The Supreme Court’s recent decision in Merit Management Group, LP v.

1. Section 90K(1)(aa) of theFamily Law Act1975 (Cth) provides that a court may set aside a financial agreement if the court is satisfied that a party to the agreement entered into the agreement for purposes including the purpose of defrauding or defeating creditors, or with reckless disregard to the interests of the creditors.

Distressed and special situations investors should take note of the U.S. Bankruptcy Court’s recent decision in Oi’s Chapter 15 case. We present our takeaways for investors.

In certain circumstances, liquidators may be at risk of personal exposure to costs orders in litigation. 

The court’s approach to the making of costs orders against liquidators depends on (amongst other things) whether the liquidator is a named party to the proceedings, whether the liquidator is commencing or defending proceedings, and whether the liquidator has acted ‘improperly’ or unreasonably in the commencement, maintenance or defence of the action.

Proceedings commenced by the liquidator / company in liquidation

On 19 October 2017, the Bankruptcy Amendment (Enterprise Incentives) Bill 2017 was introduced into Parliament by the Commonwealth Government in order to reduce the default period of bankruptcy from three years down to just one year. The stated objective of the Bill is “to foster entrepreneurial behaviour and reduce the stigma associated with bankruptcy whilst maintaining the integrity of the regulatory and enforcement frameworks for the personal insolvency regime.”

Court of Appeal judgment: Burlington Loan Management and others v Lomas and others (as the joint administrators of Lehman Brothers International (Europe) (in administration)) [2017] EWCA Civ 1462

Summary and background

We are now past the second tranche of changes under the Insolvency Law Reform Act 2016 (Cth), comprised most importantly of Part 3 of the Insolvency Practice Schedule (IPS) (containing the General Rules relating to external administrations) which came into effect on 1 September 2017.

Part 3 of the IPS will apply to external administrations that start on or after 1 September 2017.

1. On 18 September 2017 the Treasury Law Amendment (2017 Enterprise Incentives No. 2) Act 2017 (the Safe Harbour and Ipso Facto Act) became law.
2. The Safe Harbour reforms introduced in the Safe Harbour and Ipso Facto Act create a safe harbour for company directors from personal liability for insolvent trading if the company is undertaking a restructure outside formal insolvency processes.

Division 65 and the New Strict Liability Regime

As part of the significant reforms to insolvency and bankruptcy laws introduced by the Insolvency Law Reform Act 2016 (ILRA), parliament has sought to condense and simplify the requirement for external administrators to avoid conflicts of interest.