Reconstruction

The Personal Property Securities Register (PPSR) does not require the person registering a security interest to file the underlying security agreement with the PPSR. As an electronic register that permits registration to occur online, the PPSR is accordingly open to obvious abuse where a person is prepared to lodge a sham financing statement.

A key decision has provided confirmation of the purpose and effect of a number of key provisions relating to perfection, priority and vesting rules under the Personal Property Securities Act 2009 (Cth).

Last Friday, Justice Logan of the Federal Court handed down the much anticipated decision in Australian Building Systems Pty Ltd v Commissioner of Taxation [2014] FCA 116.

On 13 February 2014, Justice Davies of the Federal Court of Australia handed down her decision in Australian Securities and Investment Commission v Franklin, in the matter of Walton Construction Pty Ltd (in liq), dismissing an application by ASIC to remove the liquidators of the subject companies because of an apprehension that they may lack independence and impartiality. The decision provides useful guidance for insolvency practitioners in determining whether they satisfy the requirement of independence and impartiality and what needs to be disclosed in a DIRRI.

The High Court has confirmed that the liquidators of a landlord can disclaim a lease, with the effect of terminating the tenant's leasehold estate or interests in the land.

A recent decision by the Supreme Court of New South Wales in the matter of Dalma No 1 Pty Limited; Application of Bruce Gleeson and David Shannon, joint and several liquidators of Dalma No 1 Pty Limited and anor, has highlighted an important limitation to section 560 of the Corporations Act 2001. Funds must now be advanced to the company to enable the employees to be paid – not advanced directly to employees.

This article focuses on a recent case under the New Zealand PPSA flowing from the receivership of Mainzeal Property and Construction Limited. The decision confirms the breadth of the security interest concept under the PPSA and is a warning that security interests may arise in contracts where you may not necessarily expect.

On 27 June 2013, Justice Brereton of the Supreme Court of New South Wales handed down his decision in the matter of Maiden Civil (P&E) Pty Ltd; Richard Albarran and Blair Alexander Pleash as receivers and managers of Maiden Civil (P&E) Pty Ltd & Ors v Queensland Excavation Services Pty Ltd & Ors. This is the first Australian case to give substantial consideration to the priority of competing security interests under the Personal Property Securities Act 2009. The decision is a seminal one for insolvency practitioners and financiers, clarifying key provisions and rules under the PPSA.

Can the liquidator of a landlord disclaim a lease so that the tenant no longer has any interest in the land? This important question may be answered soon with the High Court granting special leave to appeal from the decision of the Court of Appeal of the Supreme Court of Victoria In the Matter of Willmott Forests Ltd (in liquidation).

A recent decision of the WA Court of Appeal in Carey v Korda [2012] WASCA 228, delivered on 15 November 2012, confirms receivers retain privilege in communications with solicitors even though they are agents for the insolvent company.

On 11 October 2012 the Government introduced the Fair Entitlements Guarantee Bill. If passed, this Act will replace the current General Employee Entitlements and Redundancy Scheme (GEERS), an administrative arrangement which provides advances to employees to cover unpaid entitlements where their employer becomes insolvent or bankrupt. The Fair Entitlements Guarantee Act will enshrine this right to payment in legislation, and strengthen it in certain respects.

The Australian Taxation Office (ATO) has released two draft Tax Determinations relevant to the sale of assets in the course of a receivership. These express the view that receivers have an obligation to retain sufficient funds from the gross sales proceeds to pay tax 'which is or will become due' on such asset sales. This applies even if no tax assessment has yet been issued. This obligation is said to 'take precedence' over obligations to secured creditors.

Can the liquidator of a landlord disclaim a lease so that the tenant no longer has any interest in the land? Until the recent decision handed down by the Court of Appeal in the Supreme Court of Victoria, In the Matter of Willmott Forests Ltd (in liquidation), the answer had been no. The decision has potentially wide ramifications for tenants, secured creditors, insolvency practitioners and landlords. In this alert, we explain the basis for the decision and what some of the ramifications may be.

An insolvency practitioner taking an appointment as a voluntary administrator under Part 5.3A of the Corporations Act will commonly not have the benefit of an indemnity from their appointor for the fees, liabilities and expenses which are incurred during the administration.

Can the liquidator of a landlord disclaim a lease so that the tenant no longer has any interest in the land? This question has now been answered with a resounding no. The issue was determined by the Supreme Court of Victoria in its decision on a preliminary question that was handed down last week, In the Matter of Willmott Forests Ltd (in liquidation) [2012] VSC 29 (Willmott).

Exposure drafts of two Bills aimed at reducing phoenix activity were released for public comment on 20 December 2011.

The Corporations Amendment (Similar Names) Bill 2012 (Similar Names Bill) will expose directors to personal liability for their company's debts, if:

• the company's name is the same as or similar to a company or business name of another company that has been wound up; and
  
  
• the director was also a director of that other company; and
  
  
• the debts are incurred within five years after the start of the winding up of the other company.

The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 (Phoenixing Bill) will give ASIC administrative power to order that a company be wound up, generally in circumstances where ASIC considers that the company has been 'abandoned'. This will trigger employees' entitlements under the Government's General Employee Entitlements and Redundancy Scheme (GEERS).

Both Bills reflect election commitments in the Protecting Workers' Entitlements package announced in July 2010. But will their proposed measures be effective?

The State Administration of Industry & Commerce of the People's Republic of China has published the Measures on the Administration of the Registration of Company Debt-for-Equity Swap.  The Measures, which come into force on 1 January 2012 aim to help Chinese enterprises address capital contribution problems by facilitating debt restructuring and enhancing financing capacity.

The UK Supreme Court (formerly the House of Lords) recently handed down an important decision in Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd & Lehman Brothers Inc. The case concerned the validity of a 'flip clause' in some complex structured finance documentation. In essence, the "flip clause" provided that the priority creditor A enjoyed over creditor B would 'flip' or reverse in the event of the insolvency of creditor A.

From 1 November 2011, lenders exercising powers of sale over real property in New South Wales will need to comply with new obligations contained in the Real Property and Conveyancing Legislation Amendment Act 2009 (NSW), which amends the Conveyancing Act 1919 (NSW).The obligations reflect those imposed by section 420A of the Corporations Act 2001 (Cth).

The Corporations and Markets Advisory Committee (CAMAC), an independent advisor to the Commonwealth Government, has issued a discussion paper on Managed Investment Schemes (MIS) proposing important legislative changes specifically to deal with external administration of insolvent MISs or responsible entities (RE). This follows a reference to CAMAC by Parliamentary Secretary to the Treasurer, the Hon. David Bradbury, in November 2010. This reference noted that, while the corporate insolvency provisions in the Corporations Act provide creditors and directors with certainty about their rights and obligations, the Act sets out very few specialised rules regarding the external administration of insolvent trusts or trustees.

On 2 June 2011, the Parliamentary Secretary to the Treasurer and Attorney-General jointly released a report on the regulation of insolvency practitioners, Options paper: a modernisation and harmonisation of the regulatory framework applying to insolvency practitioners in Australia.

The Corporations Amendment (Improving Accountability on Executive Remuneration) Bill 2011 (Bill) passed the Senate on the evening of 20 June 2011, without further amendment. It is now awaiting assent. Amendments relating to proxies and to voting by key management personnel on remuneration matters commence on 1 August 2011, and the remainder of the Bill's provisions commence on 1 July 2011.