VIC Voluntary Administration - Majority Shareholder Creditor vs Other Company Directors

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AIUH

Member
17 March 2015
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One of my company is currently under voluntary administration due to conflicts with other company directors (>1) and I am the absolute majority shareholders.

The interesting part is that the main debt (highest proportion ) of the company actually come from another entity which I hold.

After discussion with two different lawyers, they gave me two totally different answers towards whether I (or more precisely, the other company) am valid to attend the 'Creditor Committee' and take a leading role due to
relationship trading / insider trading concerns.

After doing research on ASIC myself, one doc indicates that
'If directors and shareholders, their spouses and relatives and other entities controlled by them are
creditors of the company, they are entitled to attend and vote at creditors’ meetings, including the
meeting to decide the company’s future.'

(http://download.asic.gov.au/media/1348514/Voluntary_administration_guide_for_creditors.pdf)

So now I am confused, what's my tactic towards voluntary administrator then?
 

Tracy B

Well-Known Member
24 December 2014
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789
Australia
Hi AIUH,

Are you a director in Company A (debtor) and/or director in Company B (creditor)?

If you are a director in any of these companies, you will owe a fiduciary duty (and statutory duty) to act in the best interest of that company. Therefore, where you are also a controlling (or majority) shareholder in the other company then you have a conflict of interest. In this case, you need to disclose this interest to the Board and obtain Board approval to attend the creditors' meeting. You should also excuse yourself from voting on this Board resolution.

If you are not a director of either company, but merely a controlling (or majority) shareholder, then as far as I am aware of, you do not owe a fiduciary duty to the companies. There may be something in the company constitution or shareholders' agreement that prevents you (as a controlling shareholder) from attending specific meetings or vote on specific matters. However, absent this, you should be able to attend as a controlling shareholder of the creditor company as well as a shareholder of the debtor company.

This is my current understanding of Australian Company law. However, companies law can get very complicated and it is even more so for listed companies. I highly recommend you contact ASIC to double check.
 
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Tim W

Lawyer
LawTap Verified
28 April 2014
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Sydney
I agree with @Tracy B.

As a "mere" shareholder, the conflicts that can burden a director simply do not arise.

And I agree about contacting ASIC - I will add that I suggest that you write to them (on paper!).
This is because you cannot rely on advice from some relatively junior person in a call centre,
for a matter of this significance.
By comparison, an item of formal correspondence from ASIC is
something that you can rely on as accurate.

You may benefit from engaging a solicitor who works in the field of insolvency,
because such a person may have encountered similar-fact situations before.
 
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