If Departmental activity, debate in Parliament and media articles are an indication, the Federal Government’s much awaited response to the Ripoll Report is imminent.
What is a debt restructuring?
The aim of any restructuring (also sometimes called a workout) is to rearrange the debtor’s financial commitments so that it is able to service its restructured debts and survive as a going concern. It is important to note that this is a consensual process and is not undertaken under the supervision of a court or other supervisory body - therefore, it is important the all creditors are involved.
If it’s voluntary, how does it work?
On 27 August 2006, the PRC National People’s Congress passed a new Enterprise Insolvency Law (the “Law”) after more than a decade’s preparation and debate. The Law, which will become effective on 1 June 2007, introduces a formal insolvency process applying to a wide range of legal entities. The Law only contains general principles which in practice are unlikely to provide sufficient protection to creditors’ interests.
Scope of application
When a company files for bankruptcy, employees are faced with uncertainty on a number of issues. Everything from outstanding wages to benefit entitlements are suddenly at risk. Further, when a company becomes insolvent, employees are often laid off in circumstances that fail to satisfy statutory or common law notice period entitlements. However, under the Bankruptcy and Insolvency Act (“BIA”), employees are often barred from fully recovering what they are owed.
Earlier this summer an affiliate of Rogers Communications Inc. acquired all of the issued and outstanding shares of the corporation carrying on the Mobilicity wireless business in the context of Mobilicity’s Companies’ Creditors Arrangement Act (CCAA) proceeding.
An insolvent entity will often have one or more businesses that, once separated from the insolvent organization or cleansed of their existing liabilities, is quite attractive acquisition targets.
In Re The Bell Group Ltd (in liquidation); Ex Parte Woodings [2015] WASC 88 (Bell) Pritchard J found that section 548 of the Corporations Act 2001 (Cth) required:
Most due diligence processes in a business acquisition context require a review of material contracts and, in particular, a review of any restrictions on assignment of those contracts.
When a business enters into a long term commercial contract with a customer, the identity of that particular counterparty may influence the terms of the contract. A party deemed more favourable may obtain a better price or better terms. Unless restricted by enforceable anti-assignment provisions, these favourable contracts can be very valuable in a traditional M&A context.
Companies in liquidation prevented from obtaining judgment for interim entitlements under the Building and Construction Industry Security of Payment Act 2002 (Vic)
Today the Victorian Supreme Court handed down a decision which provides certainty for the construction industry as to whether companies in liquidation can seek to recover interim entitlements under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act).
Of general interest is the appeal in the case of Horton v Henry, on which we reported in our January 2015 update. In Horton, the High Court declined to follow a previous ruling, and decided that a bankrupt could not be compelled to access his pension savings to pay off creditors.