Times are changing rapidly with the current flow of Coronavirus measures introduced to support businesses in debt and distress.
We take a look at what creditors can (and can’t) do to help better protect their position.
I’m owed money. What can I do?
Certain recent government measures may impede your ability to take recovery or enforcement action at the present time. The good news is that many avenues remain available.
You cannot (in some cases):
In This Issue:
U.S. Supreme Court: Creditors May Immediately Appeal Denials of Automatic-Stay Relief
Except for disastrous fires that sparked the largest bankruptcy filing of the year, liabilities arising from the opioid crisis, the fallout from price-fixing, and corporate restructuring shenanigans, economic, market, and leverage factors generally shaped the large corporate bankruptcy landscape in 2019. California electric utility PG&E Corp.
Section 510(b) of the Bankruptcy Code provides a mechanism designed to preserve the creditor/shareholder risk allocation paradigm by categorically subordinating most types of claims asserted against a debtor by equity holders. However, courts do not always agree on the scope of the provision in attempting to implement its underlying policy objectives. The U.S. Court of Appeals for the Fifth Circuit recently examined the broad reach of section 510(b) in In re Linn Energy, 936 F.3d 334 (5th Cir. 2019).
In a decision of the Federal Court handed down on 18 October 2019 in Masters v Lombe (Liquidator); In the Matter of Babcock & Brown Limited (In Liquidation) [2019] FCA 1720, Foster J held that Babcock & Brown Limited (BBL) did not breach the continuous disclosure obligations in the Corporations Act 2001 and the ASX Listing Rules.
The ability of a bankruptcy trustee to avoid fraudulent or preferential transfers is a fundamental part of U.S. bankruptcy law. However, when an otherwise avoidable transfer by a U.S. entity takes place outside the U.S. to a non-U.S. transferee—as is increasingly common in the global economy—courts disagree as to whether the Bankruptcy Code’s avoidance provisions apply extraterritorially to avoid the transfer and recover the transferred assets. Several bankruptcy and appellate courts have addressed this issue in recent years, with inconsistent results.
The NSW Supreme Court has reaffirmed the criteria for a Court to inquire into a liquidator’s conduct. It is necessary to show that there is at least a ‘well-based suspicion’ indicating a need for further investigation. ‘Mere wondering’ is not enough.
In exercising its discretion, a Court will also consider the nature and gravity of the allegations against the liquidator, delays in seeking an inquiry, the utility of an inquiry and the existence of alternative remedies.
Background
Rumors of another recession multiplied as the tumultuous second year of the Trump administration came to a close. Highlights of 2018 included a simmering trade war with China; political upheaval after the House of Representatives was retaken by Democrats in the midterm elections; mayhem in financial markets; and, in December, the beginning of the longest government shutdown in U.S. history, triggered by lawmakers’ refusal to provide $5.7 billion in funding for a U.S.-Mexican border wall.
In the wake of scandal-driven bankruptcies filed by nearly 20 U.S. Roman Catholic dioceses and religious orders, scrutiny has been increasingly brought to bear on the benefits and burdens that federal bankruptcy laws offer to eleemosynary (nonprofit) corporations. Nonprofits seek bankruptcy protection for a variety of reasons.
In the wake of scandal-driven bankruptcies filed by nearly 20 U.S. Roman Catholic dioceses and religious orders, scrutiny has been increasingly brought to bear on the benefits and burdens that federal bankruptcy laws offer to eleemosynary (nonprofit) corporations. Nonprofits seek bankruptcy protection for a variety of reasons.