Following an August 11, 2022 opinion from the Court of Appeals for the Fifth Circuit, certain irrevocable surety bonds will not be considered executory contracts in bankruptcy, even when a court applies a functional multiparty approach to the traditional Countryman definition of an executory contract.
Following an August 4, 2022 memorandum opinion from Judge Brendan L. Shannon of the United States Bankruptcy Court for the District of Delaware, a party to a safe harbored contract can qualify as a “financial participant” under section 546(e) of the Bankruptcy Code even where the party was not a financial participant at the time of the transaction.
Following a July 6, 2022 memorandum opinion from the United States Bankruptcy Court for the District of Delaware, lenders and noteholders seeking to preserve the priority of their liens must make any desired subordination protections explicit in their security documents. Judge Craig T. Goldblatt’s decision in In re TPC Group Inc. upholds a prepetition “uptier” transaction and narrows the issues before the Bankruptcy Court regarding TPC Group Inc.’s desired entry into a debtor-in-possession loan with an ad hoc group of noteholders over the dissent of minority holders.
On March 14, 2022, the United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) revisited the issue of the rejection of filed-rate contracts in bankruptcy where such contracts are governed by the Federal Energy Regulatory Commission (“FERC”). The ruling marks the first time the Fifth Circuit has addressed this issue since its 2004 decision in In re Mirant Corp.1 In Federal Energy Regulatory Commission v.
A recent order from the United States Bankruptcy Court for the Southern District of Texas (the “Court”) allowed a debtor to reopen a completed auction based on a significantly more attractive, but untimely, bid. The late bid was approximately three times the cash consideration of the previously declared winning bid, and also provided for the additional containment of potential environmental risks. The decision is being appealed to the United States District Court for the Southern District of Texas (the “District Court”).
A Supreme Court in Australia has dismissed an application by a UK company’s moratorium restructuring practitioners for recognition of a UK moratorium and ordered that the company be wound up under Australian law.
The decision provides insights into the interaction between cross-border insolvencies and the winding up in Australia of foreign companies under Australian law.
Introduction
In the matter of Hydrodec Group Plc [2021] NSWSC 755, delivered 24 June 2021, the New South Wales Supreme Court:
It is possible for a trustee in bankruptcy to make a claim to property held by a bankrupt on trust. For example, by lodging a caveat over a home that is held on trust.
A trustee in bankruptcy may be able to make a claim, relying on the bankrupt’s right of indemnity as trustee of the trust. This is because the bankrupt’s right of indemnity, as trustee, is itself property that vests in the trustee in bankruptcy under the Bankruptcy Act 1966.
Explaining a trustee’s right of indemnity
A 139ZQ notice issued by the Official Receiver is a powerful tool for trustees in bankruptcy seeking to recover a benefit received by a third party from an alleged void transaction. These include transactions such as an unfair preference, an undervalued transaction, or a transaction to defeat creditors.
Given the adverse consequences for noncompliance, a recipient of a 139ZQ notice should take it seriously and obtain legal advice without delay.
Section 139ZQ notices
Section 561 of the Corporations Act 2001 (Cth) provides that accrued employee entitlements must be paid in priority to the holder of a circulating security interest in a winding up.
Until recently, it was unresolved whether the property subject to a circulating security interest should be determined as at the date the liquidation began, on a continuous basis, or at some other unidentified date.
It is unresolved whether a creditor can rely upon a section 553C set-off under the Corporations Act 2001 (Cth) to reduce an unfair preference claim. Until the controversy is resolved by a binding court decision, liquidators and creditors will continue to adopt opposing positions.