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COVID-19 and Corporate Insolvency: What does an increase in corporate insolvency mean to creditors?

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

In these difficult times, recent legislative amendments provide assistance for debtors, but risk for creditors. Going forward, it will be important for creditors to carefully monitor their credit policies. Creditors are likely see more spikes in default rates over the next months while government restrictions and businesses’ staff isolation plans remain in place. Where a debtor is placed into external administration, they should be aware of their rights (and duties) during the insolvency process. [...]  READ MORE →

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WINDING UP BECAUSE ITS JUST AND EQUITABLE

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

In a dispute between directors of a corporate entity, one resolution can be to place to company into liquidation on “just and equitable” grounds.

Section 461(1)(k) of the Corporations Act 2001 (Cth)(“the Act”) makes provision for a court to wind up a company if the court is of the opinion that it is just and equitable to do so.  Should an order be made to wind up the company, it is usual that the costs of the application be paid by the company as per section 466 of the Act and as was ordered in the matter of Re Riverside Spares Pty Ltd [2019] NSWSC 1900 [...]  READ MORE →

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BANKRUPT MAN CONVICTED OF CRIMINAL OFFENCES

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

The idea of bankruptcy began in England in the early sixteenth century when merchants and traders conducted business on credit.  A bankrupt person could face imprisonment until released by the Lord Chancellor after disclosure of all debts and various tasks had been completed.  In the late seventeenth century Lord Kenyon reasserted the old sentiment that “Bankruptcy is considered a crime and a bankrupt in the old laws is called an offender.” [...]  READ MORE →

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Government restrains creditor enforcement action in wake of COVID-19

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

As mentioned in yesterday’s blog, the Australian Government announced it would introduce a bill, to be fast-tracked through the Parliament, to address the economic crisis as a result of COVID-19. The bill was proposed on 23 March 2020 with the third reading agreed to in the Senate on the same day. As at 24 March 2020 it has passed both houses.

Much of the legislation provides substantial subsidies to businesses as well as payments to individuals affected by the economic downturn. However, a significant part of it provides relief to distressed businesses. The main changes are: [...]  READ MORE →

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Winter is Coming – COVID-19 Changes Insolvency Law

By Anica Cunanan, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

The unprecedented financial impact of COVID-19 has forced the laws surrounding insolvencies to change – well at least temporarily.  Analogous to the process of containing the virus, the Government is currently deciding on temporary changes to also flatten the curve of the inevitable insolvencies following this pandemic.

The Treasurer has been given a temporary instrument-making power in the Corporations Act 2001, for a period of six months, in order to provide temporary relief to distressed businesses. This was announced by the Government on 12 March 2020. [...]  READ MORE →

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Debt Recovery – Why should I use a Lawyer?

By Darrin Mitchell, a Senior Associate in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group.

Meet Darrin

Aside from being a lawyer, Darrin has been involved in debt recovery for 30 years, helping companies and individuals recover monies due and owing to them.

Before Darrin was admitted as a lawyer, he worked for a finance company and a mercantile agent so he saw first hand the nuts and bolts of dealing with debtors.

This experience has given Darrin a boost in assisting clients to recover monies in-house up to the management of a full blown hearing where the debtor defends everything from non-supply of goods to alleging that the goods supplied were defective.  It also allows Darrin to give advice on the implications of debt recovery, so clients can make practical, commercial decisions. [...]  READ MORE →

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Is there such a thing as an acceptable level of debt?

Economic pundits are fond of debating whether any Federal Government should operate with a recurring budget deficit, or whether the aim should always be to stay in budget surplus.  Inevitably, this debate has extended to individual business operations.

No one likes debt (expect maybe banks).  Even the best business will however enter into debt as a deliberate strategy in order to expand, or to seize upon an opportunity that would disappear without access to more funds than are immediately at hand.  Other good businesses operate within industries where provision of credit to customers or extended payment terms are culturally ingrained.  If cash-flow and collection processes are not strictly maintained (and sometimes even if they are), outstanding payments can grow to a tipping point, where even an immediate change by customers to full compliance with credit terms will not be enough to service debt.  In that environment, can there be such a thing as an “acceptable” level of debt? [...]  READ MORE →

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Recovering debt from a company – Statutory Demand v Proceedings

By Hayley Hitch, an Associate in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group.

The first step to take in recovering a debt is to establish who the debtor actually is and what type of entity the debtor is. Debts may be owed by various types of entities, including partnerships, companies, trustees of trusts, sole traders and individuals.

So what are the advantages and disadvantages of commencing proceedings verse issuing a statutory demand when recovering a debt from a company? [...]  READ MORE →

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Creditor’s Requests – When is it unreasonable?

By Bonnie McMahon, an Associate in Matthews Folbigg’s Insolvency, Restructuring and Debt Recovery Group.

Many external administrators and trustees will have been receiving requests from creditors under section 70-45 of the new insolvency practice schedules, which were first introduced into the Corporations Act and Bankruptcy Act in September 2017.

This new provision allows creditors to request information, reports or documents from an external administrator or trustee.

At this stage, there is not a lot of guidance as to when external administrators and trustees can refuse to comply with these requests, especially as the scope of section 70-45 has only been considered by the Court in one reported case to date. [...]  READ MORE →

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Company Records? I could tell you, but I would have to go to gaol… ?

By Chloe Howard of Matthews Folbigg Lawyers, a lawyer in our Insolvency, Restructuring and Debt Recovery Group

A company is presumed to be insolvent if it fails to keep proper financial records (section 588E(4) of the Corporations Act 2001 (Cth)).

But what if you have the records, but providing them might send you to gaol?

This issue was recently discussed in the matter of Substance Technologies Pty Ltd [2019] NSWSC 612.

In this matter, the director refused to respond to a liquidator’s repeated requests for the company’s financial records because he said the records might contain incriminating material.  He couldn’t be certain but “would suspect there could well be.” (at [42]) [...]  READ MORE →

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Creditor’s statutory demand issued pending negotiations is upheld

By Andrew Behman, an Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group

In a recent matter which we acted for the Defendant (In the matter of Precise Training Pty Ltd [2018] NSWSC 1383), we successfully defended an application to set aside a creditor’s statutory demand issued by the Chief Commissioner of State Revenue (“the Commissioner“) against Precise Training Pty Ltd, the Plaintiff.

Facts

The Commissioner issued a number of assessments for payroll tax to Precise Training in 2015 as a member of a larger tax group. Precise Training disputed the assessments and lodged an objection on 10 December 2015. The Commissioner disallowed the objection and proceeded to enter into negotiations for payment of the assessments. [...]  READ MORE →

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Not opening your emails? That is not an excuse to avoid valid service!

By Chloe Howard of Matthews Folbigg Lawyers, a lawyer in our Insolvency, Restructuring and Debt Recovery Group

A recent Supreme Court matter has determined that service of an application to set aside a statutory demand was validly served in time, even though the solicitor in question did not open the email serving the application until the expiration date for service had passed.

In March 2019, the plaintiff’s solicitor and the defendant’s solicitor commenced communicating in an attempt to facilitate a resolution of the dispute between their respective clients. The communications predominantly took place by email. [...]  READ MORE →