Topic: Bankruptcy and insolvency

The Court of Appeal has unanimously overturned the largest value unlawful preference ruling to date.

A company can agree with its creditors to restructure its debts through various processes. This usually happens when the company’s underlying business is experiencing financial difficulties. The statutory processes are a scheme of arrangement (Scheme), restructuring plan (RP), and a company voluntary arrangement (CVA).

The latest statistics released by the Australian Securities and Investment Commission (ASIC) show that 7,942 Australian companies entered into external administration in 2022-23 financial year. This is up by nearly 50 percent compared to the previous year. These statistics also show that increased business distress is more acutely felt in the following high-risk industries:

Grave uncertainties following the war in Ukraine and the lingering effects of the pandemic had inspired German lawmakers to pass a series of legislative measures to soften the ramifications of multiple crisis factors for the national economy. Part of the crisis legislation (SanInsKG) was a temporary modification of one of the two insolvency triggers provided for under German insolvency law. The legislation is about to lapse and this is what managing directors now need to know.

The UK Government has confirmed it will adopt the UNCITRAL Model Law on Enterprise Group Insolvency (Group Model Law) ‘at the earliest opportunity’.

From 2016, Vroon experienced significant pressure on its liquidity due to challenges in the shipping market and its ongoing debt obligations. The financing of the group was complex with 28 different financing arrangements and 14 different lenders (as at the time the claim form for the English scheme was submitted) all with different security packages. In November 2018, the group entered into an English law framework agreement under which cross-guarantees were provided and new security was granted for the benefit of a security agent on behalf of all framework agreement lenders and it provided for a uniform maturity date of 31 March 2021.

The UK Government has published its statutory review of the effectiveness of the permanent measures introduced by the Corporate Insolvency and Governance Act 2020 (CIGA 2020). CIGA 2020 came into force on 26 June 2020, during the height of the COVID-19 pandemic, with the goals of supporting businesses through the immediate financial difficulties they faced and, in the longer term, saving viable companies.

“Bankruptcy” in the Australian vernacular refers to personal insolvency, it does not extend to corporates or other legal entities.

The German Federal Supreme Court (Bundesgerichtshof, BGH) recently had the opportunity to revisit the controversial discord between corporate and insolvency laws on the issue of claw back of shareholder dividends. In principle, the provisions of the German Stock Corporation Act (Aktiengesetz, AktG) protect shareholders from reimbursement claims in the event that they receive dividend payments, which later turn out to have been illegal. However, this only applies if the shareholders did not have knowledge about the unlawfulness of the dividend payments. In its judgement of 30 March 2023 (IX ZR 121/22), the BGH ruled that this does not extend to a protection from insolvency related claw back claims.

The SRR was created to deal with failing banks following the 2008 financial crash and the run on the first UK bank in more than a century, Northern Rock. The SRR was introduced by the Banking Act 2009 (BA 2009) and subsequently amended, notably to comply with the EU Bank Recovery and Resolution Directive (BRRD), Directive 2014/59/EU.