When a Pause Can Save a Company
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Published: 11 November 2025 | Reviewed: 5 December 2025
(3-minute read)
The structural lesson from
Mighty River International Ltd v Hughes [2018] HCA 38
A company with no money to distribute can still lawfully give creditors nothing but time, and the High Court said that pause is valid.
What Happened
Mesa Minerals entered voluntary administration with uncertain prospects. The administrators believed more investigation was needed before creditors could make an informed decision about liquidation or restructuring. To preserve value, including the company’s ASX listing and potential funding opportunities, they proposed a deed of company arrangement that did something striking.
The deed offered no immediate distribution to creditors.
Instead, it paused everything.
This structure became known as a holding deed of company arrangement. Creditors approved it by majority vote.
One creditor, Mighty River International Ltd, challenged the deed in the Western Australian Supreme Court, arguing that:
it unlawfully extended time without a court order, and
it was invalid because no property was to be distributed.
After appeals, the issue reached the High Court of Australia.
What the High Court Decided
The High Court (Chief Justice Kiefel, and Justices Gageler, Nettle, Gordon and Edelman) upheld the deed.
The Court confirmed that Part 5.3A of the Corporations Act was written deliberately to give creditors commercial flexibility, including the ability to approve a deed that temporarily pauses claims while investigations continue.
Key structural findings:
A deed of company arrangement may validly provide for a moratorium alone, without distributing property.
The statutory requirement to state what property is or is not available for distribution does not require that some property must exist.
Administrators may form opinions based on the information available at the time; the law does not demand complete certainty before proposing a deed.
The core purpose of the regime is creditor self-determination: creditors assess commercial prospects and choose the path they believe maximises outcomes.
The Court made clear that flexibility is not a loophole, it is a core design feature.
Why This Judgment Matters
The decision confirmed the holding deed as a legitimate restructuring tool in Australian insolvency law.
Three structural principles now guide its use:
A pause can be lawful when it enables proper investigation or alternative proposals that may improve returns.
Formal distributions are not required for a deed to be valid.
Courts intervene only when the statutory purpose is undermined; otherwise, creditors decide the company’s future.
This protects value that might otherwise be lost through premature liquidation, especially where the company’s listing, intellectual property, or contingent rights may yield future benefit.
But the judgment also emphasises discipline. A holding deed must serve a genuine restructuring purpose. It cannot be a delay for delay’s sake.
What Australians Should Learn
Many creditors and business owners assume that if a company has nothing to distribute immediately, liquidation is inevitable. Mighty River shows the opposite: the law expressly permits a structured pause when a better outcome may still be achievable.
The case also illustrates a deeper truth about fair process:
A pause is not inaction.
A pause is a structural safeguard that creates space for proper analysis.
A pause protects creditors from being forced into irreversible decisions when facts are incomplete.
Fairness, in this context, is not speed.
Fairness is timing used wisely.
The Structural Fix
This judgment aligns with our Client Protection Principle on Strategic Integrity, which preserves disciplined decision-making when information is incomplete and timing matters.
Learn how this safeguard works: Strategic Integrity
Reflection: The Value of a Lawful Pause
Mighty River v Hughes reframes delay as a structured tool. A lawful pause allows better information, clearer choices, and protection against rushed decisions that lock in unnecessary loss.
The High Court recognised what many Australians rarely see: sometimes the safest path is not forward or backward, but stillness long enough for the right facts to surface.
When timing is treated with care, outcomes stabilise.
In insolvency, as in advocacy, the integrity of each step depends on when it is taken.
Read: Mighty River International Ltd v Hughes [2018] HCA 38
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By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance, annual Law Society trust-account audits, and ACNC-reported standards.
Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation
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