On April 23, 2019, the United States District Court for the Southern District of New York, in fraudulent transfer litigation arising out of the 2007 leveraged buyout of the Tribune Company,1 ruled on one of the significant issues left unresolved by the US Supreme Court in its Merit Management decision last year.

Intercreditor agreements--contracts that lay out the respective rights, obligations and priorities of different classes of creditors--play an increasingly important role in corporate finance in light of the continued prevalence of complex capital structures involving various levels of debt. When a company encounters financial difficulties, intercreditor agreements become all the more important, as competing classes of creditors seek to maximize their share of the company's limited assets.

To no great surprise, the Global Corporate v Hale appeal decision has gone against the director. The Court of Appeal handed down the eagerly awaited judgment on 27 November 2018.

In our recent article on restructuring options for retail businesses, we outlined how a number of companies in that sector had implemented or were considering Company Voluntary Arrangements (CVAs).

Directors against whom claims for a misfeasance have been intimated often turn to limitation and set off in defence of a request for the repayment or restoration of the relevant sums or property.

Misfeasance and limitation

While overall insolvencies fell in number in 2017 compared with 2016, the last quarter of 2017 showed an increase compared with the previous quarters which had been stable.

In those insolvencies, the vast majority are voluntary liquidations, but there is a trend of retail businesses which are struggling turning to the Company Voluntary Arrangement restructuring option, often accompanied by a managed reduction in operations.

This article was first published in The Gazette, and the original article can be found online here.

The implementation of the Insolvency Rules 2016 has introduced a number of changes to the procedures in insolvency regimes.

Any business owner will know the importance of consistent cash flow to the success of their business. On 1 October 2017, a new Pre-Action Protocol for Debt Claims will come into force. The new Protocol will make the process of claiming debts from unwilling debtors slower and more onerous for creditors as a new mandatory process before a claim can be issued is required, with longer timescales. It also aims to avoid court proceedings wherever possible, firmly encouraging parties to engage in alternative forms of dispute resolution.

On 2 March Cambridgeshire-based merchant WellGrain went into administration, reportedly owing at least £15m to almost 300 creditors, many of those being farmers.

The administrators' report has now been published and indicates that the unsecured creditors - including some 155 farmers - will expect to receive between 1.4 - 6.7 pence for every pound they are owed.

It is an announcement which will no doubt be met with dismay by those creditors. However, it is not unusual that unsecured creditors of an insolvent company will receive little or no payment.

The procedure for an application to Court for the appointment of an Administrator pursuant to paragraph 12 of Schedule B1 IA 86 is covered by r3.3-3.15 of the 2016 rules.

Key points to note: