Getting your house in order
Understand your counterparty risks
It is very important in the present climate to understand your contracts and your counterparty risks. We are finding an increasing number of clients “stress testing” their contracts and considering the consequence of an insolvency event. This is good practice; particularly since to identify weaknesses in structures and counterparty risk upon insolvency may afford you the time to fix it before things do go wrong.
Where are the documents?
The lengthening of the restoration period for dormant companies may make a solvent liquidation an attractive option for some companies. James Stonebridge examines the impact of changes introduced under the Companies Act 2006.
In August 2012 the NSW Government commissioned an Independent Inquiry into Construction Industry Insolvency. The Inquiry was asked to assess the causes and extent of insolvency in the building and construction industry and to recommend measures to better protect subcontractors from the effects of insolvency.
Introduction
New Zealand liquidators have had their powers recognised in Australia in a series of recent ground-breaking judgments.
These decisions in respect of Northern Crest Investments Limited, a New Zealand registered company listed on the ASX, demonstrate the broad powers which the courts are willing to provide to foreign representatives under the Cross-Border Insolvency Act 2008 (Cth) (the CBIA).
Obtaining powers of Australian liquidators
The FSA has published a short update on Lifemark S.A. (Lifemark). The FSA reports that on 11 February 2010, the Luxembourg financial services regulator, the Commission de Surveillance du Secteur Financier (the CSSF), applied to the Court in Luxembourg to extend the appointment of Eric Collard of KPMG as provisional administrator in respect of Lifemark.
On 14 October 2009 the Government announced a major change to the way in which company buy-backs of debt will be taxed. The change may be relevant to any corporate debt buy-back where debt is being purchased at less than face value, including the exercise of a post-enforcement call option in a securitisation.
The global financial crisis has resulted in many loans trading at below par value. This presents borrowers with an opportunity to purchase their own debt and, therefore, extinguish the debt at a reduced cost.
The following is a broad overview of the duties and liabilities of directors when their company is in financial difficulties. It is a general guide only and there will be variations according to the specific laws in each jurisdiction.
On the 1 October 2007 new Practice Directions to the Civil Procedure came into force which will affect applications to court under the Companies Acts 1985 and 2006. In particular the rules in relation to schemes of arrangement under section 425 Companies Act 1985 are being amended to incorporate provisions in the Companies Act 2006 coming into force on 1 October 2007.
The Supreme Court of Canada’s decision in (Re) Indalex has changed the landscape for both lenders and borrowers in Canada who sponsor registered defined benefit pension plans. For lenders, carefully drafted loan documentation and effective planning can enhance the protection of a secured lender’s position in the face of the broadened scope of a deemed trust applicable to a borrower’s defined benefit pension obligations.
Everyone loves a bargain – accordingly, there is a lot of interest when liquidators and other insolvency practitioners put a business up for sale. Purchasers jostle like shoppers in the Myer stocktake sale, trying to position themselves as the perfect purchaser. At the same time they try to convey their concern about the value of the business or assets – everyone expects a discount for a distressed business.