12_Lecture 12.pptx - External Administration(Part B Class...

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External Administration Class 12 (Part B): Liquidation/Winding Up TLAW 402 (Week 12 External Administration Part 2) Liquidation 1
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Liquidation • Process by which a co’s made assets are distributed, payments to creditors and shareholders (if sufficient funds left in to insolvency), an end upon May be: voluntary Compulsory and co’s existence comes deregistration See Ch 22 of Australian Corporate Law (Harris, Hargovan & Adams 5 th ed, 2016 ) at pp 640-650 2 TLAW 402 (Week 12 External Administration Part 2) Liquidation
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Overview: Part B (liquidation) completion of this topic you should be able to: Understand 4 different types of liquidations namely: On Compulsory (court ordered) winding up: in insolvency; and on another ground [unrelated to insolvency – for eg under s 232/3 “oppression” or s 461 (k) “just and equitable” – see earlier topic on shareholder remedies. Voluntary winding up: Explain by members; and by creditors. the effects of liquidation on the parties involved. Describe how liquidators are appointed, their function and the nature of their powers and duties. Explain the law that helps liquidators to improve returns to creditors [investigation and asset recovery powers ] TLAW 402 (Week 12 External Administration Part 2) Liquidation 3
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Compulsory (Court ordered) winding up 1. Compulsory Winding Up ‘In Insolvency’( s.45 9 A; 9 5 A): Who can apply? ( s.459 P ) the Co or a creditor; liquidator; or (with court consent) ASIC, a director or shareholder Establishing Insolvency Statutory demand ( s 45 9 E , s45 9 C(2)) Grounds of challenge [by debtor co] There is a genuine dispute/or offsetting 45 9 H; or claim: s Contains a major defect/or some other reason: s 45 9 J ; Note: 21 day time limit to challenge [strictly applied] David Grant v Westpac TLAW 402 (Week 12 External Administration Part 2) Liquidation AH 4
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Objective of statutory demand A statutory demand provides a 'convenient method of proof' that a company is unable to pay its debts: Clarke & Walker Pty Ltd v Thew [ 196 7 ] HCA 28 . Objective of Statutory Demand procedure under the Corporations Act is that: “a creditor should have a quick and efficient means of “put up or requiring shut up”, a debtor who disputes the debt to - Mangraviti Pty Ltd Joe v Lumley Finance Ltd [2010] NSWSC 61 (at [15]). TLAW 402 (Week 12 External Administration Part 2) Liquidation 5
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Insolvency: Statutory Demand Most common ground for winding up Means that the co cannot pay its debts as they fall due Creditor usually issues a statutory demand when minimum debt of $2,000 is owed and gives debtor company 21 days to pay, otherwise debtor co is warned of the consequences of non-compliance (ie. appointment of a liquidator by the court): s 459H Debtor co can challenge the statutory demand within this period (strict 21 day time limit) on the basis of: exist] or offsetting claim (s Genuine dispute [must truly 459H) Defect (causing substantial set aside: s 459G) Some other reason: s 459J injustice if demand is not 6 TLAW 402 (Week 12 External Administration Part 2) Liquidation
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