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Special leave to distribute surplus in a winding up
In the recent decision In the matter of I & P Holdings Pty Limited (in liquidation)  NSWSC 975, Black J of the Supreme Court of New South Wales considered an application by the court-appointed liquidator of I & P Holdings Pty Limited (in liquidation) (Company), seeking an order under section 488(2) of the Corporations Act 2001 (Cth) (Act) that special leave be granted for her to distribute the surplus in the winding up of the Company to its two contributories.
Black J considered a number of factors relevant in determining whether to grant leave under section 488(2) of the Act, including: –
- The steps taken by the Liquidator to realise the assets of the Company;
- The steps taken by the Liquidator to pay out the secured and unsecured debts of the Company – done through the formal process of seeking proofs of debt;
- There is in fact a surplus after the Liquidator has recognised and met the creditors’ claims in full;
- A notice of intention to declare a dividend has been advertised on the Australian Securities and Investments Commission’s insolvency notice website and given to the Company’s creditors; and
- Whether the Company’s contributories consent to the distribution of the surplus in the manner proposed – this is particularly relevant where provision is made for payment of the Liquidator’s reasonable costs and expenses out of the surplus.
Upon distribution of the surplus, it is often appropriate for the Liquidator to be released and the company deregistered. In those circumstances, Black J opined that such application should not be made until the final steps involved in the distribution of the surplus have occurred.
The decision serves as a timely reminder of the factors a Court will consider when determining whether to grant special leave under section 488(2) of the Act.
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