The Bankruptcy Code grants the power to avoid certain transactions to a bankruptcy trustee or debtor-in-possession. See, e.g., 11 U.S.C. §§ 544, 547–48. Is there a general requirement that these avoidance powers only be used when doing so would benefit creditors? In a recent decision, the United States Bankruptcy Court for the District of New Mexico addressed this question, concluding, in the face of a split of authority, that there was such a requirement.

A creditor in bankruptcy must normally file a proof of claim by a certain specified time, known as the bar date, or have its claim be barred.

In March, we reported on a brief filed by the Solicitor General recommending denial of a petition for certiorari filed by Tribune creditors seeking Supreme Court review of the Second Circuit ruling dismissing their state-law fraudulent transfer claims.

A discharge of debt in bankruptcy “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor. . . .” 11 U.S.C. § 524(a)(2). Certain debts, however, including debts “for violation of . . . any of the State securities laws,” are not subject to discharge. See 11 U.S.C. § 523(a)(19). A discharge injunction does not bar the collection of such debts.

We have blogged previously about section 546(e), the Bankruptcy Code’s safe harbor for certain transfers otherwise subject to avoidance as preferences or fraudulent transfers. See 11 U.S.C. § 546(e). Among the transfers protected by the section 546(e) safe harbor are transfers by or to a “financial participant” made “in connection with a securities contract.” Id.

The Australian chapter of GRR’s Asia-Pacific Restructuring Review 2021, authored by Herbert Smith Freehills, is now available and reproduced below.

This latest edition covers major Australian legislative developments, transactions and case law relating to restructuring and insolvency in Australia over the past 12 months including:

Legislation

• Temporary COVID-19 insolvency law amendments
• Anti-phoenixing amendments to the Corporations Act

Key restructurings

The Bankruptcy Code enables a trustee to set aside certain transfers made by debtors before bankruptcy. See 11 U.S.C. §§ 544, 547, 548. These avoidance powers are subject to certain limitations, including a safe harbor in section 546(e) exempting certain transfers. Among other things, section 546(e) bars avoidance of a “settlement payment . . . made by or to (or for the benefit of) . . . a financial institution [or] a transfer made by or to (or for the benefit of) a . . . financial institution . . .

We are pleased to announce the publication of the third edition of the Herbert Smith Freehills Guide to Restructuring, Turnaround and Insolvency, Asia Pacific.

Against a backdrop of the COVID-19 pandemic and the resulting economic downturn, we are seeing companies and lenders respond to a new and challenging business environment. The challenges associated with this new environment are further exacerbated as the influencing factors change in nature and intensity.

The Australian Federal Government has announced significant insolvency law reforms that will affect small businesses with liabilities of less than $1 million. The reforms are expected to commence on 1 January 2021 and will introduce, among other measures, a new debt restructuring process and liquidation pathway for small businesses which the Government intends to be simpler, more flexible and more efficient than existing processes.

In brief

Last February, we blogged about the Third Circuit’s decision in In re Energy Future Holdings Corp, No. 19-1430, 2020 U.S. App. LEXIS 4947 (Feb. 18, 2020). The Third Circuit approved a process for resolving asbestos claims in which a bar date was imposed on filing the claims, but late claimants who were unaware of their asbestos claims would be allowed to have the bar date excused through Bankruptcy Rule 3003(c)(3). (A bar date is a date set by the court by which all claims against the debtor must be filed.