Transaction avoidance and corporate insolvency law

Is the avoidance of transactions harmful to creditors a peculiar problem for corporate law, or simply a problem for debtor-creditor law more generally? What is, and ought to be, the connection between the availability of transaction avoidance powers and the commencement of collective insolvency proceedings? What changes must be made to transaction avoidance law to accommodate the peculiar features of trading during the COVID-19 pandemic?

These and other questions were debated at a conference on transaction avoidance law and corporate insolvency hosted by the Commercial Law Centre on 15 January 2020, organised by Kristin van Zwieten (University of Oxford), Jennifer Payne (University of Oxford) and Louise Gullifer (University of Cambridge), and sponsored by Erskine Chambers.

The conference opened with a paper by Kristin van Zwieten on the connection(s) between transaction avoidance and insolvency proceedings, with particular reference to English law’s treatment of transactions at an undervalue, followed by comments from Prof. Felix Steffek (University of Cambridge).

Prof. Louise Gullifer gave the second paper, which considered the interpretation of statutory provisions on settlement finality and transaction avoidance, a subject of considerable importance in financial markets. Mr Justice Tony Zacaroli acted as discussant for this session.

The third session was devoted to the subject of COVID-19 and transaction avoidance, and featured a talk by Ignacio Tirado (Secretary General of UNIDROIT) followed by presentations by Nick Segal (Justice of the Grand Court of the Cayman Islands, Financial Services Division; Erskine Chambers) and Prof. Sarah Paterson (London School of Economics).

The final session of the day considered an important recent decision of the English Court of Appeal (the Sequana case) from a comparative perspective, with talks by Andrew Thompson QC (Erskine Chambers), and Professors Jennifer Payne, Reinhard Bork (University of Hamburg), Umakanth Varottil (National University of Singapore) and Ted Janger (Brooklyn Law School).  

A number of themes emerged over the course of the day, including that jurisdictions appeared to concern themselves with a common set of problems, but that some forms of regulation addressed these problems more straightforwardly than others (English law comparing unfavourably with equivalents elsewhere in some important respects); another was that there was more work to do to understand the connection between privately bargained solutions to these problems and mandatory rules; a third was that there were elements of transaction avoidance law (including the relationship between avoidance and director liability) that were at least in some jurisdictions not yet fully understood or worked through, and one by-product of this was that legislatures in the COVID-19 crisis had moved to provide insolvency relief for honest directors without necessarily turning their mind to connected questions of transaction avoidance law, leaving many important questions regarding the application of avoidance law in the COVID-19 crisis yet to be determined.