Social distancing. Elbow bumps. Flatten the curve. These are the new phrases and behaviors we have learned to avoid exposure to the novel coronavirus (COVID-19). This epic struggle forces us to reexamine and reevaluate our daily habits, lifestyles and customs as we work collectively to minimize the harm to our families, friends and neighbors throughout the United States.

Hot on the heels of our April 2020 article on the proposed reintroduction of the Crown preference, Parliament has recently approved legislation that will increase the ring-fenced amount available to unsecured creditors on an insolvency of a company from £600,000 to £800,000.

In our last article, which can be found here, we reported on the government’s intention to give HMRC priority in the recovery of certain debts (including VAT, PAYE, Employee NICs, and Construction Industry Scheme deductions ) in insolvency proceedings.

In the recent case of Signature Living Hotel Limited v Andrei Sulyok Roxana Monica Cocarla [2020] EWHC 257 (Ch), 2020 WL 00929732 the High Court considered whether two deeds of guarantee which failed as deeds (because the formalities for a deed had not been complied with) remained enforceable as a matter of contract.

On February 25, 2020, in Rodriguez v. Federal Deposit Insurance Corporation, No. 18-1269 (U.S. 2020), the U.S. Supreme Court effectively ruled that the so-called “Bob Richards rule” should not be used to determine which member of a group of corporations filing a consolidated federal income tax return is entitled to a federal income tax refund.

In June 2019 the Government announced a plan to introduce a new “breathing space” scheme to protect individuals and families struggling with problem debt and to give those individuals and families extra help and time to get their finances under control.

In the landmark decision in Re Systems Building Services Group Limited [2020] EWHC 54 (Ch), ICC Judge Barber held that the duties of a director survive the insolvency of a company.

Despite discussion in 2019 about corporate insolvency reforms and the reintroduction of the Crown Preference for certain tax debts, the Queens Speech on 19 December 2019 did not indicate any concrete plans to legislate for these areas this year. Airline insolvency, however, has made the list for 2020.

Why is airline insolvency a priority?

U.S. Bankruptcy Judge Dennis Montali recently ruled in the Chapter 11 case of Pacific Gas & Electric (“PG&E”) that the Federal Energy Regulatory Commission (“FERC”) has no jurisdiction to interfere with the ability of a bankrupt power utility company to reject power purchase agreements (“PPAs”).

We’ve all heard it said a million times - if it sounds too good to be true, it probably is. But does that age-old maxim apply to a bankrupt customer offering to pay you 100% of your unsecured claim through a “prepackaged” bankruptcy or under a critical vendor program? The answer can be complicated.

This article explores what it means to be “unimpaired” and paid in full in prepackaged bankruptcies and under critical vendor programs and outlines some of the potential pitfalls that can be faced by unsecured creditors under these scenarios.