The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2023 (Collective Redundancies AmendmentAct) came into operation on 1 July 2024.

The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2023 (Act) came into effect on 1 July 2024.

In Harrington v. Purdue Pharma L.P., 144 S. Ct. 2071 (2024) (“Purdue”), the Supreme Court held that the Bankruptcy Code does not authorize nonconsensual releases of nondebtors as part of a chapter 11 plan. The Court narrowly read the Code’s language, providing that a plan may “include any other appropriate provision not inconsistent with the applicable provisions of this title,” 11 U.S.C.

The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 (Act) has been signed into law but awaits a commencement order to bring it into operation.

In summary, the Act amends the Companies Act 2014 (Companies Act) by modifying the attribution test for related companies to contribute to the debts of the company being wound up, broadening the operative time for unfair preferences, and varying the test for reckless trading.

1. Related company contribution

We have previouslyblogged about the section 546(e) defense to a trustee’s avoidance powers under the Bankruptcy Code. A trustee has broad powers to set aside certain transfers made by debtors before bankruptcy. See 11 U.S.C. §§ 544, 547, 548.

Following on from the UK Supreme Court decision in Sequana (discussed here), the recent UK High Court (UKHC) decision in Hunt v Singh [2023] EWHC 1784 (Ch), further considered the duty of directors to take into account the interests of creditors in certain circumstances.

The High Court (Court) recently dismissed a petition seeking the winding up of a biofuel company (Company).

The ex tempore judgment is of note because it considers the standing of the Petitioner to bring the application and the consequences of a relevant witness not being cross-examined by the Petitioner on his affidavit evidence regarding the solvency of the Company.

Background

We have previously blogged about the section 546(e) defense to a trustee’s avoidance powers under the Bankruptcy Code. A trustee has broad powers to set aside certain transfers made by debtors before bankruptcy. See 11 U.S.C. §§ 544, 547, 548. Section 546(e), however, bars avoiding certain transfers, including a “settlement payment . . . made by or to (or for the benefit of) . . . a financial institution [or] a transfer made by or to (or for the benefit of) a . . . financial institution . . . in connection with a securities contract.” 11 U.S.C. § 546(e).

Federal law assigns to U.S. district courts original jurisdiction over all cases under Title 11 (the Bankruptcy Code) and all civil proceedings arising under Title 11 or arising in or relating to Title 11. See 28 U.S.C. § 1334(a), (b). Federal law permits each U.S. district court to refer such cases and civil proceedings to bankruptcy courts, and district courts generally do so. But bankruptcy courts, unlike district courts, are not courts under Article III of the Constitution, and are therefore constrained in what powers they may constitutionally exercise.

Section 544(b)(1) of the Bankruptcy Code enables a trustee to step into the shoes of a creditor and avoid a transfer “of an interest of the debtor in property” that an unsecured creditor could avoid under applicable state law. See 11 U.S.C. § 544(b)(1). Thus, for example, if outside of bankruptcy a creditor could avoid a transaction entered by a debtor as a fraudulent transfer, in bankruptcy, the trustee acquires the power to avoid such a transaction.