Factors for extending convening periods for administrations: lessons from the matter of Babyskin Laser & Cosmetic Clinic Pty Ltd”
In Olsen, in the matter of Babyskin Laser & Cosmetic Clinic Pty Ltd (Administrators Appointed) [2026] FCA 622 the Court considered an application to extend the time to convene a second meeting of creditors and analysed the relevant factors to assess. This article breaks down the decision and what the relevant factors are.
Facts
Between 12 December 2020 and 2 April 2026, the second plaintiff, Babyskin Laser & Cosmetic Clinic Pty Ltd (Babkyskin), operated a business of providing cosmetic and aesthetic services.
On 14 April 2026, the first plaintiff, Travis Graham William Olsen and Matthew Ormsby were appointed as Administrators.
Babyskin’s entry into administration was brought about due to several factors, including:
a sudden interruption to trading, including the closure of the clinic;
operational and staffing disruptions which interrupted normal business activities; and
dispute between the directors regarding the management, operation and direction of the company.
Babyskin did not have any secured creditors, but did have unsecured creditors claiming approximately $180,000, including $15,500 in priority creditor claims for outstanding wages and superannuation.
On 8 May 2026, the Administrators urgently applied to extend the convening period for the second meeting to 12 August 2026.
The primary reason for the application was that Mr Olsen had received offers to purchase Babkyskin’s business and assets that would likely lead to the realisation of sufficient funds to pay all creditors in full, with a surplus remaining for the shareholders. Further steps were required to negotiate, finalise, document and complete a sale, which would not be finalised by the end of the convening period.
Other reasons for the application included that:
time was required to consider any deed of company arrangement (DOCA) proposals finalise taxation lodgements, identify creditor claims and further investigate Babyskin’s financial position’
if the convening period were not extended, he would recommend that the second meeting be adjourned, which would mean that the administrators would have to incur substantial costs in preparing detailed reports to creditors.
Principles
Section 439A(1) of the Corporations Act 2001 (Cth) (Act) provides that the administrator of a company must convene a meeting of the company’s creditors within the convening period fixed by section 439A(5) of the Act, which must then be held within 5 days either before or after the convening period concludes. In this instance, the convening period ended on 12 May 2026.
However, pursuant to section 439A(6) of the Act, the Court may extend the convening period
Based on the prior decision in Freeman, in the matter of Regional Express Holdings Limited (administrators appointed) (No 2) [2024] FCA 968, the Court affirmed that the making such an order ‘the Court must reach an appropriate balance between an expectation that the administration will be relatively speedy and summary and the countervailing factor that undue speed should not be allowed to prejudice sensible and constructive actions directed to maximising a return for creditors.’
It may be appropriate to grant the order where:
there is a proper evidentiary case for the extension;
there is no evidence of material prejudice to those affected by the moratorium during the continued period of administration; and
the length of the extension sought by the administrator is exposed as having a reasonable basis.
By way of example, the Court noted that an extension may be appropriate where:
the size and scope of the business is substantial
the extension will allow a sale of the business as a going concern, so as to maximise the value of the company’s assets;
additional time is likely to enhance the return for unsecured creditors, including by allowing the progression of a DOCA; or
the creditors need additional information to be able to exercise their discretion as to the future of the company at the second meeting in an informed manner.
The interest of creditors who are affected by the statutory moratorium are relevant but not decisive
Notwithstanding these factors, the ultimate and overriding consideration of the Court is whether the extension is in the best interests of the creditors as a whole.
Decision
Ultimately, the Court considered that an extension struck an appropriate balance between the ‘legislative expectation [of the administration’s relative expedience] against the need to allow sufficient time for sensible and constructive activity to occur with a view to maximising a return for its creditors and, if possible, for its shareholders.’
The Court’s view was formed in light of the circumstances of the administration and given it was Mr Olsen’s view that a sale would provide the best return to creditors.
The Court ‘placed significant weight on Mr Olsen’s opinions, having regard to his extensive experience in corporate insolvency and administration.’
A further factor leading to the extension being granted was that, had it been refused, the Administrators would have been unable to complete all the tasks required to be completed by the second creditors meeting. Had the extension been refused, the second meeting would have been adjourned anyway, which would itself incur costs.
While the Court acknowledged that an extension would delay employees’ opportunity to file claims for unpaid entitlements, it appreciated that granting the extension would give rise to a ‘reasonable chance that the employee creditor claims will be paid in full in any event upon completion of a sale of DOCA’ and lead to future employment opportunities.
Therefore, the Court granted an extension of the convening period until 12 August 2026.
It did so in the form of a Daisytek order, which provided that the meeting may be convened at any time before, or within five business days after the end of the extended convening period. This is contrasted against the usual arrangement whereby it must be completed within 5 days either before or after the end of the period.
Given the nature of the application on an urgent ex parte basis, the orders also provided that the Administrators must take steps to inform Babyskin’s creditors of the extension.
Take Aways
The decision provides helpful insight into the factors that the Court will consider when deciding whether to grant an extension to a convening period. It also provides a useful example of an instance where an extension is appropriate.
Whether you are a creditor or administrator, Sladen Legal is able to assist in navigating the requirements for an administration, including in relation to the convening periods.
Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au
Jake Cole
Special Counsel
T: +61 3 9611 0112 | M:+ 61 413 557 157
E: jcole@sladen.com.au
Amy Green
Senior Associate
T: +61 3 9611 0175 | M +61 439 835 480
E: agreen@sladen.com.au
This article was prepared with the assistance of Charlie Cooper, Law Clerk.
