Category: Insolvency & Reconstruction

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Contracting with liquidators and administrators: how to do so effectively and the need to take care

11 March 2019

Key points:

  • When contracting with administrators or liquidators, counterparties need to be careful to ensure such contracts will give them enforceable rights.
  • An administrator can enter into almost any contract and is personally liable for numerous categories of debts they may incur.
  • A liquidator has only limited powers to enter into contracts on behalf of a company, and generally has no personal liability under such contacts.
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Can a liquidator obtain or enforce a judgment under the Security of Payments Act?

11 March 2019

Key points:

  • A liquidator is unable to apply for a judgment under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOPA).
  • Where judgment under the SOPA was obtained by the contractor before it went into liquidation, and the principal asserts an offsetting claim, the Court will stay enforcement of the judgment pending a taking of accounts pursuant to section 553C of the Corporations Act.
  • Ultimately, a liquidator will only be able to enforce payment of an amount actually shown to be owed under the construction contract, after a final reconciliation has occurred.
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When can a liquidator sell a cause of action?

11 March 2019

Key points:

  • Liquidators have the power to sell causes of action belonging to the company, or conferred on the liquidator by the Corporations Act 2001 (Cth) (Act).
  • Selling instead of litigating causes of action can be a safer, surer and quicker path for a liquidator to realise value for creditors.
  • However, there are certain important limitations on a liquidator’s power to sell causes of action.
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