In brief

In brief

In brief

The Federal Court has ordered that an insolvency professional be appointed to act as a referee and to decide questions of insolvency in relation to a series of alleged unfair preferences, rather than have the judge undertake that task.

Key takeaways

What is it?

The UK Corporate Insolvency and Governance Act 2020 came into force on 26 June 2020. It introduced a new restructuring plan procedure amongst its package of permanent measures. The restructuring plan gives directors another tool when considering restructuring options. Directors faced with financial distress can now weigh up the new restructuring plan, or the existing “tried and tested” scheme of arrangement.

^{"Whenever there is change, and whenever there is uncertainty, there is opportunity."Mark Cuban, American businessman and investor}

In the current global market, very few things are clear other than that volatility and change are ever-present.

This week’s TGIF examines a recent decision of the NSW Supreme Court which considered whether funds held in certain bank accounts of a failed Ponzi scheme should be returned to investors or paid to creditors of the companies.

What happened?

Since freezing orders were obtained by ASIC in 2017, details surrounding the infamous Courtenay House ‘Ponzi’ scheme operated from a small office at Westfield in Bondi have slowly emerged.

This week’s TGIF considers Wood v Astra Resources Ltd (UK Company No 07620218) [2016] FCA 1192, in which the Federal Court was asked to recognise a foreign proceeding under the Model Law on Cross Border Insolvency.

BACKGROUND

The ability of limited recourse provisions to protect borrowers and financiers against insolvency risks may be weaker due to a recent English court case.

Limited recourse clauses are often used in project and structured finance transactions. Borrowers want to avoid the risk of their directors being liable for trading while insolvent; and financiers may want to avoid the possibility of insolvency clawback actions if they seek to enforce their security documents.

In Rubin v Eurofinance SA and New Cap Reinsurance Corporation (in liquidation) and another v AE Grant and others [2012] UKSC 46, the UK Supreme Court held that:  

The story of the Silentnight restructuring has featured in the press today. There have been calls for the Pensions Regulator to use its anti-avoidance powers under the Pensions Act 2004 to compel HIG Europe to pay more towards the considerable deficit of the Silentnight Pension Scheme, following the purchase of Silentnight out of administration by the private equity firm last Saturday. Earlier this year, Silentnight had failed to obtain the PPF's approval to a Creditors Voluntary Arrangement aimed at addressing its historic debt, including a pensions deficit of around £100m.