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.”

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.

The natural and most appropriate jurisdiction in which to wind up a company is its place of incorporation. The Hong Kong Companies Court, however, routinely deals with winding up petitions against companies which are incorporated outside Hong Kong, but listed on the Hong Kong Stock Exchange (“HKEx”). Given recent economic difficulties, the number of such petitions has been on the rise.

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.

The recent decision in Re The Liquidator of Shenzhen Everich Supply Chain Co, Ltd (in liquidation in the People’s Republic of China) [2020] HKCFI 965 reaffirms the willingness of the Hong Kong Companies Court (the “Companies Court”) to recognise the winding-up of a company in Mainland China and thereby grant recognition and assistance to liquidators appointed in the Mainland.

In Joint Provisional Liquidators of Moody Technology Holdings Ltd [2020] HKCFI 416, the Hong Kong Court of First Instance (the “Hong KongCourt”) granted a recognition order to foreign provisional liquidators who were appointed on a soft-touch basis, to explore and facilitate the restructuring of a company. The order was made despite soft-touch provisional liquidation being per se impermissible in Hong Kong.

Background

In a long-awaited development of cross-border insolvency cooperation between Hong Kong and Mainland China, the Hong Kong Court has granted recognition and assistance to Mainland liquidators for the first time in Joint and Several Liquidators of CEFC Shanghai International Group Ltd [2020] HKCFI 167.

Background

The U.S. Supreme Court held today in Mission Product Holdings, Inc. v. Tempnology, LLC that a trademark licensee may retain certain rights under a trademark licensing agreement even if the licensor enters bankruptcy and rejects the licensing agreement at issue. Relying on the language of section 365(g) of the Bankruptcy Code, the Supreme Court emphasized that a debtor’s rejection of an executory contract has the “same effect as a breach of that contract outside bankruptcy” and that rejection “cannot rescind rights that the contract previously granted.”