(UK) Director Administration Appointments: Does the Company Really Need a Moratorium?

By Rachael Markham on November 30, 2023 Posted in UK

With increased public awareness that a notice of intention to appoint administrators (NOI) has been filed, we are finding that third parties – usually the company’s creditors, suppliers and employees – are disrupting the administration process in a way that can cause significant risks to a company’s ability to continue trading, the overall value of its business and its ability to be rescued as a going concern.

In today’s environment, when knowledge that an NOI has been filed is shared via social media and reported in the press almost immediately following the NOI being filed at court, are concertina administration appointments the answer to mitigating potential disruption?

Our latest insight highlights the issues we see in practice that can disrupt administration appointments, and considers whether and when shortening the appointment process might be an option.

(US) Delaware Bankruptcy Court Strikes Down Global Rockport Settlement

By Kyle Arendsen on November 30, 2023 Posted in US

A consensual resolution among all stakeholders is an important goal of any bankruptcy proceeding. But how can parties reach a consensual deal if financing is drying up quickly and the prospect of confirming a plan is grim? That was the issue facing the Rockport debtors (the “Debtors”) in their Delaware bankruptcy cases styled In re The RP Co. Liquidating, LLC. In this case, the Debtors filed a motion asking the bankruptcy court to approve a global settlement (the “Settlement”) with all parties-in-interest—except the Office of the United States Trustee (the “U.S. Trustee”). The Settlement offered general unsecured creditors the chance to receive a distribution in exchange for certain debtor and third-party releases.

(US) Who Owns the Crypto: Bankruptcy Court Rules That Customers Do Not Own The Deposited Crypto

By Mark Salzberg on November 29, 2023 Posted in US

Who owns cryptocurrency held by a cryptocurrency exchange? Do the cryptocurrency assets belong to the customers who deposited the crypto with the exchange, or do the cryptocurrency assets belong to the exchange itself? The answer to this question will have huge significance, both in terms of creditor recoveries as well as preferential transfer liability exposure.

Routes to Reorganisation: A Comparative Study of the Insolvency Procedures Available in the UAE, KSA, US and England and Wales

By Monika Lorenzo-Perez, Rebecca Terrace, Nima Fath, Peter Morrison and Tara Peramatukorn on November 23, 2023 Posted in Cross Border, UK, US

Our recent insight provides a comparative summary of the insolvency procedures that are available in the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA), England and Wales, and the US. It compares which debtor-in-possession, office-holder and terminal procedures are available in each of those jurisdictions, as well as considering the extent to which the UAE and KSA insolvency laws provide a framework for the recognition of cross-border insolvency.

To read that and more about how the laws in those countries have developed to support reorganisation and how those changes have been informed by the established frameworks that exist in England and Wales, and the US see here.

This insight was first published in the INSOL Restructuring Alert (November 2023)

This insight was published prior to the publication of Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy (repealing Federal Decree-Law No. 9 of 2016 on Bankruptcy

Tips For Subchapter V Creditors (US)

By Kelly Singer on November 15, 2023 Posted in US

The overwhelming majority of my practice has involved larger, complex Chapter 11 cases and out-of-court restructurings, representing debtors, Chapter 11 trustees, committees, or creditors. However, with the expansion during Covid of the Subchapter V debt limit to $7.5 million, I have found myself participating in multiple Subchapter V cases as counsel to creditors. I discovered quickly that habits developed in larger Chapter 11 cases do not necessarily translate to Subchapter V. Below, I will share some tips in representing creditors in Subchapter V cases that will be useful to all attorneys new to the Subchapter V arena, even those, like me, with prior Chapter 11 experience.

(UK) Moratoriums – a New Stay on Winding Up Petitions?

By Elliott Hill on November 14, 2023 Posted in UK

In a recent decision that will add some welcomed clarity to the imposition of Part A1 moratoriums over companies which have been presented with a winding-up petition, the High Court has reflected on the requirements of section A4 of the Insolvency Act 1986 (the “Act”) and confirmed the test that must be satisfied in order for it to make such an order.

In Grove Independent School Ltd, Re, 2023 WL 06795092 (2023), the court considered whether it had jurisdiction, and if so the threshold to be passed, for it to grant an order implementing a moratorium over The Grove Independent School Limited (the “Company”) in circumstances where a creditor, namely HMRC, had presented a winding-up petition against the Company.

(UK) ‘Substitution First, Standing Later’ – The Risk of Supporting Creditors

By Jess Bradley and Rachael Markham on November 9, 2023 Posted in UK

The case of Liberty Commodities Ltd v Citibank NA London & Ors [2023] EWHC 2020 (Ch) provides a helpful reminder of the principles that the court will adopt when dealing with a winding up petition – particularly where there are supporting creditors.

Even when the company and petitioning creditor have reached agreement in respect of the petition debt and wish to withdraw, they can only do that if there are no supporting creditors. Further if a supporting creditor is then substituted as the petitioner, not only does this extend the life of the petition, but it can also impact the original petitioner if ultimately the company is wound up. In that case, it is likely that the original petitioner will have to repay any monies received in satisfaction of the original petition debt (s127 Insolvency Act 1986 applies).

This decision therefore brings into sharper focus the need for companies to address the threat of a winding up petition as soon as it is received. More so given that creditors are becoming aware of winding up petitions at a much earlier stage and often before they are advertised. See our Insight for further detail.

(UK) Streamlining Out of Hours Qualifying Floating Charge Holder Appointments

By Victoria Green and Rachael Markham on November 8, 2023 Posted in UK

Making an out of hours qualifying floating charge holder (“QFCH”) appointment can be problematic due to the procedural requirements set out in Rule 3.20 of the Insolvency (England and Wales) Rules 2016 (the “Rules”).

If a QFCH wishes to make an appointment when the court is closed then it can do so but must follow the procedure set out in the Rules which requires the appointment documents to be sent by fax or (more likely) email, with the hard copy appointment documents being physically taken to court on the next occasion the court is open for business. However, the requirement to “take” the documents to court, conflicts with the fact that court documents should be filed electronically on ce-file. This provokes different responses from the court, sometimes the documents will be accepted over the counter, other times they will not.

(UK) HMRC and Restructuring Plans: The Next Chapter

By Helena Clarke and Rachael Markham on November 6, 2023 Posted in UK

A thorny question facing a company when considering a Restructuring Plan is how to deal with HMRC particularly following HMRC’s opposition to recent plans.

Creditors now have some assistance in these deliberations thanks to guidance published by HMRC setting out how they will approach discussions with companies considering a Restructuring Plan.

The guidance reflects the stance HMRC has taken when opposing plans and doesn’t say anything particularly unexpected or controversial. However, it does at least set a benchmark for the future by making clear that HMRC will expect proper engagement and explanations, justification for past failures to meet tax liabilities, confidence that future tax liabilities will be met, and recognition of HMRC’s status as “tax collector”.

Are UK Administrators Criminally Liable For Failing to File a HR1?

By Victoria Green on November 1, 2023 Posted in UK

The answer to that question and with a huge sigh of relief is thankfully not, following the Supreme Court finding that an administrator of a company appointed under the Insolvency Act 1986 (“IA 1986”) is not an “officer” of the company within the meaning of section 194(3) of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”).

The Supreme Court in handing down its judgment in R (on the application of Palmer) (Appellant) v Northern Derbyshire Magistrates Court and another (Respondents) allowed Mr Palmer’s appeal and quashed the previous decision made by the District Judge in the Northern Derbyshire Magistrates – see our previous blog.

This decision will be welcomed by insolvency practitioners given the potential criminal liability that attaches to a failure to comply with section 194(3) of TULRCA.