Regulated firms using company or insolvency law procedures to manage their liabilities could face action by the FCA if their proposals unfairly benefit them at the expense of their customers. The FCA has put forward draft guidance setting out the new role which it would have when a regulated firm proposes a compromise, what information it expects to be provided and the key factors which the FCA will consider.

In recent weeks, a move dubbed the “Texas Two-Step” has leaped from coverage first in publications geared only for the professional restructuring community, then to the mainstream press, then to hearings before the United States Senate Judiciary Committee, and now to a full-blown trial ongoing in a New Jersey bankruptcy court.

This article forms part of our litigation funding series and discusses a key decision that has the potential to significantly support the due diligence efforts of litigation funders in external administration contexts.

In December 2021 the Insolvency Service launched a Consultation on the future of insolvency regulation. The Consultation proposes a number of changes that will have a significant impact on the insolvency profession, including the creation of a single regulator for insolvency professionals and bringing firms providing insolvency services within the scope of insolvency regulation for the first time. The deadline for responses is 25 March 2022, although there is no specified timeline for the implementation of any reforms.

We have written many times over the past few years about how the bankruptcy courts are off-limits to state-legalized cannabis businesses. This past year brought no new relief to the cannabis industry, and the doors to the bankruptcy courts remain shut. Are the other federal courts off-limits as well? A recent district court decision from the Southern District of California sheds some light on this issue, and indicates that the district courts are at least partially open to participants in legal cannabis businesses.

Factual Background

In a December 16, 2021, decision,¹ Judge Colleen McMahon of the US District Court for the Southern District of New York reversed the bankruptcy court order confirming the Chapter 11 plan of Purdue Pharma, L.P.

During the course of the pandemic we have seen an unprecedented level of government assistance aiming to aid businesses struggling with the effects of the pandemic. This has resulted in consistently low insolvency levels. This year we will see the lifting of certain of the restrictions and the end to some of the support initiatives that have been in place. We have outlined some of the key changes and what might be in store for 2022.

At the end of 2021, the Spanish government approved draft reforms of the Spanish insolvency laws that transposes Directive (EU) 2019/1023 of 20 June 2019 on preventive restructuring frameworks into Spanish law.

The reform will bring about a comprehensive change in insolvency proceedings in Spain. So what are these changes and what effect will these have in practice?

Restructuring Plans

Can messy be good? Sometimes the answer is yes. The chapter 11 case filed by Limetree Bay Services, LLC and five of its affiliates (“Limetree Bay”) is one example of auction disorder actually bringing increased creditor recoveries. Bankruptcy professionals, financially distressed companies and acquirers of distressed assets can learn valuable lessons from this odd bankruptcy auction process, which shows the importance of (1) debtors preserving their flexibility during an auction, and (2) investors having appropriate expectations and resources before bidding on a debtor’s assets.

The Bankruptcy Court for the Southern District of New York (the “SDNY”) has been a longstanding epicenter of Chapter 11 filings. Historically seen as one of the more pro-debtor forums in the country, large companies often filed in the SDNY to take advantage of that stance. Some debtors appear to have attempted to direct their cases to specific judges within the district who were seen as particularly pro-debtor. One recent example was the bankruptcy filing by OxyContin producer, Purdue Pharma.