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Bankruptcy reform: a vaccine for the economy?

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

Countries around the world have commenced their vaccine programs, with Australia’s vaccine expected to commence imminently once the TGA completes its approval process. As to the economic impacts of COVID-19, the Australian Government has been testing its own form of vaccine through legislative changes to corporate insolvency and bankruptcy laws.

In March 2020, the Australian Government enacted a number of changes to corporate insolvency and bankruptcy laws, seeking to address the economic impact of the coronavirus. The significant changes to bankruptcy laws included: [...]  READ MORE →

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Debt Restructuring Part 3 – Restructuring plans

This is the third part in a blog series discussing the new debt restructuring regime, which commences on 1 January 2021. This blog discusses the the process of putting forward a restructuring plan to creditors.

The regime will be implemented through substantial amendments to the Corporations Act 2001 (Cth) (“the Act”) and the Corporations Regulations 2001 (Cth) (“the Regulations“). Relevant links are:

How a restructuring plan is to be proposed is guided by the Regulations (Division 3, Subdivision B). The process is again somewhat similar to a voluntary administration, but instead it avoids the need to call creditors meetings. A regime for the restructuring practitioner to resolve disputes about creditors’ debts is tied into the process. A brief overview of the process follows. [...]  READ MORE →

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Debt Restructuring Part 2 – affects on a company under restructuring

This is the second part in a blog series discussing the new debt restructuring regime, which commences on 1 January 2021. This blog discusses the effects on a company entering debt restructuring, and its creditors.

The regime will be implemented through substantial amendments to the Corporations Act 2001 (Cth) (“the Act”) and the Corporations Regulations 2001 (Cth). Relevant links are:

Conduct of the company’s business

Section 453L of the Act will prohibit the directors from entering the company into any transactions dealing with the company’s property, unless one of the following applies: [...]  READ MORE →

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Debt Restructuring Part 1 – Introduction, Eligibility & the Restructuring Practitioner

This is the first part in a series of blogs discussing the new debt restructuring regime, which commences on 1 January 2021. The regime will be implemented through substantial amendments to the Corporations Act 2001 (Cth) (“the Act”) and the Corporations Regulations 2001 (Cth). Relevant links are:

The amendments will include a new Part to the Act – Part 5.3B, titled “Restructuring of a company”. The Part sets out the regime (referred to as a ‘restructuring’) for directors of insolvent companies to propose and enter into a ‘restructuring plan’ with creditors. The process is overseen by a ‘restructuring practitioner’, who must be a registered liquidator (s 456B of the Act). The focus on this process is that it allows directors to retain some control of the company, reducing the costs of having an insolvency practitioner involved in day-to-day operations. [...]  READ MORE →

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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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Draft Bankruptcy Regulations 2021

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

On 3 December 2020, the Exposure Draft of the Bankruptcy Regulations 2021 was released for consultation.  These regulations are an updated version of the Bankruptcy Regulations 1996, and the draft copy can be found here.

The consultation period expires on 10 January 2021, and the Bankruptcy Regulations 1996 are due to sunset on 1 April 2021. Submissions can be submitted by email to Bankruptcy@ag.gov.au [...]  READ MORE →

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SME Debt Restructuring Legislation Passed

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

The Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 has been passed in the Senate as of yesterday. The legislation will take effect from 1 January 2021.

The centrepiece of the legislation is the introduction of a new restructuring mechanism for SME’s, called ‘Debt Restructuring’. The process allows insolvent SME’s to put forward a proposal to creditors to resolve unsecured debts and allow the company to continue trading. The process is similar to Part IX debt agreements available to insolvent individuals under the bankruptcy legislation. [...]  READ MORE →

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Winding Up Applications and the Extension of Time

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

Section 459R(1) of the Corporations Act 2001 (Cth) (“the Act”) requires that an application be filed to wind up a company, and for it to be determined within six months of filing. Should that six month period expire, the application can be dismissed without the orders sought being made.

However, there is provision for the six month period to be extended under section 459R(2) of the Act, if the applicant can satisfy the Court that special circumstances exist. [...]  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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Debt Restructuring legislation proposed for SMEs

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

The Treasury has today announced its Draft Bill designed to create a new, affordable restructuring mechanism for distressed small to medium businesses. The legislation seeks to resolve problems SMEs face in affording the costs of expensive Voluntary Administration processes. The Australian Government’s “Debt Restructuring” solution is a new process similar to a Part IX debt agreement available to insolvent individuals under bankruptcy legislation, as well as Chapter 11 arrangements available to companies in the US. [...]  READ MORE →

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It’s not your money: director refused access to company’s frozen funds

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

As an interim measure to recovering a debt, creditors may seek freezing orders against debtors where they feel there is a risk that the defendant will dissipate its assets so as to avoid orders. Litigants will usually be allowed limited access to frozen funds so as to fund the litigation they are involved in as well as pay for their reasonable living expenses. [...]  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 →