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Insolvent Trading Advice for Clients Affected by COVID-19

By Ellen Ferris, a Solicitor in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group

In the current climate, many accountants may have clients experiencing financial distress, including directors seeking advice on how to avoid personal liability for trading whilst insolvent.

What advice should accountants be giving their clients in this environment? What advice do directors need to hear?

Insolvent Trading – The Danger

Firstly, it is important to understand how the law defines insolvent trading. The law defines insolvency as an inability to meet debts as and when they are due and payable. Insolvent trading, in simple terms, relates to debts incurred whilst a company is insolvent.

Secondly, however, determining insolvency at any point in time is a very complex assessment.  It does not include a temporary shortage of liquidity, but looks at the company’s assets as a whole and its cash-flow.  In the current COVID-19 climate, many businesses will be experiencing temporary liquidity problems, however the questions is whether these are going to lead to longer term shortages of capital.  Given what is going on in the world, who knows?
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Creditor-Defeating Dispositions: Illegal Phoenixing Amendments 2020 #2

By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

At the beginning of this year, the Australian Government enacted amendments to the Corporations Act 2001 (Cth) (“the Corporations Act”) which include a variety of new remedies available to liquidators, creditors and ASIC, aimed at combating “illegal phoenixing activity”. The new remedies target not only the directors of insolvent companies but also third parties involved in controlling or advising the directors in respect of certain transactions designed to defeat the claims of creditors against insolvent companies.

The legislation is the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) which came into effect as of 18 February 2020. The amendments introduce a new concept, called a “creditor-defeating disposition”. A new section in the Corporations Act, section 588FDB, defines a creditor-defeating disposition as a disposition of property of a company:

  • For less than the lower of the market value of the property or the best price reasonably obtainable; and
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COVID-19: Critical Matters for Commercial & Retail Tenants and Landlords

COVID-19: Critical Matters for Commercial & Retail Tenants and Landlords

New Laws

The NSW Government now has the power to set new rules for retail landlords and tenants, the details of which will be known in coming days.

Although the new laws (currently) only relate to retail leases, nevertheless there are substantial challenges for both commercial and retail tenants and landlords to consider as set out below arising from the COVID-19 situation.

What is expected?

For retail tenants and landlords it is expected that the new laws will address such matters as evictions, bank guarantees/bonds, tenant defaults, rent abatements, and mandatory/core trading hours.

Caution must therefore be exercised when purporting to rely upon a lease term as it may be modified or prohibited under the new regime.

What about force majeure and rent abatement clauses?

Contractual force majeure provisions (ie, events beyond the reasonable control of a party) and rent abatement clauses will have important significance and need to be carefully considered in terms of the rights, remedies and obligations they create for both landlords and tenants.
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Critical Covid Response Items for EVERY Business and Employer

COVID-19

Critical Covid Response Items for EVERY Business and Employer

Business Contracts and Leases

Key questions to ask yourself in an effort to reduce losses being suffered:

  • can I use contractual and leasing force majeure provisions due to events beyond my reasonable control to cancel, suspend or renegotiate my contracts and leases?
  • what happens if I don’t have a force majeure provision?
  • can I use the “frustrated contracts” regime to my advantage?
  • is Covid a “material adverse event” for contractual purposes?
  • what time limits apply to exercise my rights and are there any mandatory procedural requirements I must follow to do so?

As the interaction between contractual wording, legal considerations, and the outcome sought are inherently fact specific, if you would like to discuss your options we invite you to contact a member of our Commercial Law Team on 9635 7966.

Staff

Does your contingency planning take into account these fundamental matters:

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Accountants Keeping Clients Afloat During COVID-19

By Ellen Ferris, a Solicitor in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group.

Accountants are being swamped by directors caught up in the effects of a global pandemic and the consequences of shutdowns and quarantine. Accountants’ own businesses are in the same boat.

How to advise clients during this time? The Australian Restructuring Insolvency and Turnaround Association (“ARITA”) has released helpful guidance for accountants seeking to help their clients at this time. These resources can be accessed via the below link:

Matthews Folbigg Lawyers has a legal team dedicated to Insolvency, Restructuring and Debt Recovery. All of the solicitors on this team are members of ARITA, and have been following the changes in this practice area closely.

Our team are ready to advise accountants with clients caught up in this complex area. If you have any questions about these changes, or would like to discuss these resources, please contact a Principal of Matthews Folbigg Insolvency, Restructuring & Debt Recovery Team:
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COVID-19 and its impact on your entry to Australia

As of 1 April 2020

Summary of the current travel restrictions

            Inbound

  • Unless exempted, if you are not Australian citizens, residents, immediate family member and/or a New Zealand citizen usually resident in the country, you cannot travel to Australia.
  • Immediate family members are:
    • spouses;
    • dependent children; and
    • legal guardians.
  • Immediate family members who are not on a Partner or Child visa should not travel to Australia until approval from the Department has been obtained.
  • Prospective Marriage Visa holders cannot come to Australia.
  • As of 23:50AEDT on 28 March 2020, all incoming travellers are subject to a mandatory quarantine period of 14 days at a designated facility. Travellers transiting New South Wales on their way to another State or Territory or another country are currently not required to be quarantined.
  • Other exemptions to the travel restrictions may apply such as individuals with critical skills – medical specialists, engineers or pilot may travel to Australia after approvals have been given. Application for exemption must be made prior to arrival in Australia.
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Family Lawyer in Focus: Kieran Ridley

Kieran RidleyKieran Ridley was admitted as a Solicitor of the Supreme Court of New South Wales in 2013 and as a Solicitor of the High Court of Australia in the same year.  Kieran is a graduate of Western Sydney University with degrees in Law (Dean’s Merit List 2012) and Business (Management).  Kieran also holds a Graduate Diploma in Teaching from Excelsia College and a  Graduate Diploma in Legal Practice from the Australian National University. Kieran is on the Family Law and Criminal Law Panels with the Legal Aid Commission of New South Wales, providing private legal representation.

Kieran is a dedicated and passionate litigation and family lawyer who has assisted clients to achieve successful outcomes since 2010.  Since his admission, Kieran has represented clients in all aspects of family law, including parenting matters, property matters (married and de facto), AVO’s, financial and parenting agreements, child support and dispute resolution. Kieran has experience in a wide variety of courts and tribunals, and appears in the Family Court of Australia and the Federal Circuit Court of Australia on a regular basis.
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Helpful Resource on Directors’ Duties During Disaster

By Ellen Ferris, a Solicitor in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group.

Directors’ duties are changing daily as the Government makes new laws to deal with the impact of COVID-19. However those duties have not been extinguished and it is important that responsible directors keep on top of their statutory obligations (and personal liabilities). The Australian Restructuring Insolvency and Turnaround Association (“ARITA”) has released helpful guidance for directors. These resources can be accessed via the below link:

  • Guidance with respect to directors’ duties – ARITA News

Matthews Folbigg Lawyers has a legal team dedicated to Insolvency, Restructuring and Debt Recovery. All of the solicitors on this team are members of ARITA, and have been following the changes in this practice area closely.

Our team are ready to advise directors  on this complex area. If you have any questions about these changes, or would like to discuss these resources, please contact a Principal of Matthews Folbigg Insolvency, Restructuring & Debt Recovery Team:
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