Last November we wrote about the Fifth Circuit Court of Appeals’ decision in Highland Capital Management, L.P., where the court reversed the bankruptcy court’s approval of a plan’s exculpation clause for non-debtors and limited the universe of parties covered by that provision. Relying on Bank of New York Trust Co., NA v. Official Unsecured Creditors’ Comm. (In re Pacific Lumber Co.), 584 F.3d 229 (2009), the Fifth Circuit held that the plan’s exculpation provision was overly broad and violated section 524(e) of the Bankruptcy Code.
When a court-appointed trustee or liquidator is tasked with liquidating an entity, they need to gain possession of all of the entity’s assets. In crypto cases, this task can prove difficult when trying to identify and control all of the entity’s different digital assets and obtain cooperation from the entity’s former operators. Unfortunately, in the case of Three Arrows Capital (“3AC”), the two founders have refused to cooperate with recovery efforts and have absconded to unknown foreign countries. Without the founders’ voluntary cooperation, 3AC’s joint liquidators (the “JLs”) resorted to seeking relief from the Bankruptcy Court for the Southern District of New York in order to serve the founders and related entities with subpoenas outside of the United States. In an interesting and fairly unprecedented ruling, the bankruptcy court authorized service of a subpoena via social media and email.
Whose crytpo is it? With the multiple cryptocurrency companies that have recently filed for bankruptcy (FTX, Voyager Digital, BlockFi), and more likely on the way, that simple sounding question is taking on huge significance. Last week, the Bankruptcy Court for the Southern District of New York (Chief Judge Martin Glenn) attempted to answer that question in the Celsius Network LLC bankruptcy case.
It is difficult to predict what 2023 might hold for businesses in the UK. Given the difficult economic environment, many will already be facing a challenging start to the year. Although the challenges of the pandemic (such as lock downs) have gone, others have materialised. Energy price hikes and inflation rises continue to make trading conditions tough.
At some point in 2023 affected businesses may have to restructure, and others may need to enter a formal process. We consider what the restructuring landscape might look like and whether 2023 will be the year that the restructuring plan (RP) comes into its own.
The requirement for overseas entities to register or be registered on the UK Register of Overseas Entities (ROE) at Companies House could impact certain transactions that insolvency practitioners (IPs) and lenders are involved with.
Our latest quick guide highlights some of those areas and flags points for IPs and lenders to consider when dealing with property or land situated in England or Wales that is owned by, or where the intended purchaser is, an overseas entity.
The requirements to register or be registered on the ROE will impact not only those practitioners in the UK but also practitioners abroad who may have or intend to deal with UK property or land that is owned by an overseas entity.
Failure to register on the ROE carries both civil and criminal liabilities.
By registering on the ROE the overseas entity will receive an overseas entity ID number that will enable dealings with UK land and property to be registered at HM Land Registry. If they are not registered on the ROE, the overseas entity will be restricted from dealing with its UK property and land. Although largely impacting transactions in a solvent context, the requirement to be registered on the ROE to perfect a sale to an overseas entity, and dealing with land already owned by an overseas entity will impact those involved in restructuring and insolvency.
The important questions for all practitioners are:
(a) Is the overseas entity and intended disposition caught by the legislation?
(b) Do exemptions apply that enable the disposition to be registered at HM Land Registry notwithstanding that the overseas entity is not registered on the ROE?
(c) What steps need to be taken to ensure that adequate protections are included within contracts and documentation to ensure that the requirement to register on the ROE and/or the restriction on title that prevents dealing with land or property can be addressed.
The recent decision in Re Astora Women’s Health LLC illustrates the importance of cross-border recognition of insolvency processes, highlighting the benefits of a joined-up global approach which recognises that modern business do not stop for international borders.
With Astora hot off the presses and the twenty-fifth anniversary of the UNCITRAL Model Law on the horizon the team at SPB have taken stock of the cross-border recognition framework from the perspective of the UK and the US.
Online claims-trading platform Xclaim Inc. came under scrutiny this past summer in the Madison Square Boys & Girls Club Inc. bankruptcy case pending in the United States Bankruptcy Court for the Southern District of New York. Since at least 2019, Xclaim has executed agreements with at least five notice and claims agent firms to synchronize their proofs of claim registers with Xclaim’s website where such claims are posted for sale. The purpose of the real-time synchronization is to permit third-parties to purchase and sell creditor claims on Xclaim’s claims-trading website using real-time data. In exchange for the claims agents’ cooperation, Xclaim pays the claims agents a small percentage of the commissions that Xclaim obtains for facilitating the trades on its website.
The private business relationships between court-approved claims agents and Xclaim has raised concerns in the Southern District of New York and requires claims agents to be fulsome and transparent in their disclosure to the bankruptcy courts. All bankruptcy professionals can take away important lessons from the Xclaim matter.
The power to appoint an administrator is an important power for debenture holders when seeking to enforce their security. In order to exercise that power, the debenture has to be a qualifying floating charge (“QFC”) and it has to be enforceable.
The case of Borg-Olivier v Knowles & Ors [2022] EWHC 2579 (Ch) (“Borg-Olivier”), highlights the importance of the QFC being enforceable and the impact on the validity of the appointment of administrators if it is not.
In this case, the appointed administrators found themselves in the unfortunate position of not being validly appointed following the Court finding that the qualifying floating charge was not enforceable at the date of appointment.
On 11th November 2022, Mr Justice Zacaroli handed down judgment on an application for directions made by the officeholders of ten different energy supply companies (“ESC” or “ESCs”) seeking clarification on issues arising in the insolvencies of the ESCs which had not previously been the subject of judicial consideration.
In terms of quantum, the issues were valued at in excess of a hundred million pounds across the ten insolvencies and potentially many more millions of pounds on other ESC insolvencies not before the court.
The outcome of the application was of particular interest not just to the officeholders of the relevant insolvencies but particularly to Ofgem; the suppliers of last resort (“SoLR” or SoLRs”) and other significant creditors in the insolvencies. All were represented at the hearing which took place over 4 days in early October 2022.
Devinder Singh, a restructuring and insolvency partner in SPB’s Birmingham office, acted for one of ten applicants in an application for directions made in the High Court by a number of officeholders following the collapse of several energy supply companies (“ESC”).
The application sought directions on a number of key issues affecting the energy industry as a whole which until today, have not been addressed by the courts, including:-
