Beware of Demand Letters

An immediate concern for any company is a threat to present a winding up petition made in an email or letter – regardless of the size of debt, whether the debt is disputed or the company has a counterclaim.

The consequences of ignoring such a threat can have an immediate and adverse impact on a business. Failure to respond can be used as evidence that the company is unable to pay and that can be used as evidence to support presentation of a winding up petition.

In In re Golden Sphinx Ltd., 2023 WL 2823391 (Bankr. C.D. Cal. Mar. 31, 2023), the U.S. Bankruptcy Court for the Central District of California denied a motion filed by a creditor of a chapter 15 debtor seeking discovery from a bank that had provided financing to one of the debtor's affiliates.

A floating charge debenture holder has the advantage that they can enforce their security by appointing their choice of administrators. This is a powerful and useful tool for lenders but is subject to the caveat that the debenture has to be “qualifying”.

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.

Corporate restructurings are not always successful for many reasons. As a consequence, the bankruptcy and restructuring laws of the United States and many other countries recognize that a failed restructuring may be followed by a liquidation or winding-up of the company, either through the commencement of a separate liquidation or winding-up proceeding, or by the conversion of the restructuring to a liquidation. Chapter 15 of the Bankruptcy Code expressly contemplates that the status of a recognized foreign proceeding may change, and that a U.S.

‘If, at first, you don’t succeed, then try and try again’ is a fitting description for HMRC’s recent approach to restructuring plans, with its opposition of plans proposed by The Great Annual Savings Company (GAS) and Nasmyth Group Limited (Naysmyth).

The GAS sanction hearing (which is due to take place this week) will be the first time that HMRC has taken an active role contesting a restructuring plan at sanction following the case of Houst where the Court exercised its discretionary power to “cram down” HMRC.

Like debtors, bankruptcy trustees, official committees, examiners, and estate-compensated professionals, foreign representatives in chapter 15 cases have statutory reporting obligations to the bankruptcy court and other stakeholders as required by the plain language of the Bankruptcy Code. Such duties include the obligation to keep the U.S. bankruptcy court promptly informed of changes in either the status of the debtor's foreign bankruptcy case or the status of the foreign representative's appointment in that case. Furthermore, chapter 15 provides a U.S.

In In re Global Cord Blood Corp., 2022 WL 17478530 (Bankr. S.D.N.Y. Dec. 5, 2022), the U.S. Bankruptcy Court for the Southern District of New York denied without prejudice a petition filed by the joint provisional liquidators for recognition of a "winding-up" proceeding commenced under Cayman Islands law.

With all the market turmoil and headlines about insolvencies or potential insolvencies in the financial sector and the wider markets, and potential rescue of stressed/distressed entities, many clients are concerned, and should be thinking, about the potential impact of these developments on their derivatives (commonly documented under an ISDA master agreement (an ISDA)) and, in particular: (a) if the relevant event constitutes a default, potential event of default, event of default or termination event or, alternatively, will trigger automatic early termination, under their ISDAs with their

It is difficult to predict what 2023 might hold for businesses in the UK. Given the difficult economic environment, many will already be facing a challenging start to the year. Although the challenges of the pandemic (such as lock downs) have gone, others have materialised. Energy price hikes and inflation rises continue to make trading conditions tough.