Virtual participation rules tested in Rex administration

The Federal Court of Australia has issued a suite of orders in administration of the Rex Group to facilitate approval of a proposed restructuring and sale transaction with Air T Inc., a US-based air services company.

Administrators Samuel Freeman, Adam Nikitins, and Justin Walsh of EY were appointed in July 2024 after a post-pandemic consumer reluctance to fly caused the company to discount its rates, which ultimately descended into a price war with other airlines. They continued to operate the Rex Group’s regional airline business while ceasing operations on its metropolitan routes and hunting for a buyer.

The administrators sold off a number of non-core assets but struggled to find a buyer for the business, prompting the commencement of second sale process with Houlihan Lokey in February 2025. Around the same time, the Government announced its intention to acquire the company’s secured debt and to step in to buy Rex if no other buyer was found.

Last week, after months of searching, the administrators confirmed that they had entered into a sale and implementation deed with Air T which contemplates transferring the business of the Rex Group through a share sale. The sale is subject to various conditions precedent, including receipt of regulatory approvals and approval by creditors. As such, the administrators sought wide-ranging relief enabling coordinated administration of all eight companies, including validation of electronic notice procedures to creditors, authorization of virtual creditor meetings, extensions of convening periods to align across entities, and protection for the administrators from personal liability under an amended Commonwealth funding facility.

A major issue concerned the proposed structure of creditors’ meetings—namely whether virtual creditors’ meetings conducted primarily through a live chat function visible only to the chairperson, without oral participation, met the “reasonable opportunity to participate” standard under r 75-75 of the Insolvency Practice Rules (Corporations). Justice Stewart held that such a restricted format did not satisfy the rule, emphasizing that creditors must be able to communicate in a manner visible to all participants to preserve the democratic nature of the meeting. While he accepted that the meetings could initially use a written live chat format for manageability, he directed that all participants must be able to see messages posted, and that the chairperson must allow oral participation where practical.

The Court also extended confidentiality orders over sensitive financial material, allowed the administrators more time to respond to creditor information requests, and confirmed their ability to rely on the amended Commonwealth loan facility without personal exposure. Finally, to ensure procedural consistency across the group, the Court amended earlier orders governing the first Rex companies so that a single, consolidated second meeting of creditors—at which the Air T transaction will be considered—can proceed on uniform terms.

Read the decision here.

Daniel Krochmalik of 3 St James’ Hall and Bradley Smith of Tenth Floor Chambers (instructed by White & Case) represented the administrators.