Before 1993, the question of whether a creditor of a corporation being wound up had received an unfair preference from that corporation was determined under section 122 of the Bankruptcy Act 1966 (Cth). In 1993, a new Part 5.7B was inserted into the Corporations Act to deal with voidable transactions such as unfair preferences. Since then two lines of divergent judicial authority have developed:

The US District Court for the District of Connecticut recently dismissed a customer suit against an insurer, based upon its determination that all of the underlying claims were excluded by the policy’s Insolvency Exclusion.1 Associated Community Bancorp, Inc., et al. v. The Travelers Companies, Inc., et al.

Kookmin Bank v Rainy Sky

We have received a number of urgent enquiries about the outcome of the Kookmin Bank case, which was recently decided by the Court of Appeal, in London. The judgment was issued at the end of May 2010 and held, in effect, that refund guarantees -- relating to advance payments of about US$46 million -- were unenforceable by the Buyers to whom the guarantees had been issued. Given the importance of refund guarantees to our shipping and banking clients, we are issuing this summary of the judgment and its general significance.

Summary

The briefing provides an overview of the reorganisation plan introduced by the new Greek Bankruptcy Code. Its purpose is to set out the more important mechanics of the reorganisation plan and examine its more important ramifications within the bankruptcy process.

The new Greek Bankruptcy Code

The European Commission has published a paper on its study covering pre-insolvency, early intervention, reorganisation and liquidation.

The UK Government has announced a consultation on proposals to strengthen the administration regime for insurers, in particular to improve the protection and payment of benefits for persons insured with companies facing financial difficulties and addressing gaps in the administration regime for insurers as compared with the liquidation regime. The proposals include:

1. applying to administration the existing rules for valuing insurance contracts in liquidation; and

2. revising the objectives of administration in insurance company cases by:

On 25 March 2010, HM Treasury published a consultation paper which proposes improvements to the protection and payment of benefits for policyholders of insurers in financial difficulty. In particular, the proposals address certain gaps in the regime for insurers in administration in contrast to the regime applied in liquidation.

On 12 March 2010, the FSA published the statement that it had provided to the court appointed examiner of Lehman Brothers Holding Inc, which is referred to in his wider report on the collapse of Lehman Brothers.

View FSA statement to the US bankruptcy court examiner on the collapse of Lehman Brothers Holdings Inc, 12 March 2010

The FSA has published the statement that it has provided to the court appointed examiner of Lehman Brothers Holding Inc, which is referred to in his wider report on the collapse of Lehman Brothers published on 11 March 2010.

View FSA statement to the US bankruptcy court examiner on the collapse of Lehman Brothers Holdings Inc, 12 March 2010

HM Treasury has published a consultation paper which is entitled Special Resolution Regime: the draft FSMA (Contribution to Costs of Special Resolution Regime) Regulations 2010.

This consultation seeks views on all aspects of the draft Financial Services and Markets Act 2000 (Contribution to Costs of Special Resolution Regime) Regulations 2010 which will be made under the new FSMA provisions when clause 28 of the Financial Services Bill is enacted.

The deadline for comments on the consultation is 15 June 2010.