The Bankruptcy Code’s Section 547(b) allows a trustee or debtor in possession to recover property transferred to a creditor, known as a preference action. However, the Code also provides defenses to a preference action, including the ordinary course of business defense.
A Section 363 sale is a sale of a company's assets pursuant to Section 363 of the Bankruptcy Code. The Bankruptcy Court will approve a 363 sale if the debtor can demonstrate a "substantial business justification" for the sale.
Key Issues
In general, Section 363 bankruptcy sales proceed as follows:
This article, part of our Creditor’s Rights Toolkit [link] series, serves as an essential guide for vendors navigating the complex landscape of dealing with financially distressed or bankrupt customers. It provides a detailed exploration of the options available to vendors who are proactive and quick to act when they learn of their customer’s financial woes.
Successor liability is a catchall term for a group of legal theories that, in certain circumstances, allow a creditor to recover amounts owed by its obligor from a person or entity who succeeds to the assets or business of that obligor. Typically, claimants cannot pursue successor liability against a purchaser in a bankruptcy sale because most sales are made "free and clear" of such claims under Section 363(f) of the Bankruptcy Code. However, there are some limited exceptions to this general rule.
The Supreme Court in Sevilleja v Marex Financial Ltd [2020] UKSC 31 has brought much needed clarity to the legal basis and scope of the so-called ‘reflective loss’ principle. The effect of the decision is a ‘bright line’ rule that bars claims by shareholders for loss in value of their shares arising as a consequence of the company having suffered loss, in respect of which the company has a cause of action against the same wrong-doer.
A recent decision of the High Court of New Zealand provides helpful guidance for insolvency practitioners on how aspects of the voluntary administration regime should operate in the context of the COVID-19 pandemic.
On 30 March 2020, the board of directors of EncoreFX (NZ) Limited resolved to appoint administrators to the company. By then, New Zealand was already at Level 4 on the four-level alert system for COVID-19.
The UK Court of Appeal has held that legal privilege outlasts the dissolution of a company in Addlesee v Dentons Europe LLP [2019] EWCA Civ 1600.
Legal advice privilege applies to communications between a client and its lawyers. The general rule is that those communications cannot be disclosed to third parties unless and until the client waives the privilege.
The High Court in DHC Assets Ltd v Arnerich [2019] NZHC 1695 recently considered an application under s 301 of the Companies Act (the Act) seeking to recover $1,088,156 against the former director of a liquidated company (Vaco). The plaintiff had a construction contract with Vaco and said it had not been paid for all the work it performed under that contract.
Regan v Brougham [2019] NZCA 401 clarifies what is needed to establish a valid guarantee.
A Term Loan Agreement was entered into whereby Christine Regan and Mark Tuffin lent $50,000 to B & R Enterprises Ltd. Rachael Dey and Bryce Brougham were named as Guarantors. Bryce Brougham was the only guarantor to sign the agreement. The Company was put into liquidation and a demand made against the Guarantor.
The guarantor argued that the guarantee was not enforceable based on the following:
The Court of Appeal in 90 Nine Limited v Luxury Rentals NZ Limited [2019] NZCA 424 allowed an appeal from a creditor in respect of an application to liquidate the respondent over a failure to pay a statutory demand.