On April 19, 2012, the U.S. Bankruptcy Court for the Southern District of New York granted in part and denied in part JPMorgan Chase, N.A.’s motion to dismiss an adversary complaint filed by Lehman Brothers Holdings Inc. (“LBHI”) and its Official Committee of Unsecured Creditors. The Complaint seeks to recover approximately $8.6 billion in prepetition transfers made by LBHI to JPMorgan in the days leading up to LBHI’s bankruptcy.

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.

The recent flurry of news reports regarding the administration of high street retail chains and the subsequent sale of parts of their businesses is perhaps an opportune time to flag up the renewed importance that the hypothec plays in Scottish property law.

By virtue of the hypothec, in insolvency, a landlord automatically obtains a fixed charge ranking on the proceeds of sale of the moveable goods of the tenant that are on the premises as at the point of insolvency, up to the value of any arrears of rent.

Agreements with administrators often contain provisions to the effect that any claim against the company in administration will rank only as an unsecured claim and not as an expense of the administration. Although such provisions are common, there has always been some doubt as to their efficacy.

Recently, the Court of Appeal upheld the High Court's decision in the Nortel Networks and Lehman Brothers disputes. The judgment confirms that liabilities under Financial Support Directions (FSDs) and Contribution Notices (CNs), which are issued by the Pensions Regulator, will rank ahead of almost all other claims when a company becomes insolvent. The discussions in the case focused on whether FSDs and CNs are classed as 'provable debts', expenses of the insolvency or, indeed, neither.

In Finnerty v Clark, the Court of Appeal has given guidance on what constitutes "good and sufficient" grounds for the removal of administrators. In this case, shareholders of a company in administration were also substantial creditors of the company. They wished the administrators to raise proceedings under Section 244 of the Insolvency Act 1986 (extortionate credit transactions) to challenge loan agreements that had been entered into by the company prior to administration.

The recent case of Stephen Petitioner offers some clarification regarding issues relating to the validity of appointment of administrators.

The Facts

On October 4, 2011, the United States Bankruptcy Court for the Southern District of New York ruled that a contractual right of a triangular (non-mutual) setoff was unenforceable in bankruptcy, even though the contract was safe harbored. In re Lehman Brothers, Inc., No. 08-01420 (JMP), 2011 WL 4553015 (Bankr. S.D.N.Y. Oct. 4, 2011).

Sections 216 and 217 of the Insolvency Act impose draconian sanctions on directors of liquidated companies who reuse "prohibited names". Prohibited names are names that are identical to, or "suggest an association with", a company that has gone into liquidation and of which they were previously directors. The sanctions include criminal penalties and personal liability for debts. It has always been difficult for advisers to confidently advise directors whether a proposed name for a new company would be a prohibited name, given the vague nature of the phrase "suggest an association".

On June 23, 2011, the Supreme Court ruled 5-4, in an opinion by Chief Justice Roberts, that a Bankruptcy Judge lacked constitutional authority to issue a final ruling on state law counterclaims by a debtor against a claimant. This is the latest round of a well-known case involving the estate of former model Anna Nicole Smith and the estate of her late husband, wealthy oil magnate J. Howard Marshall.