In a recent decision, the U.S. Bankruptcy Court for the District of New Jersey denied a debtor’s motion to reject a contract as executory under section 365 of the Bankruptcy Code, holding that the prepetition entry of a court order which required specific performance of a contract rendered the contract non-executory and, therefore, non-rejectable. In re Bennett Enters., Case No. 20-23761 (JNP), 2021 Bankr. LEXIS 625 (Bankr. D.N.J. 2021) (“Bennett Enterprises”).

Background

In a recent decision, the United States District Court for the Southern District of New York upheld a bankruptcy court order that enjoined a plaintiff holding an asbestos claim from pursuing a state court products liability claim against the successor to Manville Forest Products Corporate (“MFP”). Notably, the Court reaffirmed that a claim relating to prepetition exposure to asbestos is a prepetition claim, even though the injury may not have manifested itself until after the petition date.

In a recent decision, the United States District Court for the Southern District of New York upheld a bankruptcy court order that enjoined a plaintiff holding an asbestos claim from pursuing a state court products liability claim against the successor to Manville Forest Products Corporate (“MFP”). Notably, the Court reaffirmed that a claim relating to prepetition exposure to asbestos is a prepetition claim, even though the injury may not have manifested itself until after the petition date.

In a recent decision, Twiford Enters. v. Rolling Hills Bank & Trust (In re Twiford Enters.), 2020 Bankr. LEXIS 2964, 2020 WL 6075691 (10th Cir. BAP 2020), the Tenth Circuit Bankruptcy Appellate Panel affirmed the lower court’s decision awarding postpetition interest pursuant to section 506(b). The disputed issue was whether a reference in the variable rate promissory notes to an internal rate index maintained by the bank was sufficiently clear and specific to support a claim for postpetition interest. The court held that it was.

Introduction

The concept of winding up does not exclusively apply to insolvent companies. Solvent companies can also be wound up, on the initiation of the company’s directors and shareholders (for example, as part of a corporate reconstruction or to close down non-operating or redundant entities). 

An overview of the two key procedures to effect the dissolution of a solvent Australian company, being Members’ Voluntary Liquidation and Deregistration, is set out below. 

In brief

Even with the fiscal stimulus and other measures taken by the Federal and State governments in Australia, corporate insolvencies are likely to increase in coming months.

Under Australia's insolvency regimes, a distressed company may be subject to voluntary administration, creditor's voluntary winding up or court ordered winding up (collectively, an external administration). Each of these processes raises different issues for the commencement and continuation of court and arbitration proceedings.

In summary

In our previous alert we discussed how Justice Markovic in the Federal Court of Australia had granted the administrators of retailer Colette Group relief from personal liability for rent in respect of 93 stores.  

The Australian Federal Court has made orders relieving the administrators of retailer Colette from personal liability for rent in response to the COVID-19 crisis and the current uncertainty in respect of government policy about rent relief for tenants: see

What you need to know

Amendments to the Corporations Act 2001 (Cth) (Corporations Act) to implement the measures announced by Treasurer Josh Frydenberg on Sunday, 22 March 2020 to provide temporary relief for financially distressed businesses due to COVID-19 have now come into effect.

The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (CERPO Act) amendments were passed by the Parliament on 2 March 2020. They will apply for a 6 month period, but may be extended or have impacts beyond that timeframe.

The Treasurer, the Honourable Josh Frydenberg MP, has today announced proposed temporary changes to Australian corporate insolvency laws which will vary the minimum requirements for statutory demands and provide some relief for directors from insolvent trading. These announcements form part of the Australian Government's measures to support otherwise profitable and viable businesses due to the economic impacts of COVID-19.