Surviving the silly season. The quirks of appointing an administrator close to Christmas

Articles, Restructuring + Insolvency

Following their appointment, a voluntary administrator has a limited time within which to prepare their report to creditors pursuant to section 439A(4) of the Corporations Act 2001 (Cth) (the Act) and to convene the major meeting of creditors pursuant to section 439A(2) at which creditors will vote to decide the company’s future.

How much time an administrator has will depend on the date of the appointment, as set out in section 439A(5) of the Act, which is in the following terms:

439A(5)  The convening period is:

(a)  if the day after the administration begins is in December, or is less than 25 business days before Good Friday–the period of 25 business days beginning on:

     (i)  that day; or

     (ii)  if that day is not a business day–the next business day; or

(b)  otherwise–the period of 20 business days beginning on:

     (i)  the day after the administration begins;

     (ii)  if that day is not a business day–the next business day.

During the festive season, one area which can be tricky is the relevance of commencing an appointment as a voluntary administrator in December.  On first glance, one could be excused for thinking that if an appointment is taken in December, the convening period will be 25 business days.  A whole extra week!

Whilst for the most part that will be correct, it is the day after the appointment begins that is relevant, not the day of the appointment itself.  For that reason, if an administration begins on 31 December 2015, the first day after the administration begins will be 1 January 2016, which is of course a date in January.   Given that day is a public holiday, the convening period will be 20 business days from the first business day after that date i.e. from 4 January 2016.

Similarly, the convening period of any administration which commenced on 30 November 2015 will be 25 business days (and not the usual 20) beginning from 1 December 2015.

For more information please contact ERA Legal.

 

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