In this issue:
- Family law – business valuation checklist
- Insurance – business interruption & COVID-19
- Commercial litigation – ceasing a director, statutory demands and personal bankruptcy
- Other news – recent trends, presentations and other thought leadership
One of the most frequent questions we get asked when commencing a new engagement involving a business valuation for use in family law proceedings is “what information do you require”.
In this edition of Forensic Accountants Here Say, we have compiled a checklist of the particulars typically required in preparing a business valuation for the purposes of Family Law proceedings. The list is not intended to be exhaustive but nevertheless provide a comprehensive starting point for a business valuation.
Readers should note that further questions and requests for particulars may arise as a result of the production of the materials in this list.
In broad terms, the list of materials required can be categorised as follows:
- About the business
- Financial information
- Statutory records
- Assets and liabilities.
We trust that Family Law practitioners will find the list of materials useful when dealing with cases involving the valuation of business interests.
The Insurance Council of Australia (ICA) recently noted the commencement of proceedings in the Federal Court of Australia to test the application of further issues in relation to pandemic coverage in business interruption policies.
Lawyers representing participating insurers have filed pleadings with the court to formally commence a combined second test case.
This second test case follows an initial test case heard in the NSW Court of Appeal last year regarding the application of the Quarantine Act exclusion to business interruption policies. An application for special leave to appeal in the first test case is currently before the High Court.
The second test case consists of nine separate small business claims lodged with the Australian Financial Complaints Authority (AFCA) as part of its dispute resolution process. The insurers represented are Allianz, IAG, Chubb, Guild, and SwissRe Corporate Solutions, and the claims cover a range of business sectors and locations.
The second test case will determine the meaning of policy wordings in relation to the definition of a disease, proximity of an outbreak to a business, and prevention of access to premises due to a government mandate, as well as policies with a hybrid of these types of wordings.
The CEO of the ICA, Andrew Hall, stated:
“Insurers want this second test case brought to the court as quickly as possible so the process can be started to give certainty to policyholders and the insurance industry.
“The nine cases included have been agreed following thorough negotiations with AFCA, which reviewed 14 cases presented by insurers for consideration.
“Once final rulings have been obtained, insurers are committed to applying the relevant principles in an efficient, transparent, and consistent way when assessing customer claims.”
The following article was contributed by Corporate Insolvency Partner, Blair Pleash.
Ceasing as a Director
On 9 February 2021, ASIC announced that from 18 February 2021 there are new requirements when ceasing a company director in accordance with the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 which was passed by Parliament in February 2020.
Companies can no longer cease the last remaining director on ASIC records, unless a replacement director is also appointed. There are three (3) exceptions to this, including if:
- The last director is deceased
- The company is being wound up or under external administration
- The officeholder never consented to the appointment.
In addition, if a director’s cessation date is notified to ASIC more than 28 days after the effective date, then the effective date will be overridden and replaced with the lodgement date. Late lodgement fees still apply in this scenario, and an application fee will be charged should directors apply to ASIC or the Court to change a resignation date.
The amendments aim to prevent illegal phoenix activity by holding directors accountable, preventing them from improperly backdating their resignation or leaving their company with no directors.
Increasing the Statutory Demand Threshold
On 25 March 2020, in response to the economic impact of COVID-19, the Government temporarily raised the threshold at which a statutory demand could be issued from $2,000 to $20,000.
The Government also temporarily increased the timeframe that creditors had to respond to a statutory demand from twenty-one (21) days to six (6) months.
Noting the expiry of this relief on 31 December 2020, the Government is now consulting on whether to permanently raise the minimum threshold upon which creditors can issue a statutory demand on a company.
The following considerations have been raised in relation to the statutory demand threshold
- Confusion that might result from indexing the threshold to keep up with inflation
- Commercial costs of issuing and defending a demand at or near the current permanent minimal threshold amount of $2,000
- Alignment with personal bankruptcy threshold
- Impacts on creditors and debtor companies. For example, increasing the threshold may lead creditors to manage their risk of non-payment through less generous credit terms, such as higher interest rates or shorter payment period.
The proposal has implications for the debt collection industry.
Personal Bankruptcy Threshold
On 24 March 2020, the Commonwealth Government temporarily lifted the threshold to issue a bankruptcy notice from $5,000 to $20,000 in response to the COVID-19 pandemic.
On 18 December 2020, an announcement was made by Christian Porter, the Attorney-General and Minister for Industrial Relations, that there would be a permanent lift of the threshold to $10,000, effective on 1 January 2021 upon expiration of the $20,000 temporary threshold.
According to the Attorney-General, the new threshold took into account the changing value of money as well as changes to debt levels since that time, and was informed by consultation with stakeholders.
If you have questions or need any further assistance on these or any other insolvency related matters, you can contact Blair on +61 2 9263 2600.
Download the full article here.
We’re ready to help. If you have questions or need any further assistance please contact David Watt