1. State of the Restructuring Market

1.1 Market Trends and Changes

State of the Restructuring and Insolvency Market

There were 27,359 insolvencies in France as of the end of September 2021, down 25.1% from the same period in 2020, and down 47.9% from September 2019. Such reduction is relatively stable across all sectors, including those most severely affected by the health-related restrictions, such as accommodation and food services (down 44.2% year-on-year) and trade (down 28.1% year on year).

Fewer Insolvencies for More Opportunities

At the end of 2021, corporate bankruptcies (for most company sizes and in most sectors) were at their lowest level compared to the pre-COVID-19 figures from 2019, with a 50% drop in insolvency proceedings and a 10% decrease in pre-insolvency situations. This was largely due to the temporary impact of government emergency measures and support, including:

Generally, once a company enters into liquidation, litigation against that company cannot be commenced or be continued without the leave of the Court (Corporations Act 2001, s 471B). However, occasionally a liquidator may cause a company to commence or defend litigation after the commencement of the winding up. What happens if the company in liquidation is unsuccessful in that litigation and is subject to an adverse cost order? How will such an adverse cost order rank amongst other competing creditors?

Getting to the top

It is well known that a company served with a statutory demand has 21 days to comply. If the recipient fails to pay the amount of the demand (or obtain a court order extending the period for compliance) within the period of 21 days after the demand is served, the creditor may rely on the failure as a basis to apply for the company to be wound up in insolvency. But what if the company pays, or seeks to pay, the amount of the statutory demand after the 21 day period has expired?

The decision of the High Court of Australia in Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132 (Ramsay) clarified the limits of a Bankruptcy Court's discretion to "go behind" a judgment, that is, to investigate whether the underlying debt relied upon for the making of a sequestration order is, in truth and reality, owing to the petitioning creditor. Recently, the Ramsay decision was applied by the Federal Court of Australia in Dunkerley v Comcare [2019] FCA 1002 (Dunkerley).

Liquidators are encouraged to seek advice or directions from the Court as to the discharge of their responsibilities. But who bears the costs of such proceedings, of the liquidator and of any contradictor involved?

In the recent case of In the matter of Gondon Five Pty Limited and Cui Family Asset Management Pty Limited [2019] NSWSC 469, the New South Wales Supreme Court (Brereton J) considered the purpose and scope of an appointment as receiver to a company, and came down particularly hard on an insolvency practitioner for performing work and incurring expenses which were determined to be outside, or not incidental to, the scope of his appointment.

Background

Beauty Brands, LLC, along with two subsidiaries and affiliates, has filed a petition for relief under chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 19-10031).

Angel Medical Systems, Inc., a developer of medical devices based in Eatontown, NJ, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case No. 18-12903).

Alcor Energy, LLC filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case No. 18-12839).