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Challenging past transactions in liquidation: fraudulent preference
AG Erotocritou LLC
  • Cyprus
  • 19 February 2021

An effective weapon in a liquidator's and creditor's arsenal to ensure the fair and equal treatment of all creditors of a failing company is the ability to challenge past transactions that sought to favour one creditor to the detriment of others. Transactions entered into by Cyprus companies that are being wound up may be voided if they constitute fraudulent preference and took place during the statutory claw-back period.

New appellate court ruling on priority of straddle-year taxes in bankruptcy
Jones Day
  • USA
  • 12 February 2021

A basic tenet of bankruptcy law, premised on the legal separateness of a debtor prior to filing for bankruptcy and the estate created on a bankruptcy filing, is that prepetition debts are generally treated differently to debts incurred by the estate, which are generally treated as priority administrative expenses. However, as demonstrated by a recent US District Court for the District of Delaware decision, this seemingly straightforward principle is sometimes difficult to apply.

Can retailers use a CVA to rewrite existing lease arrangements?
Squire Patton Boggs
  • United Kingdom
  • 12 February 2021

Increasing pressures placed on those operating in the retail and hospitality sectors as a result of COVID-19 means that there is likely to be an increasing use of company voluntary arrangements (CVAs) in these sectors. The intention would be to help support and restructure businesses in distress, but could retailers use a CVA as a mechanism to rewrite the terms of their leases?

New insolvency and restructuring measures due to COVID-19 pandemic
Augusta Abogados
  • Spain
  • 15 January 2021

Due to the continuation of the COVID-19 pandemic, the government has approved Royal Decree-Law 34/2020 on urgent measures to support business solvency and the energy sector in tax matters (RDL 34/2020). RDL 34/2020 affects the solvency support available to companies and introduces new, urgent measures in the finance and insolvency sectors. This article summarises these measures.

Not just a rubber stamp: principles for liquidators to get decisions blessed by Royal Court
Ogier
  • Guernsey
  • 15 January 2021

The Royal Court recently brought an end to an important chapter in a long-running dispute regarding control of the exploration and exploitation of the oil and gas reserves of Georgia. This judgment makes it clear that liquidators can approach the court to approve a significant decision that they have taken to enter into a transaction and that such decision is akin to a Public Trustee v Cooper blessing of a momentous decision in a trusts context.

Snapshot: compulsory liquidation
Ogier
  • Cayman Islands
  • 08 January 2021

A Cayman Islands company may be wound up either voluntarily according to its articles of association or compulsorily by the Grand Court. This article provides an overview of the compulsory process in the Cayman Islands.

Legal framework on voluntary liquidation – an overview
AG Erotocritou LLC
  • Cyprus
  • 11 December 2020

Chapter 113(III) of the Companies Law is the main legal framework which regulates the voluntary liquidation procedure in Cyprus. There are two ways in which voluntary liquidation can be triggered: by members or creditors. This article provides an overview of the legal framework for voluntary liquidation by members and creditors, respectively.

Failure to abide by deed of priority may result in appointment of administrators being void
Squire Patton Boggs
  • United Kingdom
  • 11 December 2020

A recent case is a cautionary reminder to qualifying floating chargeholders (and their advisers) to review the terms of all security documents before seeking to appoint an administrator. In this case, failure by junior chargeholders to obtain consent from senior chargeholders (as required under a deed of priority) prior to the appointment of administrators led to the court finding that the out-of-court appointment of administrators was invalid (as opposed to being a procedural irregularity that could be cured).

Jersey corporate insolvency procedures
Ogier
  • Jersey
  • 11 December 2020

The financial impact of the COVID-19 pandemic has put pressure on a wide range of structures and, as a result, lenders, borrowers and other counterparties are looking more closely at the impact of possible insolvency proceedings. As Jersey entities are often used in cross-border finance transactions, it is important to be aware of the differences between Jersey and English insolvency procedures for companies, trusts and limited partnerships.

Foreign liquidators' powers to collect assets located in Switzerland – first experiences under new legislation
Pestalozzi Attorneys at Law
  • Switzerland
  • 04 December 2020

In 2019 the Private International Law Act was revised with the aim of improving and facilitating the recognition and enforcement of foreign bankruptcy rulings. Foreign liquidators can now forgo the previously mandatory ancillary bankruptcy proceedings by filing a petition with the Swiss courts. Recent experiences have shown that the Swiss courts will normally grant such leave if they are satisfied that no privileged or secured creditors in Switzerland exist.

