Is a court order necessary for security interests granted after the appointment of external administrators? Perhaps not.

These are unprecedented times for businesses trying to manage the challenging impact of inflation, labour shortages, supply interruptions, elections, fires, floods, wars and a pandemic. It is more important than ever to manage working capital, mitigate risk and monetise assets.

The Bankruptcy Code confers upon debtors or trustees, as the case may be, the power to avoid certain preferential or fraudulent transfers made to creditors within prescribed guidelines and limitations. The U.S. Bankruptcy Court for the District of New Mexico recently addressed the contours of these powers through a recent decision inU.S. Glove v. Jacobs, Adv. No. 21-1009, (Bankr. D.N.M.

(This article was originally published in the Australian Restructuring Insolvency & Turnaround Association Journal, Vol. 33 – March 2021)

A liquidator can be exposed personally in litigation. In this article we discuss the risks to a liquidator associated with litigation by examining some recent cases where liquidators have been ordered to pay costs personally. To mitigate these risks, we provide guidance on litigation strategy for liquidators.

This article was originally published in the Australian Restructuring, Insolvency & Turnaround Association Journal (Volume 32 #01 2020)

The first of March marked the second anniversary of the changes to the Corporations Act 2001 (Cth) (Act) permitting an external administrator to assign rights to sue. The Australian Government proposed the reform in the hope that the ‘sale of rights of action may enable the value in such rights to be realised’[1].

In In re Smith, (B.A.P. 10th Cir., Aug. 18, 2020), the U.S. Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Tenth Circuit recently joined the majority of circuit courts of appeals in finding that a creditor seeking a judgment of nondischargeability must demonstrate that the injury caused by the prepetition debtor was both willful and malicious under Section 523(a)(6) of the Bankruptcy Code.

Factual Background

The United Kingdom and Australia have recently implemented legislative changes to permit external administrators to assign or sell causes of action available to them.

In a recent decision, the U.S. Bankruptcy Court for the Southern District of New York held that claim disallowance issues under Section 502(d) of the Bankruptcy Code "travel with" the claim, and not with the claimant. Declining to follow a published district court decision from the same federal district, the bankruptcy court found that section 502(d) applies to disallow a transferred claim regardless of whether the transferee acquired its claim through an assignment or an outright sale. See In re Firestar Diamond, 615 B.R. 161 (Bankr. S.D.N.Y. 2020).

InIn re Juarez, 603 B.R. 610 (9th Cir. BAP 2019), the Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit addressed a question of first impression in the circuit with respect to property that is exempt from creditor reach: it adopted the view that, under the "new value exception" to the "absolute priority rule," an individual Chapter 11 debtor intending to retain such property need not make a "new value" contribution covering the value of the exemption.

Background

In In re Palladino, 942 F.3d 55 (1st Cir. 2019), the U.S. Court of Appeals for the First Circuit addressed whether a debtor receives “reasonably equivalent value” in exchange for paying his adult child’s college tuition. The Palladino court answered this question in the negative, thereby contributing to the growing circuit split regarding the avoidability of debtors’ college tuition payments for their adult children as constructively fraudulent transfers.

Background