February 2020 – #SVVoidables by Matthew Hudson

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February 27, 2020DPN's, Public Commentary

DPN’ing the corporate veil

Directors may start being held personally liable for ATO debts owed by their company from 1 April 2020. Any remnants of the corporate veil, are now well and truly gone. The move comes after the Government introduced new legislation designed to tackle illegal phoenix activities. I previously warned last year about this new legislation. When…

February 26, 2020Insolvency, Phoenixing, Public Commentary, Voidable Transactions

ASIC orders CDD’s

I have been writing all week about the new creditor defeating dispositions (CDD) and today am looking at the new ASIC CDD powers (s 588FGAA of the Corporations Act 2001). Sarah’s Garage is trading well, but has fallen behind on its BASs. Rather than pay the ATO, Sarah’s Garage is convinced by dodgy Dan to…

February 25, 2020553C set-off, Insolvency, Phoenixing, Public Commentary, Voidable Transactions

Defending the new CDD’s

Yesterday I posted about the new creditor defeating dispositions (‘CDD’). Today I am looking at defences. Imagine Co A sells its tyre shop business to Co B and nearly 1 year later enters liquidation. If Co A Liquidator pursued Co B for a CDD, what defences are available: 1. Commerciality of recovering monies from Co…

February 24, 2020553C set-off, Insolvency, Phoenixing, Voidable Transactions

Basics of the new CDD – Illegal Phoenixing Reforms

And here I thought CD’s were going the way of the dodo, insolvency law now has a CDD, or ‘creditor defeating disposition’, as a weapon to combat illegal phoenixing. The law came into effect on 18 February 2020, but ONLY applies to dispositions entered on or after that date. What is a CDD? See s…

February 20, 2020Insolvency, Public Commentary, Voidable Transactions

A theoretical conundrum: double voidable claims, same monies, same creditor but separate liquidators

If a related party (Co B) pays a text debt on behalf of Co A, and both companies enter into liquidation, which liquidator has priority in pursuing the ATO? The Co A liquidator may pursue the ATO for a third party unfair preference claim, per s588FA of the Corporations Act (assuming the requirements are met).…

February 19, 2020Insolvency

A directors duty to comprehend financial statements

I recently briefly read a case about a director trying to claim in the witness box that he couldn’t read a cash flow report prepared by his bookkeeper and therefore couldn’t speak to its accuracy. This being despite the director running a significantly successful business for decades. The Court didn’t believe him. I can’t for…

February 18, 2020VA

Danger Zone: Extension of convening period before the first meet of creditors

Do not seek an extension of time of the convening period in a Voluntary Administration until after the first meeting of creditors – that’s the veiled message I got from reading Justice Farrell’s comments in a recent Federal Court case. The case is Clubb, in the matter of DS Opco Pty Ltd (administrators appointed) (receivers…

February 17, 2020Public Commentary

Time to reform GST legislation, our courts think so

The Full Federal Court savaged our GST legislation on Valentines Day, ruminating on the “extreme difficulties” and the “tortuous journey” their Honours had in navigating the 3 different Legislative Acts just to work out whether a taxpayer is entitled to interest from the ATO on an overpayment. Justice Steward even called for reform. The case…

February 17, 2020Expert reports, Insolvency, Statutory Demands, Voidable Transactions

A thorn in the side of an ATO defence to unfair preferences

Due to a very recent case, the ATO now (I believe) has a big problem in defending unfair preference claims from Liquidators. Why’s that? The recent Full Federal Court case of ‘Solar Shop‘ found that despite Solar Shop being under a formal payment arrangement with the ATO and despite not being in breach of its…