Insolvency practitioners often encounter difficulties when trying to sell properties in residential developments because an original management company has been struck off the Register of Companies. The standard approach can be laborious and costly. A more cost efficient alternative is often available.

In a number of recent cases, borrowers have produced a detailed forensic analysis of the accrual of interest on their accounts by lenders alleging that any error in the calculation of interest invalidates the demand made by the lender and any appointment of a receiver on foot thereof.

On April 1, 2013, the U.S. Bankruptcy Court for the Eastern District of California ruled that the City of Stockton qualified to file for protection under chapter 9 of the Bankruptcy Code. The court’s decision on this issue serves as an important milestone for chapter 9 jurisprudence, clarifying the requirements for “good faith” negotiations and being “insolvent” as conditions to filing for chapter 9 protection. Significantly, the court held that a municipal debtor need not negotiate with all of its creditors, only those that it intends to impair.

On January 7, 2013, the Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York held that a dispute concerning the debtors’ use of cash collateral was not subject to arbitration, notwithstanding a broad arbitration clause in the parties’ underlying agreement, because the decision to allow a debtor to use cash collateral constituted a “core” issue and was a fundamental aspect of the bankruptcy process. In re Hostess Brands, Inc., No. 12-22052 (RDD), 2013 WL 82914 (Bankr. S.D.N.Y. Jan. 7, 2013).

Background

On May 4, 2012 Judge Kevin J. Carey of the U.S. Bankruptcy Court for the District of Delaware held that a claim against a debtor’s estate, transferred to a third party, is subject to the same infirmities as in the hands of the original holder of the claim.  In re KB Toys, Inc., — B.R. —-, 2012 WL 1570755, at *11 (Bankr. D. Del. 2012).  Judge Carey’s opinion diverged from, and criticized, the decision of the U.S. District Court for the Southern District of New York in Enron Corp. v. Springfield Assocs., L.L.C., 379 B.R. 425 (S.D.N.Y.

On March 26, 2012, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware refused to rule that, as a matter of law, payments made to satisfy a debtor’s obligations under a letter of credit constitute “settlement payments” protected from avoidance under section 546(e) of the Bankruptcy Code. EPLG I, LLC v. Citibank, National Association et al. (In re Qimonda Richmond, LLC, et al.), No. 09-10589, 2012 Bankr. LEXIS 1264 (Bankr.

InJ.D. Brian Ltd (in liquidation) & Others the High Court held that, where a floating charge crystallised prior to the commencement of a winding-up, the preferential creditors still had priority pursuant to in section 285 of the Companies Act 1963 over the holder of what had become a fixed charge.

The English court of appeal has held that a company should not be held to be balance sheet insolvent on the sole basis that its liabilities (including contingent and prospective liabilities) exceed its assets.

In BNY Corporate Trustee Services v Eurosail & Ors, the Court of Appeal considered in detail, for the first time, the construction of section 123 of the UK Insolvency Act 1986, which sets out circumstances in which a company can be deemed to be unable to pay its debts.

The relevant portions of section 123 provide as follows:

In Re: Michael McLoughlin Pharmacy Ltd. The examiner sought the High Court’s approval for a scheme of arrangement which limited his liability for negligence. The secured creditor objected as a matter of principle because such limitations of liability had become commonplace in schemes. The secured creditor made it clear that there was no suggestion of any negligence by the examiner in the particular case.

The court considered:

InDellway and Ors. v National Asset Management Agency & Ors., a number of companies and Paddy McKillen appealed a decision of the High Court in relation to the purported acquisition of €2∙1 billion in loans to the appellant companies by NAMA.

The appeal was brought on five grounds: