Bankruptcy and appellate courts disagree over the standard that should apply to a request for payment of a break-up fee or expense reimbursement to the losing bidder in a sale of assets outside the ordinary course of the debtor's business. Some apply a "business judgment" standard, while others require that the proposed payments satisfy the more rigorous standard applied to administrative expense claims.
The finality of asset sales and other transactions in bankruptcy is an indispensable feature of U.S. bankruptcy law designed to maximize the value of a bankruptcy estate as expeditiously as possible for the benefit of all stakeholders. To promote such finality, section 363(m) of the Bankruptcy Code prohibits reversal or modification on appeal of an order authorizing a sale or lease to a "good-faith" purchaser or lessee unless the party challenging the sale obtains a stay pending appeal. What constitutes "good faith" has sometimes been disputed by the courts.
In Gulfport Energy Corp. v. FERC, 41 F.4th 667 (5th Cir. 2022), the U.S. Court of Appeals for the Fifth Circuit tripled down on its nearly two-decades-long view that filed-rate contracts regulated under the National Gas Act (the "NGA") and the Federal Power Act (the "FPA") can be rejected in bankruptcy without the consent of the Federal Energy Regulatory Commission ("FERC"). Reaffirming its previous rulings in In re Mirant Corp., 378 F.3d 511 (5th Cir. 2004), and In re Ultra Petroleum Corp., 28 F.4th 629 (5th Cir.
What is the so-called "creditor duty"?
This is the duty, introduced into English common law by the leading case of West Mercia Safetywear v Dodd1 in 1988, of company directors to consider, or act in accordance with, the interests of the company's creditors when the company becomes insolvent, or when it approaches, or is at real risk of insolvency.
Background
On 22 July 2022, the English High Court sanctioned Houst Limited’s (“Houst” or the “Company”) restructuring plan (the “Restructuring Plan”), which significantly, is the first time a Restructuring Plan has been used to cram down HM Revenue & Customs (“HMRC”) as preferential creditor.1
Background
When existing interest holders attempt to retain ownership of a chapter 11 debtor after confirmation of a nonconsensual plan of reorganization, the Bankruptcy Code's plan confirmation requirements, including well-established rules regarding the classification and treatment of creditor claims and equity interests, can create formidable impediments to their reorganization strategy. In In re Platinum Corral, LLC, 2022 WL 127431 (Bankr. E.D.N.C. Jan. 13, 2022), the U.S.
On 12 January 2022, the English High Court granted Smile Telecoms Holdings Limited’s (“Smile” or the “Company”) application to convene a single meeting of plan creditors (the super senior creditors) to vote on the Company’s proposed restructuring plan (the “Restructuring Plan”). It is the first plan to use section 901C(4) of the Companies Act 2006 (“CA 2006”) to exclude other classes of creditors and shareholders from voting on the Restructuring Plan on the basis that they have no genuine economic interest in the Company.
Background
On the 19th of August 2021, the English High Court sanctioned a Part 26A restructuring plan proposed by the administrators of Amicus Finance plc (in administration) (“Amicus”) for the company’s solvent exit from administration, enabling the company to be rescued as a going concern (the “Restructuring Plan”).
Whether the pre-Bankruptcy Code "solvent debtor exception" requiring the payment of postpetition interest to dissenting unsecured creditors under a chapter 11 plan survived the enactment of the Bankruptcy Code in 1978 has been the subject of a handful of recent court rulings. This is, perhaps, most notably true of the chapter 11 case of Ultra Petroleum Corp. in connection with a protracted battle over the debtor's obligation to pay make-whole premiums to unsecured noteholders.
On 29 September 2021, the English High Court rejected a challenge in respect of Caff Nero's company voluntary arrangement ("CVA"), brought by a landlord on the grounds of material irregularity and unfair prejudice. The single disgruntled landlord, with the backing of the EG Group ("EG") (who were interested in acquiring Caff Nero), argued that the directors of the company and the CVA nominees breached their respective duties in refusing to adjourn or postpone the electronic voting process to vote on the CVA, after EG had submitted an eleventh-hour offer for Caff Nero.