When a business entity that is regulated by the Federal Energy Regulatory Commission (FERC) is closely related to another business entity, FERC takes the position that under some circumstances it may treat the two different legal entities as if they were one single entity.
The Singapore High Court recently issued the first-ever super-priority order for debts arising from rescue financing under Section 211E(1)(b) of the amended insolvency laws in the Companies Act. The decision shows that the court is open to adopting relatively unique deal structures, and could be a benefit for more business-centric solutions.
In Part 1, we discussed how, despite widespread usage, termination in the event of bankruptcy clauses (“ipso facto” clauses) are generally unenforceable pursuant to the bankruptcy code. In this second part, we discuss why these clauses are still prevalent in commercial transactions and the exceptions that allow for enforceability in certain situations.
Why Do Ipso Facto Clauses Remain in Most Contracts?
If ipso facto clauses are generally not enforceable, then why do practically all commercial agreements continue to include them? There are several reasons.
Practically all commercial transactions, including licenses, services agreements, and supply agreements, contain a provision that triggers termination rights, without notice, to a party whenever the other party files for bankruptcy or experiences other insolvency-related event. In Part 1 of a two-part series, we discuss how the commonly used termination-on-insolvency clauses are generally unenforceable despite their widespread use.
Standard Ipso Facto Provision
- On November 8, 2018, the Supreme Court of Canada (“SCC”) reversed the Federal Court of Appeal decision in Callidus Capital Corporation v.
- Dans son arrêt du 8 novembre 2018, la Cour suprême du Canada a infirmé la décision de la Cour d’appel fédérale (Callidus Capital Corporation c.
- Draft regulations implementing Canada’s “bail-in” solvency support regime for banks came into effect on September 23, 2018.
- The bail-in regime essentially requires that banks maintain “embedded contingent capital” in the form of bonds that convert automatically to equity in the event that the issuing bank has ceased or is about to cease to be viable.
- Key to the regime is the concept of “total loss-absorbing capacity”, or TLAC, which is the amount of embedded contingent capital that a bank will now be required to maintain (on a consolidated basis).
- As discussed b
- Le règlement mettant en œuvre le régime de « recapitalisation interne (émission) » au soutien de la solvabilité des banques au Canada est entré en vigueur le 23 septembre 2018.
- Ce régime de recapitalisation interne exige essentiellement des banques qu’elles maintiennent des « fonds propres d’urgence intégrés » sous forme d’obligations pouvant être automatiquement converties en actions si jamais elles cessent d’être viables ou sont sur le point de ne plus l’être.
- La clé du régime est le concept de capacité totale d’absorption des pertes
In retail bankruptcies, it is important for suppliers consigning goods to merchants to be aware of the commercial law rules governing consignments. Disputes among consignors, inventory lenders, and bankruptcy debtors have been arising frequently in retail bankruptcy cases. Disputes like these can be avoided if consignors consider the basics of commercial law rules governing consignments, particularly under the Uniform Commercial Code, and take steps to protect their rights and interests.
- On January 12, 2018, the Federal Court of Appeal (“FCA”) delivered its judgment in North Shore Power Group Inc. v.