NSW Insolvency Practitioner Update-uncertainty on seeking Court approval for disbursements with profit element: s 60-20 Insolvency Practice Schedule (Corporations)

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By Kirsten Farmer, Partner

In a recent decision of the New South Wales Supreme Court, Justice Black declined to provide Court approval to the provisional liquidators for payment of disbursements that contain a profit element.

His Honour observed that two fundamental questions arise when determining whether an external administrator may derive a profit from disbursements:

  1. What is the criteria for approving such a profit or advantage, by way of disbursements, and what is the point of prohibiting them if the Court will then regularly grant leave for them?, and
  2. On what principled basis should the Court grant such leave?

His Honour expressed no view on these questions but noted they raised relatively complex issues that might benefit from wider industry consideration.

We note that Black J’s approach contrasts with that of the Victorian Supreme Court.  Earlier this year, the Supreme Court of Victoria granted leave under s60-20 to derive a profit or advantage on external disbursements.

ARITA’s views have been sought.

For further information, please do not hesitate to contact us.

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