Supplier beware: Pt 5.3B “small business” restructuring, winding up applications and dispositions of company property during “debtor-in-possession” trading

Australia's new Pt 5.3B small business restructuring procedure is in large part modelled on Pt 5.3A voluntary administration. However, there are significant differences between the two procedures (some intended, some perhaps less so). One obvious and well-known difference is that, unlike the traditional notion of an external administration, Pt 5.3B of the Corporations Act 2001 (Cth) (“the Act”) provides for a restructuring period during which a company’s directors will continue to cause the company to enter into transactions in the ordinary course of the company’s business with no involvement or authority required of the “restructuring practitioner”. Unfortunately, the validity of many transactions that would be expected to occur in a “debtor-in-possession” trade-on under a small business restructuring will be brought into question if a winding up order is made subsequent to the appointment of a restructuring practitioner.