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.
The Act on confirmation of private restructuring plans (Wet homologatie onderhands akkoord) – which introduces a framework allowing debtors to restructure their debts outside formal insolvency proceedings (the “Dutch Scheme“) – was adopted by the Dutch Senate on 6 October 2020 and will enter into force on 1 January 2021.
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
The EMEA Determinations Committee's recent bankruptcy determination involving Selecta CDS provides additional insight on the types of chapter 15 filings that are likely to trigger Credit Events.