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How Bankruptcy Can Go Entirely Wrong – for a Successful Creditor!!

A creditor can apply to a Federal Court for an order to make a debtor bankrupt. This application is called a creditor’s petition and if everything is in order, will lead to the Court making a sequestration order against the debtor. Normally, Registrars of the Federal Courts are the ones responsible for hearing Creditor’s Petitions.

However, did you know that registrars have no power of their own to make a sequestration order? Instead the whole system hangs upon registrars exercising delegated judicial authority, and a “Constitutional imperative” that means Judges (ie those appointed under Chapter III of the Australian Constitution) must be ready to re-hear the creditor’s petition all over again (that is, a hearing de novo)? [...]  READ MORE →

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Attention Company Directors – DIN or discipline?

By Ewurama Appiah a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

The Australian Securities and Investments Commission (ASIC) has sent company directors a clear message: if you don’t have a DIN, you will suffer discipline at the hands of the regulator.

ASIC has commenced its first prosecution against a company director for failing to have a director identification number (DIN). Section 1272C(1) of the Corporations Act 2001 (Cth) stipulates that

‘’an eligible officer must have a director identification number’’. [...]  READ MORE →

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Out of the Shadows…

By Jacob Reardon a solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

Over the years, decisions such as In the matter of Condor Blanco Mines Ltd [2016] NSWSC 1196 and ASIC v Planet Platinum and Anor [2016] VSC 120 have served as sober reminders for voluntary administrators of the need to be satisfied of the validity of their appointment.

Under section 436A of the Corporations Act 2001 (Cth) (“the Act”), a company may appoint an administrator if the board resolves to the effect that: [...]  READ MORE →

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Australia’s personal insolvency system expected to surge; those with small savings buffers to bear the brunt

By Keely Wunsch a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

In October 2023 the Australian Financial Security Authority (AFSA) released a “State of the Personal Insolvency System Report” current to 31 August 2023. The report focused on two key areas, namely the current state of the personal insolvency system in Australia, and the regulatory focus of AFSA in managing the system under the Bankruptcy Act 1966 (Cth).

The report predicts that due to the cost of living crisis currently faced by Australian households and individuals, annual personal insolvency volumes are expected to rise in the next two years, by 23% in 2023-24 to around 12,250 and by a further 20% in 2024-2025 to around 14,750. It should be remembered that during COVID-19 personal insolvency numbers hit record lows, and were in decline even before that, so in part this increase is only partly increasing personal insolvency numbers towards historic (pre-COVID) averages. This figure anticipated in August 2023 also is belied somewhat by more current figures released in late January 2024 (for the December 2023 quarter) showing a decrease in personal insolvencies for that quarter, although the December quarter is traditionally quieter in personal insolvency. [...]  READ MORE →

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Fighting the Rearguard Action – s 459S and Winding Up Applications

By Jacob Reardon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

In an application to wind up a company for failure to comply with a statutory demand, section 459S of the Corporations Act 2001 (Cth) (“the Act”) operates to exclude grounds that a defendant either did rely on, or could have relied on, in an earlier application to set aside a statutory demand.

In the Explanatory Memorandum to the Corporate Law Reform Bill 1992, the stated policy goal of section 459S is to: [...]  READ MORE →

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The House that Estoppel Built?

The full version of this article was originally published in the Lexis Nexis Insolvency Law Bulletin

By Jacob Reardon, solicitor, and Stephen Mullette, Principal, Matthews Folbigg Lawyers

How long does a bankruptcy trustee have to sell a bankrupt’s home? What if the Trustee allows the bankrupt to live in the property, and pay the mortgage, council, and water rates, and repair the property for almost 5 years? Or for 8 years? More? Will the Trustee eventually become estopped from selling the property after such a long period? The answer may surprise. [...]  READ MORE →

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Dangers of Division 7A Loans In Liquidation

By Ashley Muscat, Law Clerk at Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

It is common for associates and shareholders of companies in Australia to withdraw company funds through a loan account. There are lots of tax reasons why this is a popular way to access profits from a corporate vehicle. Of course, the ATO knows this, and so if the loan is not properly documented and does not satisfy the criteria to be a Division 7A loan, the amount will be deemed to have been paid out as a dividend, and taxed in the hands of the shareholder, usually unfranked. [...]  READ MORE →

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What is the best business structure for you?

No matter what stage your business is in or the type of business you operate, it is critical to have the right business structure in place for many reasons, including to safeguard your personal and business assets, minimise risk and tax implications and optimise returns.  Each business structure has its own benefits and risks as well as criteria and regulatory requirements, which should be considered before adopting a business structure that is ideal for your business and personal needs.

Sole traders and partnerships [...]  READ MORE →

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Dotting the I’s, and crossing the T’s – the perils of creditors statutory demands

By Jeffrey Brown a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

The slightest slip of the pen can lead to disastrous consequences when you are dealing with creditors statutory demands, as a recent Supreme Court case demonstrates.

VO Group Australia Pty Limited (“VO”) was making an application to set aside a statutory demand that had been issued on it by Watpac Construction Pty Limited (“Watpac”).  Watpac in turn alleged that the application was made outside the 21 day time limit for making such an application and was invalid. [...]  READ MORE →

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Challenging Demands

By Jacob Reardon a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

Section 459G(1) of the Corporations Act 2001 (Cth) (“the Act”) allows a debtor company served with a statutory demand to apply to the Court to have it set aside. Under s 459G(2) any such application must be filed within the 21 day statutory limitation period. This is a strict 21 days and generally cannot be extended.

The operation of s 459G and the strict 21 days limit has led to some controversy in situations where a debtor company has been served with a statutory demand, but does not become aware of the service until after the expiry of the 21 day period. How could it file an application to set aside a demand it did not know about? [...]  READ MORE →

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What Constitutes An ‘Unfair’ Term?

By Arian Bahmiyari, a Law Clerk of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

Unfair terms in a contract can often be overseen and become problematic well after a contract has been entered into. Part 2.3 of the Australian Consumer Law (“the ACL”) aims to protect consumers in circumstances where they have limited opportunity to negotiate with businesses. It is therefore important to consider whether your agreements contain any terms that may be characterised as ‘unfair’. A term may be considered ‘unfair’ if it: [...]  READ MORE →

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What can be considered a “charge” when providing credit under the National Credit Code?

By Aritree Barua, Solicitor at Matthews Folbigg Lawyers in our Insolvency, Restructuring and Debt Recovery Group

In Australian Securities and Investments Commission v BHF Solutions Pty Ltd [2022] FCAFC 108 (“ASIC v BHFS”), the Full Court of the Federal Court of Australia considered the statutory interpretation of “charge that is or may be made for providing the credit” in Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth) (“the Credit Code”) in the context of a short-term credit arrangement involving multiple contracts. [...]  READ MORE →