In the course of antecedent transaction proceedings, particularly for unfair preferences, arguably the most contentious and critical question to be determined is the date of insolvency. Although that question predominantly involves an accounting exercise, it also includes an assessment of the commercial, financial and trading realities of the relevant company and a consideration of legal principles.
In late September 2020, the federal government announced that it would be introducing changes to Australia's Corporations Act (Act) and the most significant amendments to the corporate insolvency regimes in decades. The main objective is to help the small business sector deal with and overcome the economic, financial and trading challenges posed by the ongoing pandemic. Since then, the government has released its new laws via the Corporations Amendment (Corporation Insolvency Reforms) Bill 2020 (Cth) (New Laws).
The Australian federal government has continued introducing temporary and potentially permanent insolvency law reforms intended to assist the economic repair efforts during, and following, the pandemic. In the latest development, which occurred in somewhat strange circumstances, the federal government has announced that it will shortly introduce new laws into parliament, which are intended to reduce complexity, time and the costs for small businesses to restructure their financial affairs.
The Australian federal government has announced that the temporary changes it enacted in March to the Corporations Act (Cth) (Act) concerning insolvent trading laws and the creditor’s statutory demand regime (Insolvency laws) have been extended to 31 December 2020. The changes were due to expire on 25 September.
Economic Fallout Continues
Since late March 2020 there has been a steady stream of voluntary administrators seeking the assistance of the court to limit their personal liabilities under the Corporations Act (Cth) 2001 (Act) by pointing to the social and economic disruptions and restrictions caused by COVID-19.
The Australian Government has taken swift action to enact new legislation which significantly changes the insolvency laws relevant to all business as a result of the ongoing COVID-19 related developments.
Snapshot
On July 6-7, 2017, Craig Jalbert, in his capacity as Trustee for F2 Liquidating Trust, filed approximately 187 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code (depending on the nature of the claims). In certain instances, the Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.
On June 15, 2017, Curtis R. Smith, as Liquidating Trustee of the Hastings Creditors’ Liquidating Trust, filed approximately 69 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code. The Liquidating Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.
On June 13, 2017, The Original Soupman, Inc. and its affiliates (collectively “Debtors” or “Original Soupman”) commenced voluntary bankruptcy proceedings under Chapter 11 of the Bankruptcy Code. According to its petition, Original Soupman estimates that its assets are between $1 million and $10 million, and its liabilities are between $10 million and $50 million.
On May 17, 2017, GulfMark Offshore, Inc. (“GulfMark” or “Debtor”) filed a voluntary petition for bankruptcy relief under chapter 11 of the Bankruptcy Code in the United States District Court for the District of Delaware.