Introduction

Introduction

The FDIC receiverships of Silicon Valley Bank and Signature Bank have caused certain early-stage companies to face potentially crippling near-term liquidity issues. These liquidity issues may result in a company becoming insolvent. Therefore, boards of directors of such companies need to consider their fiduciary duties as well as steps that can be taken to mitigate risks.

Fiduciary duties are typically owed to the company for the benefit of its owners.

The March 2023 banking crisis has been an unexpected “stress test” for dealing with liquidity issues.

When state regulators closed Silicon Valley Bank this past Friday, many startups understandably faced severe liquidity issues triggered by the sudden and unexpected loss of access to their deposits.

On July 7, 2022, the UK Insolvency Service, an executive agency of government responsible for a variety of roles in administering the UK insolvency regime, published a consultation on the UK’s proposed adoption of two UNCITRAL Model Laws on insolvency, inviting responses (the “Consultation”).

Facts and Background

The Insolvency and Bankruptcy Board of India (IBBI) on 13 November 2020 issued the Insolvency and Bankruptcy Board of India (Liquidation Process) (Fourth Amendment) Regulations, 2020 (Amendment) which introduced seminal changes to the liquidation regime under the Insolvency and Bankruptcy Code, 2016 (IBC). The Amendment has been introduced on the back of the discussion paper issued by IBBI on 26 August 2020 on Corporate Liquidation Process (Discussion Paper).

A contentious issue in the interplay between the Insolvency and Bankruptcy Code, 2016 (IBC) and the Limitation Act, 1963 (Limitation Act) has been the applicability of Section 18 of the Limitation Act (Section 18), which stipulates that a fresh period of limitation shall be computed from the time of the acknowledgement of liability in writing before the expiration of the prescribed period of limitation.

In continuation of Reserve Bank of India’s (RBI) efforts to ease financial stress caused by the Covid-19 pandemic, the RBI issued the circular on the Resolution Framework for Covid-19 Related Stress dated 6 August 2020 (August 6 Circular). The August 6 Circular creates a limited time window for certain categories of borrowers affected by Covid-19 pandemic related business disruption to be allowed resolution plans in the nature of restructuring while permitting the borrower accounts to retain their status as ‘standard’.

In Shameeka Ien v. TransCare Corp., et al. (In re TransCareCorp.), Case No. 16-10407, Adv. P. No. 16-01033 (Bankr. S.D.N.Y. May 7, 2020) [D.I. 157], the Bankruptcy Court for the Southern District of New York recently refused to dismiss WARN Act claims against Patriarch Partners, LLC, private equity firm (“PE Firm“), and its owner, Lynn Tilton (“PE Owner“), resulting from the staggered chapter 7 bankruptcies of several portfolio companies, TransCare Corporation and its affiliates (collectively, the “Debtors“).