It is a common misconception that the Corporations Act 2001 (Cth) operates so that only two resolutions may be put at the first meeting of creditors of a company in administration.

The recent decision of Hancock, in the matter of Tarleton & Peters Pty Limited (administrator appointed) [2015] FCA 1058 has made it clear this is not the case.

Section 436E of the Corporations Act provides that following his or her appointment, an administrator must convene a meeting of creditors to consider whether to appoint a committee of creditors. Section 436E also provides that the company’s creditors may pass a resolution removing the administrator from office and appointing someone else as administrator of the company.

Some administrators and their advisers have taken the view that the combined effect of the two subsections of section 436E of the Corporations Act is that apart from general discussions about the company’s affairs and the conduct of the administration, no other resolutions can be passed.

Tarleton makes it clear this is not the case and has provided useful commentary on how further resolutions may be of assistance in a subsequent application made by the company, for example, to extend the convening period of the second major meeting of creditors.

In Tarleton, Mr Hancock was appointed to a chain of 28 butchers shops. Mr Hancock had closed some unprofitable stores and was seeking a sale of the remainder. A Deed of Company Arrangement was also being considered.

As is often necessary in complex administrations such as this one, Mr Hancock sought an extension of time in which to convene the second major meeting of creditors. On the hearing of that application, the Court noted that a resolution had already been passed (at the first meeting of creditors) by creditors in favour of an extension of the convening period for the second meeting. The Court noted the passing of that resolution was a factor which weighed in favour of the granting of the application for the extension.

Tarleton clarifies that resolutions other than those contemplated by section 436E of the Corporations Act can be passed by creditors and it would seem that there is no expressed limit on what resolutions could be passed.

Clearly in Tarleton, the Court was persuaded to grant the application for the extension of the convening period in part because the creditors of the company had already voted in favour of that happening.  Whilst it was not the only factor the Court considered, there can be no doubt that the passing of such a resolution was useful to the Court in reaching its decision in this case.

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