As mentioned in Hesketh Henry’s article “COVID-19: Insolvency law changes” (https://www.heskethhenry.co.nz/insights-opinion/covid-19-insolvency-law-changes/), Grant Robertson has announced that the Government will soon be introducing legislation to make temporary changes to the Companies Act 1993 (“Act”) to help companies facing insolvency due to the COVID-19 pandemic.

We have prepared the following tips for businesses to guide them through the current circumstances. Urgent advice should be sought where cash flow problems are arising, or where contractual obligations may not be able to be met. The best protection is preparation.

Talk to the people you deal with

Check in with the people you do business with regularly. This will include:

Following our previous updates (Ebert Construction Receivership – What You Need to Know and Ebert Construction – Receivership and Liquidation), on 12 November 2018 the High Court ordered that the Receivers of Ebert Construction Ltd (in rec and liq) (Ebert) be appointed as the receivers

Introduction

Following our Initial Note, the receivers of Ebert Construction Ltd (Ebert) released their first report on 1 October 2018. Then, on 3 October 2018, Ebert put itself into liquidation, with the liquidators subsequently issuing their first report on 10 October 2018. These developments have provided further information about Ebert’s financial position and the insolvency process.

What is currently known?

On 31 July 2018 Ebert Construction Ltd (Ebert) was placed into receivership. John Fisk, Lara Bennett, and Richard Longman from PwC have been appointed receivers. The receivership was announced the following day.

The Bankruptcy Court for the Northern District of Illinois issued a noteworthy opinion for those whose work involves real estate mortgage conduit trusts (REMIC trusts) or utilization of the Bankruptcy Code’s “safe harbor” provisions. In In re MCK Millennium Ctr. Parking, LLC,¹ Bankruptcy Judge Jacqueline P.

Bankruptcy Judge Christopher S. Sontchi recently ruled in the Energy Future Holdings case¹ that the debtor will not be required to pay the $431 million “make whole” demanded by bondholders upon the debtor’s early payment of the bonds.²

In what may become viewed as the de facto standard for selling customer information in bankruptcies, a Delaware bankruptcy court approved, on May 20, 2015, a multi-party agreement that would substantially limit RadioShack’s ability to sell 117 million customer records.

The U.S. Supreme Court’s decision in Wellness International Network Ltd. v. Sharif confirms the long-held and common sense belief that “knowing and voluntary consent” is the key to the exercise of judicial authority by a bankruptcy court judge.1 In short, the Supreme Court held that a litigant in a bankruptcy court can consent—expressly or impliedly through waiver—to the bankruptcy court’s final adjudication of claims that the bankruptcy court otherwise lacks constitutional authority to finally decide.

On May 6, 2015, the Court of Appeals for the Ninth Circuit considered whether so-called“Deprizio waivers,”¹ where an insider guarantor waives indemnification rights against a debtor, can insulate the guarantor from preference liability arising from payments made by the obligor to the lender. The Ninth Circuit held that if such a waiver is made legitimately—not merely to avoid preference liability—then the guarantor is not a “creditor” and cannot be subject to preference liability.