Insolvency insights: Recent decisions on liquidators litigation funding agreements

Section 477(2B) of the Corporations Act 2001 (Cth) provides that a liquidator must not enter into any sort of agreement that may last longer than three months without first obtaining approval of the Court, of the committee of inspection or by a resolution of the creditors.

Typically, a litigation funding agreement will be caught by this section because it will last more than three months.

The reference to 'enter into an agreement' could also catch a novation, and potentially a variation, to an agreement.

OBTAINING RETROSPECTIVE APPROVAL FROM THE COURT

In Robinson, in the matter of Reed Constructions Australia Pty Ltd (in liq) [2017] FCA 594 the following took place:

• A meeting of creditors passed a resolution authorising the liquidator to enter into a litigation funding agreement.