction company for 3 years, even if you are not at fault.

You can lose your livelihood quickly

The construction game has always been competitive and risky. There are traps everywhere. Despite this, people still tend to be surprised and upset when things go bad.

Update: Re CMI Industrial Pty Ltd (In Liq); Byrnes & Ors v CMI Limited [2015] QSC 96

Receivers do not have to distribute profits from the sale of inventory acquired by them during their appointment to priority creditors.

The question of whether priority creditors have a statutory entitlement to receivers’ inventory trading profit has largely been left unanswered until the decision handed down by Justice Mullins on 27 April 2015. 

We have heard it many times: “the only people who win when a company goes into liquidation are the lawyers and the accountants”. 

Whether that is true or not, certainly it is the case that having a corporate customer go into liquidation can cause significant damage to your cash flow, your morale and ultimately your business.

YOU MIGHT NEED TO REPAY MONEY TO YOUR DEFUNCT CUSTOMER’S LIQUIDATOR