Since we published that article, Emmett AJA of the Supreme Court of New South Wales handed down a decision in which his Honour rejected an application for an order that the winding up of an incorporated association be terminated: In the matter of St Gregory’s Armenian School Inc: Ghougassian v Arnautovic in his capacity as Liquidator of St Gregory’s Armenian School Inc  NSWSC 1022 (the Case).
The relevant incorporated association in the Case was the St Gregory’s Armenian School Inc (the School) which the Court ordered to be wound up on 21 June 2010. The land owned by the School was subsequently sold by the Commonwealth Bank exercising its power of sale as mortgagee. The Court was satisfied that there would be more than enough money from the proceeds of this sale to satisfy the debts owing to the School’s creditors in full and that there would significant surplus property after the winding up was completed.
In the Case, Emmett AJA stated that the successive decisions in Australia have held that certain considerations are relevant to the Court’s exercise of its discretion to order that a winding up be terminated:
While the Court recognised that the School would have significant surplus assets from the sale of the land, it held that this was only by virtue of its being wound up – there was no evidence that the School could trade solvently and successfully in the future, especially given the Court’s lack of confidence in the applicants’ capacity to act as directors of the School. Accordingly, the Court was not satisfied that it would be reasonable to entrust the affairs of the entity to the directors under whose management it previously failed.
In any event, the Court held that any distribution of surplus property from the winding up of an incorporated association must be approved by the Director General of the Department of Fair Trading – it was not open to the applicants circumvent that process and apply the surplus property to reopening the School’s business.
Our Litigation and Dispute Resolution Group has expertise in corporate insolvency. If you require advice in relation to terminating the winding up of a company or incorporated association, please contact us for assistance.