Insolvency

Insolvency Disclaimer As Priority Over Conflicting State Law

Insolvency practitioners and company directors will be relieved to learn that in general circumstances disclaimers of onerous obligations by a liquidator will have priority over conflicting state laws.

The recent case of Longley & Ors v Chief Executive, Department of Environment and Heritage Protection and Anor [2018] QCA 32 (Longley) overturned a contentious decision of the Brisbane Supreme Court and reiterated the general priority of the Corporations Act (Cth) over State laws.

Assignment Of Liquidator’s Right To Sue: Considerations For Liquidators And Assignees

On 1 March 2017, a significant change was made to the Corporations Act 2001 (Act) involving a liquidator’s powers to sue various parties.  This change was the introduction of a new provision into section 100-5 in Schedule 2 of the Act.  It inconspicuously sits under “Other Matters” in the Schedule and permits a liquidator to assign actions to others, which historically only a liquidator could bring.

INSOLVENT TRADING AND RELATED ENTITIES AS LAST CREDITOR PRIORITY

The recent case of Perrine v Carrello [2017] WASCA 151 demonstrates that flexible payment arrangements between related entities may still be considered debts and that if this debt is incurred while the company is insolvent, it may constitute insolvent trading, rendering directors personally liable for the debt. The Court not only ordered the directors to repay to the company the losses suffered but also said the related entities would not be entitled to any distribution in the liquidation until all other creditors had been paid.

Safe Harbour For Directors For Insolvent Trading

Recent amendments to the Corporations Act 2001 have resulted in extra protection for company directors for trading while insolvent. This ‘safe harbour’ for directors from personal liability ultimately enables company restructures outside of a formal insolvency process. This article will set out the situation before this amendment, the relevant changes, the conditions of this change and the benefits it presents.

This article deals with civil liability as opposed to the criminal liability of directors.