key takeaways

Introduction

Introduction

The right of a creditor who is owed a liquidated debt that is not subject to a bona fide and substantial dispute to have the debtor company wound up if that debt is not paid in accordance with its terms is fundamental to the proper functioning of any modern financial system.

The impact of Covid-19 is clearly the big talking point for 2022, with several questions arising: will new variants emerge, what steps will governments take to limit the spread, and what impact will it have on industries? To date, enforcement actions, insolvencies and restructurings have been relatively light, but with new restructuring legislation reforms on the horizon, and creditors starting to ramp up speed to enforcement, it appears likely that there will be an increase in winding up and cross-border restructuring work.

The Channel Islands of Guernsey and Jersey did not introduce emergency insolvency legislation as a result of the Covid-19 pandemic and do not presently have measures equivalent to those found in the UK’s Corporate Insolvency and Governance Act, 2020 (“CIGA”).

One difficulty encountered by creditors and trustees in bankruptcy is the use of one or more aliases by a bankrupt. Whether it is an innocent use of a nickname or an attempt to conceal one's identity, the use of an alias can often create problems for creditors seeking to pursue debts and for trustees seeking to recover assets held by a bankrupt.

How does it happen?

As concerns about illegal phoenix activity continue to mount, it is worth remembering that the Corporations Act gives liquidators and provisional liquidators a powerful remedy to search and seize property or books of the company if it appears to the Court that the conduct of the liquidation is being prevented or delayed.

When a person is declared a bankrupt, certain liberties are taken away from that person. One restriction includes a prohibition against travelling overseas unless the approval has been given by the bankrupt's trustee in bankruptcy. This issue was recently considered by the Federal Court in Moltoni v Macks as Trustee of the Bankrupt Estate of Moltoni (No 2) [2020] FCA 792, which involved the Federal Court's review of the trustee's initial refusal of an application by a bankrupt, Mr Moltoni, to travel to and reside in the United Kingdom.

What makes a contract an unprofitable contract which can be disclaimed by a trustee in bankruptcy without the leave of the Court under section 133(5A) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act)? Can a litigation funding agreement be considered an unprofitable contract when the agreement provides for a significant funder's premium or charge of 80% (85% in the case of an appeal)?