Key points

• The Court can grant retrospective approval under s 477(2B) of the Corporations Act. However, the intention of s 477(2B) is that approval will be sought and granted before the relevant agreement is entered into. 
• If an application for retrospective approval cannot be avoided, liquidators should usually explain why that was necessary, in their supporting affidavit.
• Where there are repeated and/or unexplained applications for retrospective approval, the Court may leave the liquidator/s bearing the costs of the application. 

Background

In the decision of Krejci, Greatcell Solar Ltd (in liquidation) [2024] FCA 1121, joint and several liquidators for Greatcell Solar Limited (in liquidation) and Greatcell Solar Australia Pty Ltd (in liquidation) sought the Court’s approval pursuant to s 477(2B) of the Corporations Act 2001 (Cth) to enter into funding and costs agreements for the purpose of pursuing litigation. 

The liquidators had already entered into the agreements when they applied to the Court. 

Outcome of the application  

The Court confirmed that it had the power to approve entry into an agreement retrospectively. 

The Court approved entry into the agreements, which it said ‘may well inure for the benefit of creditors’. 

However, the Court expressed its disapproval of the liquidators’ failure to seek approval in advance. 

In circumstances where the liquidators had also sought retrospective approval in a recent, related application, and where they had offered no explanation in either application as to why they could not have sought Court approval beforehand, the Court declined to make orders that the costs of the application be costs in the winding up. The Court ordered, instead, that the liquidators bear their own costs of the approval application.