In an unprecedented move the Federal Government has announced temporary changes to some aspects of existing insolvency laws as part of the plan to try and keep businesses operating during this unique health crisis time.

Insolvent Trading

“In this world nothing can be said to be certain, except death and taxes.” - Benjamin Franklin

Summary and Key Takeaways

THE DISPUTE

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.

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]

Executive Summary

Last week, the Supreme Court (the “Court”) ruled a debtor in bankruptcy cannot use the Bankruptcy Code to cut off a licensee’s rights under a license to use the debtor’s trademarks. This ruling resolves a Circuit split and brings the treatment of trademark licenses from a bankrupt debtor in line with patent and copyright licenses, which are protected statutorily by Bankruptcy Code section 365(n).

On 27 March 2019, the Federal Court of Australia delivered an important decision demonstrating the Court's willingness to assist liquidators to streamline the procedural aspects of liquidations using technology with the aim of conserving assets for the benefit of creditors.