Section 477(2B) madness must end

Section 477(2B) of the Corporations Act requires liquidators to seek approval of the Court or a resolution of creditors to enter into agreements which may end more than 3 months after being entered into.

For many years, the law and authorities were unclear as to whether s447(2B) applied to solicitors’ retainers. More recent authorities have clarified that where the liquidator retains solicitors on behalf of the company in liquidation, that such approval is required. Most recent authority has been critical of liquidators applying for such approval retrospectively.

Given that court processes are slow and even simple proceedings are unlikely to be resolved within 3 months, strict compliance with the provision prevents liquidators from carrying out their ordinary duties (for example debt collection), slows down liquidations and increases costs. Small claims may be rendered commercially unviable by the additional court application.

Liquidators should be empowered to retain lawyers to carry out their duties without this unnecessary oversight.