In brief
The Federal Court has recently conferred examination powers on an offshore trustee who was foreign representative for the purposes of obtaining Model Law recognition of a Swiss insolvency proceeding for the purposes of undertaking public examinations in Australia.
The decision is a reminder of the flexibility of the Model Law in assisting the recovery of assets and claims in aid of a foreign insolvency proceeding.
Key takeaways
In brief
On 1 November 2023, the Luxembourg law dated 7 August 2023, issued from Draft Bill No. 6539A on business preservation and modernization of the insolvency law ("Law" or "Reform"), entered into force.
While initial discussions leading to this Reform started about ten years ago1, the need for suitable instruments to address financial difficulties in businesses was further emphasized by the pandemic, resulting in a notable increase in bankruptcies in Luxembourg since 2021.
In brief
A selection of newly announced legislation and court decisions reinterpreting private law.
Contents
In brief
A selection of newly announced legislation and court decisions reinterpreting private law.
Draft law on preventive restructuring
The Eighth Circuit held that “avoidance actions [e.g., preferences, fraudulent transfers] can be sold as property of the [Chapter 7 debtor’s] estate.” In re Simply Essentials, LLC, 2023 WL 5341506, *1 (8th Cir. Aug. 21, 2023). On a direct appeal from the bankruptcy court, the court affirmed the bankruptcy court’s granting of the trustee’s motions to compromise and sell property under Bankruptcy Code §363(f). A creditor had objected, arguing unsuccessfully that “avoidance actions… are not part of the bankruptcy estate ….” Id.
On July 28, 2023, Judge Michael Kaplan of the Bankruptcy Court for the District of New Jersey issued an opinion granting motions to dismiss LTL Management LLC’s second chapter 11 case, finding that it was filed in bad faith due to a lack of imminent and immediate financial distress. See In re LTL Mgmt., LLC, No. 23-12825 (MBK), 2023 WL 4851759 (Bankr. D.N.J. July 28, 2023). Judge Kaplan’s decision follows the U.S. Court of Appeals for the Third Circuit’s dismissal of LTL’s first chapter 11 bankruptcy case in January 2023.
Over the past year, digital asset investors have become acutely aware of asset custody and counterparty credit risks due to the high-profile bankruptcies of Voyager, Celsius, BlockFi, and FTX. These investors have found that, at times, their assets may be stuck in a bankruptcy proceeding for years. However, these investors—now bankruptcy claim holders—have options for more immediate liquidity.
One of the benefits the US Bankruptcy Code offers debtors is the ability to assign freely contracts under which the debtor has ongoing performance obligations, even if the underlying contract contains a restriction or prohibition against such assignment. Section 365 of the Bankruptcy Code has its limits and does impose certain conditions to such assignment, such as the curing of defaults under the contract (other than so-called “ipso facto” defaults) and the requirement that the assignee be capable of future performance under the contract.
The U.S. Court of Appeals for the Second Circuit quietly affirmed a bankruptcy court’s dismissal of an involuntary petition because the petitioners’ “claims were the subject of bona fide disputes within the meaning of” Bankruptcy Code (Code) §303(b)(1) (petitioner may not hold claim that is “the subject of a bona fide dispute as to liability or amount”). In re Navient Solutions, LLC, 2023 WL 3487051 (2d Cir. May 17, 2023).