That’s odd, a CVL trumps a court liq application

A liquidator may be appointed voluntarily (as a CVL) after a court liquidation has already been filed, according to a very recent Federal Court decision.

Ordinarily, this is not possible without leave of the Court (Section 490(1) of the Corporation Act).

Otherwise, how could it be fair to a petitioning creditor who applies to court to wind-up a company, only for their application to be circumvented by the company’s members and a loss of any right to costs being recovered.

The facts in the case are kind of odd. If you face a similar instance, you should seek expert insolvency advice.

On Friday, 22 June a creditor applied to court to wind-up Tow.

On Saturday, 23 June a liquidator was appointed voluntarily by Tow.

They claim they had no knowledge of this issue until Monday, 25 June. Understandably so!

Tow also had a court order requiring it to destroy confidential State of Qld documents by Thursday, 28 June.

The Court, in balancing whether to ratify the liquidators appointment, considered, the:

  • lack of prior notice by either party in appointing the liquidator;
  • urgent record destruction order, which could possibly be best handled by a liquidator; and
  • petitioning creditor had consented to the order, subject to costs being provable in the liquidation.

What’s your view?

Link to the case: http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2018/2018fca1069

#SVVoidables

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