Merit Management Group, LP v. FTI Consulting, Inc., No. 16-784 (2018)

SAW (SW) 2010 Ltd & Anor v Wilson & Ors [2017] EWCA Cif 1001 (25 July 2017)

The Court of Appeal has held that the validity of a floating charge (and the appointment of joint administrators under that floating charge pursuant to paragraph 14 of Schedule B1 to the Insolvency Act 1986) does not depend on the existence of uncharged assets of the company at the time of its creation, nor upon the power of the company to acquire assets in the future.

BACKGROUND

Randhawa & Anor v Turpin & Anor [2017] EWCA Civ 1201

In a fascinating (and very readable) judgment, the Court of Appeal has held the appointment of joint administrators made under paragraph 22 of Schedule B1 to the Insolvency Act 1986 ("IA 1986") to be invalid because, among other things, the appointment was made following an inquourate board meeting. Readers are encouraged to read the judgment, as the following is merely an overview of the facts and conclusions.

BACKGROUND

On December 5, 2013, Judge Steven Rhodes of the US Bankruptcy Court for the Eastern District of Michigan held that the city of Detroit had satisfied the five expressly delineated eligibility requirements for filing under Chapter 9 of the US Bankruptcy Code¹ and so could proceed with its bankruptcy case.

On May 15, 2012, the Eleventh Circuit Court of Appeals (the “Circuit Court”) issued an opinion in In re TOUSA, Inc.,¹ in which it affirmed the original decision of the bankruptcy court and reversed the appellate decision of the district court. After a 13-day trial, the bankruptcy court had found that liens granted by certain TOUSA subsidiaries (the “Conveying Subsidiaries”) to secure new loans (the “New Term Loans”) incurred to pay off preexisting indebtedness to certain lenders (the “Transeastern Lenders”) were avoidable fraudulent transfers.

Introduction

The recent bankruptcy filings by infrastructure companies Connector 2000 Association Inc., South Bay Expressway, L.P., California Transportation Ventures, Inc., and the Las Vegas Monorail Company have tested the structures utilized to implement public-private partnerships (P3s) in the United States in several respects. It is still too early to draw definitive conclusions about the impact of these proceedings on P3 structures going forward, but initial rulings in two of the cases are already focusing the minds of project participants on threshold structuring considerations.

In a decision that reaffirms its previous rulings on the jurisdictional limits of bankruptcy courts, the US Court of Appeals for the Third Circuit recently held in W.R. Grace & Co. v. Chakarian (In re W.R. Grace & Co.)1 that bankruptcy courts lack subject matter jurisdiction over third-party actions against non-debtors if such actions could affect a debtor’s bankruptcy estate only following the filing of another lawsuit.

To promote equal treatment of creditors, the US Congress has armed debtors with the power to bring suit to recover a variety of pre-bankruptcy transfers. Prominent among these is a debtor’s ability under Section 548 of the Bankruptcy Code to recover constructively fraudulent transfers — i.e., transfers made without fair consideration when a debtor is insolvent.

To promote equal treatment of creditors, the US Congress has armed debtors with the power to bring suit to recover a variety of pre-bankruptcy transfers. Prominent among these is a debtor’s ability under Section 548 of the Bankruptcy Code to recover constructively fraudulent transfers — i.e., transfers made without fair consideration when a debtor is insolvent.