Background of the Act

Introduction

When a company commences winding-up, the disposition of its property and the transfer of shares in the company is void, unless the Court otherwise orders. Under what conditions will the Court allow such disposition or transfer? This was the question in Ong Boon Chuan v Tong Guan Food Products Pte Ltd [2022] SGHC 181, when the Singapore High Court was faced with an application for the sale and transfer of shares in an insolvent company ("Company").

The Court of Appeal has held that a settlement agreement between a bank and a group of companies which included releases of the parties’ affiliates prevented the companies from later pursuing claims against their own affiliates. Those affiliates were held to include former administrators appointed by the bank and the administrators’ solicitors: Schofield v Smith [2022] EWCA Civ 824.

The Hong Kong court has sanctioned a scheme of arrangement for a Hong Kong-listed, Bermuda-incorporated fertilizer manufacturer based in the mainland. In doing so, the Honorable Mr Justice Harris also warned holders of U.S. denominated debt that where they use offshore schemes of arrangement, they run the risk of individual creditors presenting winding-up petitions in Hong Kong. The view has however been queried in recent U.S. authority.

On August 6, 2022, OSG Group Holdings, Inc., which provides transactional, marketing, and payment solutions to various industries, filed a petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware (Case No. 22-10718). The company also filed a prepackaged plan of reorganization.

Bankruptcy issues have been around for a very long time—for centuries, in fact.

And bankruptcy issues have been discussed in these United States for the entire time of our existence–and before.

Even in our Colonial times (prior to 1776), bankruptcy and insolvency issues were in much discussion—especially since debtors often found themselves imprisoned, back then, for unpaid debt.

A key concern in respect of the Insolvency and Bankruptcy Code, 2016 (Code) since its inception has been the differential treatment of operational creditors and financial creditors. For context, financial creditors have a purely financial arrangement with the corporate debtor, while operational creditors are those who are owed money by the corporate debtor for the provision of goods supplied or services rendered.

Retired U.S. Bankruptcy Judge Robert E. Gerber once observed that “issues as to the interplay between environmental law and bankruptcy are among the thorniest on the litigation map.” Difficulties navigating this interplay largely stem from the inherent conflict between the goals of bankruptcy and environmental laws, with the former aimed at providing debtors with a fresh start, while the latter cast a broad net to hold parties (even some innocent parties) responsible for past harm to the environment.

Following an August 4, 2022 memorandum opinion from Judge Brendan L. Shannon of the United States Bankruptcy Court for the District of Delaware, a party to a safe harbored contract can qualify as a “financial participant” under section 546(e) of the Bankruptcy Code even where the party was not a financial participant at the time of the transaction.

Part 1 of this two-part series explored potential legislative changes which could impact the Australian insolvency landscape in 2022 and beyond. Part 2 addresses the recent major developments in case law that have the potential to shape the insolvency landscape in Australia for many years to come.