One of the benefits the US Bankruptcy Code offers debtors is the ability to assign freely contracts under which the debtor has ongoing performance obligations, even if the underlying contract contains a restriction or prohibition against such assignment. Section 365 of the Bankruptcy Code has its limits and does impose certain conditions to such assignment, such as the curing of defaults under the contract (other than so-called “ipso facto” defaults) and the requirement that the assignee be capable of future performance under the contract.

On June 27, 2023, the Official Committee of Unsecured Creditors (the “Committee”) in the BlockFi Chapter 11 bankruptcy reorganization case filed an Objection to the company’s Plan and essentially requested that the company be liquidated. The Official Committee is made up largely of 600,000 individual customers of BlockFi.

BlockFi is a wealth management and trading firm for cryptocurrency holders that first commenced operations in 2017. In July 2021, we wrote about BlockFi’s bumpy road to going public, even though its valuation had just hit $5 billion.

In brief

In Avanti Communications Ltd [2023] EWHC 940 (Ch), the English court revisited the vexed issue of fixed and floating charges. Notably, it is the first significant case since the landmark decision in Re Spectrum Plus Ltd [2005] UKHL 41 to do so.

The distinction between fixed and floating charges is economically important and affects the recoveries a secured creditor may expect to receive in an insolvent liquidation of the security provider.

Lehman Bros. Int'l (Europe) (In Admin.) v. AG Fin. Prod., Inc., No. 653284/2011 (Sup. Ct. N.Y. County May 17, 2023) [click for opinion]

In brief 

The Court of Final Appeal (CFA), in its recent judgment in Re Guy Kwok-Hung Lam [2023] HKCFA 9 (link to judgment), has ruled on the proper approach towards a bankruptcy petition where the underlying dispute of the petition debt is subject to an exclusive jurisdiction clause (EJC).

In brief

A recent decision of the NSW Supreme Court examines whether a 'hopelessly insolvent' subcontractor that executes a holding DOCA to enforce payment claims served on head contractor under the NSW security of payment legislation.

Key takeouts

This week's issue has a strong ESG focus. We cover the Senate Committee's report into the government's Bill to overhaul the existing 'safeguard' mechanism, the outcomes of the ACCC's greenwashing sweep and the ACCC's enforcement priorities for 2023/24. On the financial services front we provide an update on the status of the proposed FAR (which would expand on and replace the existing BEAR). We also provide an update on the progress of measures to further 'modernise' Corporations Act requirements and more…

Liquidators and creditors should be aware of the High Court's analysis of the limits of set-off under s 553C of the Corporations Act 2001 (Cth).