In a case with wide-reaching implications for the private equity industry, the U.S. Supreme Court ended a decade-long effort by distressed debt investors to undermine the safe harbor from avoidance actions set forth in Section 546(e) of the Bankruptcy Code. On April 19, 2021, the Supreme Court denied a petition for certiorari in the In re Tribune Company Fraudulent Conveyance Litigation (“Tribune”), preserving the safe harbor defense for LBOs established by the influential Second Circuit.
IP licensing and insolvency reform: ipso facto clauses
Licensors of intellectual property rights may soon be unable to terminate licenses where the licensee has gone into an insolvency process.
What are ipso facto clauses and why do they matter?
How was the CIGB received?
Were there any concerns?
What has changed?
What else was proposed?
What's next?
A recap
After the Corporate Insolvency and Governance Bill (CIGB) was published on 20 May 2020, it raced through the House of Commons and House of Lords and, on 26 June 2020 (in under 6 weeks) came into force as the Corporate Insolvency and Governance Act 2020 (CIGA), with certain of the temporary measures taking effect from 1 March 2020.
How was the CIGB received?
Licensors of intellectual property rights may soon be unable to terminate licences where the licensee has gone into an insolvency process.
What are ipso facto clauses and why do they matter?
Permanent measures
Temporary measures
The much anticipated Corporate Insolvency and Governance Bill (the Bill) was published on 20 May 2020.
The much anticipated Corporate Insolvency and Governance Bill (the Bill) was published on 20 May 2020.
The proposed legislation is split into two broad categories: temporary provisions brought about as a result of COVID-19 and permanent provisions which will result in fundamental changes to UK insolvency law. The proposals, both temporary and permanent, reflect a shift towards a more debtor-friendly regime.
Building on measures already introduced in the Coronavirus Act – such as the moratorium on lease termination for non-payment of rent until 30 June 2020 – the Government announced that further emergency measures will be introduced.
Statutory demands and winding up petitions issued to commercial tenants to be temporarily voided
The forthcoming Corporate Insolvency and Governance Bill will include restrictions on the use of statutory demands and winding up petitions to recover sums owed by tenants.
On April 23, 2019, Ropes & Gray, representing a large group of shareholder defendants, won a decision in the U.S. District Court for the Southern District of New York that provides potential fraudulent transfer protection for payments made to shareholders in leveraged buyouts, stock redemptions and other securities transactions.
Constructive Fraudulent Transfer Claims and the Securities Safe Harbor
Key Points
A binding contract by exchange of email did not arise where parties were simply exploring a potential deal.
Sale by auction is often appropriate where an asset is difficult to value.
Where no differential treatment of creditors, unfair harm requires that a decision does not withstand logical analysis.
The Facts