Can a liquidator run an unjust enrichment claim to seek to recover PAYE and NIC liabilities from a company’s directors arising from the company’s use of a “disguised remuneration” employee benefit trust (“EBT”) scheme? Based on the findings of ICC Judge Barber in the case of Re Ethos Solutions Ltd, the answer is “no”.
A recent order from the United States Bankruptcy Court for the Southern District of New York puts to test the theory that “it is better to ask for forgiveness than permission.” After a lengthy dispute in the bankruptcy cases of Arcapita Bank B.S.C.(c) and its affiliates (the “Debtors”), the court held Bahrain Islamic Bank (“BisB”) in civil contempt for willfully violating the automatic stay. After it pays any fees and costs awarded to the Unsecured Creditors Committee (the “Committee”), BisB may realize the truth of another piece of common wisdom, “nothing in life is free” – not even forgiveness.
Where a commercial property is sold by a receiver or insolvency practitioner (IP), VAT must be charged on the sale if the owner had exercised and properly notified an option to tax (OTT) in respect of the property. The IP acting on behalf of the seller needs to establish whether an OTT has been made and notified so that VAT is charged , if needed. This can be difficult if company records are in disarray, directors of the insolvent company are non-cooperative and/or the IP or receiver has limited knowledge of the property and company.
The new year has seen a rapid pace being set in terms of anticipated and actual legislative, regulatory and common law changes across Australia’s restructuring and insolvency regimes. In our latest insight we flag potential changes to not only the legislative regime but also the regulatory framework and consider the outlook for key stakeholders.
Following the sanctioning of the Good Box restructuring plan (RP) it seems the answer is yes. This might sound surprising to those familiar with schemes of arrangement, because that outcome is at odds with the long-standing decision in Re Savoy Hotels.
For those less familiar with schemes and scheme case law, the court declined to sanction the Savoy scheme because the company did not approve it, consequently the judge found that the court had no jurisdiction to sanction it.
In Good Box the position was somewhat different from your “usual” RP or scheme, because firstly the RP had been proposed (and drafted) by a creditor and secondly the company was in administration. Although the administrators said that their position was neutral, they did vote against the RP (and some might say that by doing that they were effectively opposing it).
Did the court therefore have had jurisdiction to sanction the RP when one of the parties to the compromise (the company) did not consent, or at least did not positively consent to it and in fact had voted against it?
Last month, the United States Bankruptcy Court for the District of Massachusetts denied confirmation of a cannabis company employee’s Chapter 13 plan and dismissed his bankruptcy case. The employee, Scott H. Blumsack (the “Debtor”), is a general manager who is licensed in Massachusetts to work for Society Cannabis Co., a Massachusetts-licensed retailer, wholesaler, and producer of cannabis products. In his role, the Debtor oversees 16 full-time employees and directly serves cannabis products to customers. The Debtor earns $75,000 annually but owns no equity in Society Cannabis and is not entitled to any profit-sharing opportunities.
The challenges facing the care sector are not news to anyone. However, as we enter 2023, a sector which has historically operated on thin margins may be about to hit breaking point, with the number of insolvencies involving residential care businesses having increased by 59% in the last year alone.
Is it possible to identify the straw which broke the camel’s back? Or is it simply that these stressors have been creeping up on businesses, before finally hitting a point where they cannot be ignored?
Businesses around the globe, including those situated in Germany, continue to face difficulties because of disruptions in their supply chain created, in particular, by COVID-19 and the war in Ukraine.
To add to that, the new German Supply Act on Corporate Diligence Obligations in Supply Chains (the “Act”) is likely to place further pressure on companies because of the steps that they are required to take to ensure compliance.
In our latest insight, we explain which companies the Act will apply to, highlight the requirements under the Act in relation to risk management, explain the due dilligence obligations and steps a company can take if a supplier is in breach.
On 7 December 2022, the European Commission unveiled a draft directive (2022/0408 (COD)) (the “Directive”) proposing to harmonise certain aspects of insolvency laws across the European Union[1].
This blog specifically discusses the impact of the draft Directive on French law. For a more detailed and general analysis of the draft Directive, see our alert.
The draft Directive aims to encourage cross-border investments by reducing inconsistencies between insolvency rules and laws across the EU. The objective is to improve the development of the Capital Markets Union and to promote freedom of capital movement. This Directive focuses on formal insolvencies rather than pre-insolvency proceedings.
Are bankruptcy doors now opening for cannabis companies? A decision last week from a California bankruptcy court indicates perhaps so, at least for cannabis companies that are no longer operating.
Factual Background
The Hacienda Company, LLC (the “Debtor”) was in the business of wholesale manufacturing and packaging cannabis products. After it ceased operations in February 2021, the Debtor transferred its value, through the sale of intellectual property, to a publicly traded Canadian company, Lowell Farms, Inc. (“Lowell Farms”), receiving approximately 9% of Lowell Farms’ stock in consideration. Lowell Farms’ sole business is cannabis growth and sales.
The Debtor filed its chapter 11 petition on September 21, 2022. In response, the United States Trustee (the “UST”) filed a motion to dismiss the case for “cause” under section 1112(b) of the Bankruptcy Code, arguing that dismissal was required because: (a) the Debtor’s equity ownership in Lowell Farms violated the Controlled Substances Act (the “CSA”); (b) the Debtor is grossly mismanaging the estate because all of its assets are subject to forfeiture under the CSA; and (c) the Debtor filed its case in bad faith because any plan proposed by the Debtor would be funded from sources obtained in violation of the CSA.
The filing of the motion to dismiss could not have been a surprise to the Debtor given the general hostility of bankruptcy courts to cannabis debtors (see Cannabis and District Courts: Are Those Courthouse Doors Closed Too? | Restructuring GlobalView (restructuring-globalview.com, Cannabis and Bankruptcy: 2020 in Review | Restructuring GlobalView (restructuring-globalview.com, Up in Smoke: More Cannabis Companies Get Shut Out of Bankruptcy | Restructuring GlobalView (restructuring-globalview.com). However, and most likely to the shock of both the Debtor and the UST, on December 21, 2022, the bankruptcy court entered an order denying the UST’s motion to dismiss, and on January 20, 2023, the bankruptcy court issued its memorandum opinion.
