Insolvency and Restructuring Bulletin

The BC Court of Appeal has confirmed the jurisdiction for Canadian courts to make reverse vesting orders (“RVO”) in receivership proceedings. British Columbia v.

Overview

In the recent decision of Invico Diversified Income Limited Partnership v NewGrange Energy Inc, 2024 ABKB 214 (“NewGrange”), the Alberta Court of King’s Bench clarified when gross overriding royalties (“GOR”) can be vested out of a debtor company’s estate pursuant to a reverse vesting order (“RVO”). The Court allowed GORs to be vested off under the Applicant’s, Invico Diversified Income Limited Partnership (“Invico”), proposed RVO, finding the GORs to be mere contractual rights and not proper interests in land.

Two recent cases out of the Third Circuit and the Southern District of New York highlight some of the developing formulas US courts are using when engaging with foreign debtors. In a case out of the Third Circuit, Vertivv. Wayne Burt, the court expanded on factors to be considered when deciding whether international comity requires the dismissal of US civil claims that impact foreign insolvency proceedings.

Case Trends

When a majority of a company’s board approves a tender offer in good faith, can it still be avoided as an actually fraudulent transfer? Yes, says the Delaware Bankruptcy Court, holding that the fraudulent intent of a corporation’s CEO who was a board member and exercised control over the board can be imputed to the corporation, even if he was the sole actor with fraudulent intent.

Background

In the recent decision of Ontario Securities Commission v Go-To Developments Holdings Inc et al, 2023 ONSC 5921 (“Go-To Developments”), the Court affirmed a receiver’s ability to control solicitor-client privilege in order to perform their mandate. The Court specifically considered whether a receiver could access email correspondence between the principal of the companies under receivership and other interested parties.

In the recent decision of Atlantic Sea Cucumber Ltd (Re), 2023 NSSC 231 the Supreme Court of Nova Scotia in Bankruptcy and Insolvency (the “Court”) departed from the long-standing norm in insolvency proceedings of granting an abridgement of time for filing and service of applications. The debtor company, Atlantic Sea Cucumber Ltd.

Recently, in In re Moon Group Inc., a bankruptcy court said no, but the district court, which has agreed to review the decision on an interlocutory appeal, seems far less sure.

Yes, says the Delaware Bankruptcy Court in the case of CII Parent, Inc., cementing the advice routinely given by bankruptcy counsel to borrowers in default. We always counsel borrower clients in default of the risk associated with lenders taking unilateral actions pre-filing, stripping debtors of valuable options and assets. Thus, we normally recommend to always obtain a forbearance and undertake the preparations required to file a bankruptcy petition immediately upon forbearance termination, although whether or not to file depends on variety of factors that should be considered.