“The right of setoff … allows entities to apply their mutual debts against each other to avoid the pointless exercise of ‘making A pay B when B owes A.’” held the Seventh Circuit on Aug. 17, 2018. Berg v. Social Security Administration, 900 F.3d 864, 868 (7th Cir. 2018). But the Bankruptcy Code (“Code”) limits “a creditor’s right of setoff during the ninety-day period prior to the” date of bankruptcy, said the court. Id.

On 13 September 2018, the UK Government published a guidance notice (Guidance) on handling civil disputes, including cross-border insolvencies, in the event that the UK exits the EU without having first agreed a framework for ongoing civil judicial cooperation, and from which time and date (11 pm on 29 March 2019) the UK will not benefit from the EU rules to replace the current arrangements.

In early 2017 we reported that following various scandals affecting business in the UK, the Government had made it clear that it intended to crack down on unacceptable boardroom behaviour.

A report published by the Business, Energy and Industrial Strategy Committee suggested that the existing law governing corporate governance did not require revision. However, the Committee recommended a number of measures including a voluntary code of corporate governance for large private companies.

A defendant creditor in a preference suit may offset (a) the amount of later “new value” (i.e., additional goods) it gave the Chapter 11 debtor against (b) the debtor’s earlier preferential payment to the creditor, held the U.S. Court of Appeals for the Eleventh Circuit on Aug. 14, 2018. In re BFW Liquidation LLC, 2018 WL 3850101 (11th Cir. Aug. 14, 2018). Even when the creditor was paid for the new goods, stressed the court, Bankruptcy Code (“Code”) “§ 547(c)(4) does not require new value to remain unpaid.” Id., at *5.

A bankruptcy court properly dismissed a creditor’s involuntary bankruptcy petition “for cause” when it “would serve none of the Bankruptcy Code’s goals or purposes . . . and [when] the sole [petitioning] creditor is not substantially prejudiced by remedies available under state law,” held the U.S. Court of Appeals for the Second Circuit on Aug. 14, 2018. In re Murray, 2018 WL 3848316, *7 (2d Cir. Aug. 14, 2018). In its view, the bankruptcy court “declined to serve as a ‘rented battle field’ or ‘collection agency’” for a single creditor. Id., at *7.

A purported conditional sale agreement “created a security interest rather than a lease,” held the U.S. Court of Appeals for the Fifth Circuit on Aug. 7, 2018. In re Pioneer Health Services Inc., 2018 WL 3747537, *3 (5th Cir. Aug. 7, 2018). Affirming the lower courts’ finding “that the relevant agreements were not ‘true leases,’” the court rejected a bank’s “motion to compel payment under [its] contract as an unexpired lease or an administrative expense.” Id., at *1. The economic substance, not the form of the transaction, was decisive.

In the recent decision of Orexim Trading Limited v Mahavir Port and Terminal Private Limited, the Court of Appeal has ruled that the Court does have power to permit service of a claim under section 423 of the Insolvency Act 1986 outside England and Wales. However, in the circumstances of this case, the Court of Appeal declined to exercise its discretion to grant permission to serve the claim form outside the jurisdiction. HFW acted for the successful First Respondent, Mahavir Port and Terminal Private Limited (MPT).

Background

The appellate courts are usually the last stop for parties in business bankruptcy cases. The courts issued at least three provocative, if not questionable, decisions in the past six months. Their decisions have not only created uncertainty, but will also generate further litigation over reorganization plan manipulation, arbitration of routine bankruptcy disputes and the treatment of trademark licenses in reorganization cases. Each decision apparently disposes of routine issues in business cases. A closer look at each case, though, reveals the sad truth: they are anything but routine.

A bankruptcy court properly denied a bank's motion to compel arbitration of a debtor's asserted violation of the court's discharge injunction, the U.S. Court of Appeals for the Second Circuit held on March 7, 2018. In re Anderson, 2018 U.S. App. LEXIS 5703, 20 (2d Cir. Mar. 7, 2018). Finding a purported "inherent conflict between arbitration of [the debtor's] claim and the Bankruptcy Code," the Second Circuit reasoned that the bankruptcy court "properly considered the conflicting policies in accordance with law." Id., quoting In re United States Lines, Inc., 197 F.3d 631, 641 (2d Cir.

“ . . . [A] bankruptcy court may not designate claims for bad faith simply because (1) a creditor offers to purchase only a subset of available claims in order to block a [reorganization] plan . . . and/or