the relation-back day under the new insolvency law reform act

The relation-back day under the new Insolvency Law Reform Act

Section 91 of the Insolvency Law Reform Act 2016 (Cth) (ILRA) introduces a dedicated section to assist Practitioners to identify what the relation-back day will be in each and every circumstance.

For those new to the insolvency landscape, the relation-back day is used by Practitioners and the Courts to determine what date to relate-back from in respect of clawing-back voidable transactions incurred during a prescribed period, pursuant to ss 588FE and 588FF of the Corporations Act 2001 (Cth) (the Act).

 

What has changed?

The introduction of s 91 of the ILRA clarifies what the relation-back day will be in a number of circumstances not previously identified under the current regime. These circumstances are explained in more detail in the below table.

The changes to the relation-back day definition also clarifies a gap in the law that currently exists when it comes to assessing the following scenario:

a) An application to wind-up a company is filed into Court;

b) Administrators are appointed before the Court determines the winding-up application; and

c) The Court subsequently (despite the company being in Voluntary Administration) winds-up the company and Official Liquidators are appointed.

Although, some Practitioners regard the relation-back day as beginning from step (a) – ie the date of the filing of the application to wind-up the company – Brereton J held otherwise in Chief Commissioner of State Revenue v Rafferty’s Resort Management Pty Ltd (in Liq) [2008] NSWSC 452. Brereton J held that the relation-back day is the date Administrators were appointed.

Section 91 of the ILRA now determines that the relation-back day begins from step (a).

 

A workable summary of s 91 of the ILRA 

 (to view full PDF, please click here)

Key (types of appointments)

 VA

 Voluntary Administration

 DOCA

 Deed of Company  Arrangement

 CAF

 Court Application Filed

 TDOCA

 Creditors Terminated DOCA

 CAD

 Court Application  Dismissed/Withdrawn

 CTDOCA

 Court Terminated DOCA

 OL

 Official Liquidation

 

 

 

We welcome the clarification to the definition of the relation-back day. If you or your clients have any questions concerning this article or anything relating to voidable transactions, expert solvency reports or insolvent trading, please feel free to contact one of the SV Voidable expert advisors.

 

Article written by Caitlin Scantlebury, Accountant Queensland and Matthew Hudson, Manager Queensland

 

Contact our Voidables team

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The relation-back day under the new insolvency law reform act

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