We at the Bankruptcy Cave are not very surprised by the ruling yesterday in Czyzewski v. Jevic Holding Corp. The Supreme Court in Jevic reviewed a Bankruptcy Court’s decision to approve a settlement (with a distribution of proceeds that contravened the Bankruptcy Code’s priority scheme) in conjunction with dismissing the bankruptcy case of the Chapter 11 debtor Jevic Holding Corp.

Most restructuring practitioners are aware, either vaguely or through punishing experience, of the power of PACA creditors. PACA (or the Perishable Agricultural Commodities Act, 7 U.S.C. § 499a et seq. for those who hate brevity) requires that buyers of produce hold such produce – and their proceeds – in trust for the benefit of produce sellers.

New Rules for Imposing Personal Liability on Directors of Insolvent Companies

When a company enters into an insolvency process, a director may be made personally liable for an insolvent company’s debts on a few limited bases under the Insolvency Act 1986, the most common of which are:

1. wrongful trading: if the director knew or ought to have known that there was no reasonable prospect of avoiding insolvent liquidation and he did not take every step necessary with a view to minimising the loss to creditors;

Editor’s Note:  Here at The Bankruptcy Cave, we love insolvency stuff; we eat it for breakfast and dream about it at night.  (We are not kidding.)  Sometimes that includes credit-related litigation, and so we keep our pre-trial, trial, and appellate skills honed.  To that end, here is a very helpful cheat sheet we prepared and which we bring with us to every deposition, just in case.  (Your author Leah even got to enjoy a no-show deposition in Chicago last year; she created a perfect record using the below.) 

Have you ever had to press garlic for a recipe? Or put together a Swedish bookshelf, purchased from a Swedish superstore? Yes, you have – and you may have succeeded, so long as you had a garlic press, or the bag of special Swedish tools respectively. But what if you don’t? Yikes.

The High Court has rejected the argument that amounts owing to British Gas Trading Ltd (BGT) under post-administration, deemed contracts for the  provision of gas and electricity are automatically classed as expenses of the administration. The  court has reserved for consideration, however, whether and if so how an administrator’s conduct may  give the liability super priority or bring the salvage principle into play.

Background and preliminary issue

The High Court has sanctioned a scheme of arrangement between a Vietnamese company and certain of its creditors; the first time a Vietnamese company has taken advantage of this restructuring process in England.

Background

A facilitation payment to encourage creditors to vote through the restructuring proposals of creditors’ debts has been held by the High Court not to be an illegal bribe. The court had regard to the fact that the offer of payment was made openly to all relevant creditors, none of whom were prevented from voting on the proposal. As such, where a creditor consented and received the facilitation payment, this was not contrary to the pari passu principle.

The facts

The Court has heard another case dealing with a defective appointment of administrators under paragraph 22 of Schedule B1 Insolvency Act 1986 (“Schedule B1”)¹. Following hot on the tail of a recent series of conflicting cases relating to defective appointments, the Court has held that:

BNY Corporate Trustee Services Limited v Eurosail-UK 2007-3BL Plc & others [2011] EWCA Civ 227

The Court of Appeal has allowed companies around the country to breathe a solvent sigh of relief, as it has held that the so-called “balance sheet” test of insolvency in s123(2) Insolvency Act 1996 is intended to apply where a company has reached a “point of no return” rather than being used as a “mechanistic, even artificial, reason for permitting a creditor to present a petition to wind up a company”.