On 28 March 2017, the Federal Government released draft reform legislation to Australia’s insolvency laws to promote a culture of entrepreneurship and help reduce the stigma associated with business failure.

The reforms, known as ‘safe-harbour’ provisions propose changes to directors’ personal liability for insolvent trading under the Corporations Act 2001 (Cth) (Act).

Background

Seyfarth Synopsis: A bankruptcy court overseeing an employer’s Chapter 11 bankruptcy proceeding allowed the employer to pay certain unsecured creditors before paying Worker Adjustment And Retraining Notification Act (“WARN”) creditors – workers who had sued the company – monies owed pursuant to a judgment, even though the bulk of the WARN monies owed were for back wages that hold priority over other unsecured claims under the Bankruptcy Code.

The recent Federal Court of Australia decision of The Owners – Strata Plan No 14120 v McCarthy (No 2) [2016] FCCA 2017, demonstrates the dangers of errors in a bankruptcy notice.

In McCarthy, the Court found that when a debtor disputes the validity of a bankruptcy notice on the ground of a misstatement of the amount claimed, the debtor’s notice does not need to identify the misstatement with complete precision to render the bankruptcy notice invalid.

Trust Indenture Act Section 316(b) Limited to Actual Amendments to An Indenture’s Core Terms

The Perishable Agricultural Commodities Act (PACA) was passed by Congress in 1930 to protect agricultural produce suppliers from unscrupulous vendors who refused to pay the suppliers for their goods.

Decision clarifies standards for priority treatment under section 507(a)(7); important implications in retail bankruptcy cases for debtors, creditors - and consumers

Overview

A recent decision of the Victorian Court of Appeal (handed down on 14 July 2016) highlights a number of areas in which conflicts can arise in a commercial transaction involving multiple secured parties and the extent to which the interests of lower-ranked secured parties need to be considered when the proceeds are dealt with.

The case - Nom de Plume

On 23 February 2016, Justice Brereton in the New South Wales Supreme Court handed down the decision in the matter ofIndependent Contractor Services (Aust) Pty Ltd ACN 119 186 971 (in liquidation) (No 2) [2016] NSWSC 106.

This is an important judgment, with significant consequences for the insolvency community.

The decision deals with two fundamental aspects of insolvency law, being:

In December 2015, the Department of Housing and Public Works Queensland released a discussion paper seeking feedback on the issue of security of payment in the building and construction industry.  The paper seeks feedback from the widest possible cross section of the building and construction industry on the following identified issues:

On March 2, 2016, Sports Authority, Inc. (“Sports Authority”) and six of its affiliates filed for Chapter 11 bankruptcy in Delaware.  The filing will significantly impact Sports Authority’s landlords and trade creditors.  In a press release, Sports Authority stated that it intends to close or sell approximately 140 locations and two distribution centers in the coming months.  The company is also seeking $595 million in post-bankruptcy financing to continue operations.  Sports Authority is a sporting goods retailer with 463 locations in 41 states and Puerto Rico.