In this edition, now in its 7th year, we review the trends and developments in M&A across a wide range of countries and territories in the Asia Pacific region throughout 2019, and discuss our thoughts on the anticipated market trends for 2020 and beyond.

Asia Pacific M&A in 2019

Key themes across the 2019 Asia Pacific market include:

Introduction  

Current turbulent times and the onset of recession are likely to result in an increase in the number of distressed sales and ultimately insolvencies. For those who are fortunate to be in the market as buyers, there may be considerable opportunities but equally there are significant traps for the unwary. This briefing examines some of the key issues which should be considered by prospective buyers of businesses in financial difficulties which are not in formal insolvency proceedings.  

The High Court has refused to grant the Queensland State Government (Qld Government) special leave to appeal the Queensland Court of Appeal’s March 2018 decision in favour of the liquidators of Linc Energy, concerning the liquidators’ obligations to cause Linc Energy to comply with an Environmental Protection Order (EPO).

1 2018 GTLAW.COM.AU 2018 NEW IPSO FACTO LAWS WHAT DOES IT MEAN FOR YOU? WHAT DOES IT MEAN FOR YOU? The Federal Government’s new ipso facto laws, which were introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth), impose an automatic stay on the enforcement of ipso facto clauses in certain contracts entered into on or after 1 July 2018. In this insight, we summarise the new laws and take a closer look at how the reforms affect particular types of transactions.

"Ipso facto" amendments to the Corporations Act - what does this mean and what impact does it have on your contracts from 1 July 2018?

Overview

Commercial contracts commonly include a term which permits one party to exercise certain contractual rights (including the right to terminate) if the other party is either insolvent or at the risk of becoming insolvent. Such clauses are commonly called “ipso facto” clauses.

The COVID-19 pandemic has already led to business failures and forced others into negotiations with lenders, landlords and other stakeholders. For many sectors, the crisis has reinforced or accelerated the challenges that they were already facing. Government support measures including loans, furlough and temporary legislative changes have delayed some of the usual pressure points, but as support is eased, many businesses will have to find cash from significantly reduced turnover to satisfy deferred liabilities or repay loans.

In continuation of Reserve Bank of India’s (RBI) efforts to ease financial stress caused by the Covid-19 pandemic, the RBI issued the circular on the Resolution Framework for Covid-19 Related Stress dated 6 August 2020 (August 6 Circular). The August 6 Circular creates a limited time window for certain categories of borrowers affected by Covid-19 pandemic related business disruption to be allowed resolution plans in the nature of restructuring while permitting the borrower accounts to retain their status as ‘standard’.

In a recent decision, the U.S. Bankruptcy Court for the Southern District of New York held that claim disallowance issues under Section 502(d) of the Bankruptcy Code "travel with" the claim, and not with the claimant. Declining to follow a published district court decision from the same federal district, the bankruptcy court found that section 502(d) applies to disallow a transferred claim regardless of whether the transferee acquired its claim through an assignment or an outright sale. See In re Firestar Diamond, 615 B.R. 161 (Bankr. S.D.N.Y. 2020).

It is so obvious to say, but suppliers want to be paid for the goods or services they supply, and we are living in highly uncertain times with suppliers increasingly concerned about the ability of customers (or clients) to pay.

A new law recently came into force that has major implications for suppliers and what they can include in their contracts to protect themselves. Suppliers need to review and update their existing and new contracts as a result.

What Does the New Law Do?

Many companies are under financial pressure in the COVID-19 era as a result of revenue substantially reducing, debts not being paid when due and supply chains being disrupted. Even companies with financial reserves are finding themselves under pressure as measures taken by state and the Federal governments to reduce the spread of the virus are expanded and extended.