December 2023

The Right of Set-off in Insolvency Proceedings

MAYER BROWN | THE RIGHT OF SET-OFF IN INSOLVENCY PROCEEDINGS

The Bankruptcy Amendment (Discharge from Bankruptcy) Bill 2023 (“Bill”) has been agreed to by both the House of Representative and the Senate and will now be presented to the Governor-General.

The Bill seeks to amend the Bankruptcy Act 1966 (Cth) (“the Act”) to provide legal certainty on the calculation of bankruptcy discharge dates, aligning the Act with current practices, by confirming that the discharge date is determined from when the Statement of Affairs is accepted, rather than when it was initially presented.

Why the change?

This article explores the efficacy of the relatively new moratorium procedure introduced under the Corporate Insolvency and Governance Act 2020 and whether the existing domestic legislation already housed a more effective debtor-in-possession rehabilitative procedure in the form of the “light-touch” administration and if so, why it has thus far been largely overlooked.

The Court of Cassation has considered whether company insolvency proceedings may be extended to a managing director and shareholder who has made payments to himself from the company's bank account.

Background

Welcome to our monthly newsletter, with a summary of the latest news and developments in UK employment law.

In this issue

• Case law updates
• Legislative developments
• Other news
• New guidance
• Consultations

 Recent publications

When does a company give a ‘preference’ in breach of insolvency legislation? The award-winning corporate attorneys at ParrisWhittaker are highly experienced in advising companies and creditors on corporate insolvency matters when they need timely advice.

An important appeal court ruling on the timing of a decision made to enter into a transaction provides clarity on what may amount to a preference in a creditor’s favour. The UK Court of Appeal has persuasive authority on the courts in The Bahamas and should be noted.

What is a ‘preference’?

This article originally appeared on Law360.

The uptick in bankruptcy cases will mean more work for insolvency professionals who specialize in asset tracing. Some of the most interesting work will arise in cases where companies engaged in significant fraud.

Each bankruptcy cycle has these cases. In 2001, Enron Corp. filed for bankruptcy. In 2008, there was Bernie Madoff. The latest example is FTX Trading Ltd.

According to a recent report, nearly 6,000 construction companies in the UK are in danger of going out of business. In Hong Kong, a major contractor has lost its licence and was removed from the government's registered list of contractors on 16 November 2023, with the company being given only a month to settle five private residential and commercial projects. When construction companies become insolvent, a host of tricky legal and practical issues come into play.

A bleak picture

The High Court has recently considered and allowed the application of an opposing creditor to extend the time allocated for the hearing to sanction a restructuring plan under Part 26A of the Companies Act 2006. David Garner reports on the sanction hearing below.

The October 2023 insolvency statistics show that company insolvencies have risen by 17.6% from October 2022 to October 2023 and by 56.7% since pre-pandemic levels in October 2019. Total insolvencies have reached the highest levels since 2009.