The Dubai Court of First Instance concludes that preventive composition, restructuring, bankruptcy, and liquidation are only possible if the debtor company has existing assets.
In a recent judgment issued on 26 April 2023 the Dubai Court of First Instance rejected the liquidation application of an indebted company on the basis that the company does not have any assets that could be liquidated.
Over the past year or so, we have seen a number of examples of Dubai Courts taking an extremely cautious approach to handling debtor-led bankruptcy cases, particularly in relation to determining whether there is a legitimate distressed financial position and enquiring as to the conduct of managers leading to the bankruptcy of companies.
On December 5, 2022, in In re Global Cord Blood Corp., 2022 WL 17478530 (Bankr. S.D.N.Y. Dec. 5, 2022) (“Global Cord”), the U.S. Bankruptcy Court for the Southern District of New York (the “Court”) denied recognition of a proceeding pending in the Grand Court of the Cayman Islands (the “Cayman Proceeding” and the court, the “Cayman Court”) because it was more like a corporate governance and fraud remediation effort than a collective proceeding for the purpose of dealing with reorganization or liquidation, as Chapter 15 of the Bankruptcy Code requires.
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In a judgment rendered on 10 October 2021, the Dubai Court of First Instance had concluded that current and former directors and managers of Marka were personally liable towards creditors of the company merely on the basis that the assets of the company were not sufficient to pay at least 20% of its debts. The 20% threshold was set in onshore Federal Decree Law No. (9) of 2016 on Bankruptcy (the Bankruptcy Law) as it then was, and the Court determined that liability applied to current and former directors and managers without distinction where the threshold is not met.
On August 5, 2021, the Eighth Circuit reversed a district court’s decision to dismiss a confirmation order appeal as equitably moot.[1] The doctrine of equitable mootness can require dismissal of an appeal of a bankruptcy court decision – typically, an order confirming a chapter 11 plan – on equitable grounds when third parties have engaged in significant irreversible transactions
On October 5, 2021, the Tenth Circuit joined the Second Circuit in concluding statutory fee increases that applied only to debtors filing for bankruptcy in judicial districts administered by the United States Trustee Program (the “US Trustee” or the “UST Program”) violated the U.S.
As a matter of practice, chapter 11 plans and confirmation orders routinely discharge administrative expense claims, including those that arise after confirmation of a plan but before its effective date. The Court of Appeals for the Third Circuit (the “Third Circuit”) recently affirmed the bankruptcy court’s statutory authority to do so in Ellis v. Westinghouse Electric Co., LLC, 2021 WL 3852612 (3d Cir. Aug. 30, 2021).
On July 26, 2021, the United States District Court for the District of Delaware (the “District Court”) affirmed the Delaware bankruptcy court’s order (the “Confirmation Order”) confirming the chapter 11 liquidation plan (the “Plan”) of Exide Holdings, Inc.