Under Section 101(54) of the bankruptcy code, any means of disposing with an interest in property is considered a transfer, and therefore, under certain circumstances, may be avoided as a preference or fraudulent transfer. In a recent unpublished opinion, the Third Circuit addressed the scope of the provisions. The Third Circuit recently held that prepetition lease termination did not give rise to a transfer.

Background

Section 303(i) of the Bankruptcy Code authorizes the court to award the debtor sanctions on account of an improper filing of an involuntary petition against it. But can a non-debtor third-party obtain such a relief? Yes, says the Bankruptcy Court In In re Vascular Access Centers, L.P., No. 19-17117 (AMC), 2022 WL 17366463 (Bankr. E.D. Pa. Dec. 1, 2022).

Background

The U.S. Court of Appeals for the First Circuit recently ruled in the Puerto Rico bankruptcy case that Fifth Amendment takings claims cannot be discharged or impaired by a bankruptcy plan. As a matter of first impression in that circuit, the Court disagreed with the Ninth Circuit and held that former property owners affected by prepetition takings must be paid in full.

In re Fin. Oversight & Mgmt. Bd., 41 F.4th 29 (1st Cir. 2022)

In May 2022, HM Treasury published a consultation to take views on how best to regulate the failure of stablecoin companies using pre-existing insolvency legislation. Stablecoin companies are classed by the UK Government as systemic “digital settlement asset” (DSA) firms. A large failure could have a significant disruptive effect on the economy, so the area requires robust statutory processes in place to manage any wind-down.

In a recent decision, the Court of Appeals for the Fifth Circuit held that an agreement between a debtor, a surety, and third-party beneficiaries was not an executory contract and, thus, was ineligible to pass-through the bankruptcy unaffected. The Fifth Circuit, however, adopted a modified Countryman test for muti-party executory contracts. Matter of Falcon V, L.L.C., 2022 WL 3274174 (5th Cir. 2022).

Background

How has HMRC managed its metamorphosis from benevolent supporter of businesses during the pandemic to hard-nosed tax collector?

Alex Jay, Tim Symes, Charlie Mercer and Aleks Valkov consider a recent decision relating to alleged transactions defrauding creditors under section 423 of the Insolvency Act 1986 (“s423”). Stewarts act for the fifth, sixth and eighth defendants.

Environment, social, and governance (ESG) are factors directors, investors, industries, and governments increasingly focus on when making commercial decisions. This is particularly so given increasing public awareness of such issues following recurrent environmental disasters and international summits such as COP26. Tim Symes and Ryan Hooton review the current regulatory environment in the UK, how it might bite on a company’s insolvency and when directors may find themselves personally liable for their actions.

The Bankruptcy Court for the District of New Jersey denied motions to dismiss the chapter 11 case of the newly created subsidiary of Johnson & Johnson, LTL Management LLC, and granted the debtor’s motion to stay prosecution of actions asserting talc related personal injuries against its J&J affiliates and the products distributors. This is the first opinion outside the North Carolina bankruptcy court approving the use of the so-called Texas Two Step as a bankruptcy execution strategy.

The Motions to Dismiss

Chris Corbin and Jeremy King, part owners of the company that owns the famous Wolseley restaurant had their company pushed into administration by its co-owner and major lender, having been in default since 2020, and now owes £38m. Administration might not have come as a surprise to anyone in that case.

However, directors and shareholders will not usually get anything like as much notice of a lender’s intention to appoint administrators and will frequently get none at all, as  Insolvency and Asset Recovery Partner Tim Symes explains here.