The equitable doctrine of marshalling can protect the security interests of subordinate secured creditors when a debtor becomes insolvent.

Marshalling is a neglected tool in the insolvency toolbox, but it can play an important role in protecting the security interests of subordinate secured creditors.

On 22 August 2019, the Federal Court of Australia (Federal Court) delivered a judgment that provides guidance on the framework within which cross-border cooperation between courts located in different jurisdictions might occur.

On August 1, 2019 the U.S. Senate passed the Family Farmer Relief Act of 2019, which more than doubled the debt limit for “family farmers” qualifying for relief under Chapter 12 of the U.S. Bankruptcy Code to $10,000,000. The House of Representatives previously passed the same legislation on July 29, 2019; the legislation will now proceed to the White House for the President’s signature.

Directors are first and foremost responsible to the company as a whole and must exercise their powers and discharge their duties in good faith in the best interests of the company and for a proper purpose. The reference to "acting in the best interests of the company" has generally been interpreted to mean the collective financial interests of the shareholders.

Payment of priority creditors under section 561 of the Corporations Act 2001 (Cth) is an activity conventionally performed by liquidators, albeit the section is silent as to the holder of the relevant payment obligation. The Federal Court of Australia has recently confirmed that distributions to priority (employee) creditors are not the exclusive purview of liquidators (where receivers are appointed contemporaneously); receivers may exercise the powers contained in section 561 to distribute certain funds to such priority creditors.

Forum bias, along with some technical issues, are still challenges in cross-border insolvencies in Australia

Just over ten years ago, Lehman Brothers filed for bankruptcy in the US, which turned out to be one of the largest cross-border insolvency cases in history.

Last year also marks:

It is inevitable that companies will face periods of financial distress during their corporate lives. During these times, it is incumbent on the directors and management to seek to maximise the company's chances of survival and preserve value for stakeholders. Certainly it has not been uncommon for directors to use the threat of voluntary administration as a part of their stakeholder management strategy during these times.

Creditors' rights to information and records

In Longoria v. Somers and LC Therapeutics, Inc., C.A. No. 2018-0190-JTL (Del. Ch. May 28, 2019), the Delaware Court of Chancery examined its authority to tax the costs of receivership against the stockholder of an insolvent corporation. The Court’s decision highlights an exception to the general principle that stockholders of a properly maintained corporation are not responsible for costs incurred by the corporation and illustrates a scenario where stockholders may be held liable for a corporation’s obligations.

In response to the Federal Energy Regulatory Commission (“FERC”), the U.S. Bankruptcy Court for the Northern District of California held that the rejection of wholesale power purchase agreements “is solely within the power of the bankruptcy court, a core matter exclusively this court’s responsibility.” [1]