What you need to know
On 7 December 2018, amendments to the Australian Insolvency Practice Rules(Corporations) came into effect, which overhaul the manner in which assigned debts can be deployed in formal corporate insolvencies. These changes have the potential to significantly impact commonly used techniques for a solvent parent/group entity looking to control the formal insolvency of a subsidiary or affiliate.
Parties involved in cross-border bankruptcy/restructuring situations may be wary of the risk that repeated litigation in different courts with jurisdiction over the same debtor will result in conflicting judgments. The principle of “universalism” is the theory whereby the decisions of one primary jurisdiction addressing a debtor’s bankruptcy/restructuring issues are given universal effect by courts in other jurisdictions.
On September 21, 2018, the United States District Court for the District of Delaware issued a decision holding that the Bankruptcy Court had constitutional authority to approve the nonconsensual third-party releases contained in the debtor’s plan of reorganization. The District Court also dismissed as equitably moot all other issues raised on appeal by the appellant in connection with the confirmation order.
The consummation of a plan of reorganization typically involves a series of complex actions by the debtor and its stakeholders (for example, existing debt and equity are extinguished and new debt and equity issued in their place). If an appeal of a confirmation order is taken, and the appeal reaches the appellate court following consummation of the plan, it raises the difficult question of whether it is possible to grant effective relief to the appellant at that stage. As a constitutional matter, courts — including appellate courts — cannot hear matters that have become moot.
What you need to know
The High Court has decided not to hear an appeal about the ability of the Linc Energy Limited (Linc Energy) liquidators to disclaim property of the company - this means the liquidators could disclaim that property, including any obligations under the specific environmental protection order (EPO) issued under Queensland's environmental legislation. The current position stands that the disclaimer notice had the effect of avoiding obligations of both the company and its liquidators under the EPO.
What you need to know
The High Court yesterday affirmed the flexibility of the purposes for Deeds of Company Arrangement (DOCA). In its reasoning, the Court placed very few limits on the use of what are commonly called "holding" DOCAs. It confirmed that a holding DOCA can be validly accepted by creditors to allow more time for an administrator to investigate the future options for an insolvent company.
On August 14, 2018, the United States Court of Appeals for the Eleventh Circuit issued a decision holding that section 547(c)(4) of the Bankruptcy Code, which provides a defense to the avoidance of preferential transfers to the extent the transferee provided new value to the debtor,[1] does not require new value to remain unpaid as of the date the bankruptcy petition was filed.
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.
On June 20, 2018, the United States Bankruptcy Court for the District of Delaware issued a decision sustaining the debtors’ objection to the proof of claim filed by Contrarian Funds, LLC.
When it comes to voting on a plan, Section 1126(e) of the Bankruptcy Code provides that a bankruptcy court may designate (or disallow) the votes of any entity whose vote to accept or reject was not made in “good faith” (a term that is not defined in the Bankruptcy Code).