SBR not a reset button for creditors

The Supreme Court of New South Wales has dismissed an application by Makisu Holdings Pty Ltd to wind up Able Technology Group Pty Ltd, ruling that the company's entry into small business restructuring did not extend the three-month period for relying on a statutory demand to establish a presumption of insolvency. Justice Nixon also found that Makisu lacked standing to pursue the application because there was a genuine dispute over the underlying debt, notwithstanding Able's earlier acknowledgements of the liability.

The dispute arose from a capital raising engagement under which Makisu agreed to provide financial advisory services to Able, which trades as Caresquare, in exchange for a revenue-sharing arrangement. Following a successful capital raise, the parties entered into a share subscription deed in March 2024 requiring Able to pay Makisu 10% of certain monthly revenues, capped at $300,000. Able subsequently experienced cash flow difficulties and failed to make the required payments, prompting Makisu to serve a statutory demand for $70,541.85 on 10 April 2026.

On 1 May 2026, the final day for compliance with the statutory demand, Able appointed Henry Kwok and Antony Resnick of DVT McLeods as joint small business restructuring practitioners under Part 5.3B of the Corporations Act 2001. The practitioners proposed a restructuring plan offering unsecured creditors an estimated return of 35.07 cents in the dollar, but the proposal failed to obtain the required creditor approval, bringing the restructuring to an end on 9 July 2026. Makisu subsequently commenced winding-up proceedings on 3 August 2026.

A central issue was whether the restructuring moratorium extended the period during which Makisu could rely on the statutory presumption of insolvency under section 459C(2)(a). Makisu argued that sections 453S and 458C effectively suspended the relevant period while Able was undergoing restructuring, extending the deadline for commencing proceedings to 9 October 2026. Justice Nixon rejected that interpretation, finding that section 453S did not prevent creditors from commencing winding-up proceedings during restructuring. Rather, section 453Q specifically governed such applications, consistently with established authorities concerning the equivalent provisions applicable to voluntary administration.

Because Able's failure to comply with the statutory demand occurred on 1 May 2026, more than three months before Makisu commenced proceedings, the statutory presumption of insolvency was unavailable. The Court therefore considered whether Makisu could independently establish its status as a creditor and pursue winding up on grounds of actual insolvency or on the just and equitable ground.

Able disputed the underlying debt on the basis that Makisu may have provided financial services without holding an Australian Financial Services Licence or being an authorised representative. On 21 August 2026, Able issued a notice purporting to rescind both the engagement letter and share subscription deed under section 925A of the Act. Although Able's director had previously acknowledged the revenue-sharing obligations and the company had included Makisu as an unsecured creditor in its restructuring proposal, Justice Nixon found that those acknowledgements did not resolve whether Able had subsequently acquired a right to rescind the agreements after discovering the potential licensing issue.

The Court held that the questions surrounding Makisu's licensing obligations, Able's knowledge of those circumstances and the validity of the rescission notice raised a genuine dispute requiring determination in separate proceedings. Makisu's creditor status therefore depended on disputed legal rights and obligations and could not support standing under section 459P. The Court also rejected Makisu's alternative argument that it qualified as a contingent or prospective creditor by reason of potential costs orders arising from the proceedings.

Justice Nixon dismissed both Makisu's application to amend its originating process and the winding-up application itself, ordering Makisu to pay Able's costs. The decision clarifies that the commencement of small business restructuring does not suspend the statutory demand presumption period, while reinforcing that a creditor whose underlying debt is genuinely disputed cannot use winding-up proceedings to resolve contested contractual liabilities.

Read the decision here.

Nishad Kulkarni of 5 Selborne (instructed by Artemide Law) acted for Able, while J Rogers (instructed by Russell Kennedy) acted for Makisu.