Borrower beware: in times of distress, your credit documents may give your secured lenders an opportunity to “flip” control of your board

Distress happens, even at companies that once appeared financially solid. When it does, the company, its board (which may be controlled by a sponsor in a public or private equity scenario), and its lenders often enter into restructuring discussions in search of a consensual path forward, typically under the terms of a forbearance agreement.

Introduction

The holidays came early for the United States Trustee (the “U.S. Trustee”) on November, 3, 2020, when a three-judge panel of the United States Circuit Court for the Fifth Circuit, on direct appeal, reversed the bankruptcy court and upheld the constitutionality of a 2017 increase to quarterly fees payable to the U.S. Trustee in Hobbs v. Buffets LLC (In re Buffets LLC), No. 19-50765, 2020 U.S. App. LEXIS 34866 (5th Cir. Nov. 3, 2020). Although the Fifth Circuit’s opinion addresses a variety of constitutional challenges to the recent increase to U.S.

Did you know that a liquidator of a foreign company may seek the assistance of the Hong Kong Court to obtain orders for the production of information which orders are, in substance, of the type made in Hong Kong windings-up under section 221(3) of the Companies (Winding-up and Miscellaneous Provisions) Ordinance?

On a recent Mayer Brown JSM application (on behalf  of the Liquidators of one of the Lehman Brothers  entities) to reduce and expunge proofs of debt, the  Hong Kong High Court has ruled that creditors who  receive an overpayment of dividends due in respect of  a proof of debt which has been “improperly  admitted” (rule 96, Companies Winding-Up Rules)  must give credit for those overpayments before  receiving further dividends in the liquidation (Re  Lehman Brothers Commercial Corp Asia Ltd (“LBCCA”) [2014] HKEC 849) (“Proof Appl

On 7 January 2014 the Financial Services and Treasury Bureau of the Hong Kong Government (FSTB), in conjunction with the Hong Kong Monetary Authority (HKMA), Securities and Futures Commission (SFC) and the Insurance Authority (IA), issued a first stage consultation regarding the introduction of a resolution regime for financial institutions in Hong Kong (the “Consultation”). The Consultation initiates a discussion as to the regulatory structure and principles that would be required to establish an effective resolution regime for financial institutions in Hong Kong.