When a company winds up, begins restructuring proceedings or goes bankrupt, a debtor or creditor may be able to cancel out the amount payable to the other party by using the remedy of “set‐off”. Set‐off involves the cancelling of crossliabilities between two parties who owe each other money. It is a valuable tool that can increase a creditor’s percentage of recovery and decrease the debt burden of a debtor.

Types of Set‐off: Contractual, Legal or Equitable

OFT is monitoring the lending and broking of secured loans to consumers where the loan's purpose is to annul a recent bankruptcy. It is asking for comments by 30 October from any consumers who have taken this type of loan.

On Feb. 11, 2009, the United States Court of Appeals for the Fourth Circuit issued its opinion in Hutson v. E.I. Dupont de Nemours and Co. (In re National Gas Distributors), attempting, in a matter of first impression, to define "commodity forward agreement" for purposes of eligibility for protection under the safe harbor provisions of the Bankruptcy Code. At first blush, this decision appears to provide the additional certainty that participants in the commodities markets require.

Pursuant to an Order in Council dated July 4, 2008, July 7, 2008 was established as the date that certain of the provisions of S.C. 2005, c. 47 (the "Insolvency Reform Act 2005") and S.C. 2007, c. 36 (the "Insolvency Reform Act 2007") came into force. The Wage Earner Protection Program Act (the "WEPPA") as well as certain of the amendments to the Bankruptcy and Insolvency Act (the "BIA") made by the Insolvency Reform Act 2005 and the Insolvency Reform Act 2007 are, as a result, now in force.

This update deals with “onerous property” and the issues involved when a trustee in bankruptcy disclaims onerous land, including the potential impact on lenders.

Disclaimer of onerous land by a trustee in bankruptcy

At any time, the trustee of a bankrupt estate may disclaim land which is burdened with onerous covenants or is unsaleable or not readily saleable (s 133 of the Bankruptcy Act 1966 (Cth)).

The waiver of Solicitor/Client privilege by a bankrupt company is a difficult matter and one distinct from the waiver of such privilege by an individual bankrupt. As there is nothing in the BIA that either gives or denies a trustee the right to waive solicitor/client privilege on behalf of a company,Hahaha yes with a lot of candles! the courts have had to turn to the common law for guidance on the issue.

On September 18, 2009, amendments (the "Amendments") to the Companies’ Creditors Arrangement Act (the "CCAA") and Bankruptcy and Insolvency Act (the "BIA") came into force.

Section 147 of the Bankruptcy and Insolvency Act (“BIA”) provides that the Superintendent’s Levy is applied to defray the supervisory expenses of the Superintendent, will be charged on dividend payments made by the trustee.

On May 16, 2008, the United States Supreme Court decided Florida Department of Revenue v. Piccadilly Cafeterias, Inc. and ruled that debtors who sell property during the course of a Chapter 11 case prior to the confirmation of a plan cannot use Section 1146(a) of the Bankruptcy Code to exempt those sales from applicable state transfer and stamp taxes.

Legal Developments

Potential hourly wage system

The Ministry of Labor and Social Development (MOL) is discussing a potential new employment system for Saudi employees named “Flexible Work” (Flexible Work). Flexible Work will be a system whereby an employee may be paid an hourly wage on a weekly basis in arrears, and various entitlements currently required under the Labor Law for conventional employees would not be required, such as: