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

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.

Many tax-exempt organizations can now change their state of organization and retain their current tax exemption.

Two key changes made to Australian insolvency law enhance restructuring efforts in Australia and could improve outcomes for US investors.

The court awarded OpCo Noteholders in excess of $320 million in Make-Whole Amount and post-petition interest, confirming that make-whole is an enforceable liquidated damage claim.

WHO SHOULD READ THIS

• Insolvency practitioners, mortgagees or other secured creditors and their advisors.

THINGS YOU NEED TO KNOW

• Whilst the foreign resident capital gains withholding provisions (FRCGW) contain insolvency exceptions that exclude most asset disposal transactions undertaken in the insolvency area, it is important to recognise that not all insolvency transactions are excluded. Transactions by a mortgagee in possession may not be excluded.

WHAT YOU NEED TO DO

WHO SHOULD READ THIS

• Restructuring and insolvency professionals.

THINGS YOU NEED TO KNOW

• Understanding liabilities from a payroll tax perspective can be complex, particularly due to the broad nature of the grouping provisions.
• Unless care is taken situations may arise where restructuring and insolvency professionals will be grouped with client entities, potentially exposing personal entities to joint and several liability for client entity debts.

WHAT YOU NEED TO DO