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ARTICLE · 23 AUGUST 2023

Circulating assets come and go, security remains resilient

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The characterisation of amounts owing to a company as 'circulating assets' is crucial in predicting priority disputes.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Craig Ensor
Craig Ensor
Andrew Edington
Andrew Edington
Nicholas Moran
Nicholas Moran
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When do amounts owed to a company constitute 'circulating assets' and how should they be distributed? This crucial question has not always been answered predictably in recent cases. The Court of Appeal's decision in Resilient Investment Group Pty Ltd v Barnet and Hodgkinson as liquidators of Spitfire Corporation Limited (in liq) [2023] NSWCA 118 has provided a framework for navigating the relevant principles in the context of a priority dispute over R&D tax refunds.

Key takeaways

  • The characterisation of amounts owing to a company as 'circulating assets' remains crucial in predicting the outcome of priority disputes. While this case found in favour of the secured lender, lenders taking security should take care to understand whether they are taking security over circulating assets.

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