DoCA's: What Claims can be Released?
PK Riddell Investments Pty Ltd v Upwards Up And Gone Pty Ltd [2024] VSC 159 ("Riddell Investments")
The UK Jurisdiction Taskforce (UKJT) has published its "Legal Statement on Digital Assets and English Insolvency Law." The Statement confirms the view that digital assets are a form of personal property to which insolvency laws apply. It also affirms that the current approach taken by the English courts to determine whether they are the appropriate venue for the commencement of insolvency proceedings works for a company dealing in digital assets.
1. Introducción
En la edición de este mes de abril destacamos la ya famosa sentencia de la Audiencia Provincial de Valencia del 27 de marzo que declara la ineficacia total del plan de restructuración de Das Photonic, S.L.
Sobre esta sentencia se ha hablado mucho porque es la primera declaración de ineficacia de un plan de restructuración.
La sentencia tiene casi 150 páginas pero reseñamos abajo los puntos clave de su contenido que hemos extractado porque creemos pueden servir de lección para casos futuros.
In Foo Kian Beng v OP3 International Pte Ltd (in liquidation) [2024] SGCA 10 (OP3 International)1 the Singapore Court of Appeal considered the trigger for when the director's duty to consider the interests of creditors is engaged (referred to in the judgment as the Creditor Duty).
The Court held that:
In 2023, we saw an increase in both voluntary administration and receivership appointments in Australia. In the context of Australia's economic climate this was unsurprising — debtor companies were grappling with volatile markets, supply chain disruptions and uncertain economic conditions, and secured lenders were invoking either or both of these regimes as a means of protecting their investments.
Investors in the Australian market are more sophisticated than ever and – unsurprisingly – so too are the restructuring transactions being promoted by these investors. One such transaction is the credit bid. While not a transaction structure that is formally recognised in Australia, a credit bid is a valuable tool in a financier's playbook that can be implemented to achieve a return where the original financing is unable to be repaid in accordance with its terms.
Credit Bidding
In today's globalised economy, local recognition of foreign insolvency proceedings can be essential for the successful implementation of cross-border restructurings. This is particularly relevant in Australia — a popular host for foreign investment and global corporate groups with local assets.
A creditors' scheme of arrangement ("Scheme") can be a powerful restructuring tool implemented to achieve a variety of outcomes for a business, ranging from deleveraging or a debt-to-equity conversion to a merger and/or issue of new debt/equity instruments. When managed appropriately, a Scheme can reshape a business' debt and equity profile, setting it up for an improved go-forward operating platform. Below we set out an outline of the Scheme process in Australia and consider some key features that are unique to Australian schemes.
Communicating with Scheme Creditors: Beware of Zealous Advocacy
A-Cap Energy Limited [2023] FCA 1356 ("A-Cap") and Symbio Holdings Limited [2024] FCA 40 ("Symbio")
The main communication with scheme creditors is the explanatory statement approved at the first court hearing.
However, there can be other communications which are proposed to be sent to creditors.
In the case of other communications which are known at the time of the first hearing, they can include:
In the current market, investors are increasingly considering their options in relation to the stressed and distressed credits in their portfolios. Whilst mindful of stakeholder relationships, secured lenders may, in some circumstances, wish to consider the "nuclear option": enforcing their share pledge over a holding company of the operating group (ideally, such pledge being over a single company which directly or indirectly holds the entire business - a "single point of enforcement").