In its decision of 6 May 2024, the Swiss Federal Supreme Court (SFSC) clarifies the conditions for a claimant to appeal an interim decision ordering it to provide security for the defendant’s costs due to appearing insolvent or having liquidity problems (case No. 4A_93/2024 [in German]; intended for official publication).
On June 27, the U.S. Supreme Court announced a 5-4 decision rejecting the nonconsensual releases of the Sackler family in the Purdue Pharma bankruptcy case. The split is an interesting alignment of Justices: Gorsuch writing the majority opinion, joined by Thomas, Alito, Barrett and Jackson; Kavanaugh for the dissent, joined by Roberts, Sotomayor and Kagan.
Deal structure matters, particularly in bankruptcy. The Third Circuit recently ruled that a creditor’s right to future royalty payments in a non-executory contract could be discharged in the counterparty-debtor’s bankruptcy. The decision highlights the importance of properly structuring M&A, earn-out, and royalty-based transactions to ensure creditors receive the benefit of their bargain — even (or especially) if their counterparty later encounters financial distress.
Background
Chapter 11 bankruptcy has long been thought of as anathema to commercial real estate (CRE) lenders. This is due to the debtor-friendly bankruptcy forum, particularly with respect to (i) the up to 18 month exclusivity period during which only the debtor could propose a plan of reorganization and (ii) threats of a "cram-down" plan used to lever concessions from lenders. These provisions can be, and often were, abused by debtors with no real rehabilitative intent using bankruptcy only as a leverage tool.
In brief
A selection of newly announced legislation and court decisions reinterpreting private law.
Click here to read in Czech.
In brief
A selection of newly announced legislation and court decisions reinterpreting private law.
Click here to read in Czech
In brief
When would the directors of a company be bound to consider the interest of the company's creditors? This was the issue at the heart of the Singapore Court of Appeal's (SGCA) watershed decision in Foo Kian Beng v OP3 International Pte Ltd (in liquidation) [2024] SGCA 10, which comes hot on the heels of the UK Supreme Court's pronouncements on the same issue in BTI 2014 LLC v Sequana SA and others [2022] UKSC 25.
In brief
The UAE has issued Federal Law No. 48 of 2023 in relation to insolvency (the "New Insolvency Law"), which replaces Federal Law No. 9 of 2016 and comes into effect on 1 May 2024. Although the previous law was more progressive compared to the previous insolvency articles embedded in the old Commercial Code of 1993, at least in relation to the numerous insolvency matters and other protective composition and restructuring witnessed by the courts.
We have set out below some of the key characteristics of the New Insolvency Law:
Mareva orders, also known as freezing orders, may be granted when there is a risk that a defendant might move its assets out of reach of the court’s jurisdiction. Mareva can orders freeze assets owned directly or indirectly by the defendants. Oftentimes a defendant subject to a freezing order has other creditors seeking repayment. Can a creditor enforce its claim against the frozen assets? Yes, but the creditor must come to the court with clean hands and should not make loans to the defendant if it has notice of the order.
In early February, a Delaware bankruptcy judge set new precedent by granting a creditors’ committee derivative standing to pursue breach of fiduciary duty claims against a Delaware LLC’s members and officers. At least three prior Delaware Bankruptcy Court decisions had held that creditors were barred from pursuing such derivative claims by operation of Delaware state law, specifically under the Delaware Limited Liability Company Act (the “DLLCA”).