Relation-Back Day Changes
Relation-back day is key in bankruptcy, marking when a liquidator or trustee can challenge voidable transactions by a company or individual. This date sets the period for reviewing financial actions taken before bankruptcy or insolvency, crucial for determining the legality and validity of those transactions.
Section 91 of the Insolvency Law Reform Act 2016 (Cth) (ILRA) introduces a dedicated section to assist Practitioners to identify what the relation-back day will be in each and every circumstance.
For those new to the insolvency landscape, the relation-back day is used by Practitioners and the Courts to determine what date to relate-back from in respect of clawing-back voidable transactions incurred during a prescribed period, pursuant to ss 588FE and 588FF of the Corporations Act 2001 (Cth) (the Act).
What Has Changed?
The introduction of s 91 of the ILRA clarifies what the relation-back day will be in a number of circumstances not previously identified under the current regime. These circumstances are explained in more detail in the below table.
The changes to the relation-back day definition also clarifies a gap in the law that currently exists when it comes to assessing the following scenario:
a) An application to wind-up a company is filed into Court;
b) Administrators are appointed before the Court determines the winding-up application; and
c) The Court subsequently (despite the company being in Voluntary Administration) winds-up the company and Official Liquidators are appointed.
Although, some Practitioners regard the relation-back day as beginning from step (a) – ie the date of the filing of the application to wind-up the company – Brereton J held otherwise in Chief Commissioner of State Revenue v Rafferty’s Resort Management Pty Ltd (in Liq)  NSWSC 452. Brereton J held that the relation-back day is the date Administrators were appointed.
Section 91 of the ILRA now determines that the relation-back day begins from step (a).
A workable summary of s 91 of the ILRA
Key (types of appointments)
|Deed of Company Arrangement
|Court Application Filed
|Creditors Terminated DOCA
|Court Application Dismissed/Withdrawn
|Court Terminated DOCA
We welcome the clarification to the definition of the relation-back day. If you or your clients have any questions concerning this article or anything relating to voidable transactions, expert solvency reports or insolvent trading, please feel free to contact one of the SV Voidable expert advisors.