State governments can be creditors of individuals, businesses and institutions that are debtors in bankruptcy in a variety of ways, most notably as tax and fine collectors but also as lenders. They can also be debtors of debtors, in their role, for example, as the purchasers of vast quantities of goods and services on credit. And they can also be transferees of a debtor’s property in (at least) every role in which they can be creditors.
On Saturday 28 March, Secretary of State for the Business, Energy and Industrial Strategy, Alok Sharma, announced a proposal for the urgent reforms to UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.
Wrongful Trading (section 214 Insolvency Act 1986)
It was announced that there would be a temporary suspension of section 214 Insolvency Act 1986 in relation to wrongful trading.
Sky News reports today that the Insolvency Service is considering reforms to insolvency laws which may include a moratorium on winding up petitions against companies and the suspension of rules on wrongful trading.
Debtors in chapter 11 cases are required to make quarterly payments to the United States Trustee’s Office. These fees support the UST Program that serves in all districts but those in two states.[i] Quarterly fees must be paid until cases are closed. And cases are closed when they are “fully administered,” a term that isn’t defined in the Bankruptcy Code or Rules.
The importance of clarity in drafting agreements can never be understated. And while there are strategies available to spouses of business owners to help protect a family in bankruptcy, it is imperative to properly plan and draft to receive such protection from the Courts. In re Somerset Regional Water Resources, LLC, _____________ F.3d ________________ (3rd Cir. 2020) (“Somerset”), recently decided by the Third Circuit Court of Appeals, offers a prime example of both cautionary concepts.
Construction litigation is no stranger to insolvency, including insolvent claimants. This is also the case for adjudication, a fast and commercially driven form of dispute resolution for the construction industry. However, there has been considerable uncertainty as to the enforceability of adjudicators’ awards where a claimant is insolvent and receives a favourable decision. Recent cases have shed some light on this issue and have started to untangle the statutory difficulties when insolvency meets adjudication.
When there are large numbers of substantial individual tort claims against a debtor, potentially involving claimants unknowable to the debtor who themselves may not know they have a claim, the bankruptcy process faces special problems. One objective of bankruptcy is to afford final relief to the debtor from the debtor’s debts, but discharging the claims of those unknown claimants without notice and a hearing poses due process problems.
There has been considerable progress towards resolution in two of the largest bankruptcy cases pending in the United States: the Commonwealth of Puerto Rico and the California utility, Pacific Gas & Electric.[1]
Re System Building Services Group Limited [2020] EWHC 54 (Ch)
Summary
A recent High Court ruling has considered the character and extent of directors’ duties in the context of insolvency.
In System Building Services, Insolvency and Companies Court Judge Barber (“ICCJ Barber”) considered, amongst other things, the nature of a director’s duties to a company and whether those duties survive the company’s entry into an insolvency process.
An appeal from a bankruptcy court’s final judgment must be filed within 14 days of when an appealable order is entered on the docket. Parties should not delay past the 14 days even if, for instance, the bankruptcy court must still decide a related request for an award of attorneys’ fees. Otherwise, an appeal will be untimely under Federal Rule of Bankruptcy Procedure 8002(a)(1).