Winding Up a Foreign Company in Australia

HFW has achieved successful outcomes for clients seeking to obtain winding up orders against foreign companies with local agents. The case summaries below, of Re Anagram International LLC (recs and mgrs apptd) [2025] VSC 267 and the earlier matter of W Capital Advisors Pty Ltd (in its capacity as trustee for the W Capital Advisors Fund) v Mawson Infrastructure Group, Inc (NSD1395/2024), provide guidance on how parties can best position themselves for success in these circumstances.

Relevant Law

Definition of foreign company

Under s 9 of the Corporations Act 2001 (Cth) (the Act), a ‘Part 5.7 body’ is defined as a registrable body that is a foreign company and is registered under division 2 of part 5B.2 of the Act.

For this to occur, two key criteria must be satisfied:

• the foreign company must not carry on business in Australia unless it is registered under division 2 of part 5B.2 of the Act (s 601CD(1)(a) of the Act); and
• ASIC must not register a foreign company under division 2 of part 5B.2 of the Act unless the foreign company has at least one local agent in relation to whom the foreign company has complied with s 601CG of the Act (section 601CF(2) of the Act).

Under section 9 of the Act, a ‘registrable body’ is defined as a registrable Australian body or foreign company.

Provision to wind up a foreign company under the Corporations Act

Section 583 of the Act regulates the winding up of Part 5.7 bodies. This is a discretionary power of the courts.

Per section 583(b) of the Act, a Part 5.7 body is not to be wound up voluntarily.

The circumstances in which a Part 5.7 body may be wound up are as follows:

1. if the Part 5.7 body is unable to pay its debts, has been dissolved or deregistered, has ceased to carry on business in this jurisdiction or has a place of business in this jurisdiction only for the purpose of winding up its affairs;
2. if the Court is of opinion that it is just and equitable that the Part 5.7 body should be wound up;
3. if ASIC has stated in a report prepared under division 1 of part 3 of the ASIC Act that, in its opinion:

A. the Part 5.7 body cannot pay its debts and should be wound up; or

B. it is in the interests of the public, of the members, or of the creditors, that the Part 5.7 body should be wound up;

4. if the Part 5.7 body is a registrable Australian body–the winding up must deal only with the affairs of the body outside its place of origin.

Unable to pay its debts

Section 585 of the Act defines when a Part 5.7 body is taken to be unable to pay its debts:

1. Creditor Demand: If a creditor, to whom the body owes a sum exceeding the statutory minimum, serves a demand for payment and the body fails to pay, secure, or compound the debt within three weeks.
2. Legal Proceedings: If legal action is taken against a member for a debt, and the body fails to address the debt or indemnify the defendant within ten days of notice.
3. Unfulfilled Judgments: If a judgment or order against the body remains unsatisfied.
4. Court Satisfaction: If it is otherwise proven to the court that the body cannot pay its debts.

The test for insolvency under section 583 is whether the company is unable to pay its debts, which technically differs from the standard test under section 95(A) that the company is unable to pay its debts as and when they fall due. However, as the Court noted in Trans Pacific [2009] NSWSC 308 (Barrett J) [37] – “there must nevertheless be considerable overlap between the two.”

Re Anagram International LLC (recs and mgrs apptd) [2025] VSC 267

Background

On 26 April 2024, Anagram International LLC (recs and mgrs. apptd) (Anagram) received a letter from a financier, PNC Bank, advising of a default on a capital facility it had guaranteed to its international parent company, Wonder Group.

While administrators were appointed over the Wonder Group, PNC Bank appointed a receiver over Anagram on 3 July 2024. Despite Anagram operating profitably, it was affected by the administration process given it had guaranteed the Wonder Group’s debt facility agreement with PNC Bank.

On 18 October 2024, the Receivers entered into an Asset Sale Agreement for the acquisition of Anagram’s business and assets.

Key issues

In this case, the key issue before the Victorian Supreme Court (Court) was whether the Part 5.7 body was able to satisfy the Court that threshold requirements under section 583(c) of the Act had been met.

The ground relied upon by Anagram was that, in the words of s 583(c)(i) of the Act, it was ‘unable to pay its debts’ and ‘has ceased to carry on business in this jurisdiction’.

This section is amplified by section 585 of the Act which outlines the basis on which a Part 5.7 body is taken to be unable to pay its debts. In this case, the Court was directed to sub-section (d) which provides that a Part 5.7 body will be taken to be unable to pay its debts if:

“it is otherwise proved to the satisfaction of the Court that [it] is unable to pay its debts.”

