New South Wales Supreme Court CITATION : Visa Australia Pty Ltd v Austsong Trading Pty Ltd [2007] NSWSC 776 HEARING DATE(S) : 18/06/07 JUDGMENT DATE : 18 June 2007 JURISDICTION : Equity Division Corporations List JUDGMENT OF : White J EX TEMPORE JUDGMENT DATE : 18 June 2007 DECISION : See paragraphs 8-10 of judgment. CATCHWORDS : CORPORATIONS – Winding-up – Application for stay or termination – Whether court should order stay or termination – Where on prior application company's liabilities exceeded its assets – Fresh application where there is a material change in circumstances – Where condition for termination of the winding-up offered by applicants is that applicants release debts in consideration for issue of shares in company – Current assets will be sufficient to satisfy current liabilities once loans capitalised – Undertakings to court that debts will be released upon issue of shares – Leave given to applicants under s 471A(1A) to perform or exercise powers as officers of company to effect capitalisation of debts so that order terminating winding-up could be made. - (Cth) Corporations Act 2001, ss 471A(1A), 482 LEGISLATION CITED : Corporations Act 2001 (Cth) CASES CITED : Visa Australia Pty Limited v Austsong Trading Pty Limited [2007] NSWSC 494 Visa Australia Pty Ltd PARTIES : v Austsong Trading Pty Ltd FILE NUMBER(S) : SC 1644/07 COUNSEL : Plaintiff: N/A Defendant: G Lancaster SOLICITORS : Plaintiff: Legal Recovery Solutions Defendant: N/A IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST WHITE J Monday, 18 June 2007 1644/07 Visa Australia Pty Ltd v Austsong Trading Pty Ltd JUDGMENT 1 HIS HONOUR: This is an application under s 482 of the Corporations Act 2001 (Cth) by shareholders of Austsong Trading Pty Limited for an order that the winding-up of that company be terminated. 2 An application to the same effect was made by an interlocutory process filed on 24 April 2007. 3 I dismissed the earlier application on 7 May 2007 (Visa Australia Pty Limited v Austsong Trading Pty Limited [2007] NSWSC 494). In dealing with that application, I expressed my disquiet as to various aspects of the financial information concerning the defendant which was disclosed on that application. I also noted that the liabilities of the company substantially exceeded its assets. This was due to the debts owing to the directors (being the present applicants) of some $388,164 as disclosed in the balance sheet of 30 June 2006. At that stage there was no proposal put to the Court for those debts to be capitalised. 4 The present application is made by interlocutory process filed on 31 May 2007. The evidence filed in support of the present application deals with the deficiencies in the financial information which concerned me when I heard the earlier application. That, in itself, would not be a sufficient change in material circumstances to justify the bringing of a further application. However, since my judgment of 7 May 2007, other matters have been put into train which do materially change those circumstances. One such matter is that the petitioning creditor has now been paid out and has accepted the amount paid as full payment of its debt and costs of the winding-up application. Further, the applicant directors and shareholders have agreed to accept an issue of shares as consideration for the discharge of their debts. Following the issue of shares, it is clear that the company will have a surplus of assets over liabilities. 5 There is also evidence from the liquidator corroborating figures provided as to the estimated value of the company's stock. Those values are substantially in excess of the values presented on the inadequate information on the last application. The liquidator says, and gives reason for his opinion, that the company has sufficient funds to meet its ongoing trading debts. The directors have been funding the payment of the company's trading debts. The liquidator is satisfied that, on the capitalisation of the directors' loans, the company will be solvent from both the balance sheet perspective and, as I understand his affidavit, from a cash flow perspective. Provision is made to meet the liquidator's costs. 6 Accordingly, I am satisfied that, on the resolution being duly passed to capitalise the directors' debts for the issue of shares, the company will be solvent and an order should be made for the termination of its winding-up. 7 The applicants are also prepared to enter into a deed acknowledging that, upon the issue of the shares, the company will have no present indebtedness to them. The powers of the applicants, as directors, to pass such resolutions and to cause the company to issue shares is presently suspended (Corporations Act, s 471A). It is appropriate to give approval to the applicants pursuant to s 471A(1A) for them to act as directors of the defendant by meeting and passing the proposed resolutions numbered 1 to 3 in exhibit A. The number of shares which I understand will be issued pursuant to the proposed resolution number 2 will be 188,338 shares to each of the applicants. 8 Accordingly, I order that the winding-up of the defendant be stayed until 5.00pm today. I order pursuant to s 471A(1A) that the applicants have leave to exercise their powers as directors of the defendant to meet and to pass resolutions in accordance with the draft resolutions which are contained in exhibit A, with the insertion of the figure of 188,338 in paragraphs (a) and (b) of resolution 2. 9 I note the undertaking of the applicants to the Court to enter into a deed acknowledging that, on the issue of 188,338 shares to each of them, the company will have no present indebtedness to them. 10 The applicants will have leave to mention the proceedings this afternoon, so that, on evidence that those steps have been taken, I will then make an order to terminate the winding-up. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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