As governments increasingly develop consumer initiatives,
insolvency practitioners will more frequently have to deal with unfamiliar issues.
A current case we are undertaking in our Canberra office highlights that liquidation is not always a straightforward business and can throw up unfamiliar and interesting issues.
In January, we were appointed as administrators of a solar panel retailer, Enviro Friendly Products (EFP).
The solar industry has seen various feed-in tariff and rebate incentives for customers at both state and federal government level. One of these incentives has been the entitlement of customers of solar panel installations to Small-scale Technology Certificates (STCs). Electricity retailers are required by law to buy a number of STCs each year, the cost of which is effectively passed to non-solar panel customers thus subsidising solar panel buyers.
The number of STCs which a customer is entitled to depends on the size of the solar plant installed. The market price of STCs has fluctuated significantly and at present is approximately $30.
Most solar panel companies provide an upfront discount to customers for the installation of their solar products in exchange for an assignment of a customer’s STCs. The solar panel companies then create the STCs and can sell them as they choose.
In the case of EFP, a large number of customers assigned their rights to create STCs to EFP however they were not provided with any upfront discount. Customers were generally advised that after the STCs were created they would be given options regarding the trading or sale of their STCs, including an option to place them into a government clearing house. When EFP was placed into administration it held approximately 21,000 STCs in its name, which had been created on behalf of customers. Our review of the records of the company indicates that there are less STCs than what is required to meet all customer claims. This appears to be as a result of EFP selling off a number of certificates prior to liquidation, without distributing the proceeds to customers.
Given the complexity of the issues, we obtained legal advice and are treating the 21,000 STCs as trust assets which are not to form part of the broader liquidation of the company.
In order to resolve the situation, we have been working with the ACT Office of Regulatory Services (Fair Trading) and it is our intention to seek court directions on how to deal with the STCs and distribute these amongst the almost 300 affected customers. It is possible that directions will be given by the Court for our appointment as Receivers & Managers of the trust assets.