The Supreme Court of New South Wales recently confirmed that, where a company is insolvent or likely to become insolvent, the Court will exercise its curative power under s 447A(1) of the Corporations Act 2001 (Cth) to validate a defective appointment of voluntary administrators, in circumstances where strict compliance with the company’s constitution was not found.
In the matter of Ulan Quarry Products Pty Limited [2026] NSWSC 408, two of the three directors of the Company held a directors’ meeting to voluntarily appoint administrators, after growing concerns the Company was insolvent. The third director challenged the appointment on the basis the meeting had not been properly convened pursuant to the Company’s constitution requiring notice of at least one business day for a directors’ meeting. Notice of the meeting had been given on a Friday afternoon and the meeting was held on the subsequent Monday morning.
The administrators applied to the Supreme Court of NSW seeking orders confirming their appointment.
Brereton J held that, although the notice requirements in the Company’s constitution had not been satisfied, the appointment of the administrators should be validated. His Honour’s reasoning centred on the Company’s financial position where the evidence strongly supported a finding that the Company was insolvent at the time of the purported appointment, and the purposes of Part 5.3A of the Corporations Act 2001 were best served by allowing the administration to continue.
The decision is a useful reminder that procedural defects in the appointment process will not necessarily be fatal. Where the underlying rationale for administration, namely protecting creditors and preserving the prospect of saving a business, has been clearly demonstrated, the Court retains a broad discretion to cure those defects and allow the administration to proceed.
Morgan + English Commercial Lawyers acted for the two directors in the proceedings, achieving a successful outcome for our clients.
If you require urgent advice regarding a company in financial distress, our Disputes team is ready to assist. For tailored advice on your options, please contact Priscilla at priscilla@morganenglish.com.au or Isabella at isabella@morganenglish.com.au.
