The scheme of arrangement (Rescue Plan) prepared by the examiner of Mac Interiors Limited (Company) has not been approved by the High Court following strong objections from the Revenue Commissioners (Revenue).

In its challenge, Revenue argued that there had been an error in “class composition” or, in other words, an error in the classification of creditors that voted on the Rescue Plan.

Class Composition

With effect from 9 May 2022, a new Order 74C of the Rules of the Superior Courts came into operation. Order 74C facilitates the operation of the Companies (Rescue Process for Small and Micro Companies) Act 2021, which inserted a new Part 10A into the Companies Act 2014 (Part 10A).

1. State of the Restructuring Market

1.1 Market Trends and Changes

State of the Restructuring and Insolvency Market

There were 27,359 insolvencies in France as of the end of September 2021, down 25.1% from the same period in 2020, and down 47.9% from September 2019. Such reduction is relatively stable across all sectors, including those most severely affected by the health-related restrictions, such as accommodation and food services (down 44.2% year-on-year) and trade (down 28.1% year on year).

Fewer Insolvencies for More Opportunities

At the end of 2021, corporate bankruptcies (for most company sizes and in most sectors) were at their lowest level compared to the pre-COVID-19 figures from 2019, with a 50% drop in insolvency proceedings and a 10% decrease in pre-insolvency situations. This was largely due to the temporary impact of government emergency measures and support, including:

The Bankruptcy Code confers upon debtors or trustees, as the case may be, the power to avoid certain preferential or fraudulent transfers made to creditors within prescribed guidelines and limitations. The U.S. Bankruptcy Court for the District of New Mexico recently addressed the contours of these powers through a recent decision inU.S. Glove v. Jacobs, Adv. No. 21-1009, (Bankr. D.N.M.

The Companies (Rescue Process for Small and Micro Companies) Bill 2021 (Bill) detailing the government's proposed rescue process for small and micro companies (SCARP) has successfully passed through the Oireachtas and is expected to be signed into law shortly by the President. The legislation will be commenced at a future date by the Minister.

The Department of Enterprise, Trade and Employment has published the outline of proposed legislation for a dedicated rescue and restructuring framework for insolvent or potentially insolvent small and micro companies – see here.

In In re Smith, (B.A.P. 10th Cir., Aug. 18, 2020), the U.S. Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Tenth Circuit recently joined the majority of circuit courts of appeals in finding that a creditor seeking a judgment of nondischargeability must demonstrate that the injury caused by the prepetition debtor was both willful and malicious under Section 523(a)(6) of the Bankruptcy Code.

Factual Background

In a recent decision, the U.S. Bankruptcy Court for the Southern District of New York held that claim disallowance issues under Section 502(d) of the Bankruptcy Code "travel with" the claim, and not with the claimant. Declining to follow a published district court decision from the same federal district, the bankruptcy court found that section 502(d) applies to disallow a transferred claim regardless of whether the transferee acquired its claim through an assignment or an outright sale. See In re Firestar Diamond, 615 B.R. 161 (Bankr. S.D.N.Y. 2020).

InIn re Juarez, 603 B.R. 610 (9th Cir. BAP 2019), the Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit addressed a question of first impression in the circuit with respect to property that is exempt from creditor reach: it adopted the view that, under the "new value exception" to the "absolute priority rule," an individual Chapter 11 debtor intending to retain such property need not make a "new value" contribution covering the value of the exemption.

Background