The need for Insolvency Practitioners to act quickly in Administrations to minimise delays!


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The need for Insolvency Practitioners to act quickly in Administrations to minimise delays!

In the complex task of finalising insolvencies, Insolvency Practitioners try to expedite the process without sacrificing thoroughness. Although certain delays are inevitable, particularly in receiving Court decisions, Insolvency Practitioners (IPs) can save time, and costs, by making use of Court provisions designed to limit their duration. 

Quick takeaway

It is in the interests of all creditors and other stakeholders that the administration of an insolvent company or individual be conducted efficiently, effectively and expeditiously. However, one significant delay can be in obtaining judgement from the Courts regarding recovery and offence actions taken by Insolvency Practitioners.  In the case of any real delay in receiving the Court’s decision, IPs should seriously consider instructing their lawyers to make inquiries of the Court, as provided for by the Court’s Guidelines, rather than allow the administration to remain in abeyance.

Background

Whether it be a bankruptcy trustee contacting banks to secure funds in the bankrupt’s accounts, or a company liquidator going to the company premises to secure the plant and equipment, insolvency practitioners must move quickly when they are appointed.

After completing initial tasks, they must then take further prompt action to contact the bankrupt or the directors, notify creditors of the insolvency, and commence investigations.

The need to resolve any insolvency promptly has to be balanced against the need to conduct investigations, resolve creditor claims, sell assets and pay any dividend.  The law imposes time limits throughout the process to ensure the administration progresses promptly.

Creditors and their advisers, and other parties affected by an insolvency, should be aware that delays can occur with the Courts. Courts are obviously an essential feature of our insolvency regime, and IPs, as officers of the Court, play an important part.  Justice and the rule of law provide the authority for practitioners in their challenges of voidable transactions and payments involving third parties.  Inevitably, time is required to ensure that due process and fairness prevail, including any right to appeal.

It is important to point out, for the sake of transparency and fairness to IPs, those situations where delays can arise in the insolvency process.

Some examples are:

  • Filing examinations summonses and obtaining hearing dates for public examinations
  • Obtaining any Court directions or approvals required by the law
  • Commencing recovery proceedings and going through the process of obtaining a hearing date, and having the matter heard, often with adjournments and directions involved
  • Responding to, or making, an appeal
  • Enforcing the orders, often through further Court process

During this time, IPs must: report to creditors; deal with creditor inquiries and claims; convene and hold meetings of creditors; realise assets, including the business itself; verify secured claims; and attend to regulatory requirements. Any of these tasks can, by their nature, involve challenges to the IP’s decision, to which the IP must respond.

There can be significant delay in the delivery of the Court’s judgment. While acknowledging the important and often complex tasks of a judge in making a decision, and giving reasons for it, the handing down of a decision can be delayed for many months. This affects not only the defendants to any claim by the IP, but also the finalisation of the insolvency administration, which might need to be put on hold pending the Court decision.  Costs can accrue unnecessarily – by way of the need for further reporting and attending to creditor inquiries, and the imposition of ongoing government charges under the ASIC funding levy.

Pending decisions from higher-level Courts on appeal, relating to important matters of insolvency practice, can also result in delays in lower Courts’ decisions.

Courts require that parties and their lawyers aim to have their matter dealt with “as quickly, inexpensively and efficiently as possible”; this includes considering the option of settling a claim or dispute.  IPs need to factor in the costs and time involved in Court proceedings, even in the case of a clear recovery right, as do creditors when they make any decision based on the IP’s recommendations. The decision to litigate and how that litigation is conducted can also be important factors when a Court later assesses the proportionality of the IP’s remuneration.

Conclusion

Inevitably, Court proceedings will be required and despite the time involved, they serve an important purpose in the administration. Most Courts have published guidelines that state a period within which parties should expect their judgment to be delivered – say within 3 months. This is supported by a process of inquiry to the Court, which is available to the parties if the delay extends beyond the stated period. If there is any real delay in receiving the Court’s decision, IPs should consider instructing their lawyers to inquire, as appropriate, rather than to allow the administration to remain in abeyance.

dVT Group knows the importance and has the experience of handling the Administration of an insolvent company or individual in an efficient and expeditious manner.  Should you wish to talk to us, please call Antony Resnick on 02 9633 3333 or email mail@dvtgroup.com.au – or complete our online contact form to find out more about how we can help.