With the possibility of a no-deal Brexit looming large, the implications for Irish insolvency practitioners is something we will all have to consider. The insolvency landscape will most likely look very different when we all return to the office after Christmas. This is a discussion on some of the possible implications for Irish and UK insolvency practitioners post-Brexit.
Current Regime
We will soon enter a phase of the Covid19 era when more and more companies will be forced to apply for protection from their creditors under the Examinership provisions of the Companies Act, 2014. Security as always will be a key consideration for the stakeholders in this restructuring process. Fixed and floating charges are almost always well protected but what about personal or corporate guarantees?
The legislation
The legislation is very specific regarding guarantees.
In a decision arising out of Tribune’s 2008 bankruptcy, the United States Court of Appeals for the Third Circuit recently issued a decision affirming confirmation of the media conglomerate’s chapter 11 plan over objections raised by senior noteholders who contended that the plan violated their rights under the Bankruptcy Code by not according them the full benefit of their prepetition subordination agreements with other creditors.
Background
The Applicant, Mr Stephen Wallace was a UK based Liquidator of Carna Meats (UK) Limited (the “Company”). He claimed that his investigations into the Company’s affairs has been impeded by a lack of books and records. The Respondent, Mr George Wallace, was the Company’s former bookkeeper based in Ireland and was identified as holding all of the records of the Company. Despite a number requests from the Liquidator, Mr Wallace did not produce the documents.
The U.S. Supreme Court held today in Mission Product Holdings, Inc. v. Tempnology, LLC that a trademark licensee may retain certain rights under a trademark licensing agreement even if the licensor enters bankruptcy and rejects the licensing agreement at issue. Relying on the language of section 365(g) of the Bankruptcy Code, the Supreme Court emphasized that a debtor’s rejection of an executory contract has the “same effect as a breach of that contract outside bankruptcy” and that rejection “cannot rescind rights that the contract previously granted.”
In a recent decision arising out of the Republic Airways bankruptcy, Judge Sean Lane of the United States Bankruptcy Court for the Southern District of New York held that the liquidated damages provisions of certain aircraft leases were improper penalties and, thus, “unenforceable as against public policy” under Article 2A the New York Uniform Commercial Code. In re Republic Airways Holdings Inc., 2019 WL 630336 (Bankr. S.D.N.Y. Feb. 14, 2019).
On February 8, 2019, the United States District Court for the Southern District of Texas, Houston Division, affirmed a Bankruptcy Court order enjoining a claimant from pursuing claims against a debtor’s non-debtor affiliates based upon third-party release and injunction provisions included in the debtor’s confirmed chapter 11 plan. In re CJ Holding Co., 2019 WL 497728 (S.D. Tex. Feb. 8, 2019).
The United States Court of Appeals for the Third Circuit recently issued a 2–1 decision affirming the ruling of the Bankruptcy Court for the District of Delaware, which reconsidered its prior approval of a $275 million termination fee in connection with a proposed merger. In re Energy Future Holdings Corp., No. 18-1109, 2018 WL 4354741, at *14 (3d Cir. Sept. 13, 2018).
On June 20, 2018, Judge Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware sustained an objection to a proof of claim filed by a postpetition debt purchaser premised on anti-assignment clauses contained in transferred promissory notes. In re Woodbridge Group of Companies, LLC, et al., No. 17-12560, at *14 (jointly administered) (Bankr. D. Del. Jun. 20, 2018).