Two recent Supreme Court of Canada decisions demonstrate that the corporate attribution doctrine is not a one-size-fits-all approach.

The High Court in England recently issued a stark warning to directors who fail to consider their duties to the company and its creditors when entering financial difficulties.

Background

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.

Court approval of a sale process in receivership or Bankruptcy and Insolvency Act (“BIA”) proposal proceedings is generally a procedural order and objectors do not have an appeal as of right; they must seek leave and meet a high test in order obtain it. However, in Peakhill Capital Inc. v.

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.

With the UK Government protections to prevent a flood of corporate insolvencies all now tailing off, will 2022 see the much talked about "tsunami" of insolvencies? Market views on that are mixed but it does seem certain that there will be at least a significant upturn in insolvencies compared to 2020 and 2021. With that in mind, it's worth considering the major differences between Scotland and England when it comes to corporate insolvencies.

1. There is no Official Receiver in Scotland

At the end of September, Government protections that were designed to prevent a flood of insolvencies are set to be lifted. Specifically, the suspension of the provisions around wrongful trading will be over and creditors can once again seek to put companies who owe them money into liquidation. 

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").