To encourage vendors and other creditors to continue doing business with financially distressed entities, the Bankruptcy Code includes various defenses to litigation brought by a bankruptcy trustee or chapter 11 debtor-in-possession ("DIP") seeking to avoid pre-bankruptcy payments to such entities. One of these defenses shields from avoidance transfers made to pay debts incurred in the ordinary course of business of the debtor and the transferee.
Federal appellate courts have traditionally applied a "person aggrieved" standard to determine whether a party has standing to appeal a bankruptcy court order or judgment. However, this standard, which requires a direct, adverse, and financial impact on a potential appellant, is derived from a precursor to the Bankruptcy Code and does not appear in the existing statute.
There is longstanding controversy concerning the validity of third-party release provisions in non-asbestos trust chapter 11 plans that limit the potential exposure of various non-debtor parties involved in the process of negotiating, implementing and funding a plan. In the latest chapter of this debate, the U.S. Court of Appeals for the Second Circuit handed down a long-awaited ruling regarding the validity of nonconsensual third-party releases in the chapter 11 plan of pharmaceutical company Purdue Pharma, Inc. and its affiliated debtors (collectively, "Purdue").
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
Federal district courts, with the consent of the parties, are authorized by statute to refer "civil matter[s]" to magistrate judges for the purpose of conducting all proceedings and entering a judgment in the litigation. In the case of an appeal to a district court from a bankruptcy court, however, this statutory authority arguably conflicts with another statutory provision dictating that appeals from a bankruptcy court order or judgment be heard by a "district court" or a "bankruptcy appellate panel." This apparent conflict was recently addressed by the U.S.
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
Supreme Court to Resolve Circuit Split on Constitutionality of U.S. Trustee Fee Hike
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”).
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.