In breaking news, Aerison, a company providing mining services, has appointed administrators due to its inability to resolve a $47.5 million dispute with the Roy Hill iron ore mine owned by Gina Rinehart, putting over 250 jobs in jeopardy. From a bitter dispute over a desalination plant to financial turmoil intensified by the pandemic, Aerison’s collapse reveals the fragile fault lines that can rupture even the mightiest mining giants. As the dust settles over the $47.5 million disagreement with Roy Hill, the shockwaves continue to be felt across the industry, casting a stark light on the precarious path that even well-established corporations may tread. In this intricate dance between business, law, and finance, the Aerison saga serves as a cautionary tale, reminding us that the ground beneath our feet can shift without warning in the turbulent world of commercial trading. In this article, Law Clerk, Riley Hickey, investigates the highly publicised fall of the mining giant, shining light on the growing number of commercial disputes resulting in the appointment of a voluntary administrator.

Mining Company Collapse – Voluntary Administration

Aerison’s dispute with Roy Hill concerned disagreements regarding the quality of work undertaken at a desalination plant and associated unforeseeable variations to the project’s projected costs as a consequent of of the COVID-19 pandemic hiking up supply chain issues and other inevitable inflation-related expenses. The company suspended trading in the first week of May 2023, pending conversations and negotiations with the big banks and Roy Hill to navigate the turbulent conditions of the rapidly deteriorating commercial relationship. Aerison’s last resort attempt at formal dispute resolution since the commercial disputes’ inception in February 2022 was instigated to protect the interest of the company and its employees and various shareholders and contractors associated with the business.

However, the liquidity shortfall is a devastating outcome for the business, with statistics revealed by the Gold Coast Bulleting indicating that Aerison had $27.1 million in borrowings outstanding in 2022, with an additional $15.8 million in trade payables, making for a grim financial situation for the mining giant ultimately causing for it to consider alternative strategies to stay afloat.

Options for Corporate Insolvency 

Voluntary Administration

Voluntary administration is frequently regarded as an inexpensive and uncomplicated procedure with considerable leniency and flexibility to provide struggling businesses with alternative routes to deal with their financial affairs. Its purpose is to provide for the business, its property and its affairs to be managed and otherwise administered in a manner that maximises the chances of the company continuing in existence, or if that is unable to be achieved, ultimately results in a more favourable return for creditors and members (as opposed to winding up the company). It may be commenced by way of the board of directors, liquidator, or a secured party (over the majority of the company’s property) resolving to appointment of a voluntary administrator in the premise where the company is insolvent or likely to be.

After comprehensive investigations into the company’s financial affairs, the voluntary administrator will prepare a report detailing their opinion as to the future of the company, whether that be that the creditors’best interests would be best represented by way of a Deed of Company Arrangements for Creditors (DoCA), finalising the administration or alternatively, winding up the company. This report is typically proffered at the creditors’ meeting, initiated through a Resolution by the majority of the company’s directors.

Alternative Options

Voluntary administration, as explained above, is merely one strategy that struggling businesses may utilise in the case of commercial disputes resulting in corporate insolvency. Alternative options that may be available are further particularised below.

Liquidation

Liquidation occurs when a company is wound up or otherwise ceases to continue trading, where its assets are sold, and the sale proceeds are used to repay its debts. Typically, a liquidator may be appointed by either creditors or members, which allows the liquidator to gain control of the company’s affairs so that it may be wound up in an amicable, streamlined, and effective manner to benefit existing creditors.

Receivership

Receivership is the process in which an individual secured creditor may be able to recover a secured debt. This involves a receiver being appointed on behalf of the individual secured creditor to realise a person’s property. In the context of insolvency, a bank or other financier seeks to take security over the company’s property, and the appointment of the receiver results in the enforcement of that security in circumstances where there is a default under the relevant security agreement.

RAMSDEN LAWYERS – HOW WE CAN HELP 

Navigating the intricate maze of commercial disputes, such as the one between Aerison and Roy Hill, can feel overwhelming and costly. It’s not just a legal matter; it’s about your business, livelihood, and future. Our experienced Litigation and Dispute Resolution Division needs to understand the law; we understand what’s at stake for you. From contracts and partnerships to joint ventures and intellectual property, we’re adept at resolving disputes efficiently, always with your best interests at heart.

If you are seeking legal advice, Ramsden Lawyers can assist you. We are happy to arrange an obligation-free initial consultation to assist you in navigating the relevant legislation for your circumstances. Our Litigation and Dispute Resolution Division has specific expertise in helping individuals and (excluded) corporations navigate the tort of defamation, and to assess what options may be the most preferable to progress the dispute.

The content of this article is intended to provide general guidance to the subject matter and must not be relied on as legal advice.  Specific advice should be sought about your circumstances.