Money transfer for specific purpose – High Court ruling on Quistclose trusts
Squire Patton Boggs
  • United Kingdom
  • 27 November 2020

Quistclose trusts classically arise in situations where loans are made for a specific purpose. Disputes over Quistclose trusts often arise in insolvency situations. In a recent case, the High Court found that a Quistclose trust had arisen in a situation where solicitors were forwarded monies by a third party for a specific purpose.

Snapshot: determining whether a petition debt is disputed on substantial grounds
Ogier
  • Cayman Islands
  • 20 November 2020

It is trite law that where a petition debt is disputed in good faith and on substantial grounds, the Grant Court's ordinary practice is to dismiss or strike out the winding-up petition. However, this principle is more easily applied in theory than in practice, resulting in a remarkable amount of case law. That body of case law has been swelled in 2020 by a number of Grand Court decisions which provide further guidance as to whether a petition debt is to be considered genuinely disputed on substantial grounds.

Bankruptcy blocking right in debtor's corporate charter violates federal public policy
Jones Day
  • USA
  • 13 November 2020

Courts sometimes disagree over whether provisions in a borrower's organisational documents designed to prevent it from filing for bankruptcy are enforceable as a matter of federal public policy or applicable state law. A handful of court rulings have addressed this issue in recent years, with mixed results. Most recently, the Delaware bankruptcy court overseeing the Chapter 11 cases of Pace Industries, LLC and affiliates denied on public policy grounds a motion to dismiss the cases filed by a preferred stockholder.

Another bankruptcy court rules that a traded claim can be disallowed if the seller received a voidable transfer
Jones Day
  • USA
  • 06 November 2020

The US Bankruptcy Court for the Southern District of New York recently added some weight to the majority rule on a hot-button issue for claims traders. In In re Firestar Diamond, Inc, the court ruled that a transferred claim can be disallowed under Section 502(d) of the Bankruptcy Code even if the entity holding the claim is not the recipient of a voidable transfer. According to the court, claim disallowance under Section 502(d) "rests on the claim and not the claim holder".

Have qualifying floating chargeholders lost control over the UK administration appointment process?
Squire Patton Boggs
  • United Kingdom
  • 06 November 2020

In a recent case, Insolvency and Companies Court Judge Jones dealt another blow to qualified floating charge holders' (QFCH's) control by finding that failure to serve a notice of intention to appoint administrators by directors of a company on a QFCH does not automatically void an administration. This finding may come as a surprise given that the reason for giving notice is to enable a QFCH the opportunity to appoint its preferred choice of administrator.

Creditors' committee denied standing to bring derivative claims on behalf of LLC debtor in bankruptcy
Jones Day
  • USA
  • 30 October 2020

The practice of conferring 'derivative standing' on official creditors' committees to assert claims on behalf of a bankruptcy estate where the debtor or a bankruptcy trustee is unwilling or unable to do so is a well-established means of generating value for the estate from litigation recoveries. However, the Delaware bankruptcy courts have limited the practice in cases where applicable non-bankruptcy state law provides that creditors have no standing to bring claims on behalf of certain entities.

Guide to restructuring and corporate recovery
Ogier
  • Cayman Islands
  • 30 October 2020

This article answers FAQs on restructuring and corporate recovery options available in the Cayman Islands, with respect to domestic procedures, cross-border procedures, creditors, avoidance transactions, contributions to liquidation estates and officer liability.

Mandatory independent scrutiny of pre-pack sales to connected parties to be introduced
Squire Patton Boggs
  • United Kingdom
  • 23 October 2020

The government recently published a report reviewing voluntary measures introduced in 2015 to improve the transparency of pre-pack sales in administration. The voluntary measures sought to improve creditor confidence, enabling connected person purchasers to voluntarily obtain an independent opinion from the Pre-Pack Pool that the proposed sale was the best option. The government's report notes that despite these measures, pre-packs are still a concern.

Cram-up Chapter 11 plans: reinstatement and indubitable equivalence
Jones Day
  • USA
  • 23 October 2020

'Cramdown' Chapter 11 plans, under which a bankruptcy court confirms a plan over the objection of a class of creditors, are relatively common. Less common are the subset of cramdown plans known as 'cram-up' Chapter 11 plans. These plans are referred to as such because they typically involve plans of reorganisation that are accepted by junior creditors and then 'crammed up' to bind objecting senior creditors.

Snapshot: bringing claims against Cayman entities subject to insolvency processes
Ogier
  • Cayman Islands
  • 23 October 2020

To ensure the orderly and collective resolution of a company's affairs, the Companies Law imposes a moratorium on commencing or proceeding with any suit, action or other proceedings against the company once liquidators are appointed by the court (including on a provisional basis). Once these officeholders are appointed, proceedings can be commenced or proceeded with against the company in question only with the leave of the Grand Court, subject to such terms as the court may impose.

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