The Supreme Court of New South Wales has recently restated the position on last minute appointments of an administrator in the context of winding up proceedings.
In the matter of Business In Focus Pty Ltd serves as a reminder for both insolvency practitioners and defendant companies that, where an administrator is appointed to a company already defending a winding up application, there will need to be a good reason put forward for the Court to adjourn the winding up hearing and allow the administration to continue. In the present case, the proceedings had been before the Court on four previous occasions. The day before the hearing, an administrator was appointed to the debtor company. No evidence had been filed in the proceedings to give the court any comfort that allowing the administration to continue would result in any benefit to creditors.
Justice Brereton stated:
…applications for an adjournment made on behalf of a company, when administrators are appointed at the very last moment before a winding up proceeding is to be heard, are unlikely to be well-received by the Court. Where there is already a process on foot that a creditor is entitled to have heard, a company should not expect that it will be derailed by the last minute appointment of administrators. That is not to say that it will never be the case, as other cases demonstrate; but if an adjournment is sought in those circumstances, the Court will expect to see evidence that shows grounds for supposing that there is a real possibility that it will be in the interests of the company and its creditors to enable the administration to proceed, even for a short time. In this case there is absolutely nothing.
In the absence of the Court having any grounds on which to adjourn the winding up proceedings, the company placed into liquidation.
The case highlights the importance of ensuring that, particularly in the case of eleventh-hour appointments, the Court is provided with persuasive evidence to establish that allowing the administration to continue would be in the best interests of creditors. It also serves as a reminder of the general position that the Court will take when it comes to last minute appointments of an administrator.
For more information on retaining appointments where a company is subject to a winding-up application please contact ERA Legal.