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It is common for commercial contracts to contain ipso facto clauses, which allow a party to terminate or modify the terms of the contract where the other party experiences an insolvency event. A concern addressed by the Government is that these clauses can prevent a financially distressed company from turning their situation around.

The High Court’s recent decision in Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28 has confirmed a bankruptcy court can exercise a discretion to go behind the judgment debt where sufficient reason is shown for questioning whether there is a debt due to the petitioning creditor.

In the recent decision of Lane (Trustee), in the matter of Lee (Bankrupt) v Deputy Commissioner of Taxation [2017] FCA 953, Cooper Grace Ward acted for the trustee in bankruptcy, who sought directions from the Court regarding the administration of a trading trust where the bankrupt was the trustee.

Facts

Restructuring: Rollovers, Small business restructure rollovers and small business CGT concessions

July 2017

Linda Tapiolas Partner

T 61 7 3231 2562 M 0437 200 334

E [email protected]

Level 21, 400 George Street Brisbane 4000 Australia

GPO Box 834, Brisbane 4001 www.cgw.com.au

A recent unreported decision in the Alberta Court of Queen’s Bench has clarified the ranking of certain municipal tax claims against a bankrupt in Alberta. In Bank of Nova Scotia et al v. Virginia Hills Oil Corp.

Section 477(2B) of the Corporations Act 2001 (Cth) provides that a liquidator must not enter into any sort of agreement that may last longer than three months without first obtaining approval of the Court, of the committee of inspection or by a resolution of the creditors.

Typically, a litigation funding agreement will be caught by this section because it will last more than three months.

The reference to ‘enter into an agreement’ could also catch a novation, and potentially a variation, to an agreement.

Key Employee Retention Plans are a common feature in restructurings occurring under the Companies’ Creditors Arrangement Act. The basis for a KERP is simple and easily explainable.