In the recent Gunns decisions, the Federal Court considered three separate unfair preference claims brought by the liquidators of Gunns Limited (in Liquidation) (Gunns) against:
In a case of first impression on the issue of “whether a lease assumption can survive discharge even though it is not reaffirmed[,]” the U.S. Court of Appeals for the Ninth Circuit recently held that a creditor’s post-discharge attempt to collect the balance owed under an automobile lease assumed by the debtor post-petition but prior to discharge in a Chapter 7 case did not violate the discharge injunction.
The Corporations Act 2001 sets out a regime for the order in which certain debts and claims are to be paid in priority to unsecured creditors.
That's straightforward enough for a liquidator, right?
Unfortunately, matters are not that straightforward. In effect, there are two priority regimes under the Act for the preferential payments of particular creditors, each of which applies to a different "fund", and we've observed this has led to some liquidators being unsure of how to proceed – or even worse, using funds they should not.
In Short
The Situation: On August 11, 2020, a Credit Derivatives Determinations Committee for EMEA ("DC") unanimously determined that the Chapter 15 filing by British retailer Matalan triggered a Bankruptcy Credit Event under standard credit default swaps ("CDS").
The Result: The DC's decision diverged from its only prior decision (involving Thomas Cook) on whether a Chapter 15 petition constituted a Bankruptcy Credit Event.
The Corporate Insolvency and Governance Act 2020 (“the Act”) came into force on 25 June 2020 making sweeping changes to the current insolvency legislative framework. This article will focus on Section 14 of the Act and its effect on suppliers of insolvent companies. These provisions had been in consideration for some time before the pandemic. They are permanent provisions unlike some other provisions in the Act which appear to have been brought in on a temporary basis as part of the government’s support package for businesses.
The effect of Section 14
This week’s TGIF considers the decision in Cant v Mad Brothers Earthmoving Pty Ltd[2020] VSCA 198, where the Court of Appeal refused to find that a payment made by a third party on behalf of an insolvent company was an unfair preference.
Key takeaways
The Australian government has taken swift action to enact new legislation that significantly changes the insolvency laws relevant to all business as a result of the ongoing developments related to COVID-19
Earlier this year, Chapter 11’s new Subchapter V became a part of the Bankruptcy Code when the Small Business Reorganization Act of 2019 (SBRA) became effective.
Since Richard Branson’s Virgin Atlantic Airways Ltd’s request for Government loan was denied (see the post by my colleague, Jess), the airline has announced plans for a private-only solvent recapitalisation to "rebuild its balance sheet" and "welcome passengers back".
Rumours that a company is in the zone of insolvency may create a race to the assets, with potential creditors or interested parties commencing proceedings in an attempt to secure payment from the company before its assets are fully dissipated or tied up in the insolvency process. This can destroy the collective value in the enterprise or scupper a restructuring and result in significant duplicative costs.