Key Points

• A dividend is a ‘transaction’ and therefore can be challenged under s 423 IA 86
• A duty to act in the best interests of creditors does not arise simply because there is a risk of insolvency which is not ‘remote’

The Facts

What does it mean to “cure” a default in the context of a plan of reorganization? This question arises by virtue of section 1123(a)(5)(G) of the Bankruptcy Code, which requires that a plan provide adequate means for the plan’s implementation, including the “curing or waiving of any default.” On November 4, 2016, the Ninth Circuit Court of Appeals defined what it means to “cure” by holding that a debtor can only cure a contractual default under a plan of reorganization by complying with contractual post-default interest rate provisions.

Key Points

Having launched the original version three years ago, we have refreshed our Safeguarding Your Business guide as an eBook. The guide assists clients in protecting themselves either proactively or reactively in respect of a counterparty’s insolvency with new sections on trusts and examples of how we have helped, using some of the principles raised.

When should debt be recharacterized as equity? The answer to this question will have an enormous impact upon expected recovery in bankruptcy since equity does not begin to get paid until all prior classes of claims are paid in full. In a recent unpublished opinion, the Fourth Circuit Court of Appeals provided some guidance on when and in what circumstances recharacterization is appropriate. The Court’s decision also serves as warning to purchasers of debt that they may not be able to hide behind the original debt transaction in a recharacterization fight.

Key Points

• Interpretation of EU case law on protection of pension payments on employer insolvency not “entirely free from doubt”

The Facts

The claimant (C) was a member of the T&N defined benefit pension scheme from 1971 to 1998. In 2006, the scheme entered a PPF assessment period and C calculated that his pension under the PPF would, as a result of caps and limitations on indexation, be roughly 67% less than what he had previously expected.

Key Points

• Trustees in bankruptcy entitled to more than return of shares wrongfully transferred by bankrupt
• Trustees also entitled to recover loss in the value of shares
• Appropriate basis of valuation was fair value (not market value)

The Facts

The Jevic Holding Corp. bankruptcy case is proving to be precedent setting.  In a prior post, we examined how the court had greatly increased the evidentiary burden on a party seeking to hold one company liable for the debts of another company under a “single employer” theory.  That ruling was seen as a boon for private equity firms who were oftentimes the target of Chapter 11 creditor

Key points

• Court does not have jurisdiction to direct detailed assessment of fees agreed by administrators on application of liquidator
• Administrators can agree solicitors’ fees for work carried out during the administration after they cease holding office
• The court has no inherent jurisdiction to direct a detailed assessment

The facts

Key Points

• Court held notice to scheme creditors (here two weeks) was not sufficient in light of complexity of scheme
• Court also highlighted deficiencies in supporting documentation

The Facts