Extending the convening period

In the recent case of Mentha, in the matter of The Griffin Coal Mining Company Pty Ltd (administrators appointed) (ACN 008 667 285) (No 3) [2010] FCA 1087, Justice McKerracher of the Federal Court of Australia dealt with an application by administrators of various companies for a third extension of time for convening a second creditors' meeting pursuant to section 439A(6) of the Corporations Act 2001 (Cth).

His Honour held that an application by the administrators under section 439A(6) of the Act for a further extension of the convening period applicable to second creditors' meetings under section 439A(5) of the Act should be granted in the circumstances where:

• it was the administrators' opinion that it was in the creditors' best interests that the companies continue to trade, with a view to realising the maximum value for the companies' business and assets as a going concern;
• the administrators had done extensive work since the previous application to extend the convening period;
• the administrators had sought consent from all active members of the Committees of Creditors for each of the companies, and that such consent was provided by all members who responded;
• all creditors had been notified of the application;
• the administrators were continuing through the administrations to pay each of the lessor creditors of the companies in the ordinary course of applicable trading terms and none of the lessor creditors expressed any opposition to the application;
• none of the parties asserting 'retention of title' claims had expressed any opposition to the application;
• the administrators were continuing to pay the trade and employee creditors through the administrations in accordance with their contractual entitlements and none of these creditors had expressed any opposition to the application;
• the companies were not party to any claims, potential claims or litigation in respect of which the companies, their creditors or any other party was prejudiced as a result of the administrations; and
• ASIC, which was on notice of the application, had not opposed it.

This case is the latest in a number of recent authorities which confirm that, provided the court is satisfied that it is in the best interests of the creditors of a company in administration, it will be prepared to extend the convening period for second creditors' meetings. In making its assessment, key factors the court will take into account are the volume and complexity of work the administrators have undertaken since the administration commenced (or, where applicable, since the last such extension application), whether the administrators have sought and obtained the support of the company's creditors and whether the administrators were continuing to make payments owed to trade, lessor and employee creditors.