'Subject to deed of company arrangement'- Deal with it.

The New South Wales Supreme Court decision of De Vries re TMPL Pty Ltd [2009] NSWSC 818 concerned the deed administrator’s application for leave pursuant to section 450E(2) of the Corporations Act 2001 (Cth) (the Act) to forgo the requirement to include on all public documents and negotiable instruments the words ‘subject to deed of company arrangement.’

Section 450E(2) of the Act provides that, except with leave of the Court and until a deed of company of arrangement (DOCA) terminates, the company must set out in every public document and negotiable instrument the expression ‘subject to deed of company arrangement’ after the company’s name, where it first appears.

The deed administrators of TMPL Pty Ltd (Subject to Deed of Company Arrangement) (TMPL) sought leave of the Court pursuant to section 450E(2) of the Act for dispensation from the requirement to include the term ‘subject to deed of company arrangement.’ 

TMPL was an investment service company that had limited dealings with other financial entities.  TMPL’s DOCA provided that once executed, TMPL would not be trading or dealing and that the only activity undertaken by TMPL would be the pursuit of an appeal against a tax assessment by the Australian Taxation Office.

In support of the application, the deed administrators relied on an affidavit of the sole director of TMPL whose primary evidence concerned the potentially negative impact on his own reputation, that of his family and other related companies and entities with which he was associated. 

The Court rejected the director’s contention and it was considered that ‘the personal interest of a director of the company subject to the deed of company arrangement (and those of his family and associated interests), divorced from the welfare of the company itself, play no part in the assessment called for upon an application such as at the present.’

It was ultimately decided that the application for the grant of leave should fail for the following reasons:

  1. in circumstances where there is no evidence that dispensation from including the notation is necessary or desirable, it is irrelevant if that dispensation poses no significant risk to creditors;

  2. as the deed of company administration was in effect, TMPL was not trading, consequently the inclusion of this notation could in no way inhibit TMPL’s ability to trade;

  3. dealings pending the termination of the deed of company arrangement were minimal and would be exclusively with persons already aware that TMPL was subject to a deed of company arrangement;

  4. there was no adverse impact on TMPL’s goodwill or reputation;

  5. the evidence did not show that the grant of any dispensation would be conducive to any rescue of the business.

This case shows that it will be necessary for deed administrators seeking leave of the Court pursuant to section 450E to provide tangible evidence that the dispensation is crucial to the operation of the company in administration, not merely that the directors or associated companies of the company in administration will suffer some prejudice.

If you have any queries in relation to this matter or any other insolvency matters, please do not hesitate to contact Alison Robertson on (08) 9288 6872 or Joseph Abberton (08) 9288 6765 respectively.

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.