In the matter of Aerison Pty Ltd, an urgent application for relief was made by the Administrators appointed to various companies within the Aerison Group, under section 447A of the Corporations Act 2001 (Cth) (Act) and section 90-15 of the Insolvency Practice Schedule (IPS).
After the appointment, the Administrators continued to operate the group as a going concern while exploring options for recapitalisation or a sale of the group.
The Administrators, initiated an expression of interest campaign, with the most viable being a Deed of Company Arrangement (DOCA) proposal from Pacific Industrial Company (PIC).
On 31 August 2023, a second creditors' meeting was convened to consider the recommended DOCA proposal. However, the process reached an impasse between 4 September 2023 and 12 September 2023, when PIC informed the Administrators that they would not proceed with the DOCA. This unexpected development created a dilemma, as section 444B of the Act requires the execution of a DOCA within 15 business days after the conclusion of the meetings of creditors, which falls on 26 September 2023. Failure to do so results in the companies in the Aerison Group entering a creditors' voluntary winding-up, by reason of section 446A(1)(b).
To address this situation, the Administrators sought urgent relief from the court. They proposed holding a further second meeting of creditors on 22 September 2023, to consider an alternative DOCA proposal from Applied Pollution Control Pty Ltd (APC). The Administrators had already received a term sheet and a non-refundable deposit from APC, and both parties had executed an exclusivity agreement outlining the proposed DOCA.
The relief sought by the Administrators included:
Section 447A of the Corporations Act, grants the court broad jurisdiction to issue any orders it deems appropriate for the effective functioning of the insolvency regime. This authority is not limited by narrow constraints and allows the court to act swiftly in cases where administrators need to address urgent matters or fill gaps within Part 5.3A of the Act to uphold the overarching objectives of the insolvency regime. This interpretation is in line with the principles regarding the scope and application of section 447A, as clarified by Austin J in the case of Deputy Commissioner of Taxation v Portinex Pty Ltd1.
In this matter, the court considered that the relief sought by the Administrators was less expensive than what had been considered appropriate in other authorities. It is also essential to highlight that if the original proponent of the DOCA had withdrawn from negotiations before the second meeting of creditors, as opposed to after it, the Administrators would have had the power to adjourn the meeting for up to 45 business days to continue the sale process. Therefore, utilising the powers under section 447A to achieve the outcome sought by the Administrators aligns with the standard operation of Part 5.3A, albeit under different factual circumstances.
More specifically, the court's decision to grant the requested relief was based on the following reasons.
In summary, the court's decision to grant the urgent relief sought by the Administrators, employees, and other stakeholders while adhering to the statutory framework governing insolvency proceedings. The decision aimed to maximise the chances of a successful DOCA proposal, thereby preserving the business and saving jobs, rather than opting for a winding-up that might result in a less favourable outcome for all parties involved.
Section 447A of the Act grants the court the authority to modify the implementation of Part 5.3A in order to resolve gaps and uncertainties that may arise during insolvency proceedings. Furthermore, section 90-15 of the IPS supports the adaptation of regulations to streamline the notification process for the subsequent second meeting of creditors.
If you have any questions about this decision, or about the DOCA process in general, the experienced Lavan team is here to assist.