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.
A bedrock principle underlying chapter 11 of the Bankruptcy Code is that creditors, shareholders, and other stakeholders should be provided with adequate information to make an informed decision to either accept or reject a chapter 11 plan. For this reason, the Bankruptcy Code provides that any "solicitation" of votes for or against a plan must be preceded or accompanied by stakeholders' receipt of a "disclosure statement" approved by the bankruptcy court explaining the background of the case as well as the key provisions of the chapter 11 plan.
There are a few things that we can be almost certain of in 2024, and others are things to add to the watchlist, but with a potential change in government on the cards, there are likely to be a few curveballs thrown into the mix that none of us can predict.
Increasing Insolvencies
Snapshot
The Restructuring Plan (Plan) was introduced as part of the UK Corporate Insolvency and Governance Act 2020, which introduced a new part 26A into the Companies Act 2006 (CA 2006). The part 26A Plan provisions are largely based on the existing scheme of arrangement rules detailed under part 26 of the CA 2006, and it is often referred to as the “super scheme”.
Plans now sit alongside schemes of arrangement and company voluntary arrangements (CVAs) to provide a further restructuring option for companies and insolvency practitioners alike.
In Short
The Situation: The U.S. Supreme Court considered whether § 363(m) of the Bankruptcy Code, which limits a party's ability to undo an asset transfer made to a good-faith purchaser in a bankruptcy case, is jurisdictional.
The ability of a bankruptcy trustee or chapter 11 debtor-in-possession ("DIP") to assume, assume and assign, or reject executory contracts and unexpired leases is an important tool designed to promote a "fresh start" for debtors and to maximize the value of the bankruptcy estate for the benefit of all stakeholders. However, the Bankruptcy Code establishes strict requirements for the assumption or assignment of contracts and leases.
Madoff
On April 19, 2021, the U.S. Supreme Court declined to hear the appeal of a landmark 2019 decision issued by the U.S. Court of Appeals for the Second Circuit regarding the applicability of the Bankruptcy Code's safe harbor for certain securities, commodity, or forward contract payments to prevent the avoidance in bankruptcy of $8.3 billion in payments made to the shareholders of Tribune Co. as part of its 2007 leveraged buyout ("LBO").
On October 26, 2020, the U.S. Bankruptcy Court for the Southern District of Texas issued a long-awaited ruling on whether natural gas exploration and production company Ultra Petroleum Corp. ("UPC") must pay a make-whole premium to noteholders under its confirmed chapter 11 plan and whether the noteholders are entitled to postpetition interest on their claims pursuant to the "solvent-debtor exception." On remand from the U.S.