Zone of Insolvency

Zone of Insolvency

COVID-19: From black swan to boiling frog

Posted in Australia

COVID-19: From black swan to boiling frogScott Atkins and Dr Kai Luck examine in this article how underlying corporate governance and risk failures may have contributed to boards being caught so off-guard by COVID-19 and how COVID-19 ‘tunnel vision’ (focused only on pandemic-related business continuity and risk management plans) may lead to companies being exposed to equally devastating risks in other contexts—including climate change and cybersecurity—as the economic recovery period commences across the globe.… Continue Reading

The shift we needed: The fight to save Virgin already changing corporate rescue laws in Australia

Posted in Australia

Airplane flying in cloudsIn this article, Scott Atkins and Dr Kai Luck look at the important role Australian courts can play in creating a stronger corporate and business rescue culture to help financially distressed but long-term viable entities navigate the economic downturn caused by COVID-19.

Since this article was written, the Federal Court of Australia granted further orders on 13 and 15 May 2020 exempting the voluntary administrators from personal liability for new contracts entered into as they seek to restructure the Virgin entities (which operate Australia’s second major airline) with a view to a going concern sale to a third party.

Looking … Continue Reading

Don’t panic this pandemic: new safe harbours for directors in COVID-19

Posted in Australia, Singapore, UK

In recognition of the significant economic impact of COVID-19, several jurisdictions have passed (or propose to pass) legislation to provide temporary relief for directors of businesses in financial distress, and hopefully mitigate some of the economic effects of the COVID-19 pandemic.

Australia

Relevant Act: Coronavirus Economic Response Package Omnibus Act 2020 (Cth)

Length of Grace Period: 6 months from 25 March 2020 (unless extended by legislative instrument)

The minimum debt which can form the basis for a statutory demand has been increased from AU$2,000 to AU$20,000. The period within which the debt must be paid or an application made to … Continue Reading

Global financial response to the COVID-19 crisis

Posted in Bankruptcy Courts, Involuntary Bankruptcy, US

We have launched our interactive cross-border guide to the financial support on offer to businesses during the COVID-19 crisis and considerations for banks, corporates and directors trading through the turmoil.

We also look at some of the issues being considered in the lending market as well as changes in insolvency law, reviewable transactions and tips for good governance of distressed companies.

Hopefully this guide will be of assistance to global operators looking to compare and contrast the impact of the crisis on their financial arrangements across a number of relevant jurisdictions.

A link to the product is here: https://www.nortonrosefulbright.com/covid-19-InternationalGovernmentResponse

Howard Continue Reading

UK Update: Foreign solvent proceedings not recognised in England under the UNCITRAL model law (as enacted)

Posted in Europe, UK

Introduction

In Carter v Bailey and Hutchinson (as foreign representatives of Sturgeon Central Asia Balanced Fund Ltd) [2020] EWHC 123 (Ch), the English High Court found that a foreign solvent liquidation could not be recognised under the Cross-Border Insolvency Regulations 2006 (CBIR) (which enacted the UNCITRAL Model Law on Cross-Border Insolvency in Great Britain). Accordingly, the court terminated the recognition order granted previously.

Key points to note

  • It was held to be contrary to the purpose and object of the UNCITRAL Model Law to interpret “foreign proceedings” as including solvent debtors and proceedings directed to producing returns for members instead
Continue Reading

US group uses an English scheme of arrangement to restructure its debts

Posted in UK, US

On 10 September 2019 the High Court in London sanctioned two schemes of arrangement as a part of the successful restructuring of the syncreon group. This transaction was unique because it involved a US based group utilising an English scheme of arrangement to surgically restructure its debts, avoiding an all-encompassing insolvency process. Recognition of the English procedure was obtained in the US and Canada.

The syncreon group is a global specialized contract logistics company supplying the automotive and technology industry. The group is headquartered in Michigan, USA with over 100 locations in 20 countries and 14,000 employees worldwide.

As … Continue Reading

Federal Court deems Halifax a “classic candidate” for cross border insolvency cooperation

Posted in Administration

On August 22, 2019, Justice Gleeson delivered her judgment in Re Halifax.

Halifax Australia (Halifax Aus) owned and operated a number of Halifax investment services companies operating under the Halifax name in various locations around the world.

In late 2018, liquidators were appointed to Halifax Aus. At the time, Halifax owned 70% of Halifax New Zealand (Halifax NZ).

As a part of business operations, funds were transferred between Halifax Aus and Halifax NZ on an “as needs basis”. A majority (95%) of the funds held on trust by the Halifax group were affected by commingling. … Continue Reading

Supreme Court settles trademark Circuit split

Posted in US

On May 20, 2019, the US Supreme Court ruled that a licensor’s rejection of a trademark license in bankruptcy does not terminate the licensee’s right to continue using the licensed mark. Mission Product Holdings Inc. v. Tempnology LLC, 587 US __ (2019). The decision brings trademarks into alignment with how patents and copyrights are already treated under the Bankruptcy Code.

Samuel Kohn, Susan Ross, Bandar Al-Saif and Joy Wang have provided a briefing.… Continue Reading

The Corporations Amendment (Strengthening Protections for Employee Entitlements) Act 2019 commenced April 6, 2019

Posted in Australia

Australia has a taxpayer funded scheme which guarantees employee entitlements arising out of liquidation up to statutory caps. It is known as the Fair Entitlements Guarantee Scheme (FEG). The Australian Government has become concerned that questionable practices which rely on FEG to avoid employee entitlement obligations, such as illegal phoenixing, are on the rise and imposing significant costs on FEG and therefore, the Australian taxpayer. The Government has introduced legislative amendments to facilitate the effective recovery of entitlements from parties which take part in these questionable practices.… Continue Reading

UNCITRAL draft Model Law on Enterprise Group Insolvency

Posted in Australia

In December 2018, UNCITRAL Working Group V (Insolvency Law) held its 54th session in Vienna where it discussed, among other topics, cross border insolvency of enterprise groups. These discussions included amendments to the Enterprise Group Insolvency: Draft Model Law (‘draft Model Law’) and the Enterprise Group Insolvency: Guide to Enactment of the Draft Model Law (‘draft Guide to Enactment’). The Working Group began drafting the Model Law after agreeing to the UNCITRAL mandate in December 2013.… Continue Reading