A basic tenet of bankruptcy law, premised on the legal separateness of a debtor prior to filing for bankruptcy and the estate created upon a bankruptcy filing, is that prepetition debts are generally treated differently than debts incurred by the estate, which are generally treated as priority administrative expenses. However, this seemingly straightforward principle is sometimes difficult to apply in cases where a debt technically "arose" or "was incurred" prepetition, but does not become payable until sometime during the bankruptcy case.

In Hafen v. Adams (In re Hafen), 616 B.R. 570 (B.A.P. 10^th Cir. 2020), a bankruptcy appellate panel from the Tenth Circuit ("BAP") held that the bankruptcy court is the only court with subject-matter jurisdiction to decide whether a claim or cause of action is property of a debtors' bankruptcy estate. As a consequence, the BAP held that the bankruptcy court abused its discretion by permitting a state court to determine whether creditors had "standing" to sue third-party recipients of allegedly fraudulent transfers.

Postpetition financing provided by pre-bankruptcy shareholders or other "insiders" is not uncommon in chapter 11 cases as a way to fund a plan of reorganization and allow old shareholders to retain an ownership interest in the reorganized entity. The practice is typically sanctioned by bankruptcy courts under an exception—the "new value" exception—to the "absolute priority rule," which prohibits shareholders and junior creditors from receiving any distribution under a plan on account of their interests or claims unless senior creditors are paid in full or agree otherwise.

In Short

The Situation: With effect from 1 December 2020, Her Majesty's Revenue and Customs ("HMRC") ranks ahead of floating charge holders and unsecured creditors with respect to recovering certain pre-insolvency taxes from an insolvent business (Crown preference). Directors can also now incur personal liability for the unpaid taxes of an insolvent company where they are involved in tax avoidance, evasion or phoenixism.

The UK government has published draft regulations providing that sales by administrators to connected persons will be subject to compulsory scrutiny.

Introduction
Bankruptcy Risk Management by Lenders
Pace Industries
Outlook

Introduction

Introduction
Disallowance of Claims of Avoidable Transfer Recipients
Firestar Diamond
The Bankruptcy Court's Ruling
Outlook

Introduction
Derivative Standing
Dura Automotive
The Bankruptcy Court's Ruling
The McClatchy Company
Outlook

Introduction

Introduction
Cram-Up Through Reinstatement
Indubitable Equivalent Cram-Up
Notable Court Rulings
Outlook

Introduction

The Corporate Insolvency and Governance Act 2020 (“CIGA”), which came into force on 26 June 2020, introduced a series of new “debtor friendly” procedures and measures to give companies the breathing space and tools required to maximize their chance of survival. The main insolvency related reforms in CIGA (which incorporates both permanent and temporary changes to the UK’s laws) include:

1. New moratorium to give companies breathing space from their creditors

2. Prohibition on termination of contracts for the supply of goods and services by reason of insolvency