In November of 2010, the trustee for the Circuit City Stores, Inc., liquidating trust filed more than 500 adversary proceedings against creditors seeking the recovery of alleged preferential payments. The extent of the trustee's success in recovering these payments will impact the overall distribution to creditors. Creditors in bankruptcy cases should be aware that preference litigation allows a trustee or debtor-in-possession to recover payments received by a creditor during the period immediately preceding the bankruptcy filing.
On 13 October 2010 ASIC released the National Insolvent Trading Program (NITP) Report, which sets out key messages, promoting greater director responsibility by encouraging directors to remain properly and fully informed about a company’s financial affairs, and to be aware of the implications of insolvent trading; and to seek (timely) professional advice from accountants, lawyers and insolvency practitioners.
After consulting over 1500 companies displaying solvency concerns, ASIC has identified several possible insolvency indicators including:
The U.S. Bankruptcy Code provides for the appointment of a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. The right examiner, with a clearly defined mission, will have a major influence on the bankruptcy process. The difference between a successful financial restructuring or liquidation-resulting in substantial recoveries for the key constituencies-and a time-consuming (and asset-consuming) meltdown, can depend on the approach of the examiner and the examiner's support team.
In addition to the cases discussed in "Considerations in Terminating an Insolvent Franchisee" in the June 24, 2010, Franchise Alert (available at www.wileyrein.com/insolvent_franchisee), two recently reported decisions have looked at franchisor attempts to gain relief from bankruptcy stays in order to enforce post-termination provisions.
Important Features of this Judgment
- A Pt X Deed may create an equitable assignment of the rights, such that obligations continue after the Deed has come to an end.
- The Trustee of the Part X Deed of Arrangement can continue the proceedings initiated against One.Tel, despite the Deed coming to an end.
- Serves as a reminder that the enforceability of the debt does notaffect a debtor’s liability.
Facts
The Australian Securities and Investments Commission (ASIC) has released Regulatory Guide 217 (RG 217) to assist directors in understanding and complying with their duty to prevent insolvent trading under the Corporations Act 2001 (Cth) (the Act). It should be noted from the outset that ASIC regulatory guides indicate ASIC’s policy on specific issues, they do not have legislative force or constitute legal advice. Insolvent trading involves complex legal and accounting issues and it is therefore recommended that you seek professional advice to find out how the Act may apply to you.
As widely reported, the bankruptcy auction for the Texas Rangers Major League Baseball franchise ended with a winning $593 million bid from an ownership group led by Nolan Ryan.
Law clerk, Myles Engelen, discusses the decision of the Supreme Court of New South Wales, in McGrath & Anor re HIH Insurance Ltd approving a proposal to use excess assets of some members of the group to fund claims by the group members.
The United States Bankruptcy Court for the District of Delaware has held that policy proceeds were not part of the insured entity’s bankruptcy estate because previous entity claims were dismissed with prejudice, it was highly speculative that the bankruptcy trustee would approve indemnification of directors and officers and the policy’s priority of payment provision provided that entity coverage was only available after payment of proceeds for direct coverage to insured persons. In re Downey Fin. Corp., 428 B.R. 595 (D. Del. Bankr. May 7, 2010).