In brief...
The use of creditors’ schemes of arrangement is on the rise in Australia. Along the way the Australian courts have made valuable contributions to international scheme jurisprudence. In this article we look at some of these contributions and then explore how Australian law might be further developed to remain a leading jurisdiction for creditors’ schemes.
Advantages of schemes as a restructuring tool
On April 15, 2019, President Petro Poroshenko signed the Code on Bankruptcy Proceedings. The text of the law was officially published on April 20 and is available in Ukrainian. The new law aims to strengthen the rights of creditors, improve the procedure of debtors’ assets sale at bankruptcy auctions, provide clear mechanisms for restoring solvency of debtors, and enhance the overall efficiency of bankruptcy proceedings.
The Fed and the FDIC, in an August 30 joint press release, announced that they are extending the filing deadline for Prudential Financial Inc. and four major foreign banking organizations to submit their resolution plans. Prudential Financial, a designated nonbank SIFI pursuant to Dodd-Frank, will now have until December 31, 2019, to submit its living will, a year later than previously required (and following previous extensions).
Certain amendments to the Federal Rules of Bankruptcy Procedure, which became effective on December 1, 2017, impose affirmative obligations on secured creditors to protect the right to distribution in a bankruptcy case. Specifically, Rule 3002(a) now requires a secured creditor to file a proof of claim in order to gain allowance for a secured claim.
After having implemented stricter anti-bribery and corruption regulations in late 2015 and mid2016, new criminal law provisions regarding confiscation orders and asset recovery will enter into force on 1 July 2017. The present legislation was considered to be insufficient. Further, the law implements European provisions into national law. The law provides new rules for compensation of damaged parties and lower prerequisites for confiscations.
The Investment Bank Special Administration Regime (SAR) was introduced in 2011 in response to difficulties faced in the Lehman Brothers administration. Following a review of the regime by Peter Bloxham in 2014, and a Government consultation in 2016, the Treasury has introduced draft regulations to improve the regime - The Investment Bank (Amendment of Definition) and Special Administration (Amendment) Regulations 2017.
The Australian government is working to significantly reform Australia’s current insolvency laws by mid-2017.
The reforms are intended to achieve greater likelihood of business preservation by introducing the flexibility to achieve real turnaround of businesses in crisis.
The proposed changes include:
Economists are renowned for their uncanny inclination to see dark clouds on a sunny day. Restructuring professionals tend to fall into the same camp; we’re no Pollyannas when it comes to forming views on business conditions. Perhaps working extensively with challenged companies tends to skew our outlook.
German insolvency case law on intellectual property rights has experienced rapid development in recent years, while attempts by the German legislature to regulate this subject with precision have repeatedly failed. The multitude of stakeholders involved (among them insolvency administrators, licensors, sub-licensees and creditors that have liens on IP rights) could not agree on a resolution acceptable to all.
It used to be the case that mortgage creditors could rest easy knowing they held a mortgage, and that they would be repaid with the proceeds of the sale of the mortgaged asset, even in the event of an insolvency.