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Traill & Associates 11th Annual

National Practical Insolvency Conference

Thursday 22- Friday 23 March 2012

Dockside, Cockle Bay - Gala Dinner 22 March 2012

Draft Program

DAY ONE Thursday 22nd March 2012

8.55 Welcome by Rosie Traill

9.00 Opening Remarks from the Chair

Richard Fisher AM, General Counsel and Adjunct Professor, Faculty of Law, Office of General Counsel, University of Sydney

9.10 Economic Outlook

What is happening in the light of the Global Financial Crisis and likely impact on Australian Businesses & Insolvency Profession

10.00 "State of the Market” Panel Discussion

Global, Local & Sector round-up

ATO initiatives

ASIC, new policy directions including reporting improvements. What impact could any future reforms have on shareholders, creditors, employees & directors

Insolvency Reforms

Creative solutions for difficult to move assets

Insolvency/Restructuring Practitioner, Legal & Banking perspectives

11.15 Morning Tea

11.30 Ultra-Practical Panel Session on PPSA

Lessons so far - what have we learnt, what is better, what is worse?

What has surprised us, what do we need to look out for now?

Where exactly are the likely dangers and pitfalls?

What are the consequences of getting it wrong?

Legal liabilities surrounding non-registration of ABN and subsequent company name changes inducing false “all-clear”status.

Perspectives from Practitioners, Legals and Banks

12.30 Misreporting and Non-disclosure of Events of Default

Finance arrangement for larger borrowers typically include Events of Default which are triggered by a breach of various financial ratio thresholds.

The consequence of reporting a breach can be significant - the loan may become immediately due and payable. For that reason borrowers have a strong incentive deploy the most optimistic accounting treatment - and some borrowers will simply present incorrect reporting.

Being able to pull that reporting apart is important for bankers - but it is also essential for accountants undertaking a forensic review to identify the earliest point of insolvency to support insolvent trading and insolvent transaction claims.

Whether you are a banker putting financial covenants in place or reviewing them in real time - or an insolvency practitioner undertaking a retrospective review - I've assembled a panel to examine a variety of situations:

Examples:

1. Retailers (a) understating SLOB (Slowmoving & Obsolescent stock), (b) crudely overstating stock

2. Capitalisation of expenses (eg mining - costs of removing overburden capitalised and amortised over life of loan

3. Including sales to associated entities in income but not even raising invoices to attempt to collect the funds

4. Harris Scarfe ("over capitalisation" of start up stores)

5. ABC

Perspectives from banking lawyer, forensic accountant, banker & accountant

1.10 Lunch

2.00 Latest in 420A

Amber Warren, Partner, Gadens Lawyers returns by popular demand this year to build on the material discussed at last year's conference, and provide an update on recent decisions and legislative changes, including:

- Section 111A of the Conveyancing Act (NSW) - the new statutory duty for mortgagees exercising power of sale - is it just "420A for non-corporates" - or is there more to it?

- Warner v Ulysius International Trading Pty Limited (Supreme Court of NSW)- Typically we focus on the sale of physical assets. In Ulysius the assets in question were intellectual property (specifically, designs said to be unique). How should intellectual assets be marketed and sold?

- Bayblu Holdings Pty Limited v CFAL (Supreme Court of NSW, Court of Appeal) - can you seek injunctive relief for an alleged breach of section 420A?; and

- MBF Investments Pty Limited v Nolan (Supreme Court of Victoria - Court of Appeal) - If the name doesn't ring a bell - this was the appeal from the controversial decision that there was a "home occupation interest" which required lenders to deal differently if a house 'was a home'. This case answers the question and also provides an appeal Court's views on a mortgagee's duty of good faith.

2.40 Locking Out The Landlord....

The moratorium available to administrators can be powerful, and for that reason lenders will often appoint both receivers and administrators to block action by landlords and lessors, especially for a retail business where location is so important.

Although such action is almost routine there have been few cases dealing with section 440C, and very few cases dealing with 440C in a retail context - as far as I can determine the Colorado case is only the third ever and the first in the last ten years. So I have jumped at the opportunity to ask our speaker to review section 440C with particular emphasis on retailing and the very recent Victorian Supreme Court decision in re Colorado Group Ltd [2011] VSC 552, and canvass:

- Onus of proof - owner or administrator?

- Criteria for granting relief

- Impact on secured creditors versus impact on unsecured creditors

- The relevance of the state of the underlying lease

3.20 Afternoon Tea

3.40 Recent Restructurings – the Drivers to Sell and the Drivers to Buy

A number of the more significant restructures over the last few years have involved major changes in financier profiles.

The panel will use a hypothetical case study to facilitate a discussion on the various drivers on the how, when and why of par lenders selling and funds buying. The case study will assume senior and junior lender groups and an enterprise value somewhere between the value of the senior debt and the combined senior and junior debt.

The session will not be limited to a state of the market commentary. A panel of both traditional par lenders and funds will provide a real insight into the drivers and motivators of selling and buying, how they go about it and the due diligence carried out in forming decisions. Issues to be canvassed will include:

· Assessing the importance of access to information and due diligence

· The proximity of a default and/or an event.

· Should a par lender be first mover?

· Sale by auction or private treaty – straight sale or sub participation?

· Understanding importance of the cost of capital for par lenders

Restructures such as I-Med, Alinta Energy, Centro, Colorado and Godfreys have demonstrated the importance in all stakeholders - shareholders, the company, the directors, senior lenders and junior lenders understanding their rights and obligations as against themselves and each other. The case study will highlight some of the typical scenarios which have significantly influenced the outcome of some of the major restructurings in recent times. Topics will include:

· Where does the power sit, what rights are with whom? Who controls acceleration and the release of security, how does voting in DOCA and scheme of arrangement meetings work, can junior debt be extinguished by seniors on enforcement?

· What is the extent of the security umbrella?

· How resilient are the assets and operations to any form of formal insolvency?

· Is pre-pack on option?

· Is equity necessarily involved?

5.15 Day One Closing Remarks from the Chair

5.30 Informal Drinks

7pm for 7.30 GALA DINNER, Dockside, Balcony Level, Cockle Bay

DAY TWO Friday 23rd March 2012

8.55 Opening Remarks from the Chair

Richard Fisher AM, General Counsel and Adjunct Professor, Faculty of Law, Office of General Counsel, University of Sydney

9.00 Bankruptcy Roundup for Corporate Practitioners

Sally Nash, Principal, Sally Nash & Co will give us her usual update in cases you need to know about including Family Law where it crosses over with Bankruptcy.

9.50 Managed Investment Schemes – special wind up procedures….How do they interact with Liquidation, receivership, VA?

Example Funds Management Ltd promotes a stable of five property funds

and acts as the Responsible Entity for each fund.

The Example Development Fund and Example Mezzanine Fund have both lent money to the "Gold Coast MegaTower" project. After media reports that the entrepreneur has fled overseas leaving the tower part-constructed and way behind budget the RE decides that the two funds cannot "accomplish their purpose " and calls a meeting of unitholders meeting proposing the winding up of the scheme by a committee comprised of the

directors of EMF. The other three funds are smaller, but appear to be solvent.

Recognising that EMF has ongoing liabilities for rent and other expenses which cannot be met without management fees from the two funds, the directors pass a resolution to appoint an administrator to EMF.

Sixty days later the unitholders confirm the winding up of the scheme, but under the control of insolvency practitioners from two separate firms. The passing of the resolution creates a default under bank loan documents, a week later the lenders to each fund appoints two receivers.

Our speaker will explain how PART 5C.9 appointees interact with other forms of insolvency appointments:

- who can act as a PART 5C.9 appointee?

- who controls which assets?

- who has agency (and when?)

- how does a PART 5C.9 appointment differ from liquidation and Voluntary

administration?

- how do the various appointments interact and overlap - and when do

conflicts arise?

