On January 17, 2019, the Fifth Circuit held that a creditor is not impaired for the purpose of voting on a plan if it is the Bankruptcy Code (as opposed to plan treatment) that impairs a creditor’s claim. The court further held that a make-whole premium is a claim for unmatured interest which is not an allowable claim under Bankruptcy Code, absent application of the “solvent-debtor” exception which may or not apply—the issue was remanded to the bankruptcy court for decision.

On January 15th, 2019, the U.S. Bankruptcy Court for the Northern District of Ohio held that the end user of an electricity forward contact was not entitled to the benefits of the safe harbor provisions under Section 556 of the Bankruptcy Code. Section 556 allows a “forward contract merchant” to terminate a forward contract post-petition based on an ipso facto clause in the contract and exempts such actions from the automatic stay.

The recent Court of Appeal decision in the case of Doherty -v- Fannigan Holdings Ltd [2018] EWCA Civ 1615 considers the issue of whether a failure to pay for shares, as provided for under an agreement between the parties is a debt on which a statutory demand can be based.

The Eleventh Circuit recently found in favor of Blue Bell Creameries, Inc. by rejecting its own earlier dicta and explicitly expanding the preference payment defense known as “new value.” This provides additional protection for companies doing business with a debtor in the 90 days prior to bankruptcy.

THE SCOOP: BRUNO’S V. BLUE BELL

On May 22, 2018, the United States Court of Appeals for the Fifth Circuit issued its decision in Franchise Services of North America v. United States Trustees (In re Franchise Services of North America), 2018 U.S. App. LEXIS 13332 (5th Cir. May 22, 2018). That decision affirms the lower court’s holding that a “golden share” is valid and necessary to filing when held by a true investor, even if such investor is controlled by a creditor.

The Advocate General Kokott (AG) has given her opinion in Grenville Hampshire -v- The Board of the Pension Protection Fund [2018] (Case C-17/17). This challenges the level of compensation offered by the Pension Protection Fund (PPF) and could result in increased payments for members.

Background

Mr Hampshire initially brought the case to the Court of Appeal in July 2016, claiming that his pension was cut by 67 per cent when his company scheme was transferred into the PPF.

The Circuit Courts of Appeal have split on whether a prepetition transfer made by a debtor is avoidable if the transfer was made through a financial intermediary that was a mere conduit. Today, the Supreme Court unanimously resolved the split by deciding that transfers through “mere conduits” are not protected. This is a major (and adverse) decision for lenders, bondholders and noteholders who receive payments through an intermediary such as a disbursing agent.

There are two aspects of wrongful trading and misfeasance that are of interest (i) board directors (and those advising the board) must be aware of the duties that the directors are subject to in performing their role as directors and the liability that attaches to breach of those duties and (ii) companies may be affected by the wrongful trading/misfeasance of customers/suppliers which impacts on trading.

The compulsory liquidation of Carillion is likely to have a wide ranging effect on the construction industry in the UK. The impact may well be felt by other contractors, sub-contractors and suppliers as well as engaged professionals such as architects, engineers and project managers. The insolvency may give rise to calls on bonds or guarantees and affect insurance arrangements.

In this bulletin we summarise what has happened and offer immediate advice.

In a previous article, The Eagle and the Bear: Russian Proceedings Recognized Under Chapter 15, we discussed In re Poymanov, in which the Bankruptcy Court (SDNY) recognized a Russian foreign proceeding under chapter 15 of the Bankruptcy Code even though the debtor had only nominal assets in the United States (the “Recognition Order”). The Bankruptcy Court had declined to rule upon recognition whether the automatic stay under 11 U.S.C.