Are you getting what you paid for?

If you are a creditor who is owed money by a company that has gone into voluntary administration, you will receive reports and notifications of meetings from the voluntary administrators.  Chamberlains can advise you on your rights and what to do in this situation.  In this case update, we look at one issue that may come up in such a scenario – when more time is needed before the second meeting.

In the recent case of Anderson, In The Matter Of NT Port And Marine Pty Ltd (administrators appointed) [2023] FCA 3 (Anderson), the Court made orders extending the time for the second meeting of creditors.  This is the substantial meeting where the voluntary administrators will ask the creditors to decide the company’s fate.

Fact of the Case

The Corporations Act 2001 (Cth) provides a ‘convening period’ per section 439A(5).  This section limits the amount of time the voluntary administrators have to hold the second meeting of creditors.  They can however apply to the Court to extend this time period.

In Anderson, the company operated a port which was essential for the viability of the area for the traditional owners as well as for the Territory and Australian governments.  If the port was not able to operate, it likely would have had significant detrimental effects on the various stakeholders.

The voluntary administrators sought an extension of the convening period in order to seek funding, engage in a sale process or alternatively consider a deed of company arrangement (DOCA).  They were not in a position to assess or make recommendations at this point, and the scenario was made more difficult by the Christmas holiday period.

The administrators submitted that if the extension was not granted, they would have no choice but to recommend liquidation because they would not be in a position to properly put forward an alternative.

The Court considered various factors, such as the complexity and amount of tasks required to be performed and the position of the company’s employees.

In another recent case of Ayres, in the matter of Trigon Trading Pty Ltd (administrators appointed) [2023] FCA 28, the Court outlined principles the Court would apply in considering such applications, such as:

• Balancing between speed and sensible options
• Maximizing returns for creditors and shareholders
• Detriments to third parties
• Size, scope and complexity of the business itself, or of a particular transaction or recovery proceeding
• Availability of records
• Time needed to consider a DOCA proposal

Result

The Court granted the extension.

Takeaway

The takeaway for creditors is that if you are a creditor of a company which is placed into voluntary administration, the voluntary administrators may need to extend the convening period however there will generally be a good reason to do so, that they believe will maximise the outcome.  If you are concerned about the progress of an administration or need advice on your rights and options for recovery of a debt, our Insolvency and Restructuring Team is here to help.