Introduction

The first stage in any restructuring by way of a scheme of arrangement in the Cayman Islands involves meetings of such classes of creditors or shareholders (as the case may be) to consider, and if thought fit, approve the terms of the scheme. An application to Court is required for orders to be granted for convening such meetings. If, at these meetings, the requisite statutory majorities are satisfied, the second stage involves obtaining Court sanction for the proposed scheme to become effective.

Bermuda, the British Virgin Islands and the Cayman Islands all have legislation that enables a company to present a scheme of arrangement to restructure its debts.

One of the defining features of a scheme of arrangement carried out under the relevant legislation in each jurisdiction is the ability to cram down dissenting creditors or members (or classes of them, as the case may be) if the requisite statutory majorities are satisfied and Court sanction of the proposed scheme is obtained.

The Court heard argument in the case on December 4, 2023.

Third-Party Releases in Chapter 11 Plans

A debtor's non-exempt assets (and even the debtor's entire business) are commonly sold during the course of a bankruptcy case by the trustee or a chapter 11 debtor-in-possession ("DIP") as a means of augmenting the bankruptcy estate for the benefit of stakeholders or to fund distributions under, or implement, a chapter 9, 11, 12, or 13 plan.

In most cases seeking recognition of a foreign bankruptcy proceeding in the United States under chapter 15 of the Bankruptcy Code, the foreign debtor's "foreign representative" has been appointed by the foreign court or administrative body overseeing the debtor's bankruptcy case.

The Bankruptcy Code does not explicitly authorize the equitable remedy of "substantive consolidation"—i.e., treating the assets and liabilities of two or more related entities as if they belonged to a single, consolidated bankruptcy estate. However, it is well recognized that a bankruptcy court has the authority to order such relief under appropriate circumstances in the exercise of its broad equitable powers when each of the original entities are already debtors subject to the court's jurisdiction.

Recent headlines have starkly illuminated the headwinds facing health care providers struggling to recover from a host of financial pressures. Many providers have resorted to filing for bankruptcy protection as a way, among other things, to right-size their balance sheets or effect a sale of their assets or businesses.

Bankruptcy and appellate courts disagree over the standard that should apply to a request for payment of a break-up fee or expense reimbursement to the losing bidder in a sale of assets outside the ordinary course of the debtor's business. Some apply a "business judgment" standard, while others require that the proposed payments satisfy the more rigorous standard applied to administrative expense claims.

Section 1124(2) of the Bankruptcy Code gives chapter 11 debtors a valuable tool for use in situations where long-term prepetition debt carries a significantly lower interest rate than the rates available at the time of emergence from bankruptcy. Under this section, in a chapter 11 plan, the debtor can "cure" any defaults under the relevant agreement and "reinstate" the maturity date and other terms of the original agreement, thus enabling the debtor to "lock in" a favorable interest rate in a prepetition loan agreement upon bankruptcy emergence.

In Short

The Background: On November 15, 2023, the Temporary Fast-Track Liquidation Transparency Act (Tijdelijke Wet Transparantie Turboliquidatie) (the "Act") came into force in the Netherlands, temporarily changing certain statutory provisions in the Dutch Civil Code (Burgerlijk Wetboek), the Dutch Bankruptcy Act (Faillissementswet), and the Dutch Economic Offenses Act (Wet op de economische delicten).