'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.
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.
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.
Safe harbours in the Bankruptcy Code designed to insulate non-debtor parties to financial contracts from the consequences that normally ensue when a counterparty files for bankruptcy have been the focus of a considerable amount of scrutiny as part of evolving developments in the pandemic-driven downturn. One of the most recent developments was a US Court of Appeals for the Second Circuit ruling concerning the landmark Chapter 11 cases of Lehman Brothers Holdings Inc and its affiliates.
Numerous recent extensions and changes to temporary measures have been announced that affect insolvency practice and procedure. These concern the ipso facto regime for small suppliers, the Corporate Insolvency and Governance Act 2020, the temporary restrictions affecting winding-up petitions, the prohibition on forfeiture proceedings and the revised Temporary Insolvency Practice Direction.
By a two-to-one majority, the Court of Appeal recently granted an appeal and set aside the High Court's recognition of Indonesian bankruptcy orders on the basis that there had been a breach of natural justice in their making. While recognition in this case proceeded on the basis of the common law regarding the recognition of bankruptcy orders, this case could be a useful interpretive aid for future challenges under statutory recognition procedures.
In the current COVID-19 environment, more businesses will likely become insolvent, some of which will have an interest in Jersey property. Insolvency practitioners appointed outside Jersey in respect of an overseas person or company (or Jersey company subject to English insolvency proceedings) must be recognised in Jersey before they can deal with certain forms of Jersey property. This is because Jersey immoveable property can be transacted only by passing a contract before the Royal Court.
Company boards of directors have a duty to continuously monitor the company's financial situation and take certain measures if it gets into financial difficulties. Given the extraordinary circumstances caused by the COVID-19 pandemic, the government has temporarily suspended their duty to notify the bankruptcy court in the event of imminent overindebtedness where there is a possibility that this situation can be remedied after the crisis.
The ability of a bankruptcy trustee or Chapter 11 debtor-in-possession to sell assets of the bankruptcy estate free and clear of any interest in the property asserted by a non-debtor is an important tool designed to maximise the value of the estate for the benefit of all stakeholders. The US Bankruptcy Court for the Central District of California recently examined whether such interests include successor liability claims that might otherwise be asserted against the purchaser of a debtor's assets.
At the recent Chambers Economic Forum, the Cayman government announced its intention to bring in a much-anticipated new regime governing corporate restructuring by the end of 2020. Until then, with the COVID-19 pandemic pushing many groups into the zone of insolvency, a number of considerations remain relevant to structures involving a Cayman entity.
The Singapore High Court recently addressed, for the first time in a written grounds of decision, the question of whether a foreign company has the requisite standing to apply for a Section 211B moratorium under the Companies Act. The grounds of decision, which the court noted was issued to assist interested parties, provides much-needed clarity on the requirements of the so-called 'substantial connection test' that foreign applicants must satisfy in order to be eligible for moratorium protection under Section 211B.
Depending on the context, bankruptcy courts rely on a wide variety of standards to value estate assets, including retail, wholesale, liquidation, forced-sale, going-concern or reorganisation value. However, certain assets may be especially difficult to value because valuation depends on factors that may be difficult to quantify, such as the likelihood of success in litigating estate causes of action. The First Circuit Court of Appeals recently addressed this issue in MMA Railway.
Set-off rights created by contract or applicable non-bankruptcy law are important creditor protections. The Bankruptcy Code preserves those rights and permits creditors to exercise them under appropriate circumstances. However, as illustrated by the ruling in Rogers Morris, courts disagree as to whether confirmation of a plan extinguishes set-off rights.
The Finance Act 2020 recently received royal assent, confirming the anticipated but opposed intention to restore Her Majesty's Revenue and Customs (HMRC) as a secondary preferential creditor on insolvency. From 1 December 2020 HMRC's claim will sit ahead of floating charge holders and unsecured creditors, reducing the monies available for distribution to both when a corporate files for insolvency. But what does this mean for secured lenders and corporates?
The Corporate Insolvency and Governance Act 2020 recently came into force. Alongside this act, a new insolvency practice direction (IPD) came into force and provides additional information on winding-up petitions and the 'coronavirus test'. This article examines a few of the key changes contained in the IPD.
May 2020 marked the 22nd anniversary of the Cayman Islands segregated portfolio company (SPC). This article reflects on the first two decades of the SPC – in particular, the principles established by the courts concerning insolvent SPCs. These cases have posed some interesting and novel questions for the Cayman courts to resolve and the decisions have fleshed out the statutory provisions as regards the status, duties and powers of office holders appointed in connection with SPCs.
In response to the COVID-19 crisis, the government introduced a series of humanitarian and financial measures, with the latter covering insolvency and restructuring matters. Although the measures could provide much-needed breathing space for companies, they might not solve problems that existed prior to the crisis.
In 2016 the Ministry of Law unveiled plans to strengthen Singapore as an international centre for debt restructuring. Pursuant to these plans, numerous complex legislative changes were introduced to Singapore's debt restructuring and insolvency laws. This article focuses on Singapore's experience of transplanting the US Chapter 11 debtor-in-possession financing provisions into the 2017 amendments to the Companies Act.
As the impact of COVID-19 is felt throughout the economy, even those companies able to weather the storm are likely to feel the effects of corporate insolvency as collaborators, customers and suppliers find themselves in financial difficulty. This article focuses on the impact of insolvency on IP licences from the perspective of both licensors and licensees. It also contains top tips for mitigating the risks.
In these unprecedented times, small and medium-sized enterprises (SMEs) and their owners require swift and cost-effective methods to sustainably manage and restructure their debt burdens, so that they can focus on transforming their businesses to meet the challenges of the post-COVID-19 economy. This article examines the legislative action taken by the government thus far, with a specific focus on its impact on SMEs.