Following submissions, the Court was satisfied to exercise its discretion to declare that Anagram had ceased to carry on business in this jurisdiction and was unable to pay its debts given that:

• upon the completion of an Asset Sale Agreement on 31 October 2024, Anagram ceased trading and all of its employees were transferred to a purchasing entity;
• Anagram no longer had any function within the parent group structure or otherwise; and
• Anagram had debts totalling $13.05 million and a net asset deficiency of $8.5 million. It had no ability to pay those debts.

Neither section 583 nor any other provision in part 5.7 states who may apply for the winding up of a Part 5.7 body.

In Trans Pacific Insurance Corporation v Douglas,¹ Barrett J held that the question should be approached by reference to the general provisions of chapter 5 of the Act, subject to ‘such adaptations as are necessary’. In circumstances where the application is made by the company itself under the direction and instruction of its director, the Court will be satisfied with the issue of standing.

Client takeaways

Given the uniqueness of such an application, the following points should be noted for any application under section 583:

• all applications must establish how the company is a Part 5.7 body under the Act;
• a Part 5.7 body is not to be wound up voluntarily under chapter 5 of the Act;²
• the winding up jurisdiction created by section 583 is discretionary;³
• the threshold of a Part 5.7 body being unable to pay its debt is amplified by section 585;
• the issue of standing should be approached by reference to the general provisions of chapter 5 of the Act, with such adaptions as necessary; and
• the Court’s power to wind up a foreign entity under part 5.7 are exercisable regardless of whether any winding up has occurred or is likely to occur in the place of incorporation of the foreign company or whether the company has otherwise been dissolved in its place of incorporation.⁴

W Capital Advisors Pty Ltd (in its capacity as trustee for the W Capital Advisors Fund) v Mawson Infrastructure Group, Inc (NSD1395/2024)

HFW also successfully obtained orders under section 583 for the winding up of a Part 5.7 body in the matter of W Capital Advisors Pty Ltd (in its capacity as trustee for the W Capital Advisors Fund) v Mawson Infrastructure Group, Inc (NSD1395/2024) (W Capital Advisors).

In an unreported decision of the Federal Court of Australia (Federal Court), HFW acted for W Capital Advisors.

Background

W Capital Advisors, a secured creditor made a contested application in the Federal Court to wind up a debtor company by serving a statutory demand pursuant to section 585(a) of the Act which was not complied with.

Key Issues

The defendant, Mawson Infrastructure Group, Inc, attempted to oppose the orders sought by, amongst others, attempting to enliven sections 581(1) and 581(2) of the Act and arguing that in circumstances where simultaneous proceedings were on foot in a United States bankruptcy court, the Federal Court should be minded to adjourn the proceedings in aid of and auxiliary to the courts of the United States. In short, it was argued that:

• the United States proceeding was commenced by the plaintiff rather than by the defendant. This can be distinguished from the situation in many of the authorities, where the foreign proceeding was commenced by the defendant as a delaying tactic;
• the adjournment would be a short one; and
• all disputes should be resolved by the United States courts.

Decision

In rejecting all three arguments, the Federal Court noted that:

• None of these reasons, whether viewed individually or cumulatively, are persuasive. In particular, it is not apparent how they show that an adjournment would be in aid of or auxiliary to the proceeding in the United States bankruptcy court.
• Whilst the proceeding in the United States was not commenced by the defendant, it is not apparent how this bears on the present application, other than to show that the proceeding in the United States was not commenced by the defendant as a delaying tactic.
• Further, the length of the adjournment is not a matter which would appear to assist the United States bankruptcy court.
• Lastly, the submission that all disputes should be resolved by the United States court is no more than an expression of the defendant’s preferences. Certainly, there is no statement or request from the United States bankruptcy court to this effect.

In these circumstances, the application for an adjournment or stay was refused and the Federal Court made orders to wind up the company under section 583(c)(i) of the Act.

HFW has extensive experience dealing with the winding up of foreign companies in Australia.

Footnotes

1. (2009) 71 ACSR 569, [17].
2. Corporations Act 2001 (Cth) s 583(c).
3. Titchfield Management Ltd v Vaccinoma Inc (2009) 68 ACSR 448.
4. Corporations Act 2001 (Cth) s 582(3).