ARTICLE · 03 OCTOBER 2008

Are Redeemable Preference Shareholders Creditors?

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In Heesh v Baker [2008] NSWSC 711, the New South Wales Supreme Court considered whether the holders of redeemable preference shares could be “creditors” for the purposes of Part 5.3A of the Corporations Act 2001 (the Act).

AustraliaInsolvency/Bankruptcy/Re-Structuring

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In Heesh v Baker [2008] NSWSC 711, the New South Wales Supreme Court considered whether the holders of redeemable preference shares could be "creditors" for the purposes of Part 5.3A of the Corporations Act 2001 (the Act).

The Facts

In July 2006, York Capital Limited (York) lodged a prospectus inviting prescription for redeemable preference shares. Various types of preference shares were issued pursuant to the prospectus.

On 5 June 2008, York was placed into voluntary administration in accordance with section 436A of the Act. The Administrators then applied to the court for a declaration as to whether any of the holders of the preference shares were creditors of York, solely for the reason of their rights against the company.

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