The purpose of s477(2B) of the Corporations Act 2001 (Cth) and the Court’s role was reiterated by his Honour Justice Black in the recent decision in the matter of Kevin Jacobsen Pty Limited (in liquidation) [2016] NSWSC 538.

An application for approval pursuant to section 477(2B) of the Act was brought by the liquidators of a company who had entered into a deed of assignment which provided an assignment of certain causes of action.

It was submitted against the application, that a failure by the liquidators to explain not having obtained creditor approval prior to entering into the deed of assignment was itself sufficient reason for the Court to withhold approval for entering into the deed nunc pro tunc (i.e. retroactively giving the liquidators Court approval to enter into the deed).

His Honour did not accept that submission and instead went on to state:

“…the jurisdiction under s 477(2B) of the Corporations Act is directed to promoting the interests of the liquidation and the creditors, not the exercise of disciplinary functions over liquidators who delay in seeking approvals under the section. Even if the liquidators not having sought approval prior to the assignment were open to criticism, it does not follow that creditors should be deprived of the potential benefit of an assignment which is otherwise in their interests.”

The benefit to creditors as a result of the liquidators’ actions was above all, a determinative factor in the Court’s exercise of its discretion.

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