Liquidators have a set of powers under the Corporations Act 2001 (Cth) (the Act) known as ‘voidable transactions’ (sometimes also known as ‘avoidance provisions’), which allow the liquidator to ‘claw back’ certain transactions in the case of an insolvent winding-up.
In insolvency, a liquidator sometimes seeks to recover money from a creditor on the grounds that the creditor has received an ‘unfair preference’ in a payment from the debtor company. Here we explain how the ‘running account’ principle can be used by a creditor to push back against a liquidator’s claim of unfair preference.
In this article, we look at the power of liquidators to obtain a warrant for the search and seizure of company books and property.
What happens when a corporate trustee of a trading trust goes into liquidation? Here we look at the current state of the law and the uncertainty around the power of liquidators in this situation.
In this article, we look at the definition of ‘unfair preference’ claims — a mechanism used by liquidators to claw back some prior payments to creditors. We also look at the available defences for an unfair preference claim, and how the new ‘simplified liquidation’ procedure for small businesses deals with unfair preference claims.
Sometimes, no matter what a director has done to try and avoid a liquidation, it will loom on the horizon as the only option when a business is no longer viable. There is nothing left to do but to get out of the building before it sinks into an oozing puddle. But in that situation, directors still need to know: what things should they take on the way out or avoid doing?
The terms ‘liquidation’ and ‘winding up’, just like the terms ‘bankruptcy’, ‘tax office’ and ‘new season of Married at First Sight’, carry a degree of anxiety. But they shouldn’t. Liquidation, or the ‘winding up’ of a company, can happen for many different reasons: it does not necessarily mean that the business is broken beyond repair.
It has been evident for a long time that Australia’s ‘one-size-fits-all’ liquidation model is inappropriate for SMEs. This inadequacy has become particularly evident in the wake of the COVID-19 related economic turbulence.
The prohibition against insolvent trading is a duty of all company directors to prevent their company from trading (i.e. incurring debts) while insolvent. It is illegal for a director of a company to allow an insolvent company to continue to trade, while having reasonable grounds for suspecting insolvency. The consequences can be serious: read our guide to find out more.
It is illegal for a director of a company to allow an insolvent company to continue to trade, while having reasonable grounds for suspecting insolvency. The consequences can be serious.
The existing policy-settings for insolvency law need some serious alteration. The threat of ‘terminators’ means too often directors are subject to the ‘stick’ of the law. A better system would provide positive incentives, ‘carrots’, for directors and their accountants and lawyers, to turn companies around.
Directors need to be aware that having the ‘best of intentions’ will often not be enough to avoid liability for a breach of the duty under the new penalties.