The Great Recession of 2008 may seem a distant memory. September 15, 2018 is the 10th anniversary of the Lehman Brothers bankruptcy, the largest bankruptcy in U.S. history, and often seen as the point at which a garden-variety recession turned into the Great Recession, with catastrophic results severely impacting the livelihood of millions.

1 2018 GTLAW.COM.AU 2018 NEW IPSO FACTO LAWS WHAT DOES IT MEAN FOR YOU? WHAT DOES IT MEAN FOR YOU? The Federal Government’s new ipso facto laws, which were introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth), impose an automatic stay on the enforcement of ipso facto clauses in certain contracts entered into on or after 1 July 2018. In this insight, we summarise the new laws and take a closer look at how the reforms affect particular types of transactions.

After a January 2018 decision by the First Circuit Court of Appeals, trademark licensees are faced with uncertainty again. (In re Tempnology, LLC, 879 F.3d 389 (1st Cir. 2018)). In our previous update, we discussed a 7th Circuit case dealing with the same issue. At the time we predicted that the holding in the case may have resolved the issue. (Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012)). But that was wrong.

Treasury has released draft regulations and a draft declaration for public consultation. The regulations and declaration support the stay on enforcement of ipso facto clauses against relevant entities. Ipso facto clauses allow parties to enforce a right, and terminate or amend a contract, when their contractual counterparties have entered into formal insolvency, regardless of the counterparties continued performance of their obligations under the contract.

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: