On 2 March 2023 the Supreme Court of Victoria published its reasons in the matter of Atlas Gaming Holdings Pty Ltd [2023] VSC 91 (the Atlas case) in which Gadens acted on behalf of the Liquidator of four companies seeking a pooling order pursuant to section 579E of the Corporations Act 2001 (Cth) (the Act). There have been very few judgments on section 579E which was introduced in 2007 by the Corporations Amendment (Insolvency) Act 2007 (Cth) Sch 1 items 133ff and operative from 31 December 2007.
After a pause in 2022, there has been much talk of the continuation, or resumption, of a wave of retail bankruptcy cases as we begin 2023. 2022 was highlighted by Revlon’s filing (discussed here: Revlon May Signal Another Wave of Retail Bankruptcies | Retail & Consumer Products Law Observer (retailconsumerproductslaw.com)).
Earlier this month, the SDNY Bankruptcy Court answered one of the gating questions at the center of Celsius Network’s Chapter 11 bankruptcy regarding the ownership of the approximately $4.2 billion in crypto assets.
Jabaluka Pty Ltd (Jabaluka) was the Trustee of the Morgan Unit Trust, which operated an IGA Supermarket (the Supermarket) from 22 September 2010 to 13 March 2020. This case concerned an application by the Liquidator of Jabaluka (the Liquidator) under s 57 of the Federal Court of Australia Act 1976 (Cth) for an order that the Liquidator be appointed without security as receiver and manager of the assets and undertaking of the Morgan Unit Trust.
In BTI 2014 LLC v Sequana SA and Others, the United Kingdom Supreme Court considered a case on appeal which asked the Court to expand the common law duty of directors in a significant way. The Appellant sought to argue that common law director duties should require directors to have regard to the interests of creditors even in circumstances where their company is solvent.
Background
Chapter 15 of the Bankruptcy Code provides a mechanism for United States cooperation and coordination with insolvency proceedings abroad, often affording foreign debtors wide-ranging relief and expansive rights through the United States Bankruptcy Court system. Not all proceedings in foreign jurisdictions are eligible — in order to be so, a proceeding must constitute a “foreign proceeding” under the Bankruptcy Code.
BlockFi Inc. and eight of its affiliates followed the paths of crypto platforms Voyager, Celsius and FTX by filing for bankruptcy protection. The case, commenced in the District of New Jersey, on November 28, 2022, is off to a fast start. BlockFi filed a plan of reorganization on the first day of its case. The plan proposes a standalone restructuring but allows the company to toggle to a sale of all or substantially all of the company’s assets. The company had its first day hearing in New Jersey on November 29th and expressed an interest in exiting bankruptcy expeditiously.
Shoba Pillay, the Examiner appointed in Celsius’ bankruptcy cases, filed her interim report on November 19, 2022. The Celsius Examiner’s report provides some important insight into a crypto-exchange’s operational and risk management failures which may provide investors and creditors some insight into what to expect in FTX.
FTX has warned its investors, customers and the crypto-world that they may have to file for bankruptcy protection without rescue financing to address its immediate liquidity crisis. Unlike the bankruptcy cases of Celsius and Voyager, FTX’s case, should it file, will likely involve many institutional investors with secured and unsecured claims.
The Full Federal Court, overturning Flick’s J decision at first instance ([2020] FCA 1759), found that the bankrupt’s main purpose in transferring their property was, in substance, not to prevent, hinder or delay this property becoming divisible amongst his creditors in breach of s 121(1) of the Bankruptcy Act 1966 (Cth).