Independence Day: Australian Court Refuses To Remove Liquidators

In Short

The Situation: Should liquidators be removed under section 90-15 of the Insolvency Practice Schedule (Corporations) in circumstances where they engaged in preappointment discussions with a secured creditor, allegedly failed to investigate the company's affairs promptly, and retained the company's preappointment solicitors?

The Solution: Ordinarily, removal of liquidators will not be warranted where they have discussed potential funding with a significant secured creditor prior to their appointment, or where they have not had sufficient time and funding to conduct investigations. However, liquidators should think twice before retaining the insolvent company's preappointment solicitors, particularly where the solicitors are creditors of the company.