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Don’t Go Chasing Waterfalls – COVID-19 Safe Harbour is (still) not Safe

The temporary safe harbour protection from director liability for insolvent trading expires on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading .

The temporary protection is found in section 588GAAA of the Corporations Act 2001 (Cth). There has been some recent debate about whether the words “before any appointment during that period” of an external administrator, mean what they appear to say, namely that any appointment must take place “during that period” of the temporary safe harbour expires. [...]  READ MORE →

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To Extend, or Not to Extend: That is the Question

By Darrin Mitchell, Senior Associate at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

Part 5.7B of the Corporations Act 2001 (Cth)(“the Act”) contains provisions that allow a liquidator to seek orders that void certain transactions undertaken by a company whilst it is insolvent, or that are not in the company’s interests. The kinds of transactions that will be investigated by a liquidator include:

  • Preferential payment – see section 588FA of the Act;
  • Uncommercial transactions – see section 588FB of the Act;
  • Insolvent transactions – see section 588FC of the Act;
  • Insolvent transactions – see section 588FD of the Act;
  • Unreasonable director-related transactions – see section 588FDA of the Act; and
  • Creditor-defeating dispositions – see section 588FDB of the Act.

The period of scrutiny of the company’s transactions prior to liquidation for each category of voidable transaction is set out in section 588FE of the Act. [...]  READ MORE →

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Danger – COVID-19 Safe Harbour STILL Requires Early External Administrator Appointment

The Government has recently extended COVID-19 business protection measures introduced in March, including the temporary safe harbour protection from director liability for insolvent trading. These protections will now expire on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading. [...]  READ MORE →

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Fighting Fund Frustrated

By Stephen Mullette a Principal of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.

In a not unsurprising decision, a liquidator has been unable to protect the balance of the funds available to him in winding up (described as the “Litigation Fund”) from potentially being made available as security for the defendants’ costs.

In Nucros (WA) Pty Ltd (In Liquidation) v Ultra Plast Pty Ltd (2017) WASC 1, the liquidator was not personally a party to the proceeding, which meant the company was susceptible to a security for costs application, pursuant to section 1335 of the Corporations Act 2001. The liquidator had recovered a preference claim from the ATO and established a Litigation Fund for the purpose of continuing certain proceedings commenced prior to his appointment. The balance of the litigation fund at the time of the security for costs application was approximately $135,000. The defendants sought an order for the provision of $90,000 security. [...]  READ MORE →