The Company Voluntary Arrangement (‘CVA’) was introduced into English insolvency law by the Insolvency Act 1986 (the ‘IA 1986’), as a result of recommendations made in the Cork Report1 in 1982.
July 2018
2018 Summer review M&A legal and market developments
In this issue...
Contractual provisions.............................................................1 Company law...........................................................................4
Listed companies....................................................................7 Good faith................................................................................9
Authors: Philip Broke, Veronica Carson
European Leveraged Finance Alert Series: Issue 6, 2018
One: Regulatory framework for Lending in Spain
In the recent court decision of Trenfield v HAG Import Corporation (Australia) Pty Ltd [2018] QDC 107, the liquidators recovered unfair preferences from a retention of title creditor who argued it was a secured creditor.
The issues
In the recent decision of Heavy Plant Leasing [2018] NSWSC 707, a creditor successfully defended an unfair preference claim by establishing it did not have reasonable grounds to suspect the insolvency of the debtor company, who was a subcontractor in the earth moving business.
The most common way of defending a liquidator’s unfair preferences claim is to rely upon section 588FG(2) of the Corporations Act 2001(Cth); commonly called the ‘good faith defence’.
In its April 2018 decision, the BGH ruled on the question whether the directors of a company that has been granted debtor in possession status by the respective insolvency court can become personally liable for a breach of a duty of care vis-à-vis the creditors like an insolvency administrator. The underlying legal question was the subject of a controversial academic discussion in the past.
Commonly, a creditor being sued by a liquidator to refund an alleged unfair preference is owed money by the company in liquidation.
Liquidators argue that under section 553(c)(1) of the Corporations Act 2001 (Act) a creditor is not able to set-off the outstanding indebtedness owed by the company to the creditor to reduce any liability of the creditor to refund any unfair preference. Similar arguments are made by liquidators in relation to insolvent trading claims.
A snapshot of the court decisions
2018 will be a year of change, challenges and opportunities for banks and financial services providers.
With miserable Christmas trading figures exacerbating an already challenging climate for UK retailers, a growing number of companies are turning to company voluntary arrangements ("CVAs") as a possible source of respite. Most commonly used by retailers and other UK companies to impose improved lease terms on their landlords, CVAs look set to come back into fashion.
Market Backdrop
On 11 September 2017, the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 was passed by the Senate. The Bill features two key changes to the Corporations Act: