Zone of Insolvency

Zone of Insolvency

A DIP of the toe into US Chapter 11 waters for Australia

By Jeffery Black (AU) and Nick White (AU) on Posted in Australia

On 24 September 2020, the Australian Government announced the introduction of two new restructuring and insolvency processes for small businesses (having liabilities of less than AU$1 million). It is proposed that these measures will be introduced from 1 January 2021 with a view to reducing the cost, time and complexity burden imposed on small businesses by the existing insolvency processes. The Australian Government has described the changes as “the most significant changes to the Australian insolvency framework in almost 30 years.”

The changes represent the latest in a series of measures introduced in Australia this year in response to the … Continue Reading

The Insolvency, Restructuring and Dissolution Act 2018 – Reforming the law on contractual remedies

By Yu-En Ong, Pooja Balani and Katie Chung on Posted in Bankruptcy Courts, Involuntary Bankruptcy, Singapore

On 30 July 2020 Singapore’s new “omnibus” Insolvency, Restructuring and Dissolution Act 2018 (the Insolvency Act) came into effect. This marks the third phase in recent years to strengthen Singapore’s restructuring and insolvency laws.

The Insolvency Act consolidates the laws on insolvency, bankruptcy, restructuring and dissolution into a single enactment and introduces a number of changes to the restructuring and insolvency framework in Singapore including: (i) the introduction of a new licencing and regulatory regime for insolvency practitioners (liquidators, judicial managers and receivers); and (ii) enhancing the judicial management provisions to allow for a company to place itself into … Continue Reading

Modernising business registers and director identification numbers

By Natasha Toholka (AU) and Deborah Tsai (AU) on Posted in Australia

A package of five legislative reforms — Commonwealth Registers Bill 2019, Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019, Business Names Registration (Fees) Amendment (Registries Modernisation) Bill 2019, Corporations (Fees) Amendment (Registries Modernisation) Bill 2019, and National Consumer Credit Protection (Fees) Amendment (Registries Modernisation) Bill 2019 — received royal assent on 23 June 2020.

These amendments introduce significant changes to the management of Australian business information by Commonwealth bodies, and improve regulation of company directors through the introduction of Director Identification Numbers.

A New register

The Commonwealth Registers Act 2020 (Cth) combines the Australian … Continue Reading

Directors Can Stop the Zombie Company Pandemic

By Scott Atkins (AU) and Dr. Kai Luck (AU) on Posted in Australia

Will the real zombie please stand up? The opportunity for directors to take controlIn the article, “Will the real zombie please stand up? The opportunity for directors to take control,” Scott Atkins and Dr Kai Luck continue their analysis of the risk that global fiscal stimulus and support measures in response to COVID-19 will be used by some entities to continue trade even when they have no realistic prospect of long-term profitability.

There are personal liability laws for directors that should now provide directors with an incentive to seek assistance from expert restructuring advisers to assess a company’s viability and, if its downturn is endemic, to look to formal insolvency options.

Directors who … Continue Reading

VIDEO – Use of schemes as UK debt restructuring tools

By Matthew Thorn (UK), Mark Craggs (UK) and Grace Carpenter (UK) on Posted in UK

VIDEO - Use of schemes as UK debt restructuring tools

Our video, Use of schemes as UK debt restructuring tools, provides insight into the circumstances in which schemes can be used in restructuring transactions where there are minority hold-out creditors and it is not possible to reach unanimous (or near-unanimous) approval thresholds for desired amendments to the finance documents and/or the capital structure.… Continue Reading

The new pandemic: Zombie companies will eat Australia’s COVID-19 economic recovery

By Scott Atkins (AU) and Dr. Kai Luck (AU) on Posted in Australia

The new pandemic: Zombie companies will eat Australia’s COVID-19 economic recoveryIn this article, Scott Atkins and Dr Kai Luck consider how the extraordinary government fiscal and stimulus measures introduced in response to COVID-19 may provide an incentive for so-called zombie companies—those that were facing endemic operational and liquidity issues pre-crisis and that have no realistic prospect of successful trade in the long-term—to continue on for the next 6 to 12 months, preventing the recycling of important capital needed to reinvest in the innovative new business ventures that will drive economic recovery and eventual growth.… Continue Reading

COVID-19: From black swan to boiling frog

By Scott Atkins (AU) and Dr. Kai Luck (AU) on 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

By Scott Atkins (AU) and Dr. Kai Luck (AU) on 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

By Natasha Toholka (AU) and Deborah Tsai (AU) on 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

By Howard Seife (US) on 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