Appointing a VA, make sure you’re insolvent!!

If you appoint a Voluntary Administrator (“VA”) to your company, it pays to first carefully form an opinion as to its insolvency (or future insolvency); otherwise you are in for an expensive day in court.

The Corporations Act requires directors, when resolving to appoint a VA, to form an opinion that the company is insolvent, or is likely to become insolvent in the near future.

A recent case from Justice Black in the NSW Supreme Court, highlights the practical dangers of relying upon contingent, undue, debts in proving insolvency.

The Court ruled that the appointment of the VA was invalid, and the director in question will likely have a number of hefty bills to pay (to reimburse all those inconvenienced).

If in doubt about insolvency, contact #SVVoidables

Case: In the matter of Bean & Sprout Pty Ltd (admin apptd) [2018] NSWSC 351 – http://www7.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWSC/2018/351.html 

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