The recent Federal Court of Australia (Court) decision Hird, in the matter of Allmine Group Limited (Administrators Appointed) (Receivers and Managers Appointed) [2013] FCA 748 involved an application for an extension to the convening period.

Facts

On 20 June 2013, voluntary administrators were appointed to Allmine Group Limited (the Company). However at the first meeting of creditors on 1 July 2013, the creditors passed a resolution that the administrators appointed in June be removed and that new administrators (the Administrators) be appointed.

The convening period within which the second meeting of the creditors of the Company must be held was due to end on 19 July 2013, and so the Administrators filed an application on 17 July 2013 for orders under s 439A(6) and s 447A(1) of the Corporations Act 2001 (Cth) (the Act) extending the convening period for approximately three months to 11 October 2013.

The Company was the holding company of a group comprising at least 17 wholly and partially owned subsidiaries incorporated in Australia, Fiji, New Zealand, South Africa, Hong Kong and Liberia. Eight subsidiaries incorporated in Australia were in external administration, with either receivers and managers or liquidators appointed.

One of the Administrators gave evidence that the receivers appointed to the Company had full control of the company’s assets and operations and were seeking to realise sufficient funds to meet the secured debt of their appointing creditor. The Administrators contended that they had little to no ability to assess what the real value of the company’s assets would have been after the appointing creditor had been paid or what the viable course of action was, and that they were not in a position to provide the recommendation to creditors required under s 439A(4).

Decision

Justice Farrell gave regard to the “overlapping considerations” relevant to Court’s decision whether to extend a convening period identified by Justice Lindgren in Silvia, in the matter of Austcorp Group Limited (Administrators Appointed) [2009] FCA 636 at [18], as well as the similar summary of principles by Austin J in Re Riviera Group Pty Ltd [2009] NSWSC 585 at [13] and [15].

His Honour considered the factual circumstances of this matter and was satisfied that the following factors supported making the order for a 3 month extension of the convening period under section 439A of the Act:

  • the application for extension was made before the convening period expired and it was the first application;
  • the 3 month extension sought was not unprecedented and there were circumstances which justified that length of time;
  • the complexity of the corporate arrangements with multiple foreign and domestic subsidiaries, and multiple external administrators;
  • the fact that there would be some time before the Administrators had access to all relevant books and records;
  • to establish the financial position of the company, it would have been necessary for the Administrators to conduct investigations but there was reason to believe there would be surplus assets when the receivers had completed their duties;
  • the Administrators would not have been in a position to prepare the report to creditors and give their recommendation under section 439A(4) until after 21 August 2013 (when the receivers report was due) at the earliest; and
  • there was no committee of creditors and the creditors themselves did not appear to be prejudiced by the extension.

Comments

This case is a reminder of the relevant factors that will be considered by a Court in determining whether to extend the convening period. Importantly, any application for an extension should be made prior to the expiration of the convening period (where possible), and it will be persuasive if the application is supported and/or not opposed by creditors, and if the extension is in the interests of creditors.