It is usual for administrators to ask for an administration to be extended by 12 months – but we have seen the courts agree to longer periods. For example, certain of the Lehman group company administrations were extended by periods of four and six years – having previously been extended by eight.
In the more recent case of VTB Capital Plc[1] the court extended the administration period for 5 years.
So, when is it that the Court is likely to agree to a long extension? Bearing in mind that extensions aside, the legislation only provides for an administration to last for 12 months.
The date that a winding up petition is presented has consequences – consequences for the company subject to the petition, its directors, the petitioning creditor and it is also important in the context of a subsequent liquidation where the date is relevant to claims which a liquidator can bring.
Although seemingly a simple question, the Court of Appeal was asked to determine the date of presentation of a winding up petition when, in today’s world, petitions are now filed at court electronically using ce-file (Re A Company (CR-2024-BHM-000012 [2024] EWCA Civ 1436).
Following the decisions in Fore Fitness and Active Wear – where the court examined the validity of decisions made by a sole director of a company that operated wholly or partly under the Model Articles[1]– the position was not entirely settled.
In the context of administration appointments where the validity of an appointment rests on the power of the appointor to make an appointment, the uncertainty is more acute. If there is no power, the validity of the appointment is brought into question. Although Active Wear did bring comfort to practitioners (see discussion in our earlier blog) it left a question mark about decisions made by a sole director where the company operated under Model Articles but historically there had been more than one director – in such instances, could a sole director transact business?
In the recent decision of KRF Service (UK) Limited [2024] the judge had to consider that question.
In KRF the company issued an application to appoint administrators, following a resolution passed at a board meeting by the company’s sole director. The company had prevously had multiple directors, but at the time of the resolution to appoint administrators only one was in office – the director being unable to find anyone willing to act because of sanction issues, and the other directors having resigned.
Subchapter V bankruptcy cases have exploded in popularity, primarily due to its high rate of obtaining confirmed plans, significantly lower costs, faster pace, and ability for debtors to retain the equity in their businesses. But some bankruptcy courts and circuit courts have begun expanding exceptions for debts that Subchapter V debtors cannot discharge. Recently, former NFL superstar wide receiver Antonio Brown demonstrated when such an exception can apply and how prepetition judgment creditors can preserve their claim against debtors notwithstanding a bankruptcy filing. Depending on the circuit, Brown’s bankruptcy case also serves as a warning to corporate Subchapter V debtors attempting to discharge prepetition debts.
The powers of investigation afforded to office-holders under s. 236 of the Insolvency Act 1986 are there to enable the court to help an office-holder discover the true facts concerning the affairs of a company, its trading and dealings, to allow the office-holder to complete their function.
These powers are wide reaching and include compelling the provision of information to the office-holder by delivery up of books, papers or other records, answering requests for clarification, providing affidavits or submitting to oral examinations.
Furthermore, these powers can extend to documents which comprise not only the company’s own records but those of third parties insofar as they relate to the affairs or property of the company. However, when it comes to exercising its discretion against third parties, the court must balance the reasonable requirements of the office-holder to obtain the information or documentation sought, against any possible oppression or inconvenience to the third-party.
The Supreme Court recently issued its long-awaited decision in Harrington v. Purdue Pharma L.P., 144 S.Ct. 2071 (U.S. 2024) (“Purdue Pharma”), addressing whether nonconsensual third-party releases are permissible under the Bankruptcy Code. In a 5-4 decision, the Court ruled that nonconsensual third-party releases are not permitted under the Bankruptcy Code. Notably, however, the Supreme Court did not opine on the issue of whether for a release to be deemed consensual it must contain an “opt-in” or “opt-out” provision for creditors and parties-in-interest. See Purdue Pharma, 144 S.Ct. at 2087–88 (“As important as the question we decide today are ones we do not. Nothing in what we have said should be construed to call into question consensual third-party releases offered in connection with a bankruptcy reorganization plan; those sorts of releases pose different questions and may rest on different legal grounds than the nonconsensual release at issue here. . . . Nor do we have occasion today to express a view on what qualifies as a consensual release or pass upon a plan that provides for the full satisfaction of claims against a third-party nondebtor.”). Thus, this issue remains open.
While there are variations as to process, an “opt-out” release typically requires parties entitled to vote on the plan and who have received ballots to do so, or nonvoting parties (who are deemed to accept or reject a plan) who have received notice, to check a box affirmatively indicating that they do not agree to provide the releases which the plan seeks to provide. In other words, in order not to be deemed to have agreed to the releases, the party must take affirmative action demonstrating a conscious decision to do so. Parties that abstain from voting will typically be deemed to have consented to the releases. In some cases, where no ability to opt-out has even been provided, parties that vote in favor of a plan are also deemed to consent to the releases. In contrast, under an “opt-in” mechanism, voting and nonvoting parties must check a box affirmatively agreeing to the nondebtor releases. Any party that does not check the box, or “opt-in,” is deemed to be a non-releasing party, including parties who do not return ballots at all. Bankruptcy Judge Craig T. Goldblatt from the District of Delaware is one of the latest judges to grapple with this issue.
Earlier this year ICC Judge Baister handed down judgment in the case of UKCloud Ltd, building on the decision in Avanti[1]by providing further analysis around the distinction between fixed and floating charges – following a dearth of caselaw on the point since Spectrum.[2]
This blog pulls together some of the key messages and practical takeaways from the case.
The statistics are clear that the number of restructuring proceedings in Poland is on rise.
Among all types of restructuring proceedings available in Poland, the procedure which is of most interest is the approval of an arrangement, primarily because it is the least formal and it offers special protection against enforcement.
However, with the increase in the number of restructuring proceedings, the instances of misuse are also increasing. The main motivation for initiating proceedings is often to avoid enforcement during the protection period or to cut down debts, even when there is no chance of the arrangement being approved or performed. In this blog we consider how creditors can defend themselves against such situations.
In the case of JDK Construction Limited the Court of Appeal had to consider whether an earlier decision by a High Court judge that liquidators had been validly appointed was correct.
The answer to that question turned on whether the resolutions that the company had passed to place the company into voluntary liquidation were valid given there were questions over who the members of the company were (or should have been) at the time the resolutions were passed.
The liquidators had relied on the filings at Companies House, but these did not reflect what ought to have been the position following shares being transferred without one of the shareholders knowing. Although it will be rare that shareholdings are transferred in the circumstances outlined below, one question this decision raises is how much reliance can a practitioner place on the members register? The trial judge said the register is conclusive evidence, but is it?
And what if the register is wrong, does this place an officeholder’s appointment at risk?
It seems like s248 of the Insolvency Act 1986 (“Act”) is flavour of the month with the judiciary at the moment, with two recent cases analysing this in the context of administration extensions (read our previous blogs here and here ) and now a further decision considering this in the context of converting an administration into creditors voluntary liquidation (“CVL”) – the question this time being whether “preferential creditors” are unsecured creditors in the context of converting an administration to liquidation under paragraph 83 of Schedule B1 (“Schedule B1”). The answer (see below) offers a helpful solution.
