Supreme Court of New South Wales recognises creditors’ autonomy to make their own decision about a restructuring process as being a relevant consideration in determining an application to adjourn a wind up hearing under section 453Q of the Corporations Act 2001 (Cth).
Andrew Evans from Stratos Legal acted for the respondent in the matter of Redback Engineering & Sales Pty Ltd [2024] NSWSC 1108 on an application pursuant to section 453Q to adjourn a winding up application after the appointment of a small business restructuring practitioner.
The matter was heard by Black J in the New South Wales Supreme Court 21 August 2024.
When the matter came before the court a restructuring proposal had been circulated to creditors and expressly recommended by the Restructuring Practitioner. The adjournment was opposed by the applicant creditor on the grounds the Restructuring Practitioner had not properly considered insolvent trading claims against the directors.
The case affirms the need to ensure a proper case can be made to the court supporting the contention it is in the best interest of creditors to continue with the SBR process.
His Honour recognised the operation of section 453Q was mandatory and if the court was satisfied it was in the interest of creditors to allow the small business restructure to proceed it had to adjourn the winding up application. His Honour took the view it was in the best interest of creditors on three points:
- There was a real basis to consider the restructuring proposal would be more beneficial than a liquidation, and in particular His Honour noted it was unlikely the insolvent trading claim would be pursued.
- The restructuring practitioner had certified making necessary inquiries supporting his view the proposal was in the best interest of creditors; and
- The autonomy of the creditors to be given an opportunity to vote on the proposal rather than to have the process taken out of their hands.
His Honour further noted the adjournment in an SBR does not deprive the applicant creditor the opportunity to wind up the company if the proposal is not accepted.
The case affirms the need to ensure a proper case can be made to the court supporting the contention it is in the best interest of creditors to continue with the SBR process.
Stratos Legal recognise the aim of the SBR process is to provide an affordable way for a distressed company to deal with its creditors and offers sensible fixed price solutions where there are winding up proceedings on foot.
