Lindholm v ASIC [2005] VSC 453

What the court decided

Global Communications Technologies Pty Ltd (GCT) was deregistered by the Australian Securities and Investments Commission (ASIC) under section 601AB(1A) of the Corporations Act 2001 (Cth) (the Act), because, 12 months or more after the due date, its review fee had not been paid in full [1]. The proceeding before Whelan J began with an application under section 601AH(2) of the Act by receivers and managers of a related company to reinstate GCT [1]. That application was not pursued by those who brought it [4]. GCT's sole director at deregistration was, at the time of this decision, an undischarged bankrupt [3].

Circuit Finance Pty Ltd (Circuit Finance), a creditor of GCT, said it wished to pursue reinstatement so that GCT could be wound up, and filed an interlocutory process that sought reinstatement only [4]. It had obtained an order against GCT for $178,958.90, which remained outstanding [6], [8]. A statutory demand was served and not complied with, and a winding up proceeding issued two days after deregistration was dismissed as a result of the deregistration [6]–[7].

Its counsel sought to amend the interlocutory process to add winding up, the appointment of a liquidator and dispensation from certain requirements of the Act and the Supreme Court (Corporations) Rules 2003 (Vic) (the Rules) about notices and advertisement [11]. The solicitor for ASIC neither consented to nor opposed that course, and agreed, in response to an enquiry from the judge, that winding up appeared appropriate despite the need for amendment and dispensation [11].

Whelan J said, citing authority, that in an appropriate case a creditor may seek orders reinstating a company and winding it up at once, with such dispensations from the Act and the Rules as are appropriate and necessary [12]. Counsel for Circuit Finance did not rely on insolvency presumed from non-compliance with the demand; she refrained "quite properly", the judge said, given section 459C of the Act [13]. She relied instead on section 461(1)(k) [13].

The judge held that GCT should be reinstated and immediately wound up [14]. If it were not, it would on reinstatement have no officers, and there was no basis for a belief that this could be remedied [14]. It would therefore be in immediate contravention of sections 201A and 204A of the Act and unable to operate under a normal administration, his Honour said, with authority cited for each point [14]. He found Circuit Finance's wish for a liquidation, with all the steps a liquidator must take, to be appropriate [15]. Reinstatement was necessary to achieve that outcome [15].

Circuit Finance had obtained a liquidator's consent to act should a winding up order be made [9]. Because that liquidator was also liquidator of another company, the judge sought and was given an assurance that the liquidator would seek a direction if a potential conflict arose [16]. Whelan J said he would make orders in accordance, or substantially in accordance, with minutes handed up on Circuit Finance's behalf, subject to finalising the form of the orders, clarifying the matter he had raised about that liquidator and filing the amended interlocutory process [17].

Why it matters

This decision illustrates that, in an appropriate case, a creditor can seek reinstatement, winding up and such dispensations as are appropriate and necessary in one interlocutory process [11]–[12], [17]. In my view, a creditor taking that course should have evidence of whether anyone could act as an officer of a reinstated company, consent from a liquidator and how any conflict of interest is answered.

This is a short decision of a single judge on particular facts, made on an application ASIC did not oppose [11]. Readers should check the legislation and rules of court now in force before relying on the decision.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.