- how are PART 5C.9 appointees controlled and remunerated?

- Can the VA manage the schemes that are not being wound up (and where

does the VA stand with AFSL licensing requirements?)

10.30 Morning Tea

10.50 Practitioner Remuneration

Our speaker will review two significant cases dealing with practitioner remuneration:

(1) In the matter of Creditors' Trust of Jackgreen (International) Pty Ltd [2011] NSWSC 748 (18 July 2011)

Arguably, trustee remuneration under the Trustee Act is a well-settled area of the law. However the 21st century creation of Creditors Trusts takes the law into a completely new context relevant to insolvency practitioner.

Our speaker will canvass the remuneration position for Creditors Trust trustees, using Jackgreen as a reference point.

(2) In the matter of Joe & Joe Developments Pty Ltd (subject to deed of company arrangement) Two shareholders sought to wind up a company on the 'just and equitable ground' - effectively to resolve a deadlock between shareholders. Before that application was heard the directors appointed an administrator and the company entered into a deed of company arrangement. There were a range of disputes between the deed administrator and the shareholders but ultimately all were resolved with the exception of the question of remuneration, which led to an application to Court.

The shareholders' expert - an experienced liquidator - criticised the remuneration on several grounds:

- that the administrator's had employed an overly complex mechanism to resolve the shareholder dispute

- that the matter was mostly routine and more tasks should have been delegated to junior staff

- that the deed administrators should have acted to bring matters to a head at an early stage thereby reducing costs

- numerous instances of 'doubled-up time' and duplication

- explanations of tasks that were deficient or 'of little relevance'

charging for 'unnecessary work' due in some cases to 'inherent double-handling

11.30 Voidable Transactions

Philip Stern, Partner, Addisons Lawyers

12.45 Lunch

1.45 Section 439A reports considered against Mediterranean Olives Financial Pty Ltd & Ors V Loaders Traders Pty Ltd (Subject To Deed Of Company Arrangement) & Ors

In Mediterranean Olives Financial Pty Ltd & Ors v Loaders Traders Pty Ltd a large independent creditor mounted a wide-ranging criticism of the administrator's report, and the Deed of Company Arrangement ultimately accepted by the creditors.

The Federal Court conducted a detailed examination of the requirements for section 439A reports, and carefully considered the meaning of "the interests of creditors as a whole".

Our speaker will present the background of the case and review:

The onus of establishing the adequacy or inadequacy of the report and the consequences of any inadequacy

Whether it is reasonable to assume that a liquidation investigation is more detailed and comprehensive than an administrator's investigation.

Whether there is any requirement to establish that additional investigation or litigation would be funded and actually undertaken

The interest of creditors:

All creditors or only those receiving a benefit under the DOCA?

Is the quantum of dividend the only consideration (what is the impact of ongoing employment)?

Is the value of future trading by the ongoing business a benefit for current supplier-creditors?

2.30 Recognition of Foreign Insolvency Proceedings

This area of practice is becoming more and more relevant and topical in recent times. Often Australian subsidiaries of offshore organisations are relatively small and might not necessarily lend themselves to appointing of practitioners larger firms, what are the legalities and implications for Australia?

3.20 Latest case round up including Bell Appeal -

if a decision has been handed down by March. Is this going to impact how banks operate in workouts? Overview of the Appeal.

4.30 Closing Remarks from the Chair

Conference Closed by Rosie Traill followed by Afternoon Tea

PLUS - Separately Bookable

Pre-Conference One Day Workshop

PRACTICAL PPSA

(PERSONAL PROPERTIES SECURITIES ACT)

Wednesday 21st March

Intensive PPSA - An expert panel will answer all the questions you have now that PPSA has commenced. You all know the basics, so how are things working in practice? What glitches are appearing? How can you guard against any problems that may arise? What are some efficiency tools that you could be using?

Any questions can be sent in prior to the workshop for individual attention.

Any other suggestions for speakers, topics and valuable additions to network with would be MOST welcome!