Originally Posted by
MickG0105
An administrator cannot cancel contacts unless there is a clause in the contact permitting the company to void the contract if it enters administration. These are known as ipso facto clauses. Such clauses that work in favour of the party entering administration are extraordinarily rare. Ipso facto clauses normally run the other way, they typically provide certain rights of relief to one party if the other party enters administration. However a recent amendment to the Corporations Act 2001 (specifically section 451E Stay on enforcing rights merely because the company is under administration etc.) now limits the enforcement of certain rights arising from ipso facto clauses.
A liquidator can disclaim a contact outright. The best that an administrator can do is repudiate contracts requiring performance by the company that the administrator cannot meet, such as the payment of monies that the administrator does not have. A repudiated contract is not cancelled, it is still in effect and the counterparty can sue for breach of it.
Yeah, that's a fair call. It's only once the Administrator is at the point if proposing a deed of company arrangement, which is wherecwhere VA is heading, that contracts can be cancelled - with the agreement if the majority of creditors by number and value. The Administrator just has greater capacity to not comply with contractual obligations up til that point, since there are limits on creditors suing for enforcement or winding up while the company is in administration.