On 29 April 2016, the Federal Government released a Proposals Paper titled ‘Improving bankruptcy and insolvency laws’.

The Government is proposing these reforms to encourage entrepreneurship and investment. It hopes to reduce the stigma and detriment around failed business ventures, while still balancing the need to protect creditors.

In a March 8, 2016 ruling from the bench, the U.S. Bankruptcy Court for the Southern District of New York issued a significant decision regarding the ability of a debtor in bankruptcy to reject gas gathering agreements and similar intrastate contracts. Judge Shelley Chapman, overseeing the bankruptcy case of In re Sabine Oil & Gas Corp., determined that those agreements could be rejected in bankruptcy, notwithstanding contractual provisions that purport to issue conveyances that run with the land.

Where a court has ordered the winding-up of a company, a shareholder may be able to have the winding up terminated under section 482 of the Corporations Act 2001.

Relevant factors

The power of the court to terminate a winding-up is discretionary. Relevant factors to be considered, which are not exhaustive, include the following:

On September 8, 2015, a federal district court invalidated a portion of the Georgia post-judgment garnishment statute in Strickland v. Alexander, No. 1:12-CV-02735-MHS (N.D. Ga.). Senior Judge Marvin Shoob found that the statute was constitutionally deficient on due process grounds, insofar as it fails to require:

Introduction

If a director can exercise a right of set-off against a company in liquidation for a debt owed to the director or for a liability of the company to the director (which may be unascertained in amount or contingent), it may help to cancel out or significantly reduce the director’s liability to the company for insolvent trading.

In family law property settlement proceedings, if a spouse is declared bankrupt, the trustee in bankruptcy may join the proceedings in an effort to recover funds from the property pool to pay the bankrupt’s creditors.

While in theory this approach sounds sensible, it may not always be prudent for a trustee in bankruptcy to seek to be joined or consent to being joined. In particular, recent trends suggest that trustees are being very cautious about getting involved in proceedings between a bankrupt and their spouse.

The involvement of a trustee in bankruptcy

In Allco Funds Management Limited v Trust Co (Re Services) Ltd [2014] NSWSC 1251, an inter-company loan transaction was challenged by a receiver appointed by the secured creditor to one of the companies. Common directors were involved in the transaction. The issue was whether the directors breached their fiduciary duties entitling the company via the receiver to have the transaction set aside.

The background to the case

A debtor company can seek to have a statutory demand set aside if there is a genuine dispute as to the existence or amount of the debt, or the company has an offsetting claim.

Because the threshold for contesting a statutory demand is relatively low, a creditor may decide it is better to issue the statutory demand for the undisputed portion of the total debt after making an appropriate allowance for the amount of the total debt in dispute or the amount of the alleged offsetting claim.

When a company is facing short term financial difficulties the directors or shareholders may decide to make a loan to the company to pay wages.