Welcome to the 2024 edition of "From Red to Black", our annual review of significant developments and topical issues in the Australian restructuring and insolvency market.
Regulator intervention and government stimulus packages in response to market shocks often mask underlying systemic distress and disrupt economic cycles. With companies now largely weaned off COVID-19 support packages, insolvencies have significantly increased.
By following certain steps and focusing on relevant courses of action, directors of startups can leverage the Safe Harbour provisions to increase their chances of navigating financial difficulties and achieving a better outcome for their company.
The Alita matter serves as a good illustration that if you intend to seek leave under section 444GA(1)(b) you should act swiftly and with regard to the potential regulatory risk.
With the mass of reports, reviews and consultations that have already occurred, there is no lack of critiques, complaints and proposed solutions. The risk is that these will (once again) be cherrypicked for fixes, rather than form the basis for a comprehensive review.
It has been 33 years since the "recession we had to have" in 1991. Fears that Australia would enter a technical recession during 2023 didn’t eventuate.
Blog Post:
Introduction
For initiating proceedings under the Insolvency and Bankruptcy Code 2016 (“IBC”), categorisation of a creditor as either a “financial creditor” or an “operational creditor” is a rather significant first step. Such categorisation is not merely organisational, but essential since the rights, obligations and procedural requirements for realisation of debt by financial and operational creditors also differ under the IBC.
The High Court of Bombay (“Court”) in a recent judgment[1] has upheld the NCLT’s powers to direct the Directorate of Enforcement (“ED”) to release attached properties of a corporate debtor, once a resolution plan in respect of the corporate debtor had been approved.
The Hon’ble Supreme Court in the landmark RPS Infrastructure Ltd vs. Mukul Sharma[1]judgement, once again delved into the issue of claims being made beyond the statutorily prescribed timelines in a Corporate Insolvency Resolution Process (“CIRP”).
The Insolvency and Bankruptcy Code (IBC), introduced in 2016, was conceived as a game-changer, a potent tool to expedite debt recovery from insolvent companies within a stipulated timeframe. Eight years into its existence, the IBC has witnessed a mixed track record. While it has successfully revitalised some companies grappling with financial turmoil, it has also faced criticism. The aim of the IBC was not only to aid the revival of struggling companies, but also to enhance the quality of lenders’ balance sheets and empower distressed asset buyers.