In a noteworthy decision, the Bankruptcy Appellate Panel for the Ninth Circuit overturned a dismissal of a bankruptcy case, which the lower court had dismissed based on its belief that the landlord debtor was receiving rental income from a marijuana dispensary. The decision is significant because it holds that a bankruptcy cannot be dismissed simply because of the mere presence of a marijuana business or related proceeds in the case.
Is your guaranty restricted or continuing? A continuing guaranty gives rise to divisible individual transactions, while a restricted guaranty—one that concerns a contemplated and specified extension of credit—arises upon execution of the guaranty. In bankruptcy, as in life, timing is everything. A debtor’s liability under a prepetition guaranty agreement for a post-petition advance of credit may depend on the distinction between restricted and continuing, and the distinction may be subtle.
The Government has released a consultation paper as part of their commitment to ongoing reform of Australia’s corporate insolvency regime. Phoenix activity refers to both legitimate business rescue activities and serial insolvency to avoid debts.
On 12 September 2017, the Hon Kelly O'Dwyer MP, Minister for Revenue and Financial Services, announced the Government's plans to crack down on illegal phoenixing activity (ie, the stripping and transferring of assets from one company to another to avoid paying liabilities) and ensure that those involved face tougher penalties.
The Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth), which introduces a safe harbour for directors of insolvent companies and a stay on the operation of ‘ipso facto’ clauses during and after certain formal insolvency processes, received Royal Assent on 18 September 2017.
Director safe harbour
The Senate Economics Legislation Committee has released a report (Report) regarding its inquiry into the provisions of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 (Bill) which amends:
The Treasury Laws Amendment (2017 Enterprise Incentives No 2) Bill 2017 was passed by the House of Representatives on 22 June 2017 and has had a second reading moved in the Senate.
The Bill:
Following consultation on exposure draft legislation between 28 March 2017 and 24 April 2017, the Treasury Laws Amendment (2017 Enterprise Incentives No.2) Bill 2017 (Cth) (Bill) was introduced into the House of Representatives and received its second reading speech on 1 June 2017.
The Bill proposes to:
Sixth Circuit Determines that an Absolute Assignment of Rents Perfected Under Michigan State Law Takes Property out of a Bankruptcy Estate (In Re Town Center Flats, LLC, Case No. 16-1812 — Decided May 2, 2017)
On March 30, the Third Circuit Court of Appeals filed an opinion regarding whether the filing of a mechanic’s lien after the commencement of a bankruptcy case violates the automatic stay. Given the frequent involvement of many companies in Delaware bankruptcy cases, you should be aware of the Third Circuit’s ruling.