In the matter of K.G.B. Export Pty Limited [2012] NSWSC 1077

Supreme Court New South Wales

Medium Neutral Citation: In the matter of K.G.B. Export Pty Limited [2012] NSWSC 1077 Hearing dates: 23 July 2012 Decision date: 23 July 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Orders made in accordance with the short minutes of order initialled and placed in the file. Catchwords: CORPORATIONS - Deregistration - Reinstatement - Corporations Act 2001 (Cth) s 601AH(2) - Reinstatement by court - Satisfaction of the court as to whether it is just that company be reinstated - Circumstances in which company deregistered, purpose of reinstatement, company's solvency and public interest generally relevant to whether company should be reinstated. Legislation Cited: - Corporations Act 2001 (Cth) ss 588G, 601AH(2), 601AH(3) Cases Cited: - Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688; 34 ACSR 232 - Pecta Pty Ltd v Australian Securities Commission (1993) 10 ACSR 188 - Re Piccoli Tesori Pty Ltd; Ex parte Bertuol [2000] FCA 462; (2006) 151 FCR 109; 57 ACSR 445 - Re Tamsin Pty Ltd (1994) 13 ACSR 136 Texts Cited: - Austin & Black's Annotations to the Corporations Act Category: Principal judgment Parties: B & G Trading Pty Ltd (Plaintiff) Representation: Solicitors: K. Kanjian (Kanjian & Company) File Number(s): 12/192748

Judgment - EX TEMPORE 1The plaintiff, B & G Trading Pty Limited ("B & G") seeks an order under s 601AH(2) of the Corporations Act 2001 (Cth) that the Australian Securities and Investments Commission ("ASIC") reinstate the registration of K.G.B. Export Pty Limited ("Company") which was deregistered by ASIC on or about 24 January 2010. B & G also seeks an order under s 601AH(3) of the Corporations Act validating the appointment of directors and a secretary of the Company that had occurred on 28 January 2010, without knowledge of the deregistration, and validating the transmission of shares registered in the names of two deceased shareholders in the Company into the names of their executors. 2B & G has given notice of this application to ASIC which has indicated that it will not oppose the application for reinstatement of the company subject to certain conditions, which have been or will be met by B & G. ASIC has also signed short minutes of order to which both parties consent. Mr Kanjian, who appears for B & G and has made helpful submissions in support of the application, has properly recognised that, notwithstanding that the relevant orders could be made with ASIC's consent, the Court must be satisfied that there is a proper basis for the exercise of its discretion to reinstate the Company. 3Section 601AH(2) provides that the Court may make an order that ASIC reinstate the registration of a company if an application for reinstatement is made by, relevantly, a person aggrieved by the deregistration and the Court is satisfied that it is just that the company's registration be reinstated. Section 601AH(3) provides that, if the Court makes an order under s 601AH(2), it may validate anything done between the deregistration of the company and its reinstatement and make any other order it considers appropriate. 4I am satisfied that B & G is a person aggrieved with standing to make an application under s 601AH(2), since it is the holder of forty-five per cent of the shares in the Company and the Company will have a significant surplus of assets when reinstated: Pecta Pty Ltd v Australian Securities Commission (1993) 10 ACSR 188; Re Piccoli Tesori Pty Ltd; Ex parte Bertuol [2000] FCA 462; (2006) 151 FCR 109; 57 ACSR 445 at [23]. 5In determining whether it is just that the company's registration is reinstated, the Court will have regard to the circumstances in which the Company was deregistered; the purpose of the reinstatement; the Company's solvency; whether any person is likely to be prejudiced by the reinstatement and the public interest generally: Re Tamsin Pty Ltd (1994) 13 ACSR 136; Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; (2000) 174 ALR 688; 34 ACSR 232; and see the other cases cited in Austin & Black's Annotations to the Corporations Act at [5A.601AH]. 6In the present case, there is a compelling case for an order requiring the Company's reinstatement. The Company was deregistered as a result of a failure to attend to statutory requirements in respect of annual returns after its two then directors and controlling shareholders had died, and that occurred only shortly before a general meeting and directors meeting organised by B & G at which appropriate steps were taken to appoint new directors, approve the transmission of the deceased shareholders' shares to their executors and instruct the Company's accountant to attend to outstanding matters. The reinstatement has a proper purpose where the Company has two properties of value and reinstatement will allow its assets to be realised, creditors paid and surplus assets distributed to shareholders in a proper manner. Although the Company's current liabilities will exceed its current assets on reinstatement, it has significant non-current assets and its current liabilities are substantially owed to creditors associated with B & G that have indicated their support for reinstatement. I can readily infer that the newly appointed directors will not, having regard to s 588G of the Corporations Act, incur debts unless the Company is in a position to meet them as and when they fall due. The public interest is satisfied where undertakings have been given by B & G's principal to ensure that the Company's statutory records are brought up to date and maintained, and the fact that ASIC does not oppose the application provides further support for that conclusion. 7Although there has been some delay in the application, that is explained by the time taken to bring the company's financial records into order, no third parties have been prejudiced and that matter does not prevent a reinstatement order in the circumstances. 8As I noted above, orders are also sought under s 601AH(3) to validate the appointment of officers of the Company and the transmission of the deceased shareholders' shares to their executors. In my view, such orders are appropriate where the appointment of the new directors and secretary and the approval of the transmission of the shares had each occurred without knowledge of the company's deregistration, would have been effective but for that deregistration and were steps taken to provide a proper basis for the conduct of the company's affairs in the future. 9Accordingly, I will make orders in accordance with the short minutes of order initialled by me and placed in the file.