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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. [...]  READ MORE →

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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. [...]  READ MORE →

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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: [...]  READ MORE →

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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: [...]  READ MORE →

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COVID-19 and Corporate Insolvency: What obligations do directors have?

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

Justifiably, many companies will be concerned about the current and future impact COVID-19 will have on their ability to pay debts and wages. Australia has strict duties on company directors to ensure companies do not continue to trade whilst insolvent. The duty applies in circumstances where there are reasonable grounds for suspecting the company is or would become insolvent and the director does not prevent the company from incurring further debt. Directors may become liable for the debts incurred as of the date the company became insolvent. Civil penalties can also apply. [...]  READ MORE →

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Pre-Insolvency Advisers (and Several Innocent By-Standers) in the Cross-Hairs: Illegal Phoenixing Amendments 2020 #1

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

Recent reforms have sought to clamp down on ‘illegal phoenix’ activity and advisers. Illegal phoenix activity is never properly defined, but is generally a reference to a business or its assets being deliberately transferred to a related entity with the intention of avoiding payment of creditors. In a series of blogs Matthews Folbigg will look at this issue and the Government’s recent legislative ‘Illegal-phoenix’ amendments targeting illegal phoenix advisers. However the changes highlight some of the very real dangers for directors, as well as for accountants, lawyers and business advisers who may inadvertently be now involved in criminal activity. [...]  READ MORE →

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COVID-19 and Corporate Insolvency in Australia

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

This month, the World Health Organisation declared COVID-19, also known as the Coronavirus, a pandemic. Governments are responding by placing travel bans and quarantine orders on people coming into and leaving the country. Businesses are responding by closing premises and making arrangements for employees to work from home. Some are even closing down entirely. [...]  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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Officer or Not? – Australian Security Investments Commission v King

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

This week the High Court in Australian Securities and Investments Commission v King & Anor [2020] HCA 4, decided an appeal from the Supreme Court of Queensland concerning the construction of the word ‘officer’ in section 9 of the Corporations Act 2001 (Cth).

This much anticipated decision has provided clarity as to the construction of the term; a decision which will be well received by ASIC. [...]  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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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 →