The liquidators of Marathon Imaging Limited (Marathon) brought a claim against the company's director, Mr Greenhill, for a prejudicial disposition of property under section 346 of the Property Law Act 2007 and a breach of director's duties under the Companies Act 1993. Marathon had begun defaulting on its tax commitments from 2008 onwards and became insolvent shortly after. The Greenhill Family Trust (Trust), a secured creditor of Marathon, appointed receivers and the Commissioner of Inland Revenue had Marathon placed into liquidation just three days later.
The New South Wales Court of Appeal recently handed down an important judgment on the remuneration of registered liquidators.
Sakr concerned an appeal by Sanderson as liquidator of Sakr against an order determining his remuneration on anad valorem basis, without reference to his time attendances or hourly rate. Due to the importance of the issues, the Australian Securities and Investments Commission (ASIC) and Australian Restructuring Insolvency and Turnaround Association (ARITA) appeared and made submissions on the issue.
In Power Rental Op Co Australia, LLC v Forge Group Power Pty Ltd (in liq) (receivers and managers appointed) the New South Wales Court of Appeal recently considered the 'fixtures' exclusion in Australia's Personal Property Securities Act (PPSA).
Power Rental agreed to lease turbines to Forge Group for two years. Shortly after the lease began, Forge Group entered voluntary administration.
In this Australian case, a major creditor of the company in question alleged that it was involved in phoenix activity and offered to fund a public examination of the director provided that the creditor's solicitors would act for the liquidators in that examination. The liquidators refused the offer and, in response, the creditor applied to have the liquidators removed.
In Fielding v The Burnden Group Limited (BGL) the English High Court dismissed an application for the liquidator to be held personally liable for the costs of a successful appeal against the rejection of a proof of debt.
In the UK case of CFL Finance Limited v Rubin and Ors, a creditor had sought to make an individual bankrupt. A creditors' meeting was held. At the meeting, a proposal for an Individual Voluntary Arrangement was approved by the creditor that held the largest portion of debt (and therefore 90.43% of the vote). The other two creditors voted against the proposal.
In this English case, a secured lender (Nationwide) appointed administrators to three companies. However, before appointing, Nationwide had:
A recent Delaware bankruptcy court decision may potentially place at risk an equity sponsor’s ability to retain proceeds from the sale of a portfolio company whose performance later deteriorates, where the selling sponsor acted in bad faith and the portfolio company was or became insolvent at the time of or on account of the sale.
Circuit Break? Delaware Bankruptcy Court Rejects Second Circuit Ruling on State Law Fraudulent Transfers
Private equity sponsors should be aware of two recent court decisions. One involves fiduciary duties under state law that may be owing to a limited liability company borrower by its managers, in the context of receivables financing facilities or other asset-based lending transactions involving the use of special-purpose vehicles. The other involves certain implications of governing-law choices under acquisition financing and related agreements.
Pottawattamie: Maybe Not So Special (Purpose) After All
Two recent court decisions may affect an equity sponsor’s options when deciding whether and how to put money into - or take money out of - a portfolio company. The first may expand the scope of “inequitable conduct” that, in certain Chapter 11 settings, could lead a court to equitably subordinate a loan made by a sponsor to its portfolio company, placing the loan behind all of the company’s other debt in the payment queue. The second decision muddies the waters of precedent under the U.S. Bankruptcy Code on the issue of the avoidability of non-U.S.