This article was originally published in the Australian Restructuring, Insolvency & Turnaround Association Journal (Volume 32 #01 2020)

The first of March marked the second anniversary of the changes to the Corporations Act 2001 (Cth) (Act) permitting an external administrator to assign rights to sue. The Australian Government proposed the reform in the hope that the ‘sale of rights of action may enable the value in such rights to be realised’[1].

Recent changes in the Australian regulation of third-party funders will have a dramatic effect on the funding of certain disputes. Although these changes were accompanied by Government and industry commentary that they would not affect litigation funding for insolvency-related claims, this may not be the case for all insolvency funding arrangements.

Singapore confirms further widening of third-party funding options

The United Kingdom and Australia have recently implemented legislative changes to permit external administrators to assign or sell causes of action available to them.

In a decision signed July 17, 2017 in the Our Alchemy, LLC bankruptcy (case 16-11596), Judge Gross of the Delaware Bankruptcy Court granted a trustee’s partial motion to dismiss a complaint, holding that a creditor cannot assert general claims against a Chapter 7 Trustee in his official capacity (essentially a derivative action meant to enrich the creditor body) .

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.

We have previously posted about a couple major milestones for Green Field Energy – here Green Field Energy Files for Bankruptcy Protection in Delaware and here: Green Field Energy Services – Preference A

Section 363 of Title 11 of the United States Code (“Bankruptcy Code”) authorizes trustees (and Chapter 11 debtors-in-possession) to use, sell, or lease property of a debtor’s bankruptcy estate outside of the ordinary course of business upon bankruptcy court approval. Some of the key benefits for purchasers are the ability to purchase assets free and clear of liens under Section 363(f) and obtain protections from adverse consequences of any appeal under Section 363(m).

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.