Administration in the e-age

Recent orders by the Supreme Court of Western Australia[1] concerned an application by administrators for orders pursuant to section 447A(1) of the Corporations Act 2001 (Cth) (Act) to modify the manner in which Part 5.3A of the Act operates as to allow:

  1. notice of the first meeting of creditors of the First Plaintiff convened pursuant to section 436E(3) of the Act; and
  2. notice of the second meeting of creditors of the First Plaintiff convened pursuant to section 439A(3) and the report issued pursuant to section 439A(4) of the Act,

to be validly given by electronic means.

Reasons for the application

Companies are embracing online communication and in some circumstances communicating with very large online customer or subscriber bases solely by email and mobile. 

Where a company that utilises online subscriptions is placed under administration it is likely that those online subscribers will be contingent creditors of the company where there has been a prepaid subscription fee (Subscriber Creditor).

Under the Act administrators are required to notify creditors (including contingent creditors) by way of written notice of the first and second meetings of creditors (including providing the section 439A report).

Where a company in administration has thousands of creditors all who need to be served with written notice by hard-copy post the total cost of this exercise can have a significantly detrimental outcome to the administration.

Having regard to the potential detriment associated with these costs, in some circumstances is in the best interests of the administrators to seek orders varying the Act so that notice may be validly given by electronic means.

The Courts’ position

In the right circumstances, Courts are willing to make orders in respect of the manner in which notice may be given of meetings of creditors, both to save costs and to save time, and thus to conserve the limited available assets for the benefit of creditors.

In Re BBY Ltd [2015] NSWSC 974 orders were made allowing, amongst other things, a link to the full notice of the meeting to be maintained on a website by the administrators and for the section 439A report to be sent to the personal email addresses of each Subscriber Creditor.

Similar orders were given in Re Hastie Group Ltd; Carson [2012] FCA 626, which concerned some 50,000 creditors with an estimated cost of issuing notices to creditors for the first meeting of approximately $160,000.  

Recently, Master Sanderson permitted the administrators of Quickflix Limited to provide notice of the first meeting of creditors and second meeting of creditors to Subscriber Creditors by:

  1. email to the personal email address as recorded in the books;
  2. notice in The West Australian and The Australian newspapers and on the ASIC notices website;
  3. placing the notice on the website maintained by the administrators; and
  4. causing notice to be released on the Australia Stock Exchange platform.

Master Sanderson similarly allowed the section 439A report to be provided to Subscriber Creditors by email and by a link maintained on the administrators’ website and the Australian Stock Exchange platform.


The federal government’s Innovation Package was aimed at revitalising innovation in Australia including a number of changes to insolvency laws proposed under the Insolvency Law Reform Bill 2015 (Bill).

The Bill received Royal Assent on 29 February 2016 with the resulting act, the Insolvency Law Reform Act 2016 (Cth) (Reform Act), allowing instruments including the Act (including the Insolvency Practice Rules) to be amended to reduce cost and increase efficiency in the practice and regulation of external administrations.

The Reform Act will allow measures to be taken to encourage electronic communication between administrators or liquidators and creditors by allowing administrators and liquidators to make information such as reports and other documents available on their websites however, the form of the Insolvency Practice Rules remains unreleased at this time.

The potential for savings by deeming consent of creditors to the electronic provision of documents is estimated to be $9.08 million. [2]

Lavan Legal comment

In an age of larger creditor groups, administrators are mindful of the costs associated with giving notice to creditors.

Our recent experience suggests that the Court will take a practical approach when considering the potential detriment associated with complying with the written notice requirements under the Act.

In our view the reforms have been needed for some time in Australia and have resulted from multiple submissions from ARITA and other industry bodies throughout the years.  The decisions mentioned above complement the proposed amendments to the Insolvency Practice Rules.

[1] Unreported decision, COR 83 of 2016 Quickflix Limited (ACN 102 459 532) (Administrators Appointed).

[2] Source: ASIC, Treasury assumptions, ARITA.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.