The High Court has confirmed in the recent case of Hyde and another v Djurberg and others ([2024] EWHC 1188 (Ch)) that it won't tolerate the concealment of after-acquired property from trustees in bankruptcy, even when the property is the subject of a settlement agreement and paid onto various third parties. The judgment highlights the importance of monitoring a bankrupt's affairs as a trustee, acting quickly to preserve assets and serving a notice pursuant to section 307 of the Insolvency Act 1986 (Act) if there's a potential claim for after-acquired property.

Tradition Financial Services Ltd v Bilta (UK) Ltd and others [2023] EWCA Civ 112

Key Takeaways:

According to a recent decision by the High Court in R (on the application of Palmer) v Northern Derbyshire Magistrates Court, an Administrator is an officer of a company in administration for the purpose of collective redundancy rules.

This means an Administrator can be prosecuted personally for failing to notify the Insolvency Service of collective redundancies being made by the company in administration.

Background law

In a decision widely anticipated by investors in emerging market and distressed debt, the Court of Appeal has upheld the decision of the High Court to refuse to grant an indefinite moratorium on claims under certain English law debts under the Cross Border Insolvency Rules (“CBIR”). In doing so, the Court of Appeal has reaffirmed a long-standing principle of English common law that provides important protection to creditors; known as the Rule in Gibbs, the rule provides that a debt may only be discharged according to its own governing law.

In a 2-1 opinion, the Second Circuit overruled the district court in Marblegate Asset Management LLC v. Education Management Corp., finding no violation of the Trust Indenture Act (“TIA”) in connection with an out-of-court debt restructuring.

Background

Companies that engage in multiple transactions with different entities of related groups often enter into contractual netting agreements that allow the setoff of obligations between entities within the groups. The effectiveness of these agreements has been called into question by a recent decision of a bankruptcy court in Delaware, which refused to allow a party to a contractual netting agreement to offset its obligations to the debtors against obligations of the debtors under the netting agreement.

Whether you are interested in purchasing assets or a going concern, bankruptcy court can be a land of opportunity. Assets may be sold by a trustee, or someone the trustee retains, in a Chapter 7 liquidation, or by a Debtor-in-Possession (a “DIP”) in a Chapter 11 reorganization case. In either case, you should expect a competitive bidding process. Going concerns are typically sold in Chapter 11 cases where the debtor determines, often after trying to reorganize, that it lacks the resources to reorganize and continue operating.