On May 11, 2021, the United States Bankruptcy Court for the Northern District of Texas (“Court”) issued a decision[1] dismissing the chapter 11 cases of the National Rifle Association of America and its affiliate (“NRA”) for cause pursuant to section 1112(b) of the Bankruptcy Code.
Chapter 11 plans commonly protect a debtor’s key stakeholders that participate in the chapter 11 process from claims arising in connection with the bankruptcy case. The Office of the United States Trustee (the “US Trustee”), the branch of the Department of Justice tasked with monitoring bankruptcy cases, has recently taken aim at limiting the use and scope of these “exculpation” provisions in large restructuring cases across the country.
Background and Standards
On April 19, 2021, the United States Supreme Court denied a petition for certiorari from the Second Circuit’s decision in In re Tribune Company Fraudulent Conveyance Litigation (“Tribune II”),[1] leaving intact the Second Circuit’s decision upholding the safe harbor defense to avoidance actions und
“The discharge of claims in bankruptcy applies with no less force to claims that are meritorious, sympathetic, or diligently pursued. Though the result may chafe one’s innate sense of fairness, not all unfairness represents a violation of due process.”
Background to the Restructuring Plan
The UK has introduced the Restructuring Plan; a new, flexible court supervised restructuring tool. The Restructuring Plan draws upon features of the existing Companies Act 2006 scheme of arrangement procedure (which remains available) but includes features which are new to the UK but similar to those under U.S. Chapter 11 bankruptcy proceedings.
On March 19, 2021, the United States Court of Appeals for the Third Circuit issued a unanimous decision[1] affirming that the mutuality requirement of section 553(a) of the Bankruptcy Code must be strictly construed and, therefore, that triangular setoffs are not permissible in bankruptcy.
In this chapter of our Annual Insurance Review 2021, we look at the main developments in 2020 and expected issues in 2021 for restructuring and insolvency.
Key developments in 2020
The Corporate Insolvency and Governance Act 2020 came into force on 26 June 2020. The changes introduced by that Act were some of the most significant made to English insolvency law for decades.
In a decision arising out of Tribune’s 2008 bankruptcy, the United States Court of Appeals for the Third Circuit recently issued a decision affirming confirmation of the media conglomerate’s chapter 11 plan over objections raised by senior noteholders who contended that the plan violated their rights under the Bankruptcy Code by not according them the full benefit of their prepetition subordination agreements with other creditors.
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On Friday 24 April, RPC hosted a 30 minute webinar on the interaction of furloughing and insolvency law.
During this session, our Insolvency Partner Paul Bagon discussed the recent High Court judgement involving Italian restaurant chain Carluccio's, which entered administration at the end of March.
On 28 March 2020 the Business Secretary announced further new far-reaching measures to help businesses combat the financial impact of COVID-19.
In a welcome intervention, the Business Secretary declared it was the government’s intention to suspend wrongful trading provisions and to introduce a moratorium for businesses undergoing a restructuring process. Both measures are intended to assist companies to trade through financial distress caused by the loss of business due to the COVID-19 pandemic.