With the increase in global trade and business, often involving complex corporate structures in multiple jurisdictions, we expect to see a significant increase in cross-border insolvency and restructuring matters in coming years. This is especially the case with rapid advancements in technology and digital change driving “borderless” transactions and investments in every industry.
Introduction
Current turbulent times and the onset of recession are likely to result in an increase in the number of distressed sales and ultimately insolvencies. For those who are fortunate to be in the market as buyers, there may be considerable opportunities but equally there are significant traps for the unwary. This briefing examines some of the key issues which should be considered by prospective buyers of businesses in financial difficulties which are not in formal insolvency proceedings.
What is a debt restructuring?
The aim of any restructuring (also sometimes called a workout) is to rearrange the debtor’s financial commitments so that it is able to service its restructured debts and survive as a going concern. It is important to note that this is a consensual process and is not undertaken under the supervision of a court or other supervisory body - therefore, it is important the all creditors are involved.
If it’s voluntary, how does it work?
Getting your house in order
Understand your counterparty risks
It is very important in the present climate to understand your contracts and your counterparty risks. We are finding an increasing number of clients “stress testing” their contracts and considering the consequence of an insolvency event. This is good practice; particularly since to identify weaknesses in structures and counterparty risk upon insolvency may afford you the time to fix it before things do go wrong.
Where are the documents?
Introduction
Introduction
Another failed property developer has just been made bankrupt in Australia, this time with a difference – he was already bankrupt in New Zealand. Bank of Western Australia (Bank) v David Stewart Henderson (No. 3) [2011] FMCA 840 is another Australian cross-border insolvency case in which we have successfully tested the boundaries of the Cross-Border Insolvency Act 2008 (Cth) (the CBIA), this time with the Bankruptcy Act 1966 (Cth).
On 5 October 2011, the NSW Supreme Court upheld an application pursuant to s 440D(1) of the Corporations Act 2001 (Cth) (the Corporations Act) for leave to bring and continue proceedings against a defendant under voluntary administration.
Introduction
New Zealand liquidators have had their powers recognised in Australia in a series of recent ground-breaking judgments.
These decisions in respect of Northern Crest Investments Limited, a New Zealand registered company listed on the ASX, demonstrate the broad powers which the courts are willing to provide to foreign representatives under the Cross-Border Insolvency Act 2008 (Cth) (the CBIA).
Obtaining powers of Australian liquidators
Everyone loves a bargain – accordingly, there is a lot of interest when liquidators and other insolvency practitioners put a business up for sale. Purchasers jostle like shoppers in the Myer stocktake sale, trying to position themselves as the perfect purchaser. At the same time they try to convey their concern about the value of the business or assets – everyone expects a discount for a distressed business.