The Insolvency Service (in reply to a letter from R3) has confirmed that it will be reframing its view of the term "creditor". This follows the cases last year of Pindar and Toogood where the court was asked to consider whether a paid secured creditor should have consented to an administration extension and therefore, in the absence of consent, whether the extensions were valid in both cases, the judges confirmed that the consent of paid secured creditors was not required.
Restructuring Plans (RPs)
2024 was a year of firsts for RPs, and as case law in this area continues to evolve, there is little doubt that this will carry through into 2025.
It would be remiss not to expect to see more RPs in 2025. News of Thames Water's restructuring is "splashed" all over the press and Speciality Steel's plan might see the first "cram up" of creditors, but there seems a long way to go to get creditors onside.
In a case of first impression in the Ninth Circuit, the US Court of Appeals recently handed bankruptcy trustees a significant power by ruling in TheLovering Tubbs Trust v. Hoffman (In re O’Gorman) that a trustee can avoid intentionally fraudulent transfers under the Federal Bankruptcy Code, even if no creditor suffered harm as a result.
The below sets out key considerations when dealing with an extension of an administration at the end of the first-year anniversary.
Categorisation of a charge as fixed or floating will have a significant impact on how assets are dealt with on insolvency and creditor outcomes.
Typical fixed charge assets include land, property, shares, plant and machinery, intellectual property such as copyrights, patents and trademarks and goodwill.
Typical floating charge assets include stock and inventory, trade debtors, cash and currency, movable plant and machinery (such as vehicles), and raw materials and other consumable items used by the business.
On August 28, 2024, Judge Gregory B. Williams of the US District Court for the District of Delaware issued a ruling in AIG Financial Products Corporation, Civ. No. 23-573, affirming an order on appeal from the Delaware Bankruptcy Court that denied a motion to dismiss a chapter 11 petition as a bad faith filing.
The £150 million judgment makes clear the full impact of the trading misfeasance offence for directors.
On July 19, 2024, Judge Michael Wiles of the US Bankruptcy Court for the Southern District of New York issued a ruling in In re Mercon Coffee Corporation, Case No. 23-11945, invalidating insider releases in a proposed chapter 11 plan on the basis that the releases were improper retention-related transfers.
Judge Wiles found that he could not approve the releases – even though the debtors had promised them and insiders had relied upon that promise – because the releases did not meet the strict requirements of Bankruptcy Code Section 503(c).
FRP Advisory Trading Limited won the United Kingdom's largest-ever wrongful trading claim and successfully established the first "misfeasance trading" claim against former directors of British Home Stores ("BHS"), highlighting the critical responsibilities of directors managing financially troubled company assets.
The UK Financial Conduct Authority (FCA has issued a consultation about proposed changes to its Guidance for Insolvency Practitioners. The aim is to clarify existing guidance and provide more information to insolvency practitioners (IPs) on how to deal with regulated firms.