Two United States Bankruptcy Judges for the Southern District of New York recently issued a joint opinion addressing common issues raised by motions to dismiss in two separate adversary proceedings – one pending before Judge Bernstein and the other before Judge Glenn (the “Adversary Proceedings”). The Adversary Proceedings were filed by the debtors in two chapter 11 cases, each involving an Anguillan offshore bank – National Bank of Anguilla (Private Banking Trust) Ltd. and Caribbean Commercial Investment Bank Ltd. (the “Debtor Banks”).

Manley Toys Limited once claimed to be the seventh largest toy company in the world. Due to ongoing litigation and declining sales, it entered into a voluntary liquidation in Hong Kong. On March 22, 2016, the debtor’s appointed liquidators and foreign representatives filed a motion for recognition under chapter 15 of the Bankruptcy Code. The motion was opposed by ASI Inc., f/k/a Aviva Sports, Inc. (“Aviva”) and Toys “R” Us, Inc. (“TRU”).

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.

U.S. Bankruptcy Rule 9019 provides that on a motion brought by a trustee (and thus a chapter 11 debtor-in-possession as well) the court may approve a settlement. The prevailing view is that due to the court’s approval requirement, pre-court approval settlement agreements are enforceable by the debtor but not against the debtor. The District Court for the Eastern District of New York recently disagreed. It held that the statutory approval requirement is not an opportunity for the debtor to repudiate the settlement.

Directors and officers (D&Os) of troubled companies should be highly sensitive to D&O insurance policies with Prior Act Exclusion. While policies with such exclusion may be cheaper, a recent decision by the U.S. Court of Appeal for the Eleventh Circuit raises the spectre that a court may hold a loss to have more than a coincidental causal connection with the officer’s conduct pre-policy period and make the (cheaper) coverage worthless.

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.