This article first appeared in Accountancy Daily on 20 January 2023.

With supply chain problems, war in Europe and other issues leading to higher inflation and an increasingly uncertain economic outlook, this article explores the options available to companies experiencing financial distress.

The active trading of loans made to a borrower that has become unable to repay in full (known as non-performing loans or distressed debt) has been a feature of the North American and European loan markets for a number of years.

On 4 November 2021, the High Court of Australia heard the arguments put forward by Wells Fargo Trust Company, National Association and Willis Lease Finance Corporation, together Wells Fargo, and the administrators (the Administrators) of the Virgin Australia Airlines group, which entered into administration on 20 April 2020. The dispute primarily concerned who should pay for the redelivery of four aircraft engines capable of being used on B737s (the Engines) to the lease redelivery location in Florida.

In what could prove to be a landmark judgment, a Dubai court ruled earlier this month that the directors of a company in bankruptcy should be personally liable for the company’s debts, to the sum of almost AED 450,000,000 (around US$ 122,000,000).

Article 144 of Federal Law No.9 of 2016 (the “Bankruptcy Law”) allows a court to order directors to pay a bankrupt company’s debts where:

Arthur C. Clarke famously observed: “Any sufficiently advanced technology is indistinguishable from magic.” Our regulatory, legislative, and judicial systems illustrate this principle whenever new technology exceeds the limits of our existing legal framework and collective legal imagination. Cryptocurrency, such as bitcoin, has proven particularly “magical” in the existing framework of bankruptcy law, which has not yet determined quite what bitcoin is—a currency, an intangible asset, a commodity contract, or something else entirely.

Arthur C. Clarke famously observed: “Any sufficiently advanced technology is indistinguishable from magic.” Our regulatory, legislative, and judicial systems illustrate this principle whenever new technology exceeds the limits of our existing legal framework and collective legal imagination. Cryptocurrency, such as bitcoin, has proven particularly “magical” in the existing framework of bankruptcy law, which has not yet determined quite what bitcoin is—a currency, an intangible asset, a commodity contract, or something else entirely.

While significant energy here at the Bankruptcy Cave is devoted to substantive bankruptcy matters, not all aspects of a general insolvency practice are always fun and litigation. Oftentimes insolvency lawyers add the most value by helping clients avoid a bankruptcy filing, or by successfully resolving a case through a consensual transactional restructuring.

Individual debtors with old tax debts relating to late-filed tax returns may be surprised to find that those tax debts may not be dischargeable under section 523(a) of the Bankruptcy Code due to the lateness of the tax filing. There is a current Circuit split regarding whether a late tax filing constitutes a “return” at all, which is critical to the dischargeability inquiry. The Ninth Circuit weighed in last week in In re Smith, 2016 WL 3749156 (9th Cir. July 13, 2016), further cementing the split.

A recent Second Circuit Court of Appeals decision, Franklin v. McHugh, 2015 WL 6602023 (2d Cir. 2015), illustrates the dire consequences of failing to comply fully with all electronic filing requirements for a notice of appeal.

Who Should Read This? Anyone that deals in distressed debt, and in particular anyone that acquires distressed or defaulted bond